By Aldo Cugnini
Broadcast & Distribution – It is sad that we must relay the news that a longtime friend will be leaving the publishing scene: Broadcast Engineering magazine. In all sincerity, I write on this here not for personal reasons (I’ve been a contributing columnist to the publication for seven of the magazine’s 54 years, and a reader for a long time), but because of the inescapable reality it suggests for TV broadcasting: sending video over the air to viewer homes just isn’t as lucrative as it used to be. Readers may say that the obvious disruptor has been the rise of the Internet, or digital media distribution in general (ironically, the very column I contributed to at BE was called Transition to Digital). So it behooves us to reflect on just how we got to this point.
The first stirrings of competition with the broadcast empire was perhaps the birth of cable TV service in the late forties, and by 2006, almost 60 percent of TV homes in the U.S. subscribed to some form of cable. Of course, cable always helped broadcasters financially to some degree, due to the retransmission consent agreements in place, and that piece of the revenue pie is growing: according to NBC/Universal CEO Steven Burke, while NBC made virtually nothing on retransmission consent two years ago, this year they’re expected to make about $200 million, with the other networks making optimistic projections as well. It’s no accident that NBC is now part of one of the largest cable companies, Comcast.
The advent of consumer video tape recording created another affront to broadcasting, in that TV viewers could now watch Hollywood films in their homes in competition with the TV broadcast schedule. The over-the-air TV business further eroded when satellite services made digital TV available to the public in the 1990’s. At the same time, companies like Motorola started making waves at the FCC, saying that the broadcast “megalopoly” was unfairly keeping other technologies (i.e., cellular telephony) out of a big chunk of spectrum. Broadcasters saw this coming, so in the late ‘80s, began considering how to deliver a competitive product, HDTV. Based in part on encryption technologies for satellite video distribution, the HDTV system became an all-digital one, and with this, broadcasters became armed with a defense for keeping their spectrum – bandwidth efficiency.
More recently, video-on-demand (VOD) and over-the-top video (OTT) have added to the woes of broadcasters by providing a seemingly-endless new breed of media with which to compete. And with disruptors like Aereopushing to change the business model, broadcasters have already “warned” that they may in fact end up switching to “other means” for distributing their over-the-air content. Faced with this onslaught of alternative video distribution means, as well as an FCC determined to pull spectrum away from broadcasters through voluntary auctions and incentives, broadcasters have made another attempt to justify their spectrum holdings – mobile video, including emergency services to disaster victims. To date, however, mobile TV has not resulted in anything more than a feeble showing, further clouded – as a viable interim business, that is – by work on a new broadcast standard.
In the meantime, viewers continue to watch and absorb video in increasing numbers on displays of all sorts, so there’s no indication of any lack of interest in video entertainment. In the next ten years, broadcasting is likely to morph into some new kind of service, perhaps more closely integrated into a multi-medium delivery scheme. And while different trade groups may argue over the number of homes relying solely on over-the-air TV (NAB says 19.3%, CEA says 7%), the truth is that revenue from broadcast advertising continues to slip – and that’s what fuels over-the-air TV and its associated businesses. The nostalgic truth is that the airwaves have lost their value as a cash cow for the TV networks, and are destined to become just another “pipe,” finally separated from their initial intrinsic value as an alternative to the movie theater.