1. Another Nail In ATSC 3.0’s Coffin

As discussed in our recent report on Local TV and Streaming, ATSC 3.0, the standard that was going to save broadcast, is having a bit of a tough time getting some traction.

Okay, that’s an understatement. It’s been struggling like crazy.

That’s too bad because it’s actually a well-designed platform that does a lot of things that could make over the air television more compelling.

The problem (as also noted in the report) is that it came along about five or ten years too late to actually make a difference.

There are other problems too—the US is a very big country and large swaths of the country have terrible-to-non-existent over the air reception. 

So there’s that and then there’s the thing about ATSC 3.0 not being backwards compatible. Meaning you need a new, ATSC 3.0-compatible TV to use it. Only the people who mostly watch over-the-air aren’t the new TV buying types. 

If only that were the real issue though.

Because even if that audience did all set out to buy new TV sets, it would be hard to find one. 

You see, the major OEMs don’t really see the need to produce ATSC 3.0-compatible TVs, and thanks to a recent court ruling, that’s going to get even worse.

Why It Matters

LG announced this week that they were going to stop making ATSC 3.0-compatible TVs. The impetus, or rather one of the impetuses, is a recent court decision that LG had impinged on the patent of a company called Constellation Designs that built the actual ATSC 3.0 tuners and thus owed them $1.68 million in damages. 

That, LG says, will raise their costs for building ATSC 3.0-compatible TVs to a point where they are no longer profitable. (The fact that there is close to zero demand for them no doubt factored into that decision as well.)

Worse still, TechRadar is reporting that Samsung and Sony may not be far behind, and VIZIO has never even gotten on board. 

So even if you wanted to buy an ATSC 3.0-compatible TV, you’d have a hard time finding one.

What about a dongle, you ask? Couldn’t people just get an ATSC 3.0 dongle?

They could.

But said dongle costs around $90, which is clearly way more than anyone but hobbyists will be willing to pay. 

Especially because ATSC 3.0’s benefits fall into the “nice to have” category. You can get addressable ads and watch some shows on demand. 

But given that you can get all that and more from a $29 Roku or FIre TV stick, I’m not really seeing the value.

Some of the broadcast trades (and Team ATSC 3.0) have tried making the argument that reception on streaming, the FASTs in particular, is not nearly as good as over the air.

Which is likely true, but reminds me of how audio enthusiasts would whine about how MP3s and streaming audio sounded so much worse than CDs.

Which was also true, but like no one literally gave a toss—Spotify was just much, much easier.

What You Need To Do About It

If you are the good people at Pearl who are leading the ATSC 3.0 battle, I’d probably tell you to call it a day, but after putting so much time and effort into trying to make this thing happen, that’s not going to be easy. 

But I just don’t see a way ahead. 

When I brought it up to people for the local report, no one was even remotely enthusiastic. One executive I spoke with said they thought the industry should have doubled down on it and created more compatible content and features as a way to push the TV OEMs into adopting it. But they also felt that window was pretty close to getting shut.

So there’s that.

There’s also the Infrastructure Bill which is going to bring low-cost,  high speed broadband to all those parts of the country that currently lack it and thus rely on over the air broadcast.

So there’s that too.

But hey, no one can accuse you of not trying. You fought a good fight and never let up. That’s not nothing.

2. Is Max’s Programming Too Good For Its Own Good?

A little remarked-upon factoid I stumbled on this week says that Max has one of the lowest uptake rates for its ad-supported product of any of the major SVOD services—only 21 percent, as per Antenna.

Which, if you think about it, is not all that surprising.  

HBO has always been sold on the notion of being ad-free, and Max/HBO has been doing a stellar job of creating Shows People Talk About. This past year saw new seasons of Succession, The Last Of Us, Barry, Euphoria and  The White Lotus, e.g. shows people would prefer to watch without commercial breaks.

Now granted there are all those Discovery and HGTV shows on there now too, but chances are not that many people are signing up to Max just to watch a new season of House Hunters International.

It’s sort of a paradox, because by making shows people really want to watch without interruptions, Max is cutting into the number of people willing to save $6/month for the ad-supported tier. Because really, who wants to watch Sicilian prostitutes take advantage of Michael Imperioli with ad breaks in between? Even really well-targeted ad breaks. 

Why It Matters

Getting people to pay for ad-supported TV has, quite frankly, always baffled me. 

Hulu made it work, but Hulu was always ad-supported and so that meant they started with a base that was 100% ad-supported subscribers.

Max, OTOH, carries the HBO legacy and one of the many reasons people liked HBO was that it did not have ads, which, back in the day, somehow made it seem superior to regular TV.

Or, as the ads reminded you, it’s not TV, it’s HBO.

Creating some of what the chattering classes regard as the best and more iconic television out there (remember when the NYT had four different articles about Succession on their homepage) is a noble goal and one Max should definitely keep pursuing.

Unfortunately, that's not a good strategy for growing their ad-supported tier.

Fortunately, however, Max is expanding its offerings. It will soon have CNN and all the live Turner sports. Both of which are much easier to watch with ads, which should help their numbers.

The bigger question though is how to play Prestige TV, the sort of shows that people lean into when they watch, the sort of shows viewers expect to watch without interruptions from their friends, families and phones, let alone advertisers.

The issue is that the industry needs these sorts of shows to survive, to get people talking and subscribing.

The downside is that it is a suboptimal experience to watch these shows with ads. I mean if nothing else, they’re not written with ad breaks the way network TV shows are and so the ad breaks are always going to seem forced and unnatural.

The flip though, is that the industry needs ads on those buzzed about original series to survive.

As noted here many times, big TV advertisers, the ones who spend $10 million on a single TV commercial, want that commercial to run against premium original content. They get that streaming is popular, but feel (correctly, I might add) that most of the inventory is against reruns.

But once all of the SVOD services hit critical mass and buying against ad-supported SVOD gives them tens of millions of desirable viewers, then those big brands will move their $100 million budgets over the streaming on the theory that SVOD is the new prime time and FASTs are the new cable.

Great, but if only 20 percent of the people watching the new season of The Last Of Us are seeing ads, then that theory goes out the window. 

What You Need To Do About It

If you are Max, Netflix, Apple, Disney et al, you have a Hobbes’ Dilemma on your hands. 

Do you keep making Prestige TV shows in the hopes that they create a halo effect for all your programming and that things like news and sports will bring in the ad-supported subscribers? 

Or do you cut back and double down on shows that feel more like “expensive NBC,” e.g. the sorts of shows where people don’t mind seeing short, tasteful ad breaks.

I don’t know the answer to that but I do know that sports is going to be the one place where advertisers will be able to reach the sorts of affluent, educated viewers who will only subscribe to the ad-free versions of streaming services and who likely have ad blockers on all their browsers as well.

It’s not a solution to the prestige content dilemma, but it is a way to get ads in front of all those high-value viewers.

Something to bear in mind next time you are negotiating sports rights.