Commentary

Is Local TV Obsolete?

by Dan Reitan , June 27, 2013

Historically, an important source of information for millions of people, Local TV was a 20^th century institution. In the 21st century, Local TV's future is far less certain.

The competitive advantage that local TV stations have enjoyed since their inception involves government-issued monopoly rights granted on broadcast VHF or UHF bandwidth, more recently also driving local CATV distribution agreements.

The low barrier to entry of cloud-based "over-the-top" technology, with its "anything to anywhere from anywhere" distribution, is severely eroding this advantage. Coupled with growing mobile wireless capacity, the new technology is rendering traditional VHF and UHF wireless broadcasting and CATV distribution virtually obsolete.

Business models of local TV stations have traditionally leveraged this local broadcast distribution advantage by bundling distribution with quality local TV production. Obsolescence of the distribution technology that created primary value in the bundle, and the viability of the model itself, is now threatened by competition from cloud-based distribution networks and from independent production companies.

Further, as media continues to fragment and diversify, audience interest is becoming more specific, more "narrow" in focus. Cloud-based technology is allowing ultra-local, as well as personal focus on events of interest. Professionally curated content such as traditional local TV increasingly competes for engagement with self-curated forms such as YouTube.

Local stations still have a window of opportunity in which they can leverage their local broadcast capabilities in conjunction with their local production capability to advantage, effectively carving out a new niche within the global content ecosystem.

Ironically, the same cloud technology threatening the status quo of local TV stations offers hope for their future—three forms of cloud-based TV are particularly promising: Global Narrowcasting, Interactive Next Gen TV, and Automated Localization.

Global narrowcasting in this case involves the production of locally topical content of global interest. While still leveraging competitive advantages in local distribution, the differentiable value proposition shifts to greater emphasis on production, curation and local knowledge.

Interactive Next Gen TV taps an exponentially growing installed base of capable viewing devices, and growing consumer interest in the new media capabilities of these devices, adding significantly to global ratings and to CPMs. It also promises to attract younger demographics. Differentiable value depending in this case on cost-effective transmedia production skill sets, and quality technology partnerships.

Automated Localization uses smart-device capabilities to automate content fragments, blending different levels of curation directly on smart viewing devices to form a single media stream. Localization of geographic interests combined with social interest graph (aka "personalization") lead also to better demographics, proven high ratings and the promise of significantly higher CPMs.

Combining all three forms -- Global Narrowcasting, Interactive Next Gen TV, and Automated Localization -- can leverage branding and other assets through four distinct distribution channels:

Conventional Local Broadcast (current model featuring VHF, UHF and cable)
Global legacy connected-TV narrowcasting
Conventional local broadcast synchronized to Next Gen Media enhancement on Smart TVs Multiscreen, and Mobile TV viewers
Global narrowcast to Smart TVs, Multiscreen, and Mobile TV viewers

Such new media programming would initially account for only a small portion of overall revenue for any early-adopter local TV stations, but would position these stations for developing long-term technology partnerships, distribution partnerships and core narrowcasting competencies essential to the new TV media reality.

TV stations unwilling or unable to adapt will not have the capabilities or technology to keep pace with the rise of interactive and social TV paradigms. Younger demographics (Millenials and Post-Millenials) have shown a clear preference for interactive and personal content.

Stations that view this change more as a challenge than a threat, and that take pro-active steps to embrace radically new production and distribution models, will be much better positioned to carve out a lasting and significant role in 21st century communications.

local media, tv

2 comments about "Is Local TV Obsolete?".

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Claudio Marcus from FreeWheel, June 27, 2013 at 5:07 p.m.
Given the fragmented nature of the local broadcast TV market, it is reasonable expect to see some leaders forging a path towards the outlined vision. What station, station groups or consortiums do you see as leading the way?
Reply

Dan Reitan from ReinCloud, July 16, 2013 at 3:30 p.m.

Excellent question, Claudio.

Broadcast network groups have the most at stake because they face an erosion of affiliate value. Facing the classic “incumbent's dilemma,” these networks are more interested in short-term defense of the status quo against rapid change, than focusing on future vulnerability to the changing media technology. To date, we have seen primarily defensive and incremental technology offerings from these networks related to TV innovation.
It seems unlikely then, that network affiliates will emerge as leaders in this new space. The local stations do not have the technology to meet the challenges of new ways of broadcasting without engaging technology partners. Also, smaller market stations do not have the economy of scale to be successful early adopters.

The nascent market will likely be led by large-market independents, in conjunction with emerging technology partners. The conditions seem similar to the early 1980s as superstations such as WGN and WTBS began to dominate their respective markets. In contrast, though, the lower barrier-to-entry in capital outlay and easier access to wider distribution than the old superstations, suggests that the model can support many such entries, in virtually every major market worldwide.