Even as broadcasters struggle to turn digital multicasts or data services into a second revenue stream, one broadcast executive believes a ready source of new money is staring right at them.
Broadcasters should make cable operators pay for rights to TV stations' high-definition programming rather than wasting time fighting for free carriage on local systems, Sinclair Broadcasting Vice President of New Technology Nat Ostroff said last week.
"The cable industry is looking to entice its subscribers to move to a digital tier," he told a Bear Stearns Washington conference crowd. "Stations are broadcasting expensively produced, expensively transmitted HDTV, and we're doing more and more of it every day." That's prime programming a cable company could use to entice people to move up to pricier digital tiers, he said.
Given that broadcasters are deriving almost no additional revenue from their over-the-air digital signals today—with either high-definition or multicast options—Ostroff said they have little to lose by playing hardball with local operators. "There is no economic risk at this point if a broadcaster turns to a cable system and says, 'If you want our digital signal, pay us for it.'"
Although few stations have won compensation for their analog signals, Ostroff said lack of high-def programming gives broadcasters enough leverage to demand revenue for digital transmissions. "We're so concerned about getting cable to carry our signal, but the real way to create cable demand is to create consumer demand."
Just as broadcast ads are used to promote General Motors and Ford, he suggested, they can whet the public's appetite for HDTV. On their analog channels, stations should regularly promote shows as shot in HDTV and urge viewers to call the local cable company to demand high-def channels be added to the lineup.
"We have the mightiest promotional engine in the world. We could create a demand for our HDTV signals on a cable system and generate a second revenue stream. Why we are not doing that, I don't know."
Ostroff's comments drew a mixed reaction from broadcast executives, who, out of reluctance to get involved in another Sinclair-driven industry argument, asked not to be named. One skeptically noted that analog-carriage rules allow stations to demand payment for carriage but few have been able to leverage the right into actual cash.
Another station group exec said he would "suggest it to his people."
Some in the audience were irked by Ostroff's praise for high-definition even as his company's 45 digital stations save on transmission and programming costs by offering only a simple standard-definition signal.