David Smith: 3.0 The Only Avenue To Growth

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.

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.