The Promise and Perils of NextGen TV Advertising and ATSC 3.0

By Thought Leaders Archives
Cover image for  article: The Promise and Perils of NextGen TV Advertising and ATSC 3.0

When viewers were raptly watching the Super Bowl's many thrills a few weeks ago, TV stations in the Detroit market were getting an extra "wow" factor that the general public couldn't see. Equipment was lighting up with data showing how many homes were using advanced TV sets that could pick up ATSC 3.0 transmission signals -- the technology that can provide advertisers on traditional TV stations with ad targeting, dynamic ad insertion and attribution.

"We had almost as many 3.0 sets pinging us in Detroit as Nielsen has meters there," said Kerry Oslund, Vice President of Strategy and Business Development at The E.W. Scripps Co. How many homes is that? "If you were looking at the 25-54 demo, that would have been about 1,400 [Nielsen] meters that were reporting."

It's still very early days for ATSC 3.0, often referred to as NextGen TV. But for the stations in Detroit -- and across the country -- the Super Bowl experience is a sign of changes afoot that will have enormous implications for spot television advertising moving forward.

There are some major challenges to overcome before NextGen TV is a next big thing for stations and advertisers alike. Not the least among them is getting more stations on board to transmit the advanced signals, more 3.0 TV receivers in the market at a price point that a critical mass of consumers can afford and giving the public enough reasons to feel that it's worth it to buy them and tune in.

The success of ATSC 3.0 is critical to the TV station business, and its implications extend well beyond advertising -- into areas like handling data needed for 3D mapping of driverless cars and advanced emergency alerting. But the advertising significance alone is enormous.

For years, linear station sellers have watched on the sidelines as digital media raced ahead with advanced opportunities, whittling away at traditional spot TV's share of the media mix. Sure, broadcast TV groups had video streaming and other digital plays. But traditional over-the-air signals, with huge local appeal, haven't had advanced advertising capabilities.

All that's about to change. "I truly believe that this is like the move from black-and-white to color TV," said Oslund. "Moving to this IP transition is really that big. And that's just talking about the advertising possibilities."

"As you look at it from an ad revenue perspective, it will allow us to get into addressable, which currently broadcasters can't," said Rob Weisbord, COO and President of Broadcast at Sinclair Broadcast Group. "It puts you into a one-to-one relationship with the viewer. And that's key to generating ROI for the advertiser." NextGen also allows for conquesting, an advertiser tactic used to target a competitor's customers, he added.

Weisbord expects that in two years all of Sinclair's stations will be updated to ATSC 3.0. And many broadcast TV companies are gunning to make big progress as well, working together through alliances like Pearl TV, which seeks to advance forward-looking opportunities. It includes eight of the country's largest broadcasters, among them: Cox Media Group, Graham Media Group, Gray TV, Hearst TV, Nexstar Media Group, Scripps, Sinclair and TEGNA.

At the end of last year, ATSC 3.0 was available to 45% of U.S. households. "Our goal, by the end of 2022, is to have over 82% of households covered," said Anne Schelle, Managing Director of Pearl TV. She reported that ATSC 3.0 signals lit up in Los Angeles at the end of last year. Among the major markets that are being added in 2022 are New York, Philadelphia, Boston, Miami and San Francisco.

BIA Advisory Services' last projections for advanced TV ad revenue, calculated in 2020, put the annual station take at $8 billion by 2030. That assumes that the technology will allow for the "holy trinity of ad targeting, dynamic ad insertion and attribution, so it's not just the same ad over ATSC 3.0. It has to have some new capabilities to it," said Rick Ducey, the firm's Managing Director.

That $8 billion would be in addition to BIA's forecast of $19 billion in revenue from standard broadcast spot advertising in 2030 (an election year).

A more near-term estimate comes from Jack Myers, Chairman and Founder of The Myers Report and MediaVillage. He puts broadcast TV stations' digital and advanced TV revenue for 2025 at less than $2 billion, up from $1.4 billion in 2020 -- so slow growth at first. "My personal belief, without having a lot of economic validation behind it, is that ATSC 3.0 will be a significant growth factor 2026 and beyond," Myers said.

Love could be a two-way street where NextGen is concerned. "The advertising piece of ATSC 3.0 is great for the broadcaster, but it's also great for the consumer -- better video quality, better audio quality, all free over the air [interactivity] that's going to drive eyeballs," said Jimshade Chaudhari, Senior Vice President of Product at Marketron. "Ultimately, it's going to bring back advertising dollars. That's the end benefit to broadcasters."

Why is that? Consider that ATSC 3.0 allows broadcasters to flop out creative and content, because they can leverage the broadcast signal downstream and the internet connectivity back upstream, based on metadata and specific viewing preferences. "That's kind of the holy grail," said Ducey. "You get one newscast; I get another newscast. You look at hockey; I look at figure skating."

With dynamic ad insertion, "you may have one basic storyline from the creative ad agency, but literally 10,000 different executions of it. And you start doing the first 100 ads and see which ones work; turn out the ones that didn't work; double down on the ones that did work; and then add in the next 500 ads," Ducey said.

Weisbord sees far more than at-home viewing growth ahead. "Think about delivery of information directly to a connected car," he said. For example, ad availabilities on interactive maps delivered by ATSC 3.0 signals. If a user drives near a certain quick service restaurant, an ad might pop up giving a discount on certain meal options -- so far just a dream in the linear TV realm.

The future growth of NextGen ad revenue hinges to a large extent on consumers buying enough sets to allow for meaningful household penetration. And they also will need to buy antennas to go along with them.

Data from the Consumer Technology Association shows that right now, the U.S. is in the early adoption phase, with only 2.9% penetration of NextGen TV-capable sets expected this year (4.6 million receivers). That is projected to ramp up to 26.2% by 2025 and 55.4% (39.9 million) by 2027.

"We went into 2021 with 70 models. What's unique about last year is Sony integrated NextGen across all their devices," Schelle said. Samsung is already on board, and "LG launched more models. The lowest priced model was a 43-inch at $544. So we're starting to get down that price curve where we start to get into volume sales."

E.W. Scripps is among the TV station groups that will see some ad dollars trickling in this year from NextGen, but Oslund says the big growth is up ahead. Right now 3.0 signals are simulcasting ATSC 1.0 signals, but much more enhanced viewing and advertising options are in the works.

"We don't want early adopters of 3.0 to say, 'Eh, there's nothing different than 1.0,'" Oslund said. "We want to give them interesting things that can happen in the 3.0 environment. We believe that the first 10 million viewers are going to have a lot to say about what the next 20 million are going to do. And we do not want to repeat 3D television."

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