SA After Hours: Roku and ATSC 3.0
This morning, Seeking Alpha published my latest piece, Roku: The Bottom is In. I have an anecdotal story that I didn’t share in that article because it didn’t really fit. But I think it helps add some additional insight into what I see in Roku fundamentally. Back in June 2018, I attended the ATSC 3.0 Midwest Next-Gen TV Summit. I know what you’re thinking. “Cool. What the hell is that? It was a local TV broadcaster conference that was sponsored by LG and Sinclair Broadcasting. The main theme of the event was to educate industry leaders at the station level and build broad support for ATSC 3.0 standard technology.
What is ATSC 3.0?
ATSC stands for Advanced Television Systems Committee. It’s essentially the technology standard for broadcast television. If you’ve always used an antenna to watch your local TV stations, you may remember needing a digital converter box about a decade ago. This was when the industry standard transitioned from NTSC (analog) to ATSC (digital) signals. That was ATSC 1.0. When the transition took place, viewers needed special adapters if they wanted to be able to use their old tube TVs. The adapter was the digital converter box. All of the new TVs now come standard with digital receptors. We’re still on ATSC 1.0 in most areas. So why the jump to 3.0?
Here’s the best part; ATSC 2.0 never actually launched. That’s how slow legacy media has been to change. Certain doom as a result of the sloth-like acceptance of changing consumer behavior be damned. ATSC 3.0 utilizes a lot of what was planned in 2.0, but it adds even more fun stuff. Without getting too into the weeds technically, 3.0 will allow for better quality video, more free digital sub channels, smartphone reception, and measurement upgrades. It would also allow for multiple different “pipes” for signal transmission. This would theoretically make TV advertising more like digital advertising. For instance, two different households watching the same Sunday night football game on NBC could be served two completely different ads. Fun stuff, you know, if you hate personal privacy.
But back to the conference
Sinclair and LG are two of the companies that have been championing this standard upgrade which is largely why they sponsored the summit. There were over a dozen speakers including industry pros, an FCC representative, and a guy named Tim Hanlon. Hanlon spoke last and he came with a sense of urgency that I appreciated.
Tim Hanlon is a media consultant with The Vertere Group. He has over two dozen years in digital media and advertising. I don’t want to misquote him as this was nearly four years ago, but the tone of his message was legitimately “adapt or die.” If memory serves, he was forecasting 3 to 5 years until local TV obsolescence if the industry didn’t enact the standard upgrades provided by ATSC 3.0 as quickly as possible.
4 years later, there are roughly a handful of stations that have implemented ATSC 3.0. I believe there is one on the west coast, a couple in Texas, and one in North Carolina. The adoption probably hasn’t been fast enough and could conceivably suffer the same fate as ATSC 2.0, in my opinion. Why? Something Hanlon said at the conference has stuck with me ever since.
He shared a mockup of what could be roughly described as a cable news channel grid. The only difference was it didn’t have cable news channels. It had local stations, cable stations, and streaming services all in one lineup. He essentially said, “whoever figures out how to do this wins.” His point was largely that people don’t want to mess with multiple device inputs. They want everything at their fingertips as seamlessly as possible.
I remember thinking in that moment that the closest thing to what he was talking about was probably Roku’s operating system. I also wondered in that moment if the internet had already rendered ATSC 3.0 obsolete anyway. My thinking was if media consumers have decided already that on-demand is the choice over pre-formatted appointment viewing, why do we need the antenna at all? If switching inputs are that big of a concern for users, then the internet wins. And that means Roku wins because the operating system has a cleaner, better user interface than anything else on the market. My opinion, of course.
Oh, and that grid that Hanlon was talking about, Roku is halfway there. Here’s a shot of my Roku TV. This grid has my local CBS station (via antenna) and a Vevo streaming channel (via internet) right next to each other. ATSC 3.0 not required.
Standard disclaimer: I’m not an investment professional. I spent over a decade in local television broadcasting with experience in production, marketing, and sales. I am long ROKU shares.
