Sinclair Broadcast Group expects to jump into the programmatic TV ad sales business next month.
Sinclair also expects looser regulation by the FCC to lead to a wave of consolidation in the station business. It also expects stations to make deals with the digital multichannel video programming distributors that have been springing up.
Speaking during the broadcaster’s fourth-quarter earnings call Wednesday, Sinclair CEO Chris Ripley said that “by the end of Q1, we should have the technology ready to start doing that,” referring to programmatic.
Ripley said that Sinclair is in active discussions with several other broadcasters to, as a group, create a more robust buy for advertisers.
“Programmatic has been probably slower than we’d like in terms of organizing both the technology and the people together,” he said. But now, it’s a priority. “It’s a big long-term opportunity for us. Our inventory is massively undervalued relative to other marketplaces. And it’s something we are very focused on, and we’ll get there eventually, and I think it will be big for us.”
Sinclair has had success selling inventory across its footprint, which covers 40% of the country, in a non-automated fashion via its audience network, which competes against cable for national ad dollars.
“We're selling local inventory as a network with a great deal of success, and it's money that is new to the marketplace whereas we're targeting cable network dollars,” said Steven Marks, chief operating officer of Sinclair Television Group.
“We're positioning our 40% footprint against cable network viewership. And when you compare our 40% to their 100% distribution, our 40% typically beats their 100% distribution by a wide margin. So we're really onto something.” Marks said.
“So we're placing these dollars locally as a network, and it's beginning to put pressure on the inventory. When you put pressure on the inventory, the rates will rise. And we're already beginning to see that,” Marks said. “What's encouraging is that we just completed our second year of doing this and we're seeing the impact in the audited shares. So when I tell you that we're beating our competition, and we are, we beat our competition both ways, politically excluded and included in fourth quarter. And we'll do the same again in first quarter.”
Sinclair’s Ripley also said the deregulatory activity coming out of the FCC under new chairman Ajit Pai has been “welcome and overdue.”
He expects that in addition to the removal of JSA processing rules and the launch of that ATSC 3.0 process, the FCC will look at ownership rules, including the UHF discount, this year.
“This is all good news for our industry, as the elimination of antiquated rules will allow us to compete on a level playing field with other forms of communications,” Ripley said.
The new rules will lead to consolidation in the station business, he said.
“We think it's a necessary activity within the industry," Ripley said. ”We have to wait and see what will happen, but we think it will actually happen fairly quickly here, and we'll start to see some movement this year. And if that happens, I do expect transformative deals to come on heels of that.”
Ripley also said he expected Sinclair to be a part of the digital MVPDs that have sprung up but by and large haven’t done deals with station groups outside of the network owned & operated groups.
“We are in active discussions with all of the OTT players that you read about and we do participate in CBS All Access and Sony Vue already,” he said. “We are in the discussions with everyone else. It's a lengthy process to work some of these things out because we are very careful about what we're going to do in terms of ensuring that our compensation is in a similar spot to the standard MVPD marketplace and that we're not disadvantaging ourselves long term. But I do think this year, you'll probably start to see some movement on that as more of these players enter the marketplace and realize that they need the local affiliates to have a robust offering.”