The Unlikely Return of the TV Antenna

Big news: EW Scripps is placing additional bets on multicast networks with the launch of three new channels (Newsy, Defy TV, and TrueReal) across their 41 market footprint.

Big question #1: What is a multicast network?

Quick answer: A multicast network takes advantage of digital TV signals and allows local broadcasts to offer multiple channels (2.1, 2.2, 2.3, etc.) as sub-channels with the primary network.

Companies launching multicast networks include:
1) CBS
2) EW Scripps
3) NBCUniversal
4) Nexstar
5) Sinclair Broadcast Group
6) Tegna

Big Question #2: What is driving the launch of multicast networks?

Quick answer: As more consumers leave the pay-TV bundle, antennas become a common way to access local broadcast stations.

Share of US TV households with at least one antenna according to Horowitz Research:
1) 2019 – 29%
2) 2020 – 40%

Quote from Michael Teicher – Chief Revenue Officer @ EW Scripps:“One out of four homes are now cable-free. And those numbers are growing. We think that this is going to get down to around 50 million homes. At the same time, antenna sales are growing, and consumers are rediscovering over-the-air television, which is now available in compression-free HD. “There’s a little over 40 million homes right now that are using digital antennas, and we believe that that’s going to continue to grow,”

Big question #3: Is it a net positive for local broadcasters when consumers drop pay-TV but continue watching broadcast TV through an antenna?

Quick answer: No. Broadcasters lose out on significant revenue from retransmission fees.

Big question #4: What are retransmission fees?

Quick answer: Pay-TV companies pay local broadcasters for the right to carry their programming along with the cable feed. These costs are passed along to consumers in the form of a higher bill.

Retransmission fees according to Kagan:
1) 2012 – $2.4B (↑ 36%)
2) 2013 – $3.6B (↑ 50%)
3) 2014 – $4.9B (↑ 34%)
4) 2015 – $6.4B (↑ 32%)
5) 2016 – $8.0B (↑ 24%)
6) 2017 – $9.4B (↑ 17%)
7) 2018 – $10.6B (↑ 13%)
8) 2019P – $11.7B (↑ 11%)
9) 2020P – $12.8B (↑ 9%)
10) 2021P – $13.8B (↑ 8%)

Big question #5: How can local broadcast stations continue growing revenue as pay-TV subscribers decline?

Quick answer: Advertisers are willing to pay more for targeted video advertising (digital and linear).

Local video advertising spend according to BIA Advisory Services:
1) 2021 – $26.7B
2) 2025 – $36.0B

Big question #6 – What verticals are rapidly growing their local video ad spend?

Quick answer: Politics (more on that soon) and online gambling.

Local TV spend (YoY growth) for online gambling according to Nielsen:
1) 2019-Q1 – $11M
2) 2020-Q1 – $13M (↑ 23%)
3) 2021-Q1 – $154M (↑ 1,062%)

More #1: TV Stations Are Launching Multicast Networks As An Opportunity To Reach Cord Cutters

More #2: How local TV stations plan to remain relevant as viewers shift to streaming

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