Summary Bullets:
- Over-the-air (OTA) free television has been a mass-market technology in North America and other regions for almost 70 years, but it may disappear altogether in the next five years, due to dramatically different TV/video delivery and consumption mechanisms, coupled with mobile operator efforts to acquire the current OTA TV spectrum.
- The pending U.S. Supreme Court ruling on ABC v. Aereo may result in the U.S. network broadcasters accelerating their exit from the OTA market, ultimately putting the last nails in the OTA TV coffin.
Earlier this month, the Consumer Electronics Association (CEA) reported that only 6% of U.S. households rely on over-the-air (OTA) antennas, while 5% of households access their TV and video services exclusively via over-the-top (OTT) connections (which require broadband Internet access, e.g., Netflix, Hulu, Apple TV). More importantly, all indicators point towards OTT overtaking OTA within the next year. I’d argue there are a ton of devil-in-the-details factors that are more relevant than these two simple percentages, but the bottom line is OTA TV is likely to go the way of the dinosaur.
What is truly ironic is that for consumers living in major metropolitan areas, they can in most cases watch all of their local broadcast channels for free, in stunning, uncompressed high-definition picture quality. Yet, the overwhelming majority of U.S. consumers pay exorbitant bills to cable, satellite or other pay-TV operators for the privilege of watching these same channels as part of an overall pay TV package. Despite a fairly comprehensive consumer outreach campaign by the FCC more than five years ago to transition analog OTA users to digital TV (most analog broadcasts were terminated June 13, 2009), many TV consumers still think that OTA or “old-fashioned” TV means snowy, static-filled pictures and goofy “rabbit ear” antennas. However, the stark reality in 2014 is that most U.S. consumers – especially younger generations – are unaware that OTA TV exists. When CBS had its contract spat with Time-Warner Cable last year, consumer outrage was quite tangible, even in large metros such as Los Angeles; meanwhile, OTA, as always, was a viable option, which CBS promoted, albeit in a limited fashion.
But we are now in a brave new TV world, and with OTT providing TV/video consumers with an ever-expanding universe of content, available any time, OTA TV’s days appear to be numbered. There are several “perfect storms” brewing right now that can and will accelerate the demise of OTA TV. First, mobile operators have been clamoring – and more critically, lobbying – for the spectrum now utilized by OTA broadcast TV. In fact, some operators such as AT&T have even gone so far as claiming that without acquiring the OTA TV spectrum, they will not be able to provide mobile broadband services effectively. The mobile broadband angle, along with declining OTA households, are by themselves enough reason for the FCC to allow the current broadcast TV spectrum to be repurposed, and a multi-billion dollar spectrum auction would help the U.S. Treasury, although not by much.
An equally critical event that could spur U.S. broadcast network exits from the OTA market is the still-pending ruling by the Supreme Court on the ABC v. Aereo case. In a nutshell, Aereo captures local network OTA signals and then rebroadcasts them over its subscription-based OTT service, enabling subscribers to view the local channel via the Internet. So, for consumers that for whatever reason do not or cannot use OTA signals – or have moved out of the area altogether – the Aereo service enables them to watch their chosen local affiliates. However, if the SCOTUS rules in favor of Aereo – not likely, in my opinion – the impending doom of OTA is likely to come sooner. The good news is that even if/when OTA TV goes away, consumers will have a growing array of content delivery options available via OTT. The major difference, however, is that unlike OTA, OTT-based content and services are not likely to be free.