Sinclair CEO Hails ATSC 3.0 Draft for Its 'Flexibility'; M&A Comments Draw Fire

Retransmission consent concerns expressed by the pay-TV industry throughout the 3.0 proceeding were "really just a smokescreen put up by the MVPDs -- a competitive smokescreen that the FCC did not fall for,” said Ripley. “We don’t see this migration affecting retrans whatsoever. It’s just important to give broadcasters flexibility.” Sinclair plans to “stack up more signals” on its 1.0 service to “free up signals to convert to 3.0, so that new and old TVs can be supported simultaneously,” he said.

Unlike the previous transition from analog to digital TV, when the FCC “set aside individual channels for us to transition to,” the commission is not doing so with the migration to 3.0 because “there’s no real estate left,” said Executive Chairman David Smith. “Broadcasters have literally gotten together and on a market-by-market basis will work through the transition details to accomplish the end result.” Ripley thinks the “punch line” on the draft was that the FCC “recognized this and gave the broadcasters the flexibility to have a market-driven answer, which is a win for us,” he said.

The process of determining the value of Sinclair’s 3.0 patent holdings “has just gotten underway,” said Ripley. MPEG LA “organized some of the first meetings” aimed at establishing a possible 3.0 patent pool, he said. “Our patents are still literally getting issued. It seems like every week, one comes through the door. We’re newbies to this process. We didn’t do the 3.0 work to gain a revenue stream. That’s just sort of a happy outcome of pushing a standard that we thought would benefit the access that we hold in the industry at large.” Financially, “there will be something that comes out of that, and we have hired experts to help us through this process,” but it’s too soon to predict when Sinclair might begin collecting meaningful 3.0 patent royalties, he said.

MPEG LA’s call for 3.0-essential patents was the “first step in creating a one-stop license,” the patent-pool administrator said in August. It’s “still early in the facilitation process, and we are not in a position to provide any other specifics at this point in time,” spokesman Tom O’Reilly emailed us Wednesday. “As you can probably imagine, each program is different and though we don’t disagree with Sinclair’s comment regarding the timeline, it is difficult to predict how long it will take to reach a consensus among many patent holders.”

Nielsen is “trying to improve what is a very antiquated product -- in our opinion not nearly fast enough,” said Ripley in Q&A when asked to comment on Nielsen’s recent statements it’s working to upgrade audience management tools. “There’s so many other sources of measurement that either exist or are coming.” For example, Sinclair is a “lead strategic investor” in Sorensen Media Group, “lighting up its platform” that will access “about a third of all the households in the country, and be able to measure second by second what every one of those households is watching,” Ripley said. “When you think about that in the context of what Nielsen does, or you think about ATSC 3.0 sending back data on what people are watching, it makes Nielsen’s product look very old-fashioned. And so, at the end of the day, we’re sort of movin’ on in terms of where technology is headed.”

The audience-measurement tools that 3.0 will enable will tell advertisers “what person and where is watching,” said Smith. “There’s no other service out there that can provide this capability,” he said. ATSC 3.0 “will provide this capability on a device-by-device basis, geolocated, once it’s up and running,” he said. “That’s the holy grail for the industry.” Through 3.0 receiver technology that Sinclair and its One Media subsidiary are developing, TV stations will be able to “capture significant and meaningful information relating to the consumer’s actual viewing and consumption behaviors,” saving broadcasters the cost of “expensive third party measurement services” that yield “questionable results,” Sinclair announced a year ago (see 1611020025).

Nielsen corporate policy “prohibits us from discussing any client contracts or ongoing negotiations,” a spokesman emailed us Wednesday. “Sinclair is a longstanding and valued client, and we look forward to releasing our enhanced local measurement solution which will deliver best in class measurement and quality that all of our clients expect and rely on.” Nielsen agrees with Sinclair that 3.0 “offers tremendous potential for broadcasters as well as consumers of local content,” he said. “Providing independent measurement of ATSC 3.0, as well as all other methods consumers will use to receive local content, will be critical to providing advertisers a complete picture of their media and ad performance.”

DOJ’s consideration of Sinclair buying Tribune remains “an ongoing process,” said Ripley. “We’ve obviously presented a very strong case that at the very least, cable should be included in the market definition” as an ad competitor to local stations (see 1706200084), he said. “It’s sort of undefendable to not at least look at that. Only time will tell as they go through that process what their view of the market will be, but we feel incredibly confident that we’re in the right.”

The FCC “for at least the first time I can recollect has come out and essentially said the local broadcasters now compete against essentially everybody,” said Smith. It “now subscribes to that view, which is obvious in terms of the reality of it,” said Smith. DOJ “sooner or later” will need to “get aligned with the reality of the marketplace,” he said. “They are not aligned with the realities of the marketplace, and I think it’s incumbent upon them and the folks over there to kind of really pay attention to what’s going on in the real world.”

That the FCC plans at the Nov. 16 meeting to vote in favor of local ownership deregulation and 3.0 “deployment” marks “a landmark development for our industry as a whole,” said Ripley in prepared remarks. “We applaud the FCC for recognizing the competitive inequities levied upon TV broadcasters for several decades while emerging technologies. media distributors and content providers have been allowed to consolidate and freely deploy technical platforms,” said Ripley. “Reforming the ownership rules and allowing for technological innovation are both necessary for the future of over-the-air broadcasting.”

Sinclair took the unusual step of opening its earnings release with a statement in which Smith hailed the FCC for recognizing in its local ownership deregulation that “the current rules no longer reflect the realities of today's media landscape and consumer viewing habits.” Sinclair applauds “the FCC's action to level the playing field, especially in light of emerging technologies and consolidation in the telecom and cable industries," he said.

Smith’s comments drew sharp rebuke from the Coalition to Save Local Media, opposing Sinclair/Tribute. “Weakened media consolidation rules do not level the playing field but pave an easier path for the Sinclair-Tribune mega-merger that is not in the public interest,” said the coalition. Sinclair and Tribune’s “arrogance throughout this process should raise serious flags” at the FCC, DOJ and “other parties investigating this proposed merger,” it said.