OTA's Silver Lining Also Has A Looming Cloud
By Harry A. Jessell, Editor
TVNewsCheck
May 24, 2013 1:46 PM EDT
http://www.tvnewscheck.com/article/67778/otas-silver-lining-also-has-a-looming-cloud/format/print
One of the great things about broadcasting is broadcasting — the
over-the-air technology that lets anyone, anywhere tune in for free
(assuming the proper antenna).
OTA gives broadcasters an edge over all cable channels, which are
restricted to the subset of TV homes that choose to subscribe to cable
or satellite. Because broadcasters reach virtually every TV home, they
continue to draw the biggest TV audiences. They remain the favorites of
the mass marketers as the returns from the upfront ad dealing will prove
once again in the coming weeks.
OTA also makes broadcasters the go-to source for news and information
when disasters strike and cable lines and cell networks are apt to fail.
See Moore, Okla.
But OTA is not the unqualified blessing that it once was.
Over the past several years, broadcasters have begun receiving fees from
cable and satellite operators that retransmit their signals. They are,
in effect, cable programmers and partners of the operators.
And retransmission consent revenue is vital. Broadcasters' digital media
have been a disappointment and, as Nexstar Broadcasting CEO Perry Sook
acknowledged in a speech at the MFM conference this week, spot revenue
is increasing at a rate of only 2% or 3% a year. “Admittedly, it’s not
the kind of growth that investors or owners want to see."
By contrast, retrans has real upside. According to SNL Kagan,
broadcasters reaped $2.4 billion from retrans last year and, if nothing
untoward happens, should see the take increase to more than $6 billion
by 2018.
So, here's the rub. Retrans is based on the number of subscribers. Every
time a viewer cuts the cord on cable or satellite and turns to OTA, it's
not just the operators who suffer. The broadcasters takes a small hit, too.
And cord-cutting is no longer a series of anecdotes. It's a fact. The
major operators recorded a net loss of 80,000 video subscribers over the
past four quarters, the Leichtman Research Group calculates.
"First-time ever annual industry-wide losses reflect a combination of a
saturated market, an increased focus from providers on acquiring
higher-value subscribers, and some consumers opting for a lower-cost
mixture of over-the-air TV, Netflix and other over-the-top viewing
options," explained Bruce Leichtman, president of the firm.
Aereo, the Barry Diller-based service that is causing broadcasters so
much angst, is using OTA against broadcasters. By claiming that it is
providing a one-to-one antenna service, it is taking the OTA signals and
packaging and reselling them to subscribers via the Internet without
paying copyright holders or broadcasters.
At bottom, it's a retrans-avoidance technology. If the courts don't shut
it down, Aereo could license the technology to cable and satellite
operators, which would then be able to offer broadcast signals in a
separate IP package to subscribers without paying retrans.
DirecTV is not waiting for the courts to rule on Aereo. Speaking at a
J.P. Morgan conference in Boston last week, according to a report in
Broadcast Engineering, CFO Patrick Doyle said that the satellite TV firm
is working on a set-top box that would seamlessly integrate OTA signals
with the rest of the cable offerings so that DirecTV would no longer
have to pay retrans fees.
Given the rising cost of retrans, "it's starting to make sense," he
said. "We’ll spend more time on it. We’ll probably test in some markets
an over-the-air integrated tuner set-up and make sure the customer
experience is there.”
This is another example of media jujitsu — turning broadcasters' OTA
strength into a weakness.
The problem with Doyle's scheme is that it will require subscribers to
hook up an antenna to the set-top box. In some cases, simple rabbit ears
will do. In many others, however, it will take an outdoor antenna,
perhaps a big array on the chimney. So, I think the impact on
broadcasters and their retrans revenue would be minimal. One of the
reasons people sign up for cable and satellite is so they can get rid of
their antennas.
Which leads me to ATSC 3.0. Many broadcasters have been lining up in
support of developing and implementing a next-generation broadcast
standard over the next several years. Its OTA signal would be far more
rugged than that of today. You will be able to receive it inside homes
or on mobile devices with small, inconspicuous antennas.
I have been a champion of such a standard, seeing it as a way for
broadcasting to maintain its ubiquity in a world where viewing of
primetime is as likely to take place on a 10-inch screen resting on
one's belly as on a 60-inch screen hanging on one's living room wall.
But there is the downside. If OTA signals can be received easily on any
device, including set-top-boxes with little whip antennas, why would
cable and satellite operators or anybody else pay for them?
As broadcasters plot strategy for the next 10 years — and I hope they
are taking time between the quarterly sales report to do so — they need
to consider the role that OTA — especially in the advanced, more potent
form contemplated by ATSC 3.0 — will play.
In the meantime, they need to find the sweet spot. They need to
encourage some cord-cutting so as to maintain a high percentage of
OTA-only homes and their advantage over cable channels. At the same
time, they don't want the percentage to go so high that it starts really
irritating cable and satellite operators and cutting significantly into
the retrans loot.
I don't know what the sweet spot is. In fact, I'm not sure of the
percentage of OTA-only homes today. Estimates range from 9% (Nielsen) to
18% (GfK Media). But my hunch is that it should be higher than it is.
More millions of homes relying on broadcasting for TV would not only
help in ratings and ad sales, but also in the battle to hang on to
spectrum in Washington. Twenty-five percent seems like a nice target.
But as broadcasters mull the optimum OTA-to-non-OTA ratio, they should
know this: As Aereo has demonstrated and DirecTV has now threatened, OTA
can and will be used against them.
This article can be found online at:
http://www.tvnewscheck.com/article/67778/otas-silver-lining-also-has-a-looming-cloud.
_______________________________________________
Medianews mailing list
[email protected]
http://etskywarn.net/mailman/listinfo/medianews_etskywarn.net
