Will DTV kill over-the-air television?
Jun 19, 2008 1:31 PM
The DTV transition will decimate the over-the-air (OTA) television audience in the United States, potentially leaving as few as 4 million to 5 million households relying solely on off-air reception, and in the process raise some uncomfortable questions for the nation’s TV broadcasters, according to an assessment by Centris’ senior vice president Barry Goodstadt.
Speaking at the Promax/BDA conference in New York City June 18, Goodstadt contended the nation’s transition to digital television transmission will likely have the unintended consequence of making viewers re-evaluate how they receive local television. When they do, up to 13 million households may scrap off-air reception in favor of cable, satellite or telco TV, Goodstadt predicted.
The nation’s broadcasters have long dealt with shrinking OTA audiences. For instance, the number of OTA households has fallen from 23.9 million in the first quarter of 2004 to 16.9 million in the first quarter of this year, according to estimates made by Centris. But the potential rapid decline triggered by the DTV transition is unprecedented.
In arriving at his conclusions, Goodstadt relied on three specific data points. First, as of February, 62 percent of OTA households said they plan to buy a DTV converter box to continue using their existing sets. If the remaining 38 percent abandon OTA, the number of OTA households remaining after the transition would be about 10.5 million.
Second, the decision to buy a converter is based on it being the lowest-cost alternative. However with the rollout of budget, or lifeline, TV packages from cable operators priced between $10 and $14 per month, the economic pain threshold has been lowered for choosing pay TV.
Third, Centris research indicates 54 percent of OTA households may have to upgrade their antennas to continue receiving an off-air signal post transition. This, too, is likely to take a toll on the number of viewers who choose to continue relying on OTA TV, he said.
Further bolstering his case was Centris/Omnibus research showing 19 percent of new cable subscribers last year were OTA households and 37 percent of new satellite TV subscribers formerly relied on terrestrial off-air reception, Goodstadt said. Even if the need to upgrade home antennas had no effect, the number of OTA households will fall to between 8 million and 9 million based on consumer choice data, he added.
According to Goodstadt, as over-the-air audiences erode and approach zero, broadcasters, as well as others affected, will have to answer some important strategic questions, such as:
- What is the value of a broadcasting infrastructure (towers, transmitters) now aimed at a diminished number of OTA viewers? What will this do to stock prices?
- To what extent does this change the broadcaster’s business model, or does it? Will new OTA TVs be cell phones and iPods?
- What will a designated market area (DMA) mean when the number of OTAs approaches zero?
- What is the meaning of “must carry” in a diminished OTA environment?
- What does this mean for retransmission agreements?
- What are the implications for advertising revenue?
- What will government regulators think about rights to broadcast spectrum that is being used to reach a tiny or non-existent population of OTA consumers?
Speaking on the phone with RF Update after the presentation, Goodstadt said that when he researched and prepared his presentation, he was surprised by the massive scale of the potential OTA household decline. Regardless of DTV's better picture, elimination of multipath ghosting and higher resolution in the case of HD, the digital television transition will significantly decrease the number of OTA households, he said.
“The whole notion of a revival of OTA broadcast thanks to digital transmission is not playing out as some expected, unless the new OTA TV model is mobile,” he said. “I can see that happening with an attractive demographic, those under 35.”
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