Video Age International October 2015

44 October 2015 V I D E O A G E Q & A with U.S. media strategist Blair Westlake on the future of free-to-air television: if it will survive, the nature of that survival, how it will be reborn and its metamorphosis. What will happen to FTA television? In 2030, many territories in the world will have migrated away from using precious spectrum to transmit television broadcasts. Even today, nearly all homes receive free-to-air TV by means other than actual broadcast (e.g. in the U.S., more than 90 percent of households subscribe to cable, satellite or Telco-provided video services). Spectrum auctions in the U.S. are fast approaching, and there is simply too much money at stake from selling off spectrum for most broadcasters to pass up. In 2030, broadcasting over-the-air will be a distant memory. Not only will other transport means be used to deliver FTA TV, but linear TV as we know it today will migrate to an entirely on-demand offering. Services such as Netflix have set expectations by consumers at a high bar: expectations that must be met by competitors or be doomed to oblivion. Heading into 2030, FTA channels will have no choice but to match Netflix’s formula for access on any connected device. Netflix’s success goes beyond its content, to its ease of access, and the selection of programming on-demand— to accommodate viewers’ schedule (and not vice versa). That has driven Netflix to record subscriber levels. Will there be such a thing as free TV anymore? Free TV, as we know it in the U.S. and in many international territories, will disappear by 2030 — and more likely by 2020. If a free-TV service cannot afford to produce or acquire the content consumers want to view, it won’t be able to compete or survive, and will simply vanish as we are seeing with printed newspapers. The means for more accurately measuring viewership (thanks to technology advances) will finally blow the lid off of CPM’s for ad-supported channels — and prices will drop precipitously. Just as cable unbundling will wipe away subsidies paid to weak channels today — which only exist because they were crammed down cable operator’s throats by their owners as part of carriage deals in the past — so, too, will the entire advertising mechanism that has existed since the early days of television. That will mean vast, and in some cases, painful changes for the TV sector. With increased poverty levels in the U.S., why would “free” TV lose out? Access to Internet has become as essential to everyoneashavingwater, electricityandtelephone services. For children in low-income households, education is seriously impeded if those children cannot access the Internet from home. Formanyyears, residential telephonecustomers in theU.S. were subsidizedby business customers, as a means of ensuring that every household could have a dial tone, regardless of what it cost to run copper wire to the home. However, U.S. regulators — the FCC and other governmental agencies — have been slow to impose broadband build-out and low-cost, subsidized, Internet offerings as part of big acquisitions. But, with the FCC’s approval of AT&T’s acquisition of DirecTV, it imposed on AT&T various broadband build-out requirements as conditions of approving the deal. It’s unlikely that free TV will even hold a candle to the rich resources the Internet can offer to low- income households. Plus, aside from local news, the fare of most free-to-air channels today is lagging so far behind that the justification for keeping free TV channels going for community information purposes will be impossible to make. Does FTA’s survival hinge on live events? The proliferation and use of the DVR has meant that live TV is the only programming that broadcasters can sell to advertisers in which ads cannot be skipped. Live events that drive large audiences will continue to be the most desirable programming for FTA broadcasters and cable channels. The broadcast of live events on TV are in three narrow buckets today: news, sports and awards shows. It’s unlikely any of these genres of programming will ever be viewed on delayed transmissions. The cost of rights to sports and awards shows has increased by staggering amounts over the past few years, particularly for sports. While most of the licensees of this programming are referred to as free-to-air services, the word “free” is a misnomer. FTA broadcasters wouldn’t have a chance of paying, or recouping, multi- billion dollar license fees without retransmission consent payments (at around one dollar per household), and hefty advertising rates. Is the future of localism (emergencies and local news) tied to FTA? While FTA channels have been a means of communicating weather alerts and similar emergencies, there are alternatives that are many times more effective. Mobile phone ownership in the U.S. is on par with the penetration of wire-line phones 20 years ago. Notification of emergencies via TV is only as reliable as someone having the TV on and actually watching it. While broadcasters still have FCC imposed obligations for emergency broadcasts, that will be supplantedbyuseofmobilephonenetworks. At the moment, Apple has concluded that taking Apple TV to the next level requires giving consumers access to their local channels, both network affiliates and independent stations. At leastfortheforeseeablefuture,localprogramming, particularly news for the older demographic, may be a must-have to move the needle on Apple TV sales. Should Apple TV be successful securing those rights, itmay bewelcome news for a category of consumers. But data shows that the under-30 audience, for the most part, does not watch over- the-air TV, thus the long term impact for FTA channels may be short-lived. Will cable TV become just a fat “pipe” for broadband, with content being transported via IPTV? As the margins on video services continue to shrink for cable providers, little by little, many will migrate away from the hassles of acquiring content and the associated costs, and simply offer data pipes as their primary service. Some of the most popular video services today are offered solely over-the-top (OTT), where the cable providers are not even involved with how the consumer subscribes and accesses the content. We have seen that change start off slowly, but more services, such as CBS, HBO Now and Showtime, are following suit. Whenwe move to a truly á la carte world, which is inevitable even before 2030,many channelswill disappear simply because the artificial subsidy they receive today (thanks to cable bundling) will be gone. Traditional channels, those delivered via cable, will only shrink in quantity, as OTT programming services — direct-to consumer offerings — will proliferate. The cable TV pipe will be a means to receive video programming, but in most cases, separate and apart from an offering from the cable provider. The Demise of FTA Is Assured, As Is The Changing Nature of Free-TV Ten Steps to 2030 Blair Westlake Blair Westlake is a media strategist who began his career as an attorney in the law department at MCA and rose to become Chairman of Universal Television and Networks Group. From 2004 to 2014, he was Microsoft Corporation’s liaison with the global media and entertainment.