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Next Gen TV: A new advertising frontier for broadcasters

This is part 2 of a two-part series on Next Gen TV technology. To read part 1 focused on the origins of ATSC 3.0 and how it compares to the 2009 digital TV transition, which also affected broadcasters, click here.

A new broadcast standard, known as Next Gen TV, is expected to bring a bevy of benefits to local TV station owners, though the timing of the rollout and expected uptake remain uncertain.

The next-generation broadcast standard ATSC 3.0, featuring Internet Protocol transport that merges broadcast and broadband, promises to offer better picture quality via Ultra High-Definition TV and high-dynamic-range signals and enhanced audio. It is also expected to open more bandwidth to watch broadcast fare on mobile devices like smartphones and tablets.

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Advanced advertising is another key component of ATSC 3.0, as the standard will enable dynamic ad insertion in live feeds and video-on-demand features. Two-way connectivity will provide viewers with supply-enhanced data capabilities, allowing advertisers to better target consumers down to the individual-device level.

Testing of the technology is underway. Sinclair Broadcast Group Inc. is working on broad testing on a single-frequency network in Dallas with Spectrum Co. LLC, an ATSC 3.0 spectrum consortium founded by Sinclair and Nexstar Media Group Inc., which also includes Univision Communications Inc. and American Tower Corp. Meanwhile, the Pearl TV consortium is conducting a market model test in Phoenix that includes stations from eight station owner groups.

A 'game changer' for broadcast advertising

Frank Friedman, E.W. Scripps Co.'s vice president of consumer engagement for local media, called the ATSC 3.0 technology "a game changer," highlighting its ability "to bring a new revenue stream to local TV advertising." He noted core local TV ad sales have been "flattish" for some time.

According to Kagan, a media research group of S&P Global Market Intelligence, core local TV ad revenues have hovered around the $12 billion range from 2014 to 2017.

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Tim Hanlon, founder and CEO of investment advisory and consulting firm The Vertere Group LLC, said that retransmission consent fees, which broadcasters receive from pay TV providers for their signals, is a way the broadcast industry has been growing recently. But those increasing fees may not be sustainable.

"Retrans has been a big boost, but you’re starting to see the big gains getting cycled through," he said, noting that fees may also be impacted by cord-cutters as operators continue to lose subscribers.

Hanlon said multichannel video programming distributors and digital outlets can take closer aim at neighborhoods and households and individual users, but "sub-[designated market area] targeting has been a missing piece for local stations."

As an example, he pointed to buys on stations serving the New York DMA for candidates in the New Jersey gubernatorial race stations as being inefficient due to the cost of the media. That reach is "wasted" on those living on Long Island or Westchester Co., N.Y., he said.

A big data move

Gathering data ahead of the addressable advertising rollout will be critical to the technology's success.

"With addressable advertising, the data will come back to you. But it doesn’t work at the outset, unless there is significant data in place," said Mark Aitken, vice president of advanced technology for Sinclair. To prepare, he said the broadcaster is collating information from zip codes, Experian, auto data firm RL Polk and Sorensen Media, which collects data from smart TVs, among other sources.

This new granular addressability of advertising will improve broadcast television’s competitive position against digital advertisers like Facebook Inc. and Google Inc., said Eric Anderson, senior vice president and chief partnership officer at Verance Corp. His company created the digital watermark embedded in ATSC 3.0 videos that carries metadata about the stream, and it has developed many of the data standards, building out the infrastructure that will be used in ad targeting.

"Attribution completes the circle," he said in an interview.

Where Internet advertisers have been able to show the connection between buying decisions and exposure to online ads through their access to user data, broadcasters, unable to track individual-user watching and buying habits, have not. Even when TV advertising may have had more impact on the buying decision, the lack of data has prevented broadcasters from demonstrating that. This has given digital advertisers a great leg up over broadcast, Anderson explained, and ATSC 3.0 hopes to change that.

John Buergler, senior vice president of growth initiatives at the broadcaster Univision, said information sources can be tapped from existing smart TVs, as well as by using automatic content recognition technologies and other proprietary techniques like Verance’s watermarking.

SNL ImageLG demonstrates ATSC 3.0 wireless network antenna
Source: LG

"We’re actively discussing partnership opportunities with the consumer electronic and broadcast equipment makers," he said.

Verance's Anderson said these kinds of partnerships are key to the success of ATSC 3.0. TV manufacturers will want to provide new competitive experiences to market their products and drive adoption, so broadcasters must apply the data they collect to create a use case for consumers.

"TV manufacturers want experiences. Programmers and broadcasters want data. They need to understand each other," he said. "That’s what’s going to build the scale and deployment."

Marrying old measurement with the new

Anne Schelle, managing director of Pearl TV, emphasized ATSC 3.0's ability to help stations participate in the industry shift away from schedules based on gender and demographic grouping information from Nielsen Holdings to those based on audience-based buys.

"If Wal-Mart is making a local buy in February, it could look to advertise snow blowers in Boston and watermelons in Florida," she said in an interview.

According to Kagan analyst Justin Nielson, "the two-way feedback will give stations access to better measurement," which also will provide stations with the added bonus of cost savings derived from not having to rely solely on sample-based ratings agencies.

Although data emanating from ATSC 3.0 will be important, Schelle said that with the legacy way of doing business, such information will be just one component of calibrating local station buys, as Nielsen panel data will remain in play, and agencies have their own data sets.

"It will be an aggregation ... in concert with other measurement systems," Schelle said.

Anderson at Verance agreed that legacy companies like Nielsen and other audience measurement companies will likely still play a part in providing a three-dimensional view of a given audience.

“For Nielsen and comScore Inc. and others, I think what will happen is more of a balancing effect. Their products are probably going to get better," Anderson said.

Rollout timing still uncertain

While executives widely agree that ATSC 3.0 will bolster advertising offerings for local stations, the timing of its arrival remains a matter of debate.

Sinclair’s Aitken said addressable opportunities will be up and running for a significant portion of the Spectrum Co. partners by 2020, and Schelle at Pearl echoed this forecast.

"Late in 2020, that seems fair," agreed Friedman.

Univision expects trials of the fundamental technology will start in the next 12 months, though Buergler said "commercial service may be three-plus years away."

Though the rollout may take some time, Television Bureau of Advertising CEO Steve Lanzano said the platform is "an almost drop-the-mic moment for stations."

"It's premium content at scale, with data and fully addressable," he said. "It's a perfect storm."

Still, Lanzano acknowledged much work needs to be done with the equipment, testing, consumer education about the value of 3.0, receptivity, data and advertising, among other elements. Lazano, for one, is trying to keep advertisers from getting too hyped, too early.

"It's four or five years down the road," he said. "At least."