TV2020

3 Of 4 Broadcast CEOs Agree: 3.0 Is A Winner

At last week’s TV2020 conference, TVNewsCheck Editor Harry Jessell sat down with station group heads Jack Abernethy of Fox, Pat LaPlatney of Raycom, David Smith of Sinclair  and Perry Sook of Nexstar for a nuts-and-bolts discussion of the money-making potential of ATSC 3.0. Abernethy liked the technology, but was skeptical about the business models. However, the other three said adopting the new technology is a no-brainer. Said Sook: “It's the next technological evolution of our business. I think it's just a matter now of how fast we can roll things out.” Watch the session above.

The heads of four of the country’s largest TV stations groups gathered at TVNewsCheck‘s TV2020 conference in New York last Thursday to consider the business prospects of ATSC 3.0, the new broadcasting standard now pending FCC approval. (Video of the session is available above.)

Of the four, three — David Smith of Sinclair, Perry Sook of Nexstar and Pat LaPlatney of Raycom — said they were eager to roll out the new technology, convinced that the enhancements and new services that flow from it would deliver an extraordinary ROI and revitalize the medium.

They talked of multicasting, datacasting, mobile reception, targeted advertising and accurate audience measurement.

A leading proponent, Smith was most insistent, arguing that 3.0 is critical to broadcasters. “We’re not a growth business, folks, in case you haven’t noticed. If you want to be a growth business, you’ve got to do something different than what we’re doing.”

The skeptic was Jack Abernethy of Fox Television Stations, saying that he doesn’t see the path to riches that the others do. But he said that it “makes sense to have a bigger pipe” and he expects he and others will eventually “come around as plans become more firm, the technology gets clearer and the choices are clearer.”

Questioning the executives was Harry A. Jessell, editor of TVNewsCheck.

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Here is the transcript of the hour-long session edited for clarity and length:

On a scale of 1 to 10, tell me what your enthusiasm is for 3.0, with 10 being the second coming of retrans and 1 being spot revenue growth in 2017.


Abernethy:
From a technological standpoint, it’s a 10 as far as I understand it. So with the capabilities, it’s really terrific. In terms of the business models, I think, we’re maybe at a 5, but we’re working on it. And so I really think you have to separate the two, and not mix them, because the capability of the system, as far as I understand it, is terrific.

I should point out that Fox has been very instrumental in creating the standard. As a matter of fact, Richard Friedel of Fox is the chairman of ATSC. So they have not been slackers on the tech side. Perry? Scale of one to 10?

Sook: It’s a 10. We’re all in. It’s the next technological evolution of our business and will provide, at the base, an enhanced viewing experience for our viewers and for our advertisers. And I think it’s just a matter now of how fast we can roll things out.

David, I guess we know where you are.

Smith: Is there any number higher than a 10, Harry? The fact of the matter is, it is essential, for this industry to survive, that we get 3.0 in the marketplace as fast as possible.

Let me just remind everybody that a number of years ago Fox and NBC started a little business called MVC [mobile DTV]. The purpose of that business model was to launch a multichannel platform across the country. And the broadcasters in this industry joined with NBC and Fox as the leaders, and said, let’s go. The unfortunate tragedy of that business model was that it was hampered by negative technology — the exact same technology that was used in 2001, only a slightly better version of it.

Believe me when I tell you there will be no shortage of thought and business models that will roll off the back of this thing. But don’t expect any of us to tell you what we’re going to do, because we compete against each other. But having said that, if you want to go at high altitude, and sit down, and talk about 30,000-foot stuff that’s the art of the possible, we can all do that — all four of us — all day long because the opportunity is unlimited in terms of what we can do.

The fact of the matter is, broadcasters don’t have any choice. Because if you want to compete in today’s world, which is a 100% mobile world — mobile platforms, mobile advertising — you have no choice but to be in this business. Otherwise you should go home because the television set hanging on the wall at your house is not irrelevant yet, but it’s becoming less relevant as we go forward.

There was a piece out the other day. One of the rags said that 70%-plus of all advertising in the future will be mobile. We’re not in that business, folks. If we’re not in that business, then we have no business.

If we’re in that business, we’re the same as everybody else. Targeted ads, specific data as to who’s watching, where, under what circumstances, geo-targeting, all those things that everybody else does. If we want to compete, you have to be in that business. If you don’t want to compete, you can close your door and go home.

Pat?


LaPlatney:
It’s tough to follow that, but I absolutely agree it’s a 10. Speaking for Raycom, and I’ll take the liberty of speaking for the Pearl group, I think with that piece of the industry is squarely behind it, there is a ton of upside. And as Perry said, you just have to move as quickly as you can to roll it out.

Tell the folks which groups are in Pearl.

LaPlatney: Forgive me, I’m going to probably forget somebody, but it’s Media General, Tegna, Hearst, Scripps, Cox, Raycom, Graham and Meredith.

Do you have any sense of where the smaller broadcasters are? Are they willing to make the investment in 3.0?

LaPlatney: My sense is yes. I haven’t made an exhaustive effort to talk to everybody, but those that I have spoken with are extremely excited about the prospect of 3.0.

Sook: There are many small broadcasters represented on the NAB board, and Jack and I sit on that board. I’ve not heard a single objection from those customers to rolling this out. It’s voluntary. You’ll either do it or you’ll be left behind. If the market makes that decision, then that’s just the way of the world.

Smith: So just to amplify that, [there are] really small market folks who look at this and say, “I don’t have that kind of money to go invest.” So here’s the business answer to that. If you don’t have the money to invest, I’ve got a deal for you, and here’s the deal. I’ll build your your platform for you. I’ll do your transition for you. I’ll write the check for that. What I want for that is, I want your 20 megabits. And once I get a 10-1 or a 1,000-1 return on that, you’re my partner. Nothing tricky. If you can’t do it, I’ll do it for you. So if there’s any small broadcasters out there who can get their heads around that idea, you’ve got my phone number.

Jack, you have a comment?

Abernethy: You invited me on this panel as the — I forget what your words were — the “uninformed cynic” or something? Was that what it was?

I think it was “informed…”

Abernethy: I think stations are coming around. People are coming around as progress is made. I was joking earlier that anybody who spoke out against 3.0 was sort of like a Trump voter — not speaking up to an exit poller for fear of looking stupid. But I think there is some resistance still, but I think it will come around as plans become more firm, the technology gets clearer, and the choices are clearer. But there still is a skepticism about this that I have, and I think it’s waning.

3.0 does a lot of different things. David said he likes the mobile capability. Perry, what excites you the most about it?


Sook:
Well as I said earlier, I think the first thing is the enhanced viewership experience for the people that are our core customers — our viewers and advertisers — already have. I don’t think we want to be in a position where the NFL asks: “Why do my games look so much better on ESPN than they do on the Fox affiliates,” because we didn’t make the transition when everybody else did.

I was part of a working group within the NAB a few years ago, and Pat was as well, where we explored the business opportunities for 3.0. And we started with 50 ideas and distilled it down to about a dozen things that we think could be applicable.

And that list today is now out of date, but who knows if there is a killer app or if it is a series of additional capabilities. The fact that the system is IP-based gives you tremendous potential that we don’t have today. So it’s just the pure fact of the option value that it gives you, the [ability] to explore all of these different business opportunities that, as David said, we can’t do today.

Smith: Let me just frame for you. Being public companies, Perry and I spend a lot of time in front of the investment community, trying to explain to them the magic of what 3.0 is.

So I reduced this down to explain in plain English what this really is all about. So I’m going to try it on everybody here.

I think most people understand real estate concepts because they’re not complex.

If you look at the history of us transitioning from analog to digital, we were given a 19.3 megabit pipe. On day one, if you did high-definition, it took 19.3 megabits, as a practical matter, to do your business. Compression came along, it got a little bit better, then it was — 18, 17, 16, 15, 14. And then all of a sudden, when you could do HD at 10 or 12 megabits, you had this free piece of real estate.

And then what came out of that? People came knocking on our doors and said, “Can you give me a channel out in your pipe?” Of course, they’re called D2’s today — D2s, D3s, D4s, D5s, right? And all those little businesses started by our renting our real estate. Some of them went out of business, some of them now make a little bit of money, some of them make a lot of money.

When you contrast the 1.0 platform of today versus the 3.0 platform of tomorrow, we essentially go from a 19 megabit pipe to roughly a 25 megabit pipe and it’s portable pipe. Also, in the world of 3.0 compression today, you will be able all that you are doing today with between 2 and 5 megabits

That leaves 20 megabits of free real estate to develop, and you can do anything you want in that business. One megabit’s got nothing to do with the next megabit. It literally is 20 separate, discrete acres of real estate that’s to be developed. It’s that simple. It isn’t any more complicated than that.

So when you think about it, think about it in just a real estate context. How are you going to develop that 20 acres of real estate going forward? From a Wall Street perspective, and a selfish perspective, I say to the Wall Street, do you think I can’t use that real estate to create 3%, 4%, 5% growth across my entire platform? The answer to that is, a blind person could do that.

So we’re trying to sell the whole notion to Wall Street, we have to do this, because I want that 20 acres of real estate to develop tomorrow. And believe me when I tell you, there are people knocking on doors now who want that real estate. It’s just about, what’s the deal and when will it be built?

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Be specific, David. You’ve described the platform. Great analog. But what’s the business? What business is going to give you the 4% or 5% growth each year?


Smith:
As I said, I’m not going to tell you what I’m going to do. But there’s a thousand different businesses. I’ll give you a simple one. I use it, [even though] I honestly don’t believe in any way that this is the highest and best use of the platform. But we all know who SiriusXM is, right? The last time I looked, it was a $20 billion market-cap business and it’s a monopoly — a nice business to have.

I’d like to have one of those someday. If I wanted to use a few megabits of my pipe to be in that business, and all of us got together … to create a national platform, we could do 100 channels of that business tomorrow with no effort and be in competition with an absolute monopoly.

Again, I’m not here to tell you I would do that, because I don’t necessarily believe that’s the highest and best use of the platform. There’s a thousand things like that you can do. That’s just one of them.

Pat, what do you think? What do you like most about 3.0?

LaPlatney: The standard enables advanced advertising, which I think is critical. As a business, we need to move in that direction. Everybody’s getting data these days. The cable guys have data. The satellite guys have data. Local broadcast, not so much. It’s going to help enable a move towards targeted advertising, which is really, really important.

There’s also the concept of wholesaling data. That’s getting data into automobiles. There really is an unlimited number of options as we go forward, and frankly, as I said last year, there’s a lot of money.

Jack, do you have any ideas? You’re considering this, anyway. What entices you?

Abernethy: I’m a buyer, not a seller. So I’m looking at this from a buying standpoint, and I started to look at a lot of these claims. There was a study that came out by Pearl that said there was $20 billion out there. I’m very suspicious of how big this could be.

But as I look at it, even in the most conservative of plans, it makes sense. It just makes sense to have a bigger pipe that we could deliver our product to. In terms of some of the bigger plans, they’re worth looking into, but I’m still a little skeptical about the size.

Well, I’ve seen the $20 billion number, too. That seems incredible. BIA/Kelsey says the total spot revenue for the business is around $20 billion today. We’re talking about doubling that.

Sook: That was a forecast, Harry. I think we’re all a little bit suspicious of forecasts these days.

Abernethy: When I see a forecast like that, then I challenge all the assumptions. Some people look and say, if it’s a tenth as good, I’m in. Right? I tend to say, “Uh oh. Let’s go through all the rest of the assumptions. I’m getting hustled here.”

Smith: Let me tell you why it’s not a hustle. The $20 billion is based on the market value of the bits across the United States, under the assumption that broadcasters have gotten together and pooled their bits. And if you think that’s an impossible task, it’s already happened twice.

It happened in the year 2000 under iBlast [datacasting service], when people freely gave several megabits of their pipe to that business enterprise. Never got off the ground. It happened with [mobile DTV]. It was a well-intentioned business model. The technology failed them. The business never got launched in the real world.

Anybody here sell spots? [How much more is] a targeted ad worth — 2X times, 3X, 4X? That’s what it’s worth. IP addresses are the ultimate holy grail for this industry, just like it is for the internet, just like it is for Facebook. They know who you are, where you are, and what you’re doing.

Broadcasters have no clue what goes on in the real world. We have no legitimate, honest-to-God audience measurement data whatsoever. Does anybody here believe Nielsen’s ratings? Does anybody here believe [comScore]?

On an absolute basis, do you believe it? If you do, raise your hand. I’d love to know. Alright, nobody believes it. So the point is, when an IP-based platform is launched, every device in the marketplace, I know who it is and where it is. I can now sell a specific ad to that. Jack can sell to that. Anybody can sell to that. That is worth more. If you do nothing more than that alone, and you get 2X, what’s that worth in terms of Wall Street’s view of growth? If I did nothing else, I’m happy doing that.

Abernethy: Can I just jump in? I think coming up with a measuring system is the most important thing for this industry. I’ve always been frustrated by the lack of effort to kind of come together and do that. If we could create a measuring system that’s actually accurate, then that would be more valuable in my view than all the other stuff you talked about.

Smith: So those of you who know us at Sinclair know we tend to be a little bit pushy and a little bit forward. So let me tell you, if you read the press release that came out a week or so ago, we are going to develop …  the next data-gathering platform in this industry because somebody has to do it.

So we’re going to do it in conjunction with anybody who wants to participate in the process. Feel free. We have a vested interest in knowing exactly what is going on, minute by minute, day by day, period. We’re going to develop it. And when we’re done, we’re going to hand it to the industry just like we did 3.0 and say, here it is. If you want to participate in the process, please contact Mark [Aiken, Sinclair VP of advanced technology] because we’ve already started the process.

Let’s talk about cost. Perry, you own 170 stations. What’s the cost of upgrading for 3.0?

Sook: Not as much as you would think. I mean, to get into the game, it’s probably a quarter million dollars to a half million dollars per call letter. Now if you want to get into the SFN business and things like that, it’s going to be more. But I don’t think that has to be done on Day One. I think it’s a crawl-walk-run kind of a deal. To put it in perspective, for our entire group, it would be less than one year’s run rate capex. The analog-to-digital transition was about five years worth of capex.

Pat, is that true? Can you get away with just putting in the new exciter and the transmitter? Don’t you have to build the single-frequency network in order to do the mobile that David talks about?

LaPlatney: There’s certain things you can do with just the new exciter, and then there’s more you can do if you put in SFN. So if you put in the new exciter, you get this great spectral efficiency. So you can add channels and capabilities, and you’ll have a better looking picture, better audio, better video. So there’s absolutely value there. And ultimately, if you want to have an SFN network, it’s going to open up more possibilities.

Explain what an single frequency network is.

LaPlatney: I should let the engineer do that. A single frequency network basically is a repeater system. David, do you want to expound on that?

Smith: The primary purpose of it is to create a quality of service that replicates what the phone companies do. Because the phone companies, as scary as this may be, are the ultimate competition. I would tell you something. One of our board members is Martin Leader, our former FCC attorney. Thirty years ago, he told me he understands who our competition is, and who our enemy is. It isn’t the other broadcasters. It’s the phone companies. He said, if you don’t see what’s coming, you’re going to get rolled. And the tragedy is, we got rolled 15 years ago. And we’re not going to get rolled again, because we’re going to do this, because it’s in our interest.

If we can’t offer a quality of service that, in the long term, is as good as theirs, then we have an inferior product. Right now, the typical broadcast platform has got a radius of 35, 40, 50 miles, depending how tall your tower is and one thing and another. So as Pat said, you don’t need to do it today. But if you want to be in other businesses, and you want to further develop that 20 acres of real estate, there is a legitimate business reason [deploy the SFNs].

But it is not essential on Day One to do that. What’s essential on Day One is that we have data gathering capability, because I want to be able to take the data that comes off the device, give it to an in dependant third party, have them quantify and stamp it, and do all the things necessary to say, yes, it’s real. It’s not disputable anymore because it’s coming from an individual device. I know where it is, and who it is, yada, yada. That’s the most important thing. Once we have that, the world changes for us.

So how much is it going to cost for the SFN is every market?

Smith: Immaterial.

Pardon?

Smith: It’s immaterial. Not relevant. In the typical marketplace you might do four to six SFN platforms. But again, you don’t have to do that today. You can do that later on. The whole purpose of doing that business model is to create a nationwide broadcast market exchange where people have committed bits on a total basis into a pool. So the people in Columbus, Ohio, can use the bits differently than a person in Dayton, Ohio, or the person in San Antonio, Texas, or Seattle, Wash., or wherever it happens to be.

Think of that as a completely separate and much larger scale business model that Akamai might use, or Amazon might use, because they got to fill out that last mile, because the internet’s failed on that, whatever it happens to be.

Don’t even worry about that now. Just focus on getting 3.0 out. Let’s cover our 40-mile radius, and get data that we know is legitimate. For anybody here who sells — and there’s a lot of folks here who sell — can you imagine walking into an advertiser and saying, I can actually tell you there’s are 42,000 women with blond hair, blue eyes, six foot tall, that live in this ZIP code? Do you know what they’d pay for that? A whole lot more than they pay today. A whole lot damn more. That alone is worth multiple growth points.

Perry, do you have the same trouble as David does selling this to Wall Street?

Sook: I think people get the fact that you make an investment, there’s multiple opportunities for return, and it enhances your base business. So I don’t think the resistance out there is maybe what you think.

Jack, how much of your skepticism is based on the cost of this thing? Is that a factor?

Abernethy: No.

What is it, then? Elaborate a little bit on what’s holding you back. All along, the missing piece here has been the networks. CBS has been public, essentially asking, what’s 3.0 going to do that we can’t do on OTT? They’re sort of all in on All Access. They like broadband. They get cash money for it. What’s Fox’s problem?

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Abernethy: I can only speak for us…. We’re in the station business, and we look at it the way every other station group does…. I often sense an anti-network bias within the station groups that sort of fuels some kind of suspicion. I don’t think there’s anything.

I’ve heard that the networks are actively opposing it in some quarters in Washington. But let’s just say they’re ignoring it. Doesn’t that hurt you on Wall Street, David and Perry?

Sook: Let’s let the market decide. OK? If the market embraces this technology, do you want to be the only one without it? I’m not particularly worried about it. You know, there was some foot dragging in the analog-to-digital conversion by certain groups, but ultimately everyone got there because they had to get there.

I think this is the same way. And if it’s voluntary, there’ll be first movers. Maybe there’ll be a first mover advantage, and I think others will quickly determine that for all the reasons we’ve said so far, this is the business they’ve got to be in.

Smith: The thing to appreciate about the broadcast business today — and I think I can make a general statement here — we’re not a growth business, folks, in case you haven’t noticed. If you want to be a growth business, and you want to get multiples associated with growth businesses, you’ve got to do something different than what we’re doing.

3.0 absolutely will provide that optionality to be a growth business, and be looked upon differently, fundamentally, by Wall Street. If you want to be a growth business, period, end of discussion, you’ve got to make that decision.

I don’t think there is a network for the smallest broadcaster in the world who doesn’t say, I’m here to make more money. And, oh, by the way, that’s not inconsistent with serving the public interest because one of the public interest aspects of this is huge in terms of more news, more news channels.

If the broadcasters spend all this money to improve the over-the-air coverage and people start cutting the cord, aren’t you cutting your retrans revenue off? I mean, every person who says, “Wow, this is great. I can get TV on my rabbit ears” and cancels his cable service, is one less person paying you through retrans.

Sook: Why do you think that the two are linked and related? Why do you think that? You prefaced that as almost an affirmative statement. You’re speculating that that would happen. Right?

Just speaking as a consumer, if suddenly I pull the TV out of the box, and I set it up, and I hook up rabbit ears and and I’m getting 30 channels in New York, why am I paying for cable?

Sook: I live in Dallas, Texas, and I think there are 68 channels that you could watch if you rescanned your TV. So I don’t know that I agree with your premise. And if it were so, then why didn’t it happen in the analog to digital transition, because wasn’t that a better picture?

It was better picture for those who could receive it, but the coverage was lousy. A lot of people became more dependent on cable because the signal was so poor. They were disenfranchised.

Smith: But Harry, that’s evolved in the last 15 years. 1.0 receivers today aren’t what they were 15 years ago. They’re materially better. But on a relative basis, they’re not worth a damn compared to 3.0. But on an irrelative basis, they’re dramatically better. As Perry points out, the world hasn’t changed as a function of that.

So this new technology, you’re saying, will not cause a rise in OTA viewership?

Smith: Let me give you my kind of broad view of that. It’s going to do what it does. The market’s going to do whatever it does. But in the broader picture, my 20 acres of real estate, I’m here to suggest to you, is worth more than what my network relationship is.

OK. Jack, are you worried about loss of retrans?

Abernethy: I have a little bit of a different take. First of all, Perry said that the fact that we have a new technology doesn’t necessarily change the dynamic. Right now, you can still get a superior signal over the air.

Our take on it is a little different in that we are absolutely committed to a dual revenue stream business that’s broadly distributed. That’s the only way we’re going to keep the NFL. It’s the only way we’re going to get the best product that’s going to make broadcasting a premier platform.

Anything that endangers that is something that we’re going to have to deal with very seriously. So the ability to use the technology doesn’t mean you’re going to necessarily go down one road or the other. It just gives you the optionality.

But we are absolutely concerned about giving away our product for free, and undermining our business model. Let’s look at print and everything else. You’ve got to be very careful. Because remember, for years, everybody said oh no, we’ll give it away on the web. We’re reaching younger viewers, and we’re promoting our service. And now those businesses are nearly gone. So we have to be very careful about protecting the dual revenue stream. But ATSC 3.0 doesn’t have anything…. You know, it may even create opportunities.

Oh. So you’re not concerned that you roll this out with the SFN, better coverage. You don’t think that would contribute to loss of your revenue?

Abernethy: It could, but the technology itself just gives us optionality. It doesn’t tell us how we have to use it.

Sook: Harry, I don’t know that they’re necessarily linked. They might be linked, but I don’t think people make the decision to cut the cord because they can get a better picture over the air. They do it for other reasons. On the Upper West Side, my bill to Time Warner just for broadband, or broadband plus video is just an incremental increase. And so there are a lot of reasons people buy the bundle. You get into the whole bundle discussion, the skinny bundle, but I don’t think you can put ATSC as a cause for people to cut the cord. It may be related, but I think you’re mixing apples and oranges.

LaPlatney: I would concur. Could there be some leakage? Yeah. And in the study we did last year, once we got through, we looked at it and it said yeah, maybe there’s some leakage. And by the way, the world’s gotten a hell of a lot more complex since last year. I mean, there’s a new over-the-top distributor popping up every day. So there’s a lot of reasons why people cut the cord. There’s a lot of reasons why people who are cord-nevers might decide well, for $35, I’ll take that deal. It’s a complex world. But the fact that the technology is there and enables other revenue streams, the thought was that the growth in advanced advertising would more than offset whatever leakage there was.

Sook: In my universe, approximately 14% of our audience does not consume us via a pay service. That’s on the primary set. When you go to the set in the workshop or the kids’ bedroom, that number becomes two or three times that. What if that were a better viewing experience? Are there ancillary benefits to that? So I think you’re trying to take a multivariable equation and binary if-then statement. I’m just not sure that the two are linked.

You are not asking for the FCC to mandate 3.0 receivers in every TV set. I assume that was because you wanted the support of the consumer electronics industry. But is that really a good idea, David, not to have a tuner mandate?

Smith: I think we live in a market-driven world today, and I think we’re sophisticated enough as marketers and delivery guys to figure out how to get the consumer to want our product. I don’t think it’s that complicated.

What I’m suggesting to you is that the market will demand the availability of local television stations everywhere, all the time. And we create that demand. We will do that.

Now having said that, I’m opposed to the notion that we should do things on a mandatory basis. If the government, for some reason, woke up one day and said, you know what? We think it’s a national security issue that every television station, every phone, every car in the United States, by virtue of public television’s ability to blanket the entire country, said we think that manufacturers should have these things in their devices, that’s their business.

That’s a hell of an argument. Why don’t the broadcasters make it, Pat? When don’t the broadcasters make it? There’s [NAB President] Gordon Smith over there ready for marching orders.

LaPlatney: So in South Korea, they’re preparing for the 2018 Olympics. And the Korean manufacturers are building dual-tuner sets right now. That certainly can be replicated in this country. I don’t see any reason why we necessarily need the mandate.

As David said, we’re good marketers. We don’t necessarily need a mandate. However, if for public safety concern reasons that there’s some interesting functionality in 3.0, like it can wake up devices and other such [functions], there is an argument there.

David, I wanted to back you up on something. You said the SFN cost is immaterial. Could you put some numbers to that? Could any of you put some numbers to how much it would actually cost? Would it be millions of dollars? Tens of millions?

Sook: If a single-tower SFN, through which every broadcaster in the marketplace could go … so just envision a small building, a small tower, maybe it’s on top of a hill, maybe it’s an American tower, common antenna, single transmission line, eight broadcasters in the bottom of it. Bingo, everybody’s in the SFN business. What’s that cost? Half a million dollars, three quarters of a million dollars if you want to get crazy and you want fancy grass, and painted walls, and whatever.

That presumes that all the broadcasters will collectively do these things.

Smith: I would say, why would you go spend half a million dollars when you could do it one time and split the cost? Or you can rent. Let somebody else build it, and you can rent.

Well, that was my question. I mean, it’s one thing to sit around the table and talk. But it’s another for broadcasters to get together in each market, become partners and work together.

Smith: So the four of us here represent how many television stations?

Almost 400.

Smith: OK, throw in Gray and a couple other guys, and all of a sudden, we’ve got two-thirds of the broadcasters in the United States, and there’s five of us sitting at the table.

Let’s make a deal right now. Let’s do it.

Smith: How do you know we’re not doing that? So let me ask the last question. What choice do you have? That is the ultimate question you have to answer for yourself.

LaPlatney: What’s the opportunity cost of not doing it?

Smith: Yeah. You have no choice.

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Shaye Laska says:

November 16, 2016 at 3:54 pm

Bravo for an excellent forum Harry. I feel that the local/regional advertiser application with 3.0 is going to be game changing.

Gabby Fredrick says:

November 25, 2016 at 10:55 am

Excellent forum???…Do you work for one of these guys??? Have any of you ever heard the statement “you can’t push a rope”? The problem for these heavily leveraged broadcasters is this fact. Their revenue has not grown in the past few years without Political and Retrans. Even with digital growing 20%+ annually on some local stations it is less than 10% of their total revenue and they are missing their revenue #’s and will continue to. Trump has shown that political spending will never be what it once was and what are these local groups going to do when the networks (content sources) bypass them as distributors in the next few years and go directly to satellite and the cable carriers.They are done!!!!!!…..it’s going to bring back memories of the the 2008 financial collapse… Ask any GM and DOS of a local station, if they are paying attention, how they feel everyday and you’ll hear crickets..They are petrified and a lot are looking for their next move (hope they have saved their $$ or have another career planned)…The only GMs and GSM ‘s that are safe are at the ones at Network O and O’s. The gravy train in Local television is long gone people. 3.0 cannot be implemented fast enough. Ask your friends how they feel about local commercials…They dont believe them and cannot stand watching them. The networks are going to always be there because they produce content..The only content that local stations produce is the local news and a few politically necessary public affairs shows ( Who cares..the majority of viewers don’t) …. most people are not watching local news any longer..it’s horrible in content and has lost most of it’s credibility just like network and cable news..The first blocks are nothing but bad news. Why do you think ratings have dropped???The networks will grow due to product placement revenues tied into commercials running and the ability to showcase their advertisers..Local TV (news) cannot do this..Cars on new sets ???? Watch 2017 and local broadcasters stock prices..Anyone heard the investing term “short the stock price”…A perfect example of this is Gray..their stock dropped in half this year and they are now buying it back to hopefully drive up the price and EPS….good luck with that. They thought they could fake out the street by buying up stations but the model is broken…
What has happened to local broadcasters is quite simple. Its the first thing you learn in an economic class..Supply and Demand. There is plenty of supply but….you fill in the blanks.


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