By Cora Leightner
Special to RBR+TVBR
NextGen TV can double the revenue growth rate of local TV stations over the next decade.
That was just one takeaway from the third webinar in a six-episode series on making money with ATSC 3.0, the emerging technology positioned to define next-generation broadcast TV.
The forecast came courtesy of Rick Ducey, Managing Director at BIA Advisory Services.
“If we just did TV as it is now, it’s 3.8% growth,” he said. “If we do everything we can with the spectrum as an asset, we can grow it from a 3.8% CAGR to 8% growth.”
Ducey was joined by a cast of advertising industry experts discussing how ATSC 3.0 will change the business of over-the-air television. NextGen TV advertising is poised enable stations to provide different ads to different households within the same program. Referred to as “addressability,” it will leapfrog anything available to local buyers today.
Evan Daugherty, regional digital sales manager for Sinclair Broadcast Group, sees this as the biggest financial upside of NextGen TV. “It allows for the expansion of inventory,” he said, “So you’re taking a spot break that might have five spots and you’re turning that into a 25-spot break with targeting. OTT is getting close, but until ATSC 3.0 comes out, we won’t see true addressable TV.”
Meanwhile, Daugherty and others now see OTT as a proving ground for NextGen TV. Both technologies reach across the device ecosphere and leverage data analytics to determine audience interest, a la the Netflix recommendation algorithm. NextGen hyper-localizes this ability.
“OTT was able to train us,” Daugherty said. “It trained us on what to expect. It trained buyers on what they can expect from us, and it trained viewers on what they can expect from ATSC 3.0.”
In particular, OTT trained Daugherty and his sales colleagues to inform as much as sell. “Any shift in buying habits is going to take some sort of education,” he said. “With OTT, we saw a lot of products hit the market that were not true OTT. So, the main education right out of the gate was what was real versus what wasn’t. That continues today. As we get into hyper-local and hyper-targeting, we really see that education picking up.”
This continuing shift comes at a time when ATSC 3.0 deployments and OTT adoption are on the rise. Streaming services have boomed during the pandemic, while TV stations across the country have continued to deploy ATSC 3.0—most recently, seven stations in Portland, Ore.
TIPPING POINT
COVID-19 hit during an ongoing decline in brick-and-mortar patronage. There is no wiggle room in local ad budgets, so OTT had to prove itself. When it did, there was little hesitation, notes Gordon Borrell, who monitors the local media buyers.
“We saw OTT go from zero recognition two years ago, to shooting through the roof in about six months,” he said. It’s this rapid shift that Borrell cautions broadcasters to anticipate.
“The concern I have moving forward with this is that broadcasters will likely do what everybody else has done, in an incumbent business faced with… a technological disruption—and that is, they’ll sell more of that ‘stuff’ to their current client base,” he said. “The larger opportunity in… targeted television, is basically the 95 percent of businesses that don’t buy television currently. As TV goes into this, the people most likely to purchase OTT or targeted video aren’t auto dealers… or furniture stores or personal injury attorneys… the most common characteristics of people who buy OTT buy radio advertising,” he said.
Reaching beyond traditional TV clients is crucial, Borrell added, because local TV already has the largest ad spend.
“The television buy is $200,000 on average, while radio and newspaper are more like twenty to fifty to $75,000 — that makes television a really big target,” he said. “In the COVID crisis, we saw that about 135 of TV buyers were maintaining their ad spend and 2% are increasing. That was lower than just about any other type of traditional media. Coming out of COVID, 11% said they’d start spending more and 2% said they’d spend it on TV.”
That’s where NEXTGEN TV comes in. Ad agencies are already looking at ATSC 3.0 for their 2021 budgets, Ducey said. Growth is likely to come from the smaller competing categories, such as desktop/laptop video ad inventory. This has the highest predicted growth rate over the next four years, data from BIA Advisory Services show—moving to $4.4 billion from $2.1 billion. “That’s where NEXTGEN TV can target,” he said.
Ad-ID Executive Director Harold Geller pointed out another advantage of NEXTGEN TV. One of its biggest selling points, he said, is the mitigation of fraud. “ATSC 3.0 was designed from the ground up as secure and efficient. The interfaces; the handoffs from point-to-point. When was the last time you saw somebody’s transmitter hacked? … The whole addressable infrastructure was built on that secure environment.”
Ultimately, NextGen viability in the ad market will depend on penetration. Ducey’s research indicates that 50% household coverage is the threshold. “We expect NextGen platforms, and adoption at scale, to be built out by about 2025,” he said. “That’s when you should be able to go to the agency with 50 percent household penetration.”
Information in this article originated from a webinar from the ATSC 3.0 Monetization series from Sinclair Broadcast Group. The next webinar will be on Datacasting, held on Tuesday, Aug. 18 at 2pm Eastern. Click Here to Register.
