Friday, January 13, 2006
Maximizing Television's Key Assets - Do These "New" Revenue Streams Show Promise?
Mark Fratrik, VP BIAfn
Television advertising revenue growth has slowed or gone negative in recent years. Not surprisingly, television broadcasters are rethinking their businesses and are aggressively searching for new non-advertising revenue models that utilize their content and spectrum assets. Broadcasters are developing content that can be displayed on a variety of devices and are utilizing their digital channel capacity for other uses. Without other revenue streams these broadcasters would have a dreary future.
On the content side, the most significant activity has been the networks securing arrangements with alternative delivery systems. Capitalizing on their programming, ABC has created a deal with iPod for downloads and CBS and NBC have been pursuing video on demand options. At a local level, WRAL-TV, Raleigh, NC has introduced a service provided to one of the local cellular companies offering news/weather/traffic subscriptions. Meredith Broadcasting has also announced a deal to provide local content from their 14 network affiliated stations to local cellular companies. Other local stations have entered into agreements to provide additional programming services to local cable systems while still others are opting for retransmission consent payments for their programming from local cable systems.
On the spectrum utilization side, broadcasters have an attractive untapped asset. Their 19.4 Mbs digital channel capacity far exceeds the 3 to 4 Mbs required for standard definition broadcasting or the 8 to 12 Mbs required for HDTV. As such, broadcasters are pursing datacasting or multicasting strategies. The multicasting allows broadcasters to offer multiple channels of programming, and some are offering a second network or an all-weather (e.g., NBC Weather Plus) or news channel on a portion of their digital channel.
Datacasting allows broadcasters to use the excess digital channel capacity for transmitting data, audio or video to computers or other devices. Television station's large coverage areas allow enterprise and government clients to push their content to many sites within the metro and surrounding area. Still others are leasing the excess digital channel capacity out to aggregators who offer terrestrial cable-lite services (e.g., USDTV) to local viewers.
At this point, relatively small dollars are being generated by most broadcasters through these new applications. But we expect this to change significantly over the next five years. In certain circumstances, a smaller broadcaster may be able to generate up to 25% of their revenue, 40% of their cash flow, from these new applications. As advertising revenue continue to soften and network compensation continues to be terminated, broadcasters must look to new ways to monetize their valuable assets. Those broadcasters with distinctive programming should look towards repurposing that programming while others without that programming should look towards greater utilization of their digital spectrum. Broadcasters that do not take any actions will be hard pressed to see any growth, and in several cases hard pressed to guarantee their long-term existence.
BIAfn's Take:
Television broadcasters are beginning to see some success in developing additional revenue streams. From the networks providing their programming on alternative means of distribution to local television stations providing local news to cellular companies to local television broadcasters selling their unused digital spectrum to cable-lite providers, the television industry is generating non-advertising revenues. By either repurposing some of their programs or by taking full advantage of their digital spectrum these broadcasters are finding the necessary opportunities to insure their continued success.
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