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Christopher Ripley Rick Howe Sinclair Broadcast Group NAB NY TV STIRR

Sinclair CEO Chris Ripley on ATSC 3.0, M&A And Online Video’s ‘Sea of Blood’

Christopher Ripley, CEO and president of the country’s biggest chain of TV stations, Sinclair Broadcast Group, took to the stage at the recent NAB NY conference to discuss the transformative potential of ATSC 3.0; the “antiquated” TV viewing experience; what acquisitions might be in store; how Sinclair hopes to STIRR the streaming video pot; why the Tennis Channel is perfectly positioned for a sports gambling future; and why Sinclair won’t compete directly in the “sea of blood” with Netflix, Hulu, Amazon and other tech giants.

Subjects Ripley didn’t discuss with Rick Howe, a long-time industry consultant and self-described ITV Doctor, included criticism of the company’s controversial imposition of conservative editorial positions on its local news anchors, as well as what went wrong with that failed Tribune deal that would have dramatically increases Sinclair’s already substantial national reach. Yeah, I know. All of the fun stuff. Nevertherless, Ripley covered lots of worthwhile territory, as Sinclair continues to be an ambitious TV player to watch. The conversation has been edited for brevity and clarity.

Rick Howe:
Give us an overview of your long-term strategy for growing Sinclair.

Christopher Ripley:
So when we think about strategy at Sinclair, we really break it up into three buckets, the first being content, which is probably the most important part right now. What we’ve seen in the marketplace, Netflix has taught us that players that combine information and entertainment, with convenience and user experience, will win.

And what does that mean for the rest of us, for companies like Sinclair? We’re really focused on winning in areas where we’re strong in. That means local, that means topicals, that’s sports.

Just to unpack that a little bit more, specifically in mobile. We know the younger generation wants mobile, but is very unhappy right now with the choice of platforms on wireless. Right now, the default platform for that generation is social. Social does a very poor job and also has problems with trustworthiness. So that’s where we’re focused. How do we serve them on their platform of choice?

The second leg of the stool for us is wireless. You’ve heard a lot about that at this conference. We’ve been a big booster and a technology provider into ATSC 3.0. And that is going to take our wireless spectrum, which is only used by 15 to 20 percent of the population today, and is going to unlock a significant amount of value and actually make it a platform which the entire country is going to want to use.

And then, last but not least, we think about our marketing services, our relationships with the advertisers, national but primarily in the mobile marketplace. And we approach that from an integrated approach where we go to capture more of their share of wallet, and provide them a fully integrated suite of marketing services, including spot, website, AdWords, social, social campaigns, so they have a one-stop shop to get the cash register.

Reaching Younger Audiences

Rick Howe:
So let’s talk a little bit about audience, because you talked about younger folks not necessarily being served well by social media. I had a meeting with a group of students from NYU. We talked a little bit about broadcast and that generation associates broadcast with cable, which they have no interest in. They don’t even divide the two. This group of folks actually had no idea that there was such a thing as over-the-air television. They didn’t realize they can get that but they’ll watch content on Hulu, so they want the shows from primetime network television but they don’t know where where else to get it. So how do you reach those kids, because I mean that’s the future.

Christopher Ripley:
There isn’t really an incentive on behalf of the industry to promote the existing over-the-air experience. It’s a good experience from a quality perspective. You can get HD high-quality pictures over the air to a television on the wall. But it really is an antiquated experience in a lot of regards. The next generation, even if they knew about it, I’m not sure if they would really take full advantage, because it’s only delivering linear TV and that’s really not the way that generation is used to interacting with things.

Rick Howe:
That’s right. They don’t want your schedule, they want their schedule. They want to watch it when they want to watch it.

Why ATSC 3.0 Matters

Christopher Ripley:
Correct, and so at this conference you saw a whole slate of broadcasters proclaiming their dedication to rolling out ATSC 3.0. That’s really important because ATSC 3.0 delivers five key benefits to broadcasters, and consequently benefits to (everyone else).

No. 1 is that it’s IP (internet protocol) end to end. So that means television will no longer be a separate technology stack unto its own. It will support a hybrid environment. From a user perspective, you will not be able to know whether you’re getting information and data from over the air or through the public Internet. You will get an interface that will be seamless to you, and it will have both pipes working. And that means you can deliver an experience that this generation is used to having over the Internet today but through our own distribution platform, so it will be interactive. It’ll have on-demand features. It will have all the advanced features that you associate with a best-in-class OTT experience today.

The second benefit is that it will provide dramatically more capacity, so we’ll be able to do a lot more with existing spectrum and we’ll have about four times more capacity and potentially more down the future as compression increases.

It’s a mobile-first standard, so that’s the third benefit. It’s designed with mobility in mind so no longer are you tethered to that TV on the wall. We all know that the TV of the future is your personal device. Those screens are getting bigger and bigger and that generation is consuming a lot on mobile devices and that will continue to increase across all age cohorts.

Rick Howe:
They’re watching more on mobile than the average American does, period. I mean, they’re just consuming like crazy. They are heavy users.

CEO President Sinclair Broadcasst Group Christopher Ripley

Sinclair Broadcast Group CEO and President Christopher Ripley

Christopher Ripley:
Correct, so ATSC 3.0 was designed with mobility in mind. You can receive a quality signal while going 100 miles per hour in a car. You can’t do that right now.

And then the fourth benefit is that it will allow for targeted ads, which…is a lot more valuable from an advertiser perspective. We see CPMs two to three times that of linear in a targeted world.

And then, last but not least, it can be pay-walled so you can offer subscription-based services the likes of Netflix or Hulu, where certain content may be free and certain content you have to be a subscriber to get.

Rick Howe:
My students, who are all MBA candidates… insist on the user experience being described in four words: ‘S***, that was easy.’ That’s what they want to see. When they’re using something, they want to be able to click and watch. They don’t want fuss with it, they don’t want to navigate with it. When you were talking about making ATSC 3.0 operational for this device, and you’re investing in providing ATSC 3.0 tuners to try and salt that market. What manufacturer are you working with?

Seeding the Market for ATSC 3.0 Rollout

Christopher Ripley:
We have partnered with Saankhya Labs out of India, which is a fabulous chip designer. The first prototype chips have just come off the foundry. We’ll have chips available for CES. We’re investing tens of millions of dollars so that when the transmission side rolls out, we will have the technology available for ATSC 3.0 to be in all devices.

Rick Howe:
So we’ll get to the point where I have an app and it’s in here and one click and I’m off to the races, and I’ve got a menu of whatever you want to deliver to me.

Christopher Ripley:
That’s right. That is the vision. As I said, we are making sure the technology is available. We’re also talking to the carriers, offering them incentives to incorporate this technology, because that’s where we know it ultimately is going. We haven’t got any takers yet but we think as the market develops, carriers will jump on board. Also there is a very, very strong public-safety element here. For what amounts to a couple of dollars per device, what public-safety organization wouldn’t want the ability to reach the entire country…with enriched media and video for times of disaster to get the message out?

Rick Howe:
And you have the ability because you’re broadcasting, you’re local and you’re IP. You could be hyper-, hyper-local.

Christopher Ripley:
You can be hyper-local, all the way down to an individual device, or you can be national.

Hyper-Local As Competitive Advantage

Rick Howe:
Okay, so hyper-local. If you have flash floods, and you’re driving down the street and see water in front of you… (with ATSC 3.0, broadcasters) actually have the ability to get me a message to my car that says, “Main Street, right down there, is flash flood. Turn around.” You can actually direct that. That’s a real interesting public service feature.

Christopher Ripley:
Not only will we unlock the technical capability to do that, but broadcasters in general also have the information to unlock that. When (Hurricane) Florence came through, it was our station in New Bern (N.C.)…giving block-by-block, street-by-street reports about where was not safe, where people should and should not go through that hurricane. They have better reporting, better information because they are actually local. And then ATSC 3.0 in all personal devices is a way to technically deliver that information in a more focused way.

Rick Howe:
All right, so you actually talk about how that would be a function of a local news organization. CBS has a different approach. They’re driven by the big network and then grabbing content from local affiliates and pumping it into the stream. You are also looking to do something on the news side with content. Can you tell us about that?

Creating a STIRR

Christopher Ripley:
We do have an offering that reaches about 95 percent of the country called NewsON, through us and other (companies’) affiliates. We’ll be coming out shortly with our own OTT product called STIRR. STIRR will have a combination of local news in every market, syndicated product, and then a plethora of other national channels. It’ll be an AVOD package.

Rick Howe:
AVOD meaning advertising-supported video on demand. But news on demand. Doesn’t the news need to be right now?

Christopher Ripley:
Everything in STIRR will be available in both a linear format and on demand. It’s coming soon.

Rick Howe:
STIRR as an over-the-top, advertising-supported VOD. So are you partnering with already established players to get a marketing push?

Christopher Ripley:
We are partnering with all the best channels out there, like (inaudible) Collective or FailArmy, so that we have a full suite of channels and on-demand assets. It’s not just about news and syndicated content. We’ll have a number of channels available so you can stay with an ecosystem, get your news, get your talk show, but also get some entertainment programming from these best-in-class providers.

Rick Howe:
Matt Strauss, who does all product development for Xfinity for Comcast, talks about adding Netflix, Amazon Prime and Hulu is going to come in and maybe Pluto and others. Would you talk to Comcast about having them plug in STIRR?

Christopher Ripley:
We absolutely will do that. Half our business is about reselling our content to other distributors. We get half of our revenue from people like Comcast who take our content, our channels and redistribute it to other places, so that’s absolutely part of the strategy.

Online Streaming’s ‘Sea of Blood’

Rick Howe:
You have some sports plays coming. What are those?

Christopher Ripley:
We have Tennis Channel. It’s a great example of a multi-platform content strategy. We have Stadium, a general, collegiate-sports-focused channel that is both 24/7 and on-demand and over-the-top offering. And then of course we have our local sports operations, which are largely high school sports.

But just taking a step back for second on content, what we see happening is the big tech companies turning entertainment programming into a negative-margin business. You’ve got Apple coming in, you’ve got Amazon, you’ve got Netflix. They’re all spending billions and billions of dollars on entertainment programming and we see that just being a sea of blood. It’s going to be a negative margin business for the foreseeable future.

Rick Howe:
And you can’t compete with somebody who doesn’t care how much money they lose.

Christopher Ripley:
Correct, and when I say negative margin, I mean negative gross margin. So, it’s going to be a very, very difficult space for a lot of players, including some of the biggest media players.

We’re focused on areas where we can create scarcity value, where we have advantage. That is really local, it’s sports and it’s topicals, those are the areas that we are strong in. We are looking at those where we can actually protect and create scarcity value and then taking the multi platform and that’s what we’re doing in sports.

So tennis is a great example of that. Tennis Channel is the No. 1 brand in tennis and tennis lifestyle. It has the No. 1 cable channel. It has the No. 1 online destination with Tennis.com. It has the No. 1 magazine with Tennis magazine. And it now is going to be branching out to the globe and other markets.

Betting on the Tennis Channel

Rick Howe:
And tennis, as you told me, generates a fair amount of betting?

Christopher Ripley:
Yes, a little-known fact is that tennis is the second-most bet sport in the world. You wouldn’t know that here in the US because no one bets on tennis play. In the rest of the world, people bet on it like crazy, and it’s all in-match. So, bet on this next serve, bet on who wins the next point. It’s gonna be a huge opportunity for us in the U.S., and we think it’s going to be a big boon not only for viewership but also ancillary revenue.

Rick Howe:
Will I see tennis matches that people are betting on?

Christopher Ripley:
You will soon.

Rick Howe:
And from you?

Christopher Ripley:
We are figuring that out right now. At the end of the day, if you’re going to do in-match betting, you’re going to want to watch the media at the same time. This isn’t about betting on the results of the match. This is about following along in real time and betting in real time. And so Tennis Channel has most of the rights to tennis in this country, aside from some of the majors, and we are actively looking about how we append gaming onto that.

Rick Howe:
M&A for Sinclair. You have growth in your plans for adding distribution. Everybody knows about Tribune and I don’t want dig into the whys and wheres of that. But give us a little bit about where you want to go and how you want to do it.

Competing with the Tech Giants

Christopher Ripley:
It’s been no secret that we have been vocal proponents of deregulation. When you take a look across the media landscape, the entire broadcast industry has a market capitalization of probably no more than $10 billion, maybe a little more than that, and we’re now in a world where we’re competing with companies worth hundreds of billions of dollars, just one company alone. Some are approaching $1 trillion, so we’re just entirely too small as an industry. More consolidation has to be part of this.

We’re focused on more consolidation within television. There’s a plethora of opportunities coming on the market today, but we’re also focused on adjacencies. So we’ll look at cable, we’re going to be looking at these RSNs (regional sports networks) coming in and we’re pretty active in digital as well.

Rick Howe:
So I heard the guys from NextStar and Fox networks speak. You’re bigger than both of them but they have aggressive views of the world. Does this come down to three big players in the broadcast space, Sinclair, Fox and NextStar?

Christopher Ripley:
How many players ultimately end up dominating the broadcast marketplace I think is the wrong question. Because there is not going to be a broadcast space in short order. It’s all going to mesh together and if you just think of yourself as competing in the broadcast space and you don’t think you’re competing against the diversified media companies or you’re competing against Amazon or Netflix or Google, then you really don’t know what the marketplace is.

We’re very much a media company. In fact we’re very much a technology company. When you take a look at the things we’ve done around ATSC 3.0, what we’ve done in terms of our content management system online, what we’re doing with STIRR, all that’s homegrown. In fact, we come from a very technical background. That’s why we sound a lot different than the average broadcaster. We generally approach things from a technology standpoint first. Most of our peers approach it from a content or sales strategy first. Our core of Sinclair… we think about the technology first. We’re very much a technology mindset company.

Rick Howe:
So we wouldn’t be surprised to see you acquire an MVPD?

Christopher Ripley:
I don’t think that’s going to be in our cards in the future. Look, I never say no to anything. For the right price, I’ll literally buy anything. But, you know, I don’t think that type of distribution will be the right value zone for us.

Packing the Pipe With More Than Mobile Video

Rick Howe:
But cable companies have pipes, and you need pipes. Although frankly, with ATSC 3.0, you are the pipe.

Christopher Ripley:
It’s a wireless pipe.

Rick Howe:
And it’s a wireless pipe.

Christopher Ripley:
And it’s vastly more efficient than anything that exists today and 4g, or even what 5G will be. And we know we’re not going to be able to span the entire nation, due to these arcane regulations. However, we formed, in partnership with other broadcasters, something called Spectrum.co, a consortium where people contribute their spectrum and span the entire nation to roll out a service.

Rick Howe:
So in any given market, when ATSC 3.0 comes in, let’s use my home Baltimore market, how much of the available bandwidth described as channels do you think you will be putting out in the Baltimore market with content? Are you going to go to five, six, seven (channels), I mean, how many?

Christopher Ripley:
It’s an order of magnitude (change). You can do what you’re doing today, the channels we’re putting out today. And so Baltimore, let’s use that example. I bet you over-the-air today, there’s 60 channels. And that can be squeezed into one fourth of the spectrum used today. So technically you can 4X. Sixty (channels) could go to 240.

I don’t ultimately think that’s what’s going to happen. More channels will be added but you’re also going to be adding datacasting of some sort. You could be adding audio. You could be doing content or info-tainment into connected cars. So I think at the end of the day, the highest and best use of ATSC 3.0 ultimately may not be exclusively mobile video. It’s going to be other use cases.