"There is a tide in the affairs of men, Which, taken at the flood, Leads on to fortune."— William Shakespeare in
Julius Caesar
The tide for broadcast television is more at ebb than at flood these days. In the opinion of many, its defining moment—its tipping point, for better or worse—is at hand. Broadcast television's future depends almost entirely on the medium's response to the promise and inevitability of digital television. So far, that response has been sometimes valiant, but almost always short of the mark.
Hundreds of millions of dollars have been spent—many reluctantly—by broadcasters following the letter of the law of the digital transition. What has been missing is a willingness to reinvent their medium in ways that would have been unthinkable to the television pioneers of the 20th century. Digital broadcast pioneers have leapt but halfway across the digital chasm.
Today, broadcast TV is at a disadvantage. It cannot provide multichannel offerings and is confined to one revenue stream (advertising). The 1,600 over-the-air television stations (1,300 commercial) have left reception largely to others and are now dependent on cable and satellite to reach most of its audience. It's a flimsy foundation for a business. Only a one-vote margin in the Supreme Court supports laws that says cable and satellite must carry just one signal from each TV station. Broadcasters must take charge of their own destiny.
The good news is that they can—by exploiting fully the potential of their digital channels. To do that, however, they need a Manhattan Project-style crash program to:
- Improve the reception of DTV stations so that it is at least as good as that of their analog stations and;
- Explore the economic and technological feasibility of subscription-supported multichannel broadcasting through a broadcast-only set-top box.
A NEW GATEWAY
The broadcasters' set-top would be their new gateway into the home. With it, they could compete head-to-head with cable and satellite, offering a mix of the long-promised high-definition television, and standard-definition television, data for computers and possibly even Internet access. And like cable and satellite, they could begin to enjoy the second revenue stream of subscriber fees.
For consumers, the broadcast box would represent more choice, an alternative to the cable and satellite TV and one that, through the magic of broadcasting, could be enjoyed on any set in any room in the house. Assuming cooperation (and that's a big assumption), a local consortium of stations could deliver at least 20 or 30 channels, including possibly popular cable networks like ESPN, Lifetime and CNN. Some of the channels could be free. Some pay. Some HDTV. Some SDTV.
Interest in reviving broadcasting as a stand-alone medium independent of cable and satellite is taking hold in the industry. And much of it is being focused by the Association of Maximum Service Television, a Washington-based trade group dedicated to getting the most of the over-the-air technology. With the backing of some of major station groups on his board, MSTV President David Donovan is trying to rally broadcasters around the idea of a broadcast lab, an industry-funded R & D center to make DTV work.
"We are looking at the core fundamentals—getting the signal out off the tower and into the back of the set with a simple antenna," Donovan says.
"The coming of the digital age presents us with unique technical challenges and opportunities," he says. "It offers the promise of becoming a wireless facilities-based competitor to cable and satellite, delivering the long-promised HDTV and other services."
Creating a broadcast lab is not the only approach. The industry could wait on the marketplace. Indeed, WOW Digital TV Inc., a start-up company, has been testing an STB with "flying wing" antenna since February in Salt Lake City. The box receives the digital signals of the city's nine DTV stations—HDTV and SDTV—as well as WOW's proprietary content (video games and Internet-like news, sports and weather) that it is broadcasting over KJZZ-TV, an independent station owned by Utah Jazz owner Larry Miller. Encouraged by the trial, the company hopes to begin selling the boxes through retail stores in the fourth quarter. The price tag: $200.
This magazine first advocated a set-top box for broadcasters more than a year ago (April 23, 2001) in a three-page article by my predecessor as editor in chief, Donald West ("Digital Box to the Rescue"). Now, West and a number of associates—including John Abel, the founder of Geocast—are refining the concept under the trade name VideoEdge. Their emphasis is as much, if not more, on the business plan for digital as on the technology itself.
SPEND MONEY TO MAKE MONEY
But because of the complexity of the technological problems and the urgency, Donovan and leading broadcasters believe a lab is the way to go. It won't be cheap, but even spending many millions a year is miniscule when measured against the potential. The National Association of Broadcasters could help by dipping into its $85 million reserve fund.
Whatever the cost, the eventual pay-off could be great. Since they still deliver the most popular programming carried by cable and satellite, broadcasters have long believed they deserve a big share of cable and satellite subscription revenues, which are approaching $35 billion this year. Where retransmission consent failed in getting that share, the broadcast-only STB could succeed. "Whoever collects the fees controls the game," says the head of one Top 25 station group. "Let's build a box so that we can collect the fees."
Broadcasting's digital opportunity comes from Congress. In 1996, it awarded each TV station a second digital channel with the understanding, but not the requirement, that it would be used for HDTV. The idea was that broadcasters would build digital stations and operate them in parallel with their analog stations. Once 85% of TV homes had new TV sets with digital tuners—once the country had made the transition from analog NTSC to digital HDTV, in other words— the broadcasters would turn off the NTSC service and give back the analog channels.
That plan has hit high dead center. Although more than 400 stations have turned on digital stations, few have any idea of how to recoup their considerable investment in transmitters and antennas, let alone how to create a profitable new business. In fact, if not for the FCC's build-out schedule, digital stations might number in the 10s rather than the hundreds. And many of the new digital stations are empty shells, broadcasting at low power to meet the letter, not the spirit, of the law.
Meanwhile, the consumer electronics industry has run into great difficulty selling integrated digital receivers—that is, TV sets containing tuners and the other electronics necessary to watch over-the-air signals. There was a market for big-screen digital monitors—over two million have been sold—but fewer than 200,000 contained the electronic guts to enable broadcast reception.
To speed the digital transition, FCC Chairman Michael Powell is now talking about a rule that would require set manufacturers to integrate digital tuners in new sets over the next several years. The Powell initiative should be appreciated, but it's not the answer.
EMPOWERING THE ANALOG TV SET
The answer to broadcasters' digital future is analog. There are now 260 million television sets in the United States. But for the few hundred thousand digital sets (with tuners) sold in the last five years, they are all analog. Another 30 million analog sets join that population each year. Essentially, they never die.
The digital broadcast scheme now in place would relegate all those sets—and the television homes they occupy—to obsolescence. They won't yield the field easily. Cable figured this out from the first. It pioneered set-top boxes years ago because it couldn't wait for set to be built with cable tuners and because it wanted to scramble pay programming. Similarly, direct satellite takes advantage of digital compression and picture enhancement but in the end depends on analog sets for display.
By developing their own STB, broadcasters can re-empower every analog set. Then it can hold that part of the television audience intact through the true digital transition, which will take not years, but the greater part of a generation.
Broadcasting may have an ally in the effort to reinvent itself. Those consumer electronics manufacturers that are closed out of the cable and satellite STB market may be eager to mass produce the broadcast STB. Whatever the profit on each box, the manufacturers can multiply it by some large portion of those 260 million analog sets. Their challenge is to produce a box that not only handles whatever the broadcasters choose to send, but also provides the necessary addressability and security.
If cable and satellite were agreeable (currently they are not), manufacturers could integrate cable, satellite and broadcast into a single STB. Tribune's Ira Goldstone has conceived such an integrated box and has outlined it in a paper for the Advanced Television Systems Committee. Broadcast-only or integrated solutions aren't rocket-science technologically, although there are major variables in how they might be configured— and consequently in cost.
Perhaps a greater technological challenge than the box is improving coverage of the over-the-air digital signal. From the start, the 8-VSB digital transmission standard has been plagued by poor propagation and a surprising susceptibility to interference. Broadcasters cannot offer a new service to the 105 million TV homes, if it cannot reach them with a strong and reliable signal, preferably receivable via an indoor antenna. It's a problem, but one that should yield to the consumer electronics and broadcast engineers, if there are economics to demand it.
Another challenge is aggregating spectrum. Because each TV station has only one 6 MHz digital channel, a viable multichannel broadcast service requires cooperation among the broadcasters. Individually, a broadcast station can offer only a handful of SDTV channels in each market. Together, a group of broadcasters could offer a mix of at least 20 or 30 channels.
The number of channels could be higher. In the digital realm, the quality of a television picture can be turned up or down, with the ultimate judgment in the eye of the beholder. Cable, for example, uses compression ratios a broadcaster would never consider and has millions of customers who apparently are content. Over time, the inevitable improvements in compression and transmission technologies will make possible an escalating scale of broadcaster content. The key is in getting started before the opportunity—and perhaps the spectrum itself—is lost.
Broadcasters will also have to do some selling on Capitol Hill. The idea of multichannel digital broadcasting will upset lawmakers who feel that broadcasters should stick to the original deal—spectrum for HDTV. But rather than apologize for their multichannel ambition, broadcasters must start explaining it and win over those who oppose it. That's what the NAB is for.
CAN'T BROADCASTERS COOPERATE?
Some of the work of organizing broadcasters has already been done. iBlast has pulled together a broadcast DTV consortium of major broadcast groups including Tribune, Gannett, Cox, Post-Newsweek and Emmis. One source estimates it has contracts with over 250 stations covering more than 90% of TV households. Those blueprints have been designed primarily to connect broadcast-originated signals with personal computers, but presumably could be redirected.
Until now, broadcasters have sought political solutions to their dilemma—primarily by requiring cable to carry not just one digital signal but all they can muster in 6 MHz of spectrum. Or, alternatively, by seeking legislation that would require placement of integrated digital tuners in all sets manufactured after a given date—a solution that would eventually produce a digital universe but in the interim would require consumers to pay a premium for a service they might neither want nor need while still leaving behind those millions of legacy analog sets.
TV broadcasting is still a good business, particularly in the large markets where executives can talk about profit margins of 40%-50%. But it's not a growing business, and in small markets it is probably already a declining one. Deregulation will help bolster the bottom line. The more stations you can own and operate under one roof, the more viable each becomes. But what happens when all those efficiencies are exhausted and cable is an even more potent force in advertising?
Broadcasters need to become multichannel players with major program offerings and multiple revenue streams. It must reestablish its own proprietary gateway to and headend within the home. It must learn to cooperate. It must establish a transactional relationship with the viewer. It must capitalize upon all the advantages inherent to its medium. At the end of the day, broadcasting's first advantage may be its greatest: It can be wireless all the way.
Getting it done will require a talent with which broadcasters have little familiarity: cooperation. Part of the genius of the medium has been that, when any two broadcasters—or three or four or 50—are competing for the same audience, they will fight to the death for the last rating point. Now, they must put the rivalries aside and pool their resources to develop this new service and pool their spectrum to implement it. The perfect vehicle may be MSTV's broadcast lab.
It will require, as well, breaking out of the single-channel mindset and a rigid reliance on any one style of technology or business. Broadcasting's fiscal future may rely more on the subscriber than the advertiser, as is the case today with cable and satellite.
The Shakespeare quotation that began this analysis didn't stop there. It went on to add: "Omitted, all the voyage of their life is bound in shallows and in miseries." That's fair warning from the 16th century to the 21st: Catch the wave or miss the future.
