“The Future of Broadcasting”
The National Press Club – October 4, 2006
Remarks of David Rehr, President and CEO, National
Association of Broadcasters
Ten months ago, when I took this position at the NAB, I knew that
joining the broadcasting industry would be exciting. But after seeing
the dynamics of this business first hand, it is 20 times more exciting
than I could have ever imagined.
One surprising thing I’ve learned is that most Americans are
unaware of the dramatic changes taking place in our industry. And they
are also unaware of the strength of broadcast radio and television
among all media. Of course, part of this lack of attention to the
changes in broadcasting is by industry choice. After all, it is the
broadcasters’ fundamental job…
To make the audio and visual experience paramount;
To provide the best local news and sports, entertainment and
music;
To offer outstanding network and syndicated programs;
And, to serve as a lifeline – often the only one – in
times of peril.
This is at the core of being a broadcaster.
But with all the changes taking place around us in a fast-paced
world, broadcasters must do a better job of showing the amazing
transformation we are undergoing. You might say that we have
inadvertently relinquished some of the excitement occurring in
broadcasting to our competitors, by not being more proactive. That ends
today, because we have a very compelling story to tell.
Broadcasting is a vibrant business. It is a business that embraces
the future. We are switching from analog to digital technology, a
literal “reinvention.” Digital technology offers
broadcasters unlimited new ways to serve their audiences, along with
grander picture and sound quality. This technological change, which
fuels our future success, has also brought us an exploding number of
new competitors. And we must chart new courses.
But, these new media competitors, if given the choice, would prefer
to be in our position.
That is because, by any measure, broadcast remains the undisputed
leader in news and entertainment – by far. And, as we look
to the future, our competitors do not have the history, business
cultures or experience to provide true localism – events, news,
weather – the local link that has built the broadcast
industry.
Today, my goal is to begin the dialogue on areas where broadcasters
have enormous opportunities. We need to re-engage those who have a
false perception of the broadcast industry and begin to correct it. I
would like to focus on three areas that demonstrate the vibrancy,
strength and reach of broadcast:
- Number one – broadcasters are seizing new
opportunities in digital media;
- Number two – broadcasters are reasserting our
unparalleled leadership as the media of choice;
- And number three – broadcasters are leveraging our
unique advantage of localism – enhancing community life and
encouraging responsibility.
First – We are seizing opportunities in digital media. Going
digital is spawning amazing new tools and business models for networks
and local stations. Today, over 1,600 television stations are
broadcasting in digital and high-definition (HDTV). Standard digital
programming offers dramatically improved picture quality over analog
TV. High definition is the highest quality viewing experience available.
The majority of broadcast prime time scripted programs, major sports
and entertainment are now delivered in HD. And it’s important to
know that viewers with digital television sets, who rely on
over-the-air broadcasting, receive a more pristine picture than cable
or satellite provide. Anyone who has seen a golf tournament or a
football game in high definition knows exactly what I’m talking
about.
People get HD! They get it when they can see the individual blades
of grass and even the logo on the golf ball.
But, the greatest potential of digital television is the ability to
provide multiple streams of programming, which bring increased choices
to viewers. With our advanced technology, digital stations can
broadcast up to six different programs at once. And all of these
program streams together take the same bandwidth required for just one
current analog program. This offers a phenomenal opportunity to
increase diversity of content and localism.
Some stations refer to their multiple program streams as
“hyper local.” They broadcast local college and high
school sports, gavel-to-gavel city council meetings, instantaneous
local weather and other local programs. One of the first to go
“hyper local” was KTVB in Boise, Idaho.
But this expanded content and localism, tied to our new technology,
has not come about without a cost. To go digital, TV stations have
invested anywhere from around one million in small markets to over 20
million dollars in large markets. What many people don’t
appreciate is that during the DTV transition, broadcasters are literally
paying to operate two stations – one in analog, and one in
digital. For many stations, this has been a huge financial challenge,
without offsetting revenue.
Congress has mandated February 18, 2009, as the date when
television broadcasters will go fully digital, and return the analog
spectrum to the federal government. But most Americans are not aware of
this transition. One of the unintended consequences of the transition
is the potential for 73 million analog television sets, currently in
use, to stop working in February 2009. The federal government has
recognized this challenge and is working with us to help solve the
problem.
An important step in ensuring that no set goes dark took place just
last week. NAB joined in an unprecedented collaboration with the
Consumer Electronics Association (CEA) and the Association for Maximum
Service Television (MSTV). Together we submitted a plan to the
National Telecommunications and Information Administration regarding
the initiative to protect consumers from losing access to television.
Key to this effort is a program to provide digital-to-analog converter
set top boxes to viewers. CEA President and CEO Gary Shapiro, and MSTV
President David Donovan, deserve enormous credit for bringing the
parties together to seek a common solution, so that no television set
stops working.
The NAB Television Board has made it a top priority to undertake an
aggressive marketing campaign to explain the benefits of DTV and the
digital transition to the American public.
In the weeks and months ahead, we will roll out the specifics
behind this concerted effort. And we will need your help. We
have only 865 days left until the conversion occurs.
Radio is also undergoing its own digital transformation
– “HD Radio.” A layman’s explanation of HD radio
is as follows: HD radio brings FM quality to AM and CD quality
to FM.
And HD Radio brings expanded program offerings – and
less interference. More than 1,000 HD radio stations are already on the
air, available to 75 percent of the population. Thousands more
will be going digital soon. Like their digital
television counterparts, HD radio broadcasters can also offer multiple
program streams. More than 350 stations are doing just that –
rolling out additional channels with new music formats, local
information and local creative content.
By the end of the month, there will be 21 models of HD Radios
available for consumer purchase from 14 different manufacturer
brands. More digital radio products are coming to market before
the end of the year. We at the NAB are working to accelerate the number
of HD receivers in the marketplace, to increase the diffusion of this
technology throughout the nation. In fact, it is a top priority
of the NAB Radio Board of Directors to make this amazing technology
commonplace.
Another benefit of digital technology is our ability to move content
from one platform to multi-platform distribution – to expand our
reach. Multi-platform generally means broadcast programs delivered on
something other than the TV set or the radio. Not at the expense
of our core business – but in addition to all that we do.
What makes multi-platform strategies attractive is having more
convenient access to our audiences – such as radio on cell
phones, and TV on laptops. We hear a lot about expanding to
multi-platform at the TV network level and at broadcast stations in
large markets. The networks take seriously the need to maximize the
platforms available for viewers, so everyone can experience outstanding
network programming. And they are creating much excitement across the
entire media spectrum.
And in case anyone is wondering how the broadcast networks are doing
in the new season, I will quote this week's "Advertising Age"
magazine. "Broadcast TV is alive and kicking harder than it
has in years. Audiences have shown up in droves for the fall
season."
One reason for additional optimism is that small stations are also
embracing multi-platform. This was confirmed by an NAB survey just last
month. We surveyed stations from the smallest market in the country
– number 210 in Glendive, Montana – with 3,980 TV
households, up to the number 70 TV market – Tucson, Arizona
– with 433,000 TV households.
Here’s what we learned:
- 72 percent are streaming video on their Web sites,
- 36 percent are sending text messaging to mobile phones,
- And 88 percent sell advertising on their web sites.
Radio is also pursuing multi-platforms. More than 8,000 radio
stations have Web sites, and many of these are being used as portals to
stream their stations' audio. Radio stations earned more than
$200 million dollars in revenues last year from online
offerings alone.
But even with all of these expanded business opportunities, we must
address new competitors.
Who are the newer competitors? On the television side, in addition
to cable and satellite and the Internet, we now have Video on Demand,
interactive TV, time-shifting, place-shifting, and much more. On the
radio side, we have satellite radio, Internet radio, iPODs, other MP3
players, cell phones and others. How will we compete?
Our vision is a broadcast signal on all of these platforms, and on
any gadgets yet to be invented. Broadcast signals will not only enhance
the experience for the viewer or listener – they will also give
the manufacturers that include us an advantage over competitors who do
not.
This is already happening in radio. Motorola's I-Radio is merging
the cell phone, the car radio and the MP3 player. FM adaptors for iPods
are in the marketplace. It is no accident that Microsoft has included
an FM tuner in its just-launched portable media player
“Zune.”
Broadcast signals on all devices. That’s our future.
We also need more distribution of broadcast signals. For example,
telephone companies should be allowed to compete fairly with cable in
offering video services. Another competitor to cable and
satellite will give consumers more choices. It will give them
better prices. It will also give consumers better programming options,
especially those broadcast multi-stream programs I mentioned earlier,
which cable companies often choose not to carry.
So as you can see, broadcasters are rapidly seizing new
opportunities in digital media. I’ve mentioned just a few.
It is our future.
My second point today – broadcasters are reasserting our
unparalleled leadership as the media of choice. Since the inception of
radio and television, there has been fragmentation of viewer and
listenership. This is a natural consequence of a vibrant business
and has affected literally every industry in America. But as
we’ve moved forward, we have allowed our competitors to create a
false impression that they are more competitive with us and have a
larger presence before the public than they really do. This
misconception affects our ability to attract investment, ad dollars,
personnel and create momentum in the market place. We are obligated to
set the record straight.
First, let’s look at TV viewership.
If I asked you, “In the 2005 – 2006 TV season, where in
the top 300 most watched programs would your favorite cable show rank?
What would your answer be?
Well, for starters, broadcasters had the top 235 highest rated
programs among all TV households. Cable's most-watched show was number
236. It was on ESPN.
In the critical 18 – 49 age demographic, broadcast grabbed 100
of the top 100 programs. We took the next 84 as well. In fact, in
this important demographic, broadcast was responsible for 512 of the top
522 programs for 2005-2006.
So, what about specific cable shows? Where do they rank?
According to the latest Nielsen figures:
Emmy award winning cable show “Monk” came in at 1,022.
Nip/Tuck came in at 1,403.
And Larry King Live ranks 1,883 on the most watched list.
I think you see my point.
What about local news? Let’s look at a typical American
mid-sized city to compare cable news viewer-ship versus local broadcast
affiliate news. In Spokane, Washington, in May, in the 25-54 age
demographic, the combined viewer-ship for five Comcast Spokane cable
newscasts available at 6 pm was 994 people. That’s a total of
994 Comcast subscribers watching CNBC, CNN, Fox News Channel, Headline
News and MSNBC.
This compares with a viewership – in the same demographic
– of 38,500 for the three local broadcast
newscasts at 6 pm. Let me repeat: 38,500.
That’s not even close. This is a good example of the value
proposition of local news. We work hard every day for our audience, and
the numbers bear this out.
And what about the misperceptions about radio? You hear much about
satellite radio, XM and Sirius. The satellite radio companies have
done a good job in creating excitement for their product and keeping
Wall Street interested. But let’s look at the facts.
Satellite radio says it has at most 12 million subscribers. By contrast,
260 million people listened to local radio last week. This is
week in and week out. And we have recently learned that upwards of
500,000 of satellite radio’s so-called subscriber count are in
empty cars that sit in dealer parking lots. In fact, the Securities and
Exchange Commission is looking into how these subscriber numbers are
counted.
But what about radio’s strength?
An Omnitel/American Media Services study released in August shows
local radio’s continued impact:
- 21 percent listen to local radio more than they did five
years ago;
- Another 51 percent listen to about the same;
- And 63 percent rate local radio as their primary source to
learn about new music –20 points ahead of its nearest
competitor, which is a category called "talking with
friends."
I could go on and on with the facts. The bottom line is that
broadcast television and radio are the overwhelming media of choice.
And we need to continue to reassert that reality in people’s
minds.
Three – Broadcasters are leveraging our unique advantage of
localism – enhancing community life, and encouraging
responsibility.By localism, we mean broadcasters are the integral part
of our communities, promoting local causes, raising funds for charities
and providing vital emergency information.
How many of you would turn first to a cable or satellite TV channel
or satellite radio when a tornado, a wildfire or a flood is approaching
your community? When you need information on school closings or
Amber alerts, where do you turn first? The answer is and remains
broadcasters.
And as you know, when the power goes out, the only connection you
have is a battery operated broadcast radio or TV.
If you were in charge of the Race for The Cure for breast cancer in
your community, who would you call first to maximize your
visibility? Would you ask your cable or satellite company to
sponsor the event, get the word out and send volunteers to work?
Probably not. If there is a blood drive, coat drive or a need for
volunteers down at the local boys and girls club, it’s the same
thing – it is the local broadcasters who will take care of it.
Local radio and television have always done these things for our
communities. And it will continue to be our fundamental
strength.
The NAB announced in June that in 2005, broadcast stations generated
$10.3 billion dollars worth of public service in air time and local
station contributions to worthy causes all across the nation. Many of
our activities are not included in this $10.3 billion – such as
the value of hundreds of hours of volunteer time given to local
communities by station personnel. This commitment to communities
cannot be replicated by our competitors.
We are also using our unique ability to connect locally to help
parents work through the everyday life decisions of what their children
should see and hear in the media. Broadcasters are taking a
leading role in empowering parents to control what comes into their
homes through television.
We have joined with all parts of America’s media – the
broadcast networks, the cable industry, direct broadcast satellite
companies, the movie industry, the consumer electronic manufacturers
and others in what will be a $300 million dollar Ad Council campaign to
reach every home in America.
The campaign has already been launched and has received strong
positive reaction. It is the brainchild of one of our guests
here today, my friend, Jack Valenti. Jack has led this unprecedented
effort because he, other media leaders and broadcasters believe that
parents have the total power right now to control what comes into their
homes. It is parents, not government, who should decide what is
appropriate for their children to watch. But we are obligated to
give parents the tools they need.
The Ad Council has provided public service announcements and a new
Web site,
TheTVBoss.org, to our
broadcasters to help parents block unwanted programming from whatever
the source. TheTV Boss.org has already had more than a quarter
million visitors. This will be an 18-month campaign to educate
parents. Some of you might have seen the first wave of these
announcements already.
Broadcasters have embraced this effort wholeheartedly ….
running the public service announcements, featuring the campaign
in local news, on morning shows, and linking the effort to their
station Web sites. Our goal is to ensure every home in America has the
opportunity to take advantage of this joint effort.
Let me conclude by talking about the specific role of NAB in
moving the broadcast industry forward. As anyone in Washington knows,
the best new business models of any industry can be stopped cold by
wrong legislation or regulation. That is why NAB is taking stronger
steps to ensure a regulatory climate in which radio and television can
grow our business and better serve consumers.
Managing change and taking risks will not be easy as we move
forward. Working out the copyright, technology and business models will
take hard work and cooperation. It will take a concerted effort to
update our laws and regulations to ensure that free, over-the-air
broadcasting can continue to provide our great service to millions of
Americans.
We are seizing the digital future.
We are reasserting our strength as the unparalleled media of choice.
And we are leveraging our localism to advance communities all across
America.
And that is why the future of broadcasting is 20 times more exciting
than anyone could imagine.
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