Free-to-air TV relevant and vibrant again in the age of self-aggregation

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In terms of television broadcasting, the adage “old becomes new again” seems apt.

And this time, the “old” is more seductive.

The television industry has evolved steadily since the inception of commercial broadcasting in the 1940s and has gone through three fundamental phases.

  • The first was “the era of free television”. Viewers received free VHF and UHF channels using over-the-air (OTA) antennas. The only downside was the limited choices, so technologies were developed to meet this latent demand.
  • Then came the rise of cable and satellite, offering paid subscribers over a hundred networks, even if they were only interested in a few. At its peak, around 90% of households opted for this all-you-can-eat buffet on their televisions.
  • We have now entered a new era, still driven by technology, with the emergence of on-demand streaming services. Some have monthly fees like Netflix and Disney+. Others are free, like the growing number of AVOD services and FAST platforms like Pluto and Tubi. Some services are hybrids like Peacock and Hulu that offer free and paid subscriptions.

At Scripps, we’ve called this the “age of self-bundling” because consumers can now decide which combination of services is optimal for their needs.

Keep cable and add two streaming services? Cut the cord and subscribe to six? Which six?

In a country of 122 million households, we could end up with nearly 122 million different combinations. Even within a home, display options vary depending on whether the room has a smart TV and what brand.

Based on the facts, Scripps believes free-to-air TV will play an important role in this new era. According to the Consumer Technology Association, approximately 8.5 million digital antennas are sold in the United States each year. Antenna penetration in homes has increased and today nearly one in three homes owns one, rising from 26% in 2019 to 32% in 2021. Many own more than one.

50 million households by 2025?
Antenna owners include a surprisingly even mix of cable/satellite subscribers and non-subscribers. Cable cutters and non-cables use antennas to watch content that is not widely available on SVOD services, such as local news and live sports. Cable and satellite homes use antennas to watch TV on wireless sets and watch channels not included in their subscription packages. OTA access is just another thing to consider when putting together your own package. And it’s free.

The penetration of digital antennas should continue to grow at a steady rate. According to projections, OTA could eclipse 50 million American households by 2025. Content is likely to be a huge driver. After all, assembling the optimal combination of breadth and depth of content is the guiding principle of self-grouping.

If you don’t have an antenna, you may be surprised how many channels you can receive with this simple device. A common misconception is that OTA only includes the major broadcast networks, one or two independent stations, a PBS affiliate, and maybe a few commercial and religious channels. In fact, the offerings typically include more than two dozen multicast networks, also known as “diginets.” These networks are carried over the transmissions of traditional television channels via digital compression.

The most-watched networks are MeTV (classic series), Grit (westerns), Bounce (series and movies targeting African Americans), and Start TV (off-network dramas). Additional networks offer sci-fi, comedy, movies, sports, tutorials and other unscripted reality programming, and more. Two former cable networks, Newsy and Court TV, have been relaunched as free-to-air multicast networks. Six new multicast networks launched last year alone.

70% audience growth
The dramatic increase in the number and diversity of multicast networks, coupled with dramatically improved and engaging content, has resulted in nearly 70% growth in this segment’s audience over the past five years, according to Nielsen. During this same period, cable network ratings fell by almost a third.

The biggest barriers to OTA being part of more consumer packages are awareness and familiarity. As stated earlier, non-antenna owners underestimate how many networks they can receive with a digital antenna. They also don’t realize that over-the-air networks are different from those available through cable and satellite packages. Unknowing consumers may also perceive antennas as settling for an inferior package. But research indicates that OTA households are overall more satisfied with their plans than MVPD subscribers.

Improved technology will be an additional driver of OTA adoption. ATSC 3.0 (also known as NextGen TV) promises improved reception, better sound quality, the ability to watch on mobile devices, targeted data streaming and other benefits. It has already started to roll out market by market.

Additionally, a new generation of “smart antennas” work with home Wi-Fi and allow users to watch OTA content on demand and more easily record broadcast programs with built-in DVR functionality. They can also provide return path data, which is extremely important for audience measurement and to enable addressable advertising.

The bottom line: Even though antennas date back to an earlier era, they have evolved and are now helping to shape the self-grouping equation, and that won’t change in the future. The original delivery system for television has become one of the most attractive.

For one, you can’t beat the cost.

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