JESSELL AT LARGE, BONUS TRACK

David Smith: 3.0 The Only Avenue To Growth

The head of Sinclair Broadcast Group makes a powerful argument for ATSC 3.0. He believes it will spawn many enhancements and businesses that will more than justify the "immaterial" cost of implementation, especially the ability to deliver targeted advertising. There's room for skepticism, but not enough to stop broadcasters from moving briskly ahead with the technology.

It was quite an admission for the head of one of nation’s largest TV station groups, especially a publicly traded one: “We’re not a growth business, folks, in case you haven’t noticed,” Sinclair’s David Smith proclaimed last week at TVNewsCheck’s TV2020 conference on the money-making potential of ATSC 3.0.

He went on to say that if broadcasters want to be in the growth business, they’ve “got to do something different than what we’re doing.”

The “something” he had in mind is ATSC 3.0, the so-called Next Gen TV standard now pending FCC approval. Smith has been an early and vehement proponent of the standard and over the past few years he has won over a good number of his peers.

Indeed, two of the other major broadcasters on the panel with Smith last week — Perry Sook of Nexstar and Pat LaPlatney of Raycom — declared themselves all-in on 3.0.

Jack Abernethy of Fox Television Stations was half in. He said he liked the technology, but hasn’t been sold on any of the business plans. He said the Pearl Group study that concludes that 3.0 will add as much as $20 billion to stations’ top line made him feel as if he were being hustled.

As is his style, Smith dominated the hour-long discussion and he is hard for a moderator (in this case me) to rein in. But he makes a powerful argument for 3.0. He believes that there are many enhancements and businesses that 3.0 will enable that will more than justify the “immaterial” cost of implementation.

BRAND CONNECTIONS

He was most persuasive when he talked about the value of targeted advertising. With 3.0, which will allow seamless integration with the internet, broadcasters will be able to send specific ads to individuals based on their viewing habits or such things as their Facebook profile.

“Anybody here sell spots?” Smith asked. “[How much more is] a targeted ad worth — 2X, 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.”

Of course, even if the technology works as Smith says it will, it will be many years before most TV sets are equipped with a 3.0 tuner and link to the internet.

Two weeks ago in this space, I asked whether 3.0 would kill the golden goose of retrans. My thought was that 3.0 would so improve over-the-air reception that cord-cutting would accelerate and broadcasters would lose a buck or two a month for each home that abandoned their cable or satellite service.

The 3.0 proponents at the conference weren’t buying it. Sook didn’t see the linkage between 3.0 and cord-cutting. “I think you’re mixing apples and oranges,” he said.

LaPlatney conceded there make be some loss of retrans revenue as of a result of a 3.0-powered rise in OTA-only homes. “But … the thought was that the growth in advanced advertising would more than offset whatever leakage there was.”

I think that is probably the best answer — or at least the one that makes the most sense to me. If a station can one day double or triple the price of its spots by targeting them, concerns about lost retrans become trivial.

Although I agree with Sinclair that broadcasters have to deploy 3.0 as their best hope of regularly posting big revenue gains again, even in odd-numbered years, I also remain a bit of a skeptic.

But my skepticism is the opposite of Abernethy’s.The business opportunities are clear and compelling. But having seen ATSC 1.0 and its mobile DTV derivative fall short of the hype, I still need to be convinced that the 3.0 technology is really up to the job.

We posted an edited transcript and full video of the session yesterday. If you haven’t already done so, I urge you to  check out one or the other.There’s a lot more to mull and parse.

There is no bigger story in TV broadcasting today.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here. You can read earlier columns here.


Comments (6)

Leave a Reply

Doug Smith says:

November 21, 2016 at 3:13 pm

I would not bet against David Smith, Pat LaPlatney, And Perry Sook, they are real broadcasters, Fox has too many apples in too many baskets besides broadcasting. Mr Smith is right broadcasting is not a growth business if your not growing then your declining!

Robert Vincent says:

November 21, 2016 at 9:56 pm

Its to get to the profit model as fast as possible. Broadcasters have not been able to adequately monetize OTA television. Sinclair developed the entire ATSC 3 format in order to be able to turn free tv into pay tv. Soon to come are encrypted channels based on a subscription model. It will even include a mix of free and pay tv where you pay to see the CBS NFL game. You pay to see the Saturday night movie. This becomes a reality under ATSC 3 and for many, it will simply be the end of the entire tv experience.

    Trudy Rubin says:

    November 22, 2016 at 11:16 pm

    David Smith and the others stated they believe in the free market and I believe them. At the moment you have OTT (Netflix, Hulu etc.) cord-cutters (who some deny exist, or at least play a factor) and wireless phone carriers and everyone wants viewers. I doubt they will make a good profit going to all subscription, but again the free market will dictate it. Personally I would love to see how much better if at all the ATSC 3.0 signal would be. Perhaps I would be able to get Sinclair’s WNYO again (if it survives the auction). Whether I got WNYO or not, it would be great fun trying to get the ATSC 3.0 signal. Sinclair if you want someone to test the ATSC 3.0 in a OTA home on the fringes of the Buffalo NY market, I am volunteering. Although I am sure the real test will take place when the FCC gives the go ahead for the move to the new standard

Shaye Laska says:

November 23, 2016 at 9:08 am

3.0 will be local cable on steroids. 3.0 will deliver mass scale consumers base, not “super niche” [tiny local audiences] targeted by geo, date and time and screen. Local and regional business will have all they want, from one provider. How will that not be a major hit? I’m all in.

Philip LeNoble, Ph.D. says:

November 23, 2016 at 5:00 pm

I am curious how many consumers will adopt VPN’s to hide their IP addresses as intrusiveness by both government and commercial interests become more pervasive and personal privacy concerns become more mainstream. I think banking on the availability of IP addresses and browsing history without considering consumer concerns about privacy is like driving with a blind spot.

Gabby Fredrick says:

November 25, 2016 at 11:02 am

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 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 economics class..Supply and Demand. There is plenty of supply but….you fill in the blanks.


More News