Smith: Adopt Next TV Standard – Now

The Sinclair Broadcast Group has been much in the news lately, buying up stations at an unprecedented pace. The spree has boosted the Baltimore-based group to No. 4 on the TVNewsCheck-BIA/Kelsey Top 30 Station Groups, and it’s still shopping for more.

But CEO David Smith would rather not be thought of as the industry’s great consolidator, but rather as its great visionary.

Although he has never been part of the industry’s clubby inner circle, he has led before by example. He practically invented the legal workaround that lets groups operate multiple stations where the FCC rules say they can’t own them. He was early and aggressive in demanding retransmission consent fees, thereby establishing a solid new revenue stream.

And he just did the entire industry a favor by rescuing Dielectric, the leading maker of TV antennas and other RF gear that was about to close up shop for good.

His current vision is one in which broadcasting goes toe-to-toe with cable, satellite, wireless broadband and any other medium in providing multichannel TV, free or pay, fixed or mobile, and in giving advertisers the ability to target ads to the individual consumers most likely to buy.

It’s all possible, Smith insists in this interview with TVNewsCheck Editor Harry A. Jessell, if the industry moves quickly and decisively in developing and implementing a new, more capable broadcast standard, even if it is incompatible with the current standard and the tens of millions of TVs in use today.

An edited transcript:

The Advanced Television Systems Committee has begun work on a new broadcast standard it has dubbed ATSC 3.0. You and your advanced technology maven Mark Aitken have become vocal proponents of defining, adopting and implementing it as soon as possible. How come?

The answer is easy. I look at all the technologies out there that are in use today that compete against us, and the fact of the matter is, we can’t compete.

Why is that?

We’re a one-way technology in a two-way world and we’re a one-way technology that doesn’t work in any kind of portable or mobile context. If I pull out a portable television set and set it on my desk, there’s a high probability I can’t watch it. If I want to pick that TV set up and walk 20 feet to the other side of the room, there’s a chance it might work better. Well, that’s not a business. There’s no business that revolves around technology that works part-time.

When you think about the larger picture of what we need as broadcasters, if we can’t do what everybody else does in a portable and mobile context, then we can’t compete.

So this next-generation signal, you think it cures the mobility problem. It will get broadcast signals into smartphones and tablets wherever they are?

Absolutely.

And what will this next-generation standard be?

It will be an evolved iteration of what we proposed initially 15 years ago, which was what we thought was the right platform.

And what was that?

It will be an OFDM-based platform that may have lots of different bells and whistles attached to it because of the evolution of technology.

This is what they are using in Europe so we have some experience with it.

Yeah, we do. They’re using it pretty much everywhere now. It’s called a number of different things—DVB-T, DVB-T2. The phone companies use it. We actually use it in newsgathering now. We’re using OFDM-based portable transmitters on camcorders. So if you’re watching the golf tournament, the guy is walking around with a camera and on the back of the camera he has got a little OFDM transmitter.

What else does the new standard do for you? What do you do with the signal once it is truly ubiquitous?

You get materially more capacity, which would provide us the ability to deliver different spots to different devices, be they television sets in the home, iPad-type devices, phones, etc. This is the way the world is moving very quickly — to the model of I- want-to-deliver-a-different-spot-to-each-different-device.

We live in a world of big data and the ability to target by virtue of the Internet and by virtue of phone companies’ capability to deliver specific spots to specific people now. Advertisers want that because it’s more efficient.

But broadcasting could never get as granular in targeting ads as cable and the Internet.

Sure we can.

Think about it in terms of Mary and Joe Beercan. They have phones and iPads. If they don’t today, they soon will. That pad has a specific address. It’s my sense that people don’t loan phones or their iPads any more than they loan a car or their clothes.

Therefore, once they have downloaded my app so they can watch my station, they have given me some specific information. I now know who they are and I know when and what they’re watching. That is the most valuable data that exists in the universe today. That’s what advertisers want to know.

Doesn’t a targeted advertising service require two-way capability?

No, not at all. I only need to deliver one-way because your device is probe-able. You may not like to hear that, but the fact of the matter is that your device is being probed all the time.

When you sign up for an app — whether it’s a newspaper app, TV app, whatever — it doesn’t make any difference. When you read that contract, you have essentially waved all your rights to anything.

Once you have downloaded that app, I can probe your computer, I can probe your device, and then I can target advertising to you. I can tell the advertiser specifically who watched your content and saw your ads and I can tell you where they were when they watched it because all the stuff has geo-targeting capabilities on it. With GPS today, I can tell you where you are and what you’re doing.

Is the targeting advertising the No. 1 application you see for the next-generation standard?

Yes. People want to know, advertisers want to know what the value of their ad was, and how do you measure the value of your ad. There are two ways: No. 1, you have certainty that somebody saw it; No. 2, you have certainty that somebody took an action as a function of seeing it.

You are the majority owner of MileOne, among the largest privately owned car dealers in the country. As such, you are a big advertiser. Have you been experimenting with targeted advertising as a car dealer? Is that where all this is coming from?

Right, correct. Pretty much everything we do is Internet-based advertising, targeted advertising specifically to individuals who have given us information. It’s a function of big data. I now know that you have a car that’s 14 years and three months old, that has two sets of tires on it, that’s got 172,000 miles on it. That tells me you’re likely to buy a car in the not too distant future just based on statistical averages. I will now start sending you an ad based on the kind of information. If you have a Chevy today, I may start sending you Chevy ads saying: “Have you seen the latest Chevy?”

How do you send that ad today?

I can’t do this in the context of over-the-air television. But I can do it in the context of the Internet and in the context of cable. With cable, I can do it to neighborhoods or individual houses and soon to individual set-top boxes within the houses.

All the cable and satellite companies are doing this. This is pretty much basic 101 stuff anymore, not complicated.

So broadcasters have to move to the next-gen system just to keep pace?

Absolutely. Right now, we are a one-to-many medium and the world is moving. That’s the problem with our business model. That’s why we need adaptable technology to move with us. We don’t have that. We don’t have adaptable technology.

What other opportunities are afforded by the new standard?

With a new platform standard, I can be a multichannel pay provider.

Well, people have tried that over-the-air subscription business before and not gotten very far.

Not seriously they haven’t because the platform didn’t work. It wasn’t ubiquitous, it wasn’t available everywhere and the technology didn’t lend itself to making it easy to do. Now it’s easy to do.

So now you’re telling me that with the new standard, you would try wireless cable again?

Absolutely, absolutely. You can do it all day long, all night long. It’s not just wireless. It’s ubiquitous and by virtue of the technology, we can make every television set addressable, every phone addressable, every portable device addressable.

We could be talking to those devices with content that we wouldn’t be able to put over the air on a free basis. So I would ask you then, how many subscribers do I have to have?  How many subscribers does the industry have to have in order to push that content through our pipe?

How many people would have to subscribe and hit my app and say: “I’m prepared to pay $5 a month because I can get content I can’t get on cable.” And I can use my little local television station to tell people they better go watch it.

It’s an idea whose time could come again and the only thing that stands in the way is the platform and the desire on the part of the people in our industry to go make money. That’s all.

OK, so there’s another route that you can explore with the new standard.

There’re a hundred routes, all of them focused on making money.

Around the time of this year’s NAB Show you said that you were going to start experimenting with mobile DTV — the mobile extension of the current standard. Why bother with that when the next-gen standard will presumably do mobile better?

I view it as a transitional standard.

Until we get to this next point, this single unified field theory of broadcasting where a single signal can reach every kind of device, fixed or mobile?

That’s correct.

NBC, Fox and ABC are pushing a new mobile strategy called TV Everywhere. TV Everywhere is kind of a bonus for paying cable and satellite subscribers. You partner with cable and satellite and maybe you would make a few extra retransmission bucks along the way by being part of it. What do you think?

I have to tell you that I haven’t paid much attention to it.

Given the potential you envision, do you think people undervalue broadcast spectrum?

Of course they do.

To what degree?

I can’t calibrate that for you. All I can tell you is [securities analyst] Marci Ryvicker at Wells Fargo came out and said, our stock, independent of earnings, was worth $35 a share. I can’t calibrate that for you. That’s her own calculus.

What I would tell you is that there’s no difference between my bit and their bit. I frankly think my spectrum is worth a lot more than $35 a share and I say that based on the analysis that we had done almost two years ago.

How quickly do you think the industry should move to this new standard and how quickly can it be done?

I think we should move as fast as humanly possible and my sense is, we could be rolling out new devices and new everything within 24 to 30 months with no challenge whatsoever, no technical challenge.

Except that you do freeze the technology at that point in time. Isn’t that one of the problems with standards?

No you don’t, because if you adopt the right platform and you have some visibility into what the rest of the world is doing, then you can, with the right base platform, you can adapt to those new changes in technology.

Because it’s software based?

Yes. That’s right.

What about the transition? The next-gen system will be incompatible with the current system and you know what an ordeal the transition from analog to current system was. How are we going to get through another transition?

I think we get through it simply by having to bite the bullet and do it because I frankly don’t think we have any alternative.

And what’s involved in biting the bullet?

Biting the bullet could mean that broadcasters, possibly in conjunction with the government, maybe not, will have to offer devices to the consuming public so as not to obsolete their existing television sets. This could be something as simple as a dongle that you can give away that plugs into the HDMI slot on the back of the TV. You would have to make a basic assumption there that pretty much all the television sets in this country are all digital and they all have HDMI ports on them.

I don’t know whether you have seen the ads in the local newspapers that are starting to come out now in full force, that 4K television is a must have for everybody, right?  Well as that thing starts to work its way into the marketplace, maybe we should start to give some thought to why not adopt the new platform now and make the transition simultaneous. The world is going to go to 4k.

So if we hurry up with the new standard, we can build the new tuners into the next generation of 4K sets?

Yes, why not?

Your assumption is probably correct. Most people do have digital sets with HDMI ports. But I suspect there are a lot of analog sets still out there with the A-to-D converter boxes that the government helped pay for.

Well, I’m not sure what they’re watching. I would tell you the cost of accommodating them is a rounding error in the larger business discussion.

Are you concerned about the incentive auction and the repack will somehow mess of the TV band and your ability to broadcast a ubiquitous signal?

I am not.

You’re not?

I don’t think so. If I’m on ch. 46 today and they want to repack me down to ch. 34, I’m OK with that. Just send me the check for a new antenna, transmission line and whatever I need to make that transition. I’m fine with that.

I think the bigger challenge for the industry — not just for Sinclair, but the entire industry — is there is a distinct possibility that for us to evolve in a way that’s consistent with the marketplace, we could need more spectrum over time.

You filed comments at the FCC in which you suggested that you might be a buyer of spectrum in the incentive auction. Is that right? You could see yourself being a buyer of spectrum?  

Yeah, in theory, sure, if I’m allowed to be a buyer. I may want to be a buyer in marketplaces where I own television stations.

To do the same kind of things we have been talking about here?

Exactly. I just want to do what they’re going to do. I want to do what the phone companies are going to do. The phone companies are going into the broadcast business because they recognize the importance of a one-to-many model. They also recognize the importance of a unicast model, which is what they do now, but they know they can be much more efficient if they can do one-to-many.

Do you feel that any of your peers understand what you are saying and the urgency in moving to the next-gen standard?  I know that you have talk to them about this.

Yes, there’re any number of people who completely understand it.

Who are they?

I don’t want to talk about that.

I don’t hear anybody else talking about the need to move to a new standard as quickly as possible. They seem to think that 2020 is soon enough.

Yeah, we’ll all be gone by then. That’s why we need the sense of urgency now.