Talking TV: When Is NextGen TV Revenue Coming?

ATSC 3.0’s skeptics — and they are many — will argue that the new broadcast standard and its nationwide implementation are too complex, too fraught with unwranglable forces and facing too much consumer indifference and ignorance to ever become a viable revenue stream for broadcasters.

To which John Hane says pshaw.

Hane, president and CEO of the BitPath NextGen consortium between Nexstar and Sinclair, says data leasing revenue could start rolling in within select markets or regions inside of the next year. He sees that the mountain NextGen TV has yet to scale is massive, but argues the progress made so far in lighting up new ATSC 3.0 markets is also considerable.

In this Talking TV conversation, Hane takes the measure of that progress, lays out the challenges still in front of the technology’s implementation, and ventures a guess as to when it will finally become a significant percentage of broadcasters’ bottom line.

Episode transcript below, edited for clarity.

Michael Depp: BitPath is a spectrum consortium between Nexstar and Sinclair built on ATSC 3 architecture to deliver data and create new revenue streams for TV broadcasters. So, how is that whole new revenue stream thing going?

I’m Michael Depp, editor of TVNewsCheck, and this is Talking TV. My guest today is John Hane, president and CEO of BitPath. We’ll be doing a check in with how far along BitPath has come in building its network, the challenges it continues to face in its growth and the biggest question of all: When, if ever, is ATSC 3 going to become a viable revenue stream for broadcasters? We’ll be right back with that conversation.

Welcome, John Hane, to Talking TV.

John Hane: Hey, Michael. Thanks for having me.

Good to see you. John, I wanted to talk about ATSC 3 and revenue right now because we’re coming up on the NAB Show in Las Vegas next month and checking in with NextGen TV is always an important part of the narrative at the show. I’m also supposed to be moderating a panel on NextGen revenue with a trio of station group leaders during the show, so there’s a good chance for me to do a little prep in advance. So, let’s check in with the situation. First of all, how many markets is Next-Gen lit up in now?

John Hane: In terms of number of markets, I don’t know. It’s well over 60% depending on how you count. People count differently, but 60% of the population in terms of markets, we have, I think as of the end of this month. We’re launching a top 10 market this month. We’ll have, I think, seven of the top 10. Something like 20 or 21 of the top 25 and 43 or 44 of the top 50. So, we’re filling in the gaps. I mean, there’s been a lot of activity. A lot of markets have launched. We’re still waiting for some big ones to pop, including one that we’re launching this month. But we’re continuing to roll out markets. We have markets on the rollout plan for every quarter of the year.

So, are you on schedule? Ahead? Behind?

We didn’t have a formal schedule for getting everything done because there’s no central management of this process. We’ve led the significant majority of BitPath, our team has led … and when I say led, I mean the people doing the work are the station groups. We’re just sort of nudging and providing some coordination services and helping figure out the hosting plans. But we’ve been involved in the great majority of the rollouts. Pearl has done a number of rollouts, including some of the big markets and others have sort of rolled out on their own without any sort of participation in either of BitPath or Pearl.

The industry is moving along. You know, I guess you can call it organically. We didn’t have a hard schedule. What I liked and, you know, I guess a good phrase is ‘how are we doing?’ Better than I expected, but not as good as I could have hoped for. I think we’re in a good place. We need to fill in these holes and the top 50, top 25 and especially in the top 10.

You know, as you get into the remaining large markets, they have various complicated issues that have to be worked through and they take time. And not everything is within all the players’ control. So, I’m highly confident that they’re going to be work out. I wish they were worked out, you know, now. But everybody in those markets that is planning to transition to 3.0 is working very hard on it.

You touched on a key issue there. There’s no central management of all this. So, that’s kind of one of the things that makes this very tough, isn’t it?

Yes, it is.

All right. Your consortium believes that data leasing is going to be ATSC 3’s real revenue superpower, right?

I think it is a real revenue superpower. So, you know, I did I was involved in retransmission negotiations for the first 10 or 12 years of that and since some of the major and groundbreaking ones. So, I’m very aware of the changes and the profile of advertising versus subscription revenue. And I think with 3.0, the television side is extremely relevant to that. I won’t go down that rabbit hole now, but I think it’s super, super important. And people who discount the importance of 3.0 to revenue on the core television side, I think are selling it short.

You have to look at two factors: what are the growth opportunities and what are the opportunities of 3.0 to sort of mitigate some of the headwinds that are in the existing business in particular as they affect the revenue streams. So yes, I do think on a bit-for-bit basis, there is no question that much higher revenue can be delivered per bit through data services, through non-traditional television data services. But I’m not discounting at all, you know, the revenue opportunity inside the core business.

Well, let’s stick to the one rabbit hole, though, OK? For the uninitiated, very briefly, can you explain how that works?

The way that we evaluate it is in order to provide wireless data services, you need a tremendous amount of infrastructure. You need management systems, you need devices, you need control systems. You need all of those things. Well, the highest cost items really are the RF infrastructure, the spectrum licenses, the towers. That is far and away the highest capital cost associated with providing wireless data services.

We have that in place. So, the way that we view it is we need to provision these participating stations to be able to provide ATSC 3 data, and that’s once you’ve switched over, it’s really fairly uncomplicated and we’re sort of building a playbook of how we do that in an effective way. Then you’re able to transmit, then you’re able to put data in.

You have to have devices, right? You have to have receiver devices in addition to the regular television sets. So, we’re working on that part, too, and we’ve developed a few core businesses that we intend to launch first that we think are compatible with where we are in the transition.

And we’re working on optimizing the way we get that data into the television stations. We have a plan operating now, and also how we sort of get the market for user devices going so that we can have customers for those services.

OK, but in order to capitalize on data leasing, you have to have these important things that fall into place. First, you need a national footprint of NextGen stations to light up and then they have to join your network, right?

You don’t need a national network for everything. You need a national network for some services. And ultimately the full realization of that potential is when you have a national network. But the services that we’re launching initially are services that don’t require the national network or national coverage. They’re services that are sort of more market-oriented to individual markets.

And those would be, if you think about one of our first target verticals is energy distribution. Those tend to be clustered in specific geographic regions. And they’re heavy users of certain kind of data and in particular certain kinds of data services. So, we can provision those. If you think about, I mean, here in the Washington, D.C., metro, Pepco, which will make electric power, is the big electricity provider. Our coverage in D.C. already covers substantially all of Cape Coast footprint in the region.

But to get the full potential and to have the national network in place, about how far along are you from realizing that?

Well, we have over 60% of the country covered.

I mean timewise. Are we talking a couple of years?

I think we’re clearly over halfway. I mean, if you’re talking about the long tail and getting down to market 200, you know, some of those are very difficult because many of them have only one or two stations. If it’s one station, you have to flash cut it. But to have a substantially complete nationwide network, you know, I think if we could get some regulatory certainty from the FCC, I could see it being done in two years.

And the biggest markets you mentioned before, they’re the toughest to launch, right? The most complicated?

Well, they have a sort of a unique set of complications. There are some things that are more difficult. Some of them have not been that difficult. Some of them are proving exceptionally difficult and they’ve just taken a lot more work.

And the second dynamic required to monetize data leasing, as I understand, is the companies that want to lease the data transfer services from you need to build these compatible receivers on their ends as sort of destinations for the data that they send.

Right.

How hard of an ask is that to make of those companies?

You know, I think it’s a hard ask today because the full coverage and the full network is not in place and that’s why we’re not waiting for that. We’re building our own receiver devices and the first services we launch will be our own branded services that we will provide directly. And we’re building and working on acquiring compatible devices for that service. So, we’re not going to wait for third parties.

And I think there’s a lot to be said for this approach. If we wait for others to come build devices to buy our services, I think we’re going to be waiting until everything is built. You have to prove that it works, and we know that it works. We’re proving it in the field. We’re building the devices. We’re showing very high value on some particular verticals. Are the devices optimal today? No, they’re not.

But we’re working very hard on getting better form factors, lower power requirements, moving closer to where we ultimately want to be for a really widespread consumer B2C and B2B set of customers throughout the economy, including end user retail economists, customers. We’re building the devices depending on how well that goes. You know, we could have paying customers early next year.

I hear what you’re saying about this incremental kind of market-based or regional-based implementation of this right now as a lead up to more national services. But all in all, there are some pretty complicated things that need to fall into place here for the cash register to start really ringing for broadcasters. What do you say to the critics or the skeptics who say this is all just too complicated and it’s never going to happen?

People that say this is too complicated are people who have not launched, you know, wireless data services and they’re sort of not familiar with the processes. The project steps, the way you finance these things, it’s an unknown. So, if I took somebody from satellite or mobile wireless and drop them at the NAB and some of them work in some of the sessions that seem very important and topical to everybody who listens to and watches this podcast, you know, they wouldn’t know what we were talking about, and it would seem all very difficult and arcane. But, you know, our staff is built of people who do this.

Our contractors and providers are people who do this. I’ve done this in the past. You know, these are known steps, right? It’s just a matter of us taking them out, execution and success in the marketplace. You know, those depend on a lot of factors. But knowing how to get from point A to point B, how to build a network, how to start before the network is fully built, how to sort of step into it methodically, those are known things.

OK, you are a true believer. Obviously, you are John the Baptist here. So, given that, when do you think the broadcasters are really going to see an ROI on this technology? When are we going to see it as a business line in the earnings reports?

On the on the data side, only separating that from the core business you asked me to do, I think so. When you say an ROI, I would say if you’re talking about the incremental cost of propagating data, for our initial services it’s very, very low. So, I think the ROI will be really good as soon as it starts, and I think it could start next year. We’re not going to burden the full cost of the transition in the first year or two on the first data services that we launch. But if you look at them on a on a bit-for-bit basis for the capital cost of setting those services up and for the operating cost of provisioning them and for the capacity overhead that we’re taking away from television, which by the way, for everything we’re planning for the next four years is trivial. You don’t have to stop any television service at all in order to accommodate this.

Now, BIA sort of famously projected that by 2030, revenue from NextGen datacasting could run between $6.5 and $15 billion for the industry. How many millions are you personally willing to bet on the accuracy of that prediction?

Well, I didn’t make the predictions, so I don’t want to bet on the accuracy. But I definitely believe the business falls somewhere in there.

Does the timeline sound right to you as well?

Yeah, I think so. I mean, so here are the things that we don’t have within our control. When we set up these transition rules with the FCC, they were not the rules that we wanted. They were a negotiated set of rules that had a lot of input from cable competitors, and we didn’t get everything we wanted. And even if we had gotten everything we wanted, it was impossible to know back then exactly how this would play out. Right. So, we’re sort of at the midpoint or better and we need some adjustments.

So, you’re asking for that FCC task force?

Well, we need a task force, and we need some relief on the hosting rules. The hosting rules have some fairly perverse consequences, given the way that things are rolled out, particularly with the growth of diginets. So, you know, we’ve we’re working with the [FCC] Media Bureau and with the commission. I’m not sure that they fully appreciate the urgency of this. The rule changes can’t or are not a sufficient condition to wrap this up quickly, but they’re clearly a necessary condition. They’re absolutely a necessary condition.

And I’ll give you an example. In the largest market, and we’re not managing that market, but in the largest market, there’s a particularly difficult problem. And the parties have come up with different solutions. And one of the solutions would require what, to my mind, would be a very inconsequential modification or waiver of the hosting roles. And I think the commission is very concerned about it and overthinking it. But that’s my perspective.

So, I think relief from the FCC could definitely ease things and speed them up. It’s not going to solve it. We have a lot of commercial business and technical and other issues that we have to tackle. But, you know, we’re way along the way when you have, you know, 21, 22 of the top 25, you have most of the top 50. We have a lot more going up, the 75 and even 100. You know, there’s been a lot of metal bends. I mean, we’re bending metal, right? This is happening.

Well, you may get a chance to buttonhole FCC Chair Jessica Rosenworcel next month, if you’re lucky.

I hope so.

Well, John Hane, it’s been good to check in with you and see you at the NAB show in April.

Absolutely. Thank you.

Thanks to all of you for watching and listening. You can catch past episodes of Talking TV on TVNewsCheck.com and on our YouTube page. We’ll see you next time. Thanks.