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No Fear, Some Loathing in Las Vegas

Broadcasters are optimistic about digital future, wary of government 4/28/2006 08:00:00 PM Eastern

TV execs attending the opening of last week's National Association of Broadcasters (NAB) convention got a little something extra at their seats. As they sat down in the Las Vegas Hilton ballroom to watch as three TV newsmen—Dan Rather, Tom Brokaw and the late Peter Jennings—were honored, attendees found on their chairs a bright-pink handbill having nothing to do with journalism.

Written on the sheet was a plea for NAB members to immediately phone key congressmen. The goal: to stop a legislative proposal initially scheduled to come up for a vote last Wednesday that would undercut TV stations' leverage in negotiations with cable systems retransmitting their signals. “Contact your member of Congress TODAY and urge a 'NO' vote,” the sheet read.

Politics are in the air at NAB shows, where a showcased star is just as likely to be a regulator like Federal Communications Commission Chairman Kevin Martin as a top media exec like Disney/ABC TV chief Anne Sweeney.

Of course, the attendees swarm Vegas for many other reasons. Most are shopping for or selling a numbing array of gear, from sleek compact HD cameras to disaster-recovery video systems.

But politics still rule because, with content, ownership and technology strictly regulated, broadcasters' fortunes lie in Washington as much as they do on Madison Avenue or in Silicon Valley (or even Grass Valley, the California hotbed of TV-technology development).

What are the hot political issues? One is the big digital switch-out. “February 2009 is staring us in the face,” said new NAB President David Rehr in his first NAB show address. That is the date when Congress has ordered broadcasters to shut off their analog transmitters and broadcast only digital, and the stations face a train wreck.

Anyone with an old TV set who doesn't subscribe to cable or satellite (currently around 20 million homes) will see nothing but snow unless they get some sort of converter. Some industry executives estimate that the total number of TVs without cable exceeds 70 million.

There are currently no converters ready for the market. A few manufacturers showed prototypes at NAB; they're waiting for the feds to set standards, particularly in detailing what kind of equipment might be eligible for a subsidy.

“Studies show that the majority of the American public still has a blank slate on what DTV truly means,” Rehr said. “We can't leave the job of educating the public on this issue to Congress. We can't leave it to our competitors. And certainly, we can't leave it to the guy who sells televisions at Best Buy.”

Any broadcasters hoping to postpone the transition should probably give up. “There is so much riding on time certainty,” says Jerry Fritz, senior VP, legal and strategic affairs, Albritton Communications Co. “Equipment manufacturers need a head start to produce this stuff; programmers need time.”

Retransmission consent is a close second to the digital switch as a major issue. Broadcasters believe they're on the cusp of finally generating meaningful cash from cable systems seeking to retransmit TV stations' signals. They've squeezed cash out of satellite and small cable operators, but major operators still refuse to pay straight license fees. Big operators offer such compensation as buying advertising or carrying a cable network a broadcaster has launched.

With local-TV ad revenues growing just 3%-4% a year, retransmission fees paid by cable operators would be a boost to the bottom line.

“Our company is not anti-cable, it is anti-single revenue stream,” says Nexstar Broadcasting CEO Perry Sook, who has aggressively wrestled cable operators for cash.

Media consultant Tom Wolzien, a former Wall Street analyst, offers a very different view. In a presentation at a panel on retransmission consent, he accused broadcasters of being short-sighted. The major threat to the broadcast business is the diversion of dollars by advertisers to the Internet, which offers better targeting and tracking of commercials. Rather than demanding cash, he suggested, broadcasters should work with cable operators to create, for example, interactive, zoned advertising opportunities.

Meanwhile, the FCC's assault on indecency touched a fresh nerve. TV executives are still reeling from the commission's move in March to levy more than $3 million in fines for sexual content and profanity. The programming that triggers investigations almost always comes from a network; stations are the ones that actually face the fines.

Broadcasters have complained that the FCC decisions leave them without a roadmap to avoiding indency violations. Martin, however, blasted back, noting that the rules are clear and the violations valid.

Perhaps Rehr summed it all up best by urging his comrades to take action. Broadcasters can't be “perceived as protecting the status quo,” he said. “Ladies and gentlemen, my sense is that broadcasting has been defensive in its thinking for too long. We can transform that mentality—and we can start today.”

E-mail comments to jhiggins@reedbusiness.com

 

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