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RandomSouthHall“Broadcasters haven’t reached a fork in the road; they’ve reached a tangled multi-spoke hub. In one direction is the well-traveled old-school way, over-the-air broadcasting. … But that idea seems to be withering under the intense heat of the Internet.”

That’s just one small part of a long report by Ned Soseman, writing in Broadcast Engineering. Soseman uses the occasion of the NAB Show to summarize the current state of the broadcast industry. “The one point nearly everyone seems to agree on is that NAB isn’t just for broadcasters,” he wrote. Video technology advances apply to everyone because anyone can be a broadcaster, if you count the internet.

From the customers’ perspective, there’s the stuff that’s available for free over the air, and there are the channels we actually watch, and there’s the huge cable/satellite bill that supports them. There’s Senator John McCain’s a la carte bill (going nowhere, by the way) and a cable spokesman’s claim that a la carte wouldn’t lower cable bills. Soseman summarizes the way it all looks today and then sums it up by saying, well, broadcasters need to try something different. It all reads like something I would have written, except that I would have tried for some crazy guess about the future. Anyway, I’m happy that Soseman did the work, and that it gives me an excuse to run one more NAB Show photo. Now go read it!

by ·Comments Off on Broadcasters are hooked on retransmission payments
Coins dropping into a TV set

© Depositphotos.com / Pixelery.com

DirecTV announced this week that it was exploring the possibility of adding an over-the-air receiver to its set-top box. That part isn’t new; some DirecTV boxes had OTA capabilities over a decade ago, and my Dish Network receiver has an OTA adapter. What’s new is the reason DirecTV is re-exploring this addition: It wants to avoid retransmission fees.

As TVBlog writer David Goetzi wrote, this tactic would be unquestionably legal, although that doesn’t mean the broadcast networks wouldn’t question it. And as Goetzi put it, this should be a scarier prospect than the Aereo streaming service that’s got the networks filing lawsuits. If every cable and satellite company started using OTA to circumvent retransmission fees for a large percentage of its viewers, those networks might find themselves cut off from revenue they’re now depending on.

If this scenario ever looked imminent, what would the networks do? My guess is that they would pull back on their retransmission fee increases in exchange for promises to keep OTA out of the cable set-top box. Surely cable companies would prefer a known, lower retransmission payment rather than the upfront cost, uneven OTA experiences and service calls that would result from thousands of OTA antennas. Still, a new upper limit on retransmission money would wreck some of the business plans networks have been showing investors.

The deeper question is whether retransmission fees are appropriate. Broadcasters have a monopoly on the public airwaves they occupy. The ability to send ads, with a few intervening programs, over the air to every TV set used to be quite valuable all by itself. When cable companies made it easier to pick up OTA channels, broadcasters wanted a piece of that cable bill, and they persuaded Congress to see it their way. Now at each renewal, each station gets to wrestle with each cable system, often as part of the inevitable parent company’s desire to add more of their cable channels to the lineup at higher prices. That doesn’t sound like it’s in the public’s interest.

Just imagine if anyone was free to retransmit any OTA signal using the Canadian model of royalty payments. With today’s connected world, soon anyone would be able to watch any station. Royalties would flow to the content producers according to the popularity of their programming whether they’re in New York or Billings MT. The viewing public would benefit from an incredible cornucopia of choices. The only folks who would get less money would be those folks who negotiate ever-escalating retransmission agreements. Everybody else would be happy. Wouldn’t that be nice?

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Chase Carey, speaking at the NAB keynote

Chase Carey, speaking at the NAB keynote

While I continue to put together way too many NAB photos to tell you what the show is like, I’ll mention what Chase Carey, president of News Corp., said at the keynote. Carey wasn’t on board with the “embrace the future” theme; he said that if Aereo survives and folks continue to watch for free (without retransmission consent money), he’ll convert Fox to a cable network.

This pronouncement caught the attention of a lot of TV people, but I think it’s only saber-rattling. If Fox and its other network friends fail in the courts against Aereo, they’ll go straight to Congress to change the rules. The threat of pulling the Super Bowl off the air will give representatives cover for doing what the networks’ money asks them to do, and there you’ll have it.

Consider that Fox could decide to go cable tomorrow. It could have made the switch years ago, when retransmission money was a tiny fraction of what it is now. But it didn’t and it won’t because it just doesn’t make sense. The end, at least to me.

On the other hand, Broadcasting and Cable’s Jon Lafayette presents a more nuanced examination of what Fox would gain and lose by taking themselves off the public airwaves. In particular, doing so would negate the argument broadcasters have been making about needing all that spectrum they’ve been fighting to keep. So go read that.

Once upon a time, this already sort of happened. WGN and WTBS converted from distant over-the-air superstations (from the perspective of most cable TV systems) to cable channels. In both cases, they continued to locally broadcast most of the programming they sent to the cable systems, with just enough difference to make it count. The easiest way for Fox to convert would be to pick a few of its most popular shows and substitute reruns or infomercials over-the-air for an hour or two a night. To watch next year’s “House” or “24”, you’d need to watch it on cable, but local news would still be over-the-air. I still don’t think it’ll happen, but if it does, see if that’s the way it plays out.

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Erik Moreno speaking at NABThere are all kinds of fun stories coming out of the 2013 edition of the NAB Show, but what I heard this morning was not fun. During a session called Mapping the Future of Broadcast Television, one of the co-general managers of the company behind Dyle, the mobile TV system, revealed what it plans to do once the service is on its feet. Dyle viewers will be “authenticated,” and if they subscribe to a service that pays retransmission fees to local broadcasters, their device will be turned on. Left unsaid was what would happen to those poor souls who dare to watch over-the-air TV at home for free with an antenna.

Erik Moreno, co-general manager of Mobile Content Venture, was one of the panelists in the session, and he said a lot of things that made sense. There was a lot of talk among panelist about the tension between cell phone companies providing on-demand digital content and TV broadcasters, both grabbing for the same spectrum. Moreno correctly pointed out that this shouldn’t be an either-or question. “If I were God,” he said, “I would make sure to have both.” Broadcasting is the best delivery method for live and popular programming, and on-demand is great for individualized and long-tail requests.

Moreno made note of a simultaneous announcement at the show that Fox was launching a streaming app similar to that available from ABC. He said that mobile users will appreciate being able to watch the stream over their cell phones, then will be disappointed by the data usage bills they’ll get. At that point, mobile TV will have a great opportunity to catch that audience and switch them to Dyle, which would presumably need to be included in their cell phone hardware.

As I’ve pointed out before, Dyle’s press releases had been careful to note that subscriptions weren’t necessary … yet. Moreno made it clear that this was only because there are so few Dyle-compatible stations that they needed to grow the market before beginning to monetize it.

If I needed someone to create and implement a successful business plan, Moreno would be high on my list. But listening to such a casual, naked rejection of free TV over the public airwaves left me shaken and sad.

Instead of ending on such an unhappy note, let’s look to the future. In my next post, I’ll try to give you an idea of what the NAB Show exhibit hall is like. Spoiler: It’s fun, interesting, and even inspiring.

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CES 2013 exhibit hallFirst, let me apologize to anyone who tried to visit here in the past week only to be turned away, often by a 500 database error. According to my web host, FTABlog suddenly began devouring huge chunks of memory for no good reason, and its server had nothing to do with that. After wrestling with the problem for a few days, I moved the blog to a new host, and this time the transition seems to have been successful. Who says I never learn my lesson?

Now I’ve got a lot of CES reporting to catch up on. The first, most interesting bit is that I was proved right; the onsite staff of CNet reportedly voted Dish Network’s Hopper with Sling receiver as 2013 CES Best of Show. Unfortunately for Dish, CBS owns CNet, and CBS (among others) is suing Dish because of the Hopper’s advertising-skipping function. So CBS got wind of the award and squashed it, directing CNet to pick somebody else.

The Verge has a superb story on the whole affair, and it gets bonus points from me for dragging in Alki David, our friend from FilmOn.com. Quite a while ago, fresh from getting smacked by CBS (among others) after his first attempts to stream over-the-air programming, David sued CBS for allowing CNet to report extensively on piracy, including how-to pieces, and for the related site Download.com, which supposedly hosted circumvention software. In that lawsuit, CBS lawyers argued that CNet was independent of CBS’s control. The Verge writes, “Holding CBS responsible forCNET, CBS’ lawyers argued, ‘would create grave uncertainties for writers and publishers — including search engines, web encyclopedias, blogs and most technology journalists — that seek to communicate truthful information about emerging technologies including P2P file-sharing services.'”

I don’t know whether David can use this to show that CBS isn’t quite so hands-off when it comes to CNet, and I think it’s a darned shame that Dish was denied another CES Best of Show (it won in 2009 for the ViP 922 receiver). But I think the Hopper has a chance of beating the courts and becoming a real game-changer. As a Dish shareholder, I sure hope so.