Local TV stations plan to remain relevant as they move to streaming

Adam Symson, CEO of EW Scripps

Source: EW Scripps

The technology behind the proliferation of television has evolved over time from antenna to cable to satellite and most recently to streaming.

According to Adam Symson, Chief Executive Officer of EW Scripps, now is the time for the next frontier in television:

The antenna.

As consumers move away from traditional pay-TV to subscription streaming services, the digital antenna will be a necessary part of people’s viewing habits, Symson said in an interview.

Americans need to find other, free ways to complement streaming services as they get the most out of the monthly subscription fees, Symson said. Broadcasting networks that offer local news, sports, soap operas, staples for game shows like “Wheel of Fortune” and “Jeopardy”, and prime-time content from their national networks will continue to deliver indispensable content to American households – even after streaming services hit linear television as the dominant form of television, he said.

“There is no digital platform that can match the ubiquity and availability of broadcast television,” said Symson. “Everyone’s looking at the subscription video services. They’re all spending a huge amount of money on risky ventures trying to create platforms. But for the average American consumer, if you sign up for all of them, I don’t think it’s economical is sustainable. “

A young girl adjusts the antenna of a television to get a digital signal.

Luis Gutierrez | Norte photo | Getty Images

The transition to streaming is quick. According to a Deloitte poll released this week, the average American is already paying for four video streaming services. Nearly 7 million American households likely stopped their traditional pay-TV service in 2020, a record high.

However, there is a significant risk for broadcasting groups – companies like Sinclair Broadcast Group, Nexstar Media Group, TEGNA, EW Scripps, and Gray Television – as Americans turned live linear television over to a mish-mash of Disney +, Netflix, Peacock from NBCUniversal , HBO Max from AT&T, Paramount + from ViacomCBS, and others.

Retransfer fees

The biggest existential concern for network partners is the hypothetical loss of billions of dollars in retransmission fees if Americans cut the cable and get pay-TV out of the way.

Over the past decade, broadcasting groups have been charging pay-TV operators – Comcast, DirecTV, Dish, Charter, etc. – for the right to broadcast their channels. The trend started around 2006 when broadcasting groups realized that consumers wanted access to their local TV channels as well as, if not more than, the most popular cable networks (such as ESPN or CNN), which had long been charged.

Channel groups rejected so-called “must-carry” regulations, according to which pay-TV operators had to broadcast local channels and share advertising revenue with them, and instead accepted direct payments from pay-TV operators – with the risk that one day Pay TV operators could change their minds and discontinue these channels.

This shift led to a booming industry. The total retransmission fees paid to station group owners rose from about $ 200 million in 2006 to over $ 10 billion in 2018. They are still rising. Research firm S&P Global expects fees to exceed $ 15 billion by 2023.

Nexstar, the largest US television station owner, earned nearly $ 2 billion in retransmission fees last year – about 44% of the company’s total annual revenue. Nexstar’s total return was nearly 3,000 percent between 2010 and 2020, making it the fifth-best stock of the decade on The Russell 1000 Large Corporate Index.

Nexstar continues to report an increase in retransmission fees. Curry Baker, an analyst at Guggenheim, estimates that Nexstar will generate around $ 3 billion in retransmission revenue by 2024. This assumes that estimated future surcharges on retransmission fees will more than make up for the number of subscribers who will cut the cable over the next three years. About two-thirds of all US households still subscribe to a linear bundle of channels – either via cable, satellite, or a digital bundle of networks like Hulu with live TV or YouTube TV.

Charges could also be protected by “re-intertwining” digital streaming services and local broadcast channels into a non-existent cable package, said John Chachas, a longtime media banker who advised EW Scripps on its $ 2.6 billion Acquisition of Ion Media, which was completed earlier this year. In an unusual move, Chachas also personally acquired 23 Ion Media networks to ensure regulatory approval for this deal.

“There will inevitably be a new streaming distribution platform that offers a thinner bundle of subscription streaming services and digital broadcasting networks,” said Chachas. “These platform packages have to pay broadcasters for their local content because they are the only ones who will have it.”

But a fundamental shift in how Americans view television could dramatically change those predictions.

The largest entertainment companies have reorganized over the past year to shift resources to streaming and away from traditional linear networks. It is possible for entertainment companies to offer enough content within the walls of their paid streaming services that broadcasters are slowly losing favor over time.

There are already signs of this. Comcast’s NBCUniversal and ViacomCBS recently signed an 11-year deal with the National Football League, whose games are always the most popular content on television. On the surface, this was good news for the broadcasters, who now have more leverage to further increase retransmission fees.

The deals also give NBCUniversal and ViacomCBS the right to stream local NFL games to paying subscribers to Peacock and Paramount +. This can speed up cable cutting.

Comedian Seth Meyers during an interview with host Jimmy Fallon on November 18, 2019


Football isn’t the only content that goes beyond the exclusivity of broadcast television. NBCUniversal made “The Tonight Show with Jimmy Fallon” available on Peacock first before airing it on NBC Partners every night at 11:35 p.m. ET. Time-shifting programs in favor of paid streaming services could add value to television television entertainment, which in the past first aired prime-time programs.

The problem with the antenna

There is no retransmission fee for an antenna. While an antenna can help maintain local broadcast television-related advertising revenue, it is not a good solution to the retransmission problem.

It will also be difficult to convince younger consumers to buy an antenna, said Jack Perry, founder and CEO of Syncbak. About 15 years ago, Perry developed a website called AntennaWeb that told consumers which free channels were available with an antenna. He quickly realized that while millions of people were using the website every week, it didn’t result in actual sales of antennas.

Loretta Hostettler | Getty Images

“When you say antenna, people think ‘old-fashioned,'” said Perry. “If you want to use an antenna, that’s great, but there has to be a streaming solution.”

NextGen TV

If younger consumers are declining to buy a digital antenna, NextGen TV is a possible answer.

NextGen TV – or rather ATSC 3.0 – is a 4K wireless television that can be used for streaming. Access is via new smart TVs with integrated tuners. Sony, Samsung and LG are already making them.

So far it only exists in 26 cities. But 14 more are coming this summer and more than 50 this fall, including New York, San Francisco and Miami.

“Bringing wireless terrestrial television together with the Internet enables local broadcasters to personalize their news, sports, live events and shows with interactive features that provide viewers with the content that is most relevant to them,” said NextGen’s website.

Streaming solutions

For NextGen TV, however, a consumer must buy a new television. With so much showing on mobile devices, developing a streaming option for local broadcasters is critical.

Syncbaks Perry developed this. Syncback introduced a digital platform called VUit that seeks to be “the Netflix of live, local, and free” television. A VUit user can access 200+ local TV channels for free and watch live linear feeds from local channels as well as other local content specially created for the service. The platform debuted in September.

There are also free ad-supported national streaming services like Tubi from Fox Corp. that have started offering local news feeds. ViacomCBS’s Pluto TV has started asking local broadcasters for access to their news programming, according to those familiar with the matter, but the digital feed would not be live – which would avoid retransmission payment.

Adam Ware, executive director of Sinclair Broadcast, said Pluto executives asked for access to Sinclair’s 186 channels but so far the company has declined. Instead, he uses this moment to develop a streaming service for the Sinclair Broadcast Group called Stirr.

Stirr is a free linear service that features local newscasts from the Sinclair station and other local content specially designed for streaming – and it’s the company’s plan to go straight to consumers. Sinclair has also started creating original local content for the service, such as Stirr City, a linear feed of news, sports, lifestyle and entertainment programming based on where a person lives.

“Right now, the first thing we think about is content that we have the rights to power Stirr on, which we think is a growth component of Sinclair,” said Ware. “If you look at previous reviews, this goes against the idea that local channels are nothing more than network programming. Au contraire. These channels have significant value because of the local content they offer.”

Whatever the solution, the key for broadcasters is to think about new sources of revenue if retransmission fees eventually plateau and fall, Perry said. The main ingredient, he said, is more creative hyper-local programming that only a community broadcaster can deliver – content that goes beyond local news and appeals to an increasingly older audience.

But that is easier said than done. It makes sense to combine hyper-local video with cable television or other inexpensive, under-viewed programs.

“The focus for local broadcasters really has to be on giving our viewers something interesting that they can’t find anywhere else,” said Perry. “Let’s use what we do best, which is our communities. And after we’ve done that, we bring our local advertisers into the mix. That’s the formula for success.”

Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.

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