Television broadcasters are still trying to find a way to make money with digital television. Emmis Communications Chairman and CEO Jeff Smulyan used the recent NAB forum in Las Vegas to propose a way that broadcasters might reclaim lost revenue and re-establish severed audience relationships.
Smulyan proposed a spectrum initiative that would allow broadcasters to compete with cable operators by pooling their DTV spectrum to carry about 30 of the most popular cable channels to a broadcaster-controlled set-top box. The box would cost customers a one-time fee of about $100 and the service about $25 a month.
Such a new multichannel service would allow broadcasters to leverage the $3.5 billion DTV investment and compete with cable and satellite operators on the same playing field, Smulyan said.
“Forty years ago, Americans began taking down their TV antennas and severing broadcasters’ direct link to television audiences,” said Smulyan. “Since then, the middlemen who replaced us — the cable companies — have created more than $300 billion of value for themselves, using our product. But technology has advanced in our favor.”
Smulyan was joined at an NAB news conference by supporters of the idea including Barrington Broadcasting, Citadel Communications, Clear Channel Communications, E.W. Scripps, Fisher Broadcasting, Media General, Meredith Corporation, Nexstar Broadcasting Group, Prime Cities Broadcasting, Raycom Media and Sunbelt Communications.
“We pool our spectrum and come together as an industry to offer it at a lower price. Every broadcaster receives retransmission and can monetize the digital spectrum,” Smulyan said.
He said broadcasters would be paid through retransmission payments, cable network licensing fees, ad revenues and a share of the profits. The consortium of stations, he predicted, could reasonably generate revenues of $4 billion to $6 billion within five years, with margins in the high teens to mid-20s. He said start-up costs would be about $500 million to $700 million over three to four years.
Not addressed in the initiative is how much money participating broadcasters would pay the federal government for use of their spectrum in a pay television service. However, participating broadcasters will comply with rules that call for them pay 5 percent of gross revenues to the government. Any alternative use would require special FCC approval.
The new service is similar to but not affiliated with another such shared spectrum service, U.S. Digital Television (based in Salt Lake City) that is now delivering more than 26 channels to viewers in Salt Lake City, Albuquerque, N.M. and Las Vegas for $19.95 a month. Thus far it has attracted 1200 subscribers, but has begun a TV and radio ad campaign and will expand into 30 markets that, it hopes, will raise the number to 300,000 by the end of the year.
A webcast with the replay of the Smulyan presentation at NAB is available by visiting www.emmis.com. Broadcasters interested in participating in the initiative should call (317) 684-6530.