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November 2008

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Digital Broadcast Television: More Content, More Opportunity

By Bret Morstad

Unless you've been living on another planet for the last year, you know by now that all local television broadcast stations are required to switch from analog to digital broadcasting by February 2009.

This event is far-reaching and disruptive. According to David Rehr, President and CEO of the National Association of Broadcasters, this change is "the most significant advancement of television technology since color TV was introduced."

The focus of getting the word out, to date, has been aimed at informing consumers so they are prepared with the right equipment to tune into the new digital signal. Obviously each affected consumer needs to know what's happening. Beyond that, the big question is what does this incredible transition mean for the broadcast business, content producers and the advertising community?

But first, a few details. The digital television broadcast transition is the switchover from traditional analog transmission signal to an exclusively digital signal for all free over-the-air television programming.

The digital signal will provide a number of significant advantages over analog. For one, most consumers will experience a much improved picture quality, especially if they are wired to receive and watch in High Definition.

More importantly, however, local broadcasters will have the ability to split their bandwidth into more than one channel. Technically termed 'multi-casting', stations can sub-divide their signal into 3 or 4 sub-channels and offer multiple feeds of entirely different programming on each channel. If you were longing for more choice over the millions of video options online or your 500 channels on cable just weren't enough, prepare yourself for even more.

New Business for Broadcasters

Mark Cornetta, General Manager at NBC affiliate KUSA-TV here in Denver, sees it all as a way to enhance the consumer experience. “The Digital Transition will provide broadcasters new opportunities to distribute news, information, data and entertainment to the communities that we serve. It will allow us a more efficient use of our 6Mhz of spectrum so that we can multi-cast and provide more options and choices for our viewers. The viewer will be given a richer experience with free-over-the-air television.”

According to a survey done by Harris Corp, 57% of broadcasters say they see multi-casting as the most viable new business opportunity for the industry, ahead of even the Internet. Every broadcaster has invested heavily into this new technological switchover. As a result, they want to see a return on that investment and all of them are scrambling to figure out the right business model.

“There has to be new business to offset the significant costs broadcasters have invested in digital conversion,” says Darrell Brown, former General Manager of KMGH-TV, Channel 7 and now President of McGraw-Hill Broadcast.

New Content Plays

What that 'new business' is remains to be seen. Like the advent of cable television in the late 70's and the disruptiveness of the Internet in the late 90's, local multi-casting is an opportunity with many complex models. Local broadcasters must add this to the growing list of ways to enhance their brand and keep people on their channel. Or in this case, channels.

Local viewer ship is dropping as consumers move to watch content online or on mobile devices. Audiences are increasingly segmented and short on attention. The challenge to programmers at the local stations is to develop content that is relevant and interesting enough to capture that attention.

“The opportunity is significant,” states Cornetta. “The business model is something that has to be worked out and it may be a different model for each opportunity. The key will be generating the compelling content. If you get that right, the business will follow.”

The question then becomes, what is that compelling content and where will it come from? WPXI in Pittsburgh has already moved to digital broadcast and has developed at least one new sub-channel. What was there solution to content? They are offering syndicated re-runs of old television shows like Hawaii 5-0 and I Love Lucy.

There is a ton of existing content out there for sale, for free and for license and much of it, especially familiar old TV shows, could come with an endearing group of fans. This is the quickest, most obvious solution to filling up the bandwidth and getting an audience.

But the local nature of the digital broadcasting transition provides a real opportunity to develop even deeper niche viewers. KUSA already offers their WeatherPlus channel for real time local weather, a niche that will always have its place. Additionally, their recently launched, and heavily promoted, website is an excellent candidate for programming at the sub-channel level. A relevant, very well defined niche group of viewers who will tune in regularly to see other local mom's talk about all things mom related.

However, even Cornetta realizes internally developed ideas won't be enough. “We will definitely be looking to create content that we produce and distribute as we do with WeatherPlus but we are also looking at other programming options that are produced by outside resource.”

The creative minds' of Denver's production community is where the best content will germinate. The opportunity for local producers is enormous. If each of Denver's eight local stations, channels 2, 4, 6, 7, 9, 12, 20 and 31, adds two sub-channels, there will be 16 brand new channels. That's a lot of bandwidth to fill. All genres of content are on the table as well as all models of sponsorship to pay for it. How local producers take advantage of this growing area of local programming will be one of the major factors in the success of the multi-casting era.

New Advertising Options

Of course, none of this technology or compelling content means anything without the money to get it out there. That money comes from advertisers willing to spend their ad dollars in yet another new area of audience development.

Media buying is as thinly spread and niche oriented as viewer ship. Local advertising is especially thin. According to the Television Advertising Bureau, local TV ad spending dropped 9.5% from $18.7 billion in 2006 to $16.9 billion in 2007. How the digital broadcasting transition will impact local spends is still unknown.

When asked if they had considered making use of these additional advertising channels, Eileen Weinert, President at Denver's The Media Team commented, “Not yet. None of the stations are marketing them at this point. We anticipate it's probably six months away before they isolate their digital channels, provide programming and offer time on them for sale.”

One big reason for this is the unknown quantity of how viewer ship will be measured, as the numbers of local viewers will be well below the threshold for Nielsen type tracking. As is always the case with new technology plays, the model will only be proved out by the brave few willing to take a chance that this particular new offering translates to a big payback.

According to Weinert it is “to soon to tell. We will have to figure out the measurement and currency exchange. The big question is 'what is it worth' to advertisers and the stations.”

An Exciting Future

The digital transition and the opportunity multi-casting offers is an emerging, continuously unfolding future. Local Denver broadcasters, producers and advertisers all see it as an exciting new opportunity to grow their business. The hurdles remain; including legal issues such as “must-carry rules” the broadcasters are fighting with the FCC and cable operators to carry these new channels. In the end, however, local digital television will find its place.

Weinert is cautiously optimistic. “This is an exciting time in media and advertising as we see television, radio, Internet and mobile technologies start to blend into new content aimed at very specific groups of people. The challenge is to convince advertisers to give us the opportunity and the budget to test new ideas, learn what works, refine the ideas and grow their businesses.”

Stay tuned.
Bret Morstad is Co-Founder of local video marketing company the Enable Agency and also Video Development Laboratories, the publisher of Advertising & Marketing Reviews digital edition. He has also had a long career as an analyst in the communications industry.

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