Editor's note: The following editorial was written prior to last week's news of the collapse of the Sinclair Tribune merger.
Does the television broadcasting industry need further consolidation in order for Next Gen TV to succeed?
That was one of the main arguments put forth by Sinclair in its efforts to acquire Tribune when it announced its deal last year. “The acquisition will enable Sinclair to build ATSC 3.0 advanced services, scale emerging networks and national sales and integrate content verticals,” said Chris Ripley, Sinclair president/CEO at the time.
The $3.9 billion deal would have added 42 stations to Sinclair’s current stable of 193 stations. Even after selling off a number of stations to comply with federal rules, the combined group would control 215 stations reaching 62 percent of U.S. households in 102 television markets.
Last month, FCC Chairman Ajit Pai, who originally supported the proposed deal, did an about face, expressing doubts about the acquisition after reviewing station transactions—in particular, two stations in Texas and WGN-TV in Chicago, characterizing them as “sham” transactions.
Later, the commission released a hearing designation order that provided more details about their concerns, saying it had “significant questions” about the divestitures.
“We are unable to find upon the record before us, that grant of the applications would be consistent with the public interest,” the commission said, adding that the facts in the order “raise questions about whether Sinclair was the real party in interest under Commission rules and precedents and attempted to skirt the commission’s broadcast ownership rules.”
Sinclair denies any wrongdoing and says it has been straightforward with the commission. Nevertheless, the company said it would be “greatly disappointed if the transaction cannot be completed.”
The FCC’s actions has prompted the Department of Justice to examine the process of TV ad sales and whether broadcasters have conspired to artificially inflate ad pricing. Several class action suits have been filed against Sinclair, Tribune and several other station groups.
The furor that has erupted over this issue illustrates the dilemma broadcasters face in today’s media market. Facing increasing pressure from Silicon Valley over digital advertising platforms based on personal data that can target individual consumers down to their shoe sizes, the broadcast industry is responding by touting the advantages of Next Gen TV, which, because of its IP-based two-way data capabilities, will be able to better compete with the Googles and Amazons of the world in targeted advertising.
“The biggest continual decline in our business is ad revenues,” Mark Aitken, vice president of advanced technology for Sinclair told the Wall Street Journal last year, adding that deployment of the new standard could stop and ultimately reverse that “draining process.”
Now that the merger is in serious doubt, do we need to be concerned over how it will affect the transition to ATSC 3.0? The transition to ATSC 1.0 was a government-mandated transition, with built-in incentives to ensure consumers would continue to receive over-the-air broadcasts. The transition to ATSC 3.0 has no such protections—it is a market-driven, voluntary deployment that will also require cooperation among competitors to transition away from 1.0. Sinclair is not the only station group that has promoted the advantages of consolidation in order to finance the deployment and advantages of ATSC 3.0.
But the benefits far outweigh the burdens of deployment, which could cost as little as $100,000 for a small independent station to as much as $1 million for a facility shared by several. It will enable broadcasters to improve their competitiveness in the digital media marketplace and better serve their local communities. And let’s not forget perhaps the most important incentive of all: When it comes to spectrum, the FCC is effectively telling broadcasters: “Use it or lose it.” The commission has made it clear that our industry will need to make optimum use of our remaining spectrum and to that point, ATSC 3.0 is the end game.
Deal or no deal, I believe Sinclair will continue to work towards deploying the standard. I don’t doubt their offer to “put millions of chips into the hands of suitable device manufacturers free of cost,” still stands. The company holds numerous patents on the standard that will still enhance their bottom line if and when widely deployed. And let’s not forget the importance of alliances such as Pearl TV that continue to test and commence building out facilities to launch Next Gen TV.
The business advantages for ATSC 3.0 extend beyond just the consumer market. Sinclair, in particular has touted the standard’s datagathering advantages for business-to-business and related enterprises.
In short, we are just beginning to touch the surface of Next Gen TV’s vast opportunities and its success is not dependent on any one company. The potential collapse of the Sinclair Tribune merger could make it more difficult to reach critical mass, however it won’t stop the train.