Sinclair Envisions ATSC 3.0 Royalty Windfall

If the proposed next-gen TV transmission standard is adopted, Sinclair Broadcast Group stands to profit from its contribution of intellectual property, the company's execs say. "You should assume that anybody who is going to watch television, whether it is on virtual reality devices, cars, machines, phones, pads, TV sets is going to [be using] our technology," said CEO David Smith.

Sinclair Broadcast Group CEO David Smith has high hopes for ATSC 3.0, not only as a new, more capable broadcasting system, but also as a source of revenue from the technology it has contributed to the standard through its OneMedia R&D unit.

The intellectual property “opportunity is fairly straightforward,” Smith said on a call with securities analysts following the release of fourth quarter earnings this morning. “We own it; it’s ours.”

Once the standard is finalized by the ATSC, authorized by the FCC and put to work, he suggested that Sinclair would be entitled to royalties for every TV set sold in the United States, probably the rest of North America and South America, likely South Korea and possibly even Europe.

“It’s possible that it becomes the global standard,” he said.

“How do you subscribe value to that? We are not even going to try. But you should assume that anybody who is going to watch television, whether it is on virtual reality devices, cars, machines, phones, pads, TV sets is going to [be using] our technology.”

For Sinclair, any royalties would represent a return on the investment it has made in OneMedia. According to Lucy Rutishauser, SVP, corporate finance and treasurer, that investment amounted to $12 million in 2015 alone.

BRAND CONNECTIONS

ATSC 3.0 is “advancing very quickly now,” Smith said. ATSC will soon finalize the standard. After that, he said, the industry will petition the FCC to permit its use.

Then, it’s just a matter of the top station groups getting together and implementing it. With consolidation, that is not as tough today as it would have been several years ago, he said.

In the meantime, Sinclair will be active in heralding the new standard. It is planning a demonstration of what the “future world” will look like with ATSC 3.0 enhanced by a single frequency network in Baltimore and Washington, the two adjacent markets where Sinclair owns stations.

Single frequency networks — multiple transmitters broadcasting the same programming — is key to the ATSC 3.0 rollout, insuring blanket coverage of markets.

Sinclair will also be involved in “full-blown” demos at the NAB Show in April and will host a “plug and play” where manufacturers of TV gear and receivers “get in a room and start comparing notes and making sure that their equipment is interfacing and does everything that it is supposed to do.”

Said Sinclair CFO Chris Ripley: “Our expectations and conviction around ATSC 3 has been quite high and [they will] only be getting higher.”


Comments (3)

Leave a Reply

Ellen Samrock says:

February 24, 2016 at 4:10 pm

The issue of royalties became very obvious last year when Sinclair threatened to go it alone if the ATSC didn’t adopt its technology. But LG, Zenith, GatesAir and others have also contributed to the new standard and will also be taking their share of royalties.

Joel Ordesky says:

February 25, 2016 at 7:58 am

80-85% of Americans who are watching cable/satellite will be paying royalties for a technology they will never use. If the goal of 3.0 is to get people off of pay TV, back to OTA, then the royalties may help make up for the loss of retrans.

Lavada Lambert says:

February 26, 2016 at 11:01 am

You both present good observations. If the total royalty pool is only $1 per device, then by the time you divide it all up each party may not get that much. I’m not sure the goal of 3.0 is to get people off pay TV but it seems to me that if consumers can get 35% of the media viewing they want for free and both much easier (no antenna) and to mobile devices without using wireless data, the consumers could increasingly cancel pay TV. Consumers can then pay “a la carte” for Netflix, Hulu, or whatever other media they want to subscribe to.


More News