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Guest Commentary: Challenges Don’t Limit Digital TV’s Potential

Jan 12, 2004  •  Post A Comment

As we start the new year by gearing up for the National Association of Television Program Executives conference, we continue to find our industry in a situation such as the television business has never before experienced. Consolidation is ubiquitous; television is exiting one of the most challenging economic downturns ever; and the international market is maturing to reach parity with the United States.
Further, new technology is propelling the medium to heights never before reached, and the advent of digital television is leading the charge in how we develop, produce, distribute and advertise through the medium. Certainly, digital television is affecting everyone in the business, and while challenging, there are solutions everyone, including local broadcasters, can incorporate into their strategies to help make their transition to digital financially efficient.
Despite some obstacles, the conversion from analog to digital has the potential for a great payoff in the future. As stations move forward with monetizing up to five additional digital signals, not including their original analog and online platforms, these new feeds will enable them to create new revenue streams. Working closely with the advertising community on creating viable marketing alternatives and ensuing returns in the form of advertising revenue can provide much-needed relief during the digital transition process.
Stations transitioning from analog to digital are creating, identifying and executing new models to build new businesses through multicasting while also maintaining existing revenues from their analog feed. Given the broad reach advertisers enjoy through analog, compared with the nascent form of digital television, general market advertisers understandably continue to prefer analog as their primary platform to market their products. This places broadcasters, justifiably obliged to fulfill their clients’ needs, at a crossroad: continue providing advertisers with the strongest platform through analog while also expanding to digital.
Clearly, this is a valid concern for broadcasters in the midst of converting their stations’ signals. But in creating a new outlet, stations can quickly find a new source of content and revenue for the interim period during digital conversion.
Before digital television reaches critical mass, other sectors, namely the direct-response community, are welcoming the many available new feeds through which to advertise their products. During the current transition, direct-response marketers are looking at digital as a valuable supplement to their existing analog-based campaigns. While digital’s current reach might not be as strong as analog, it allows marketers to experiment with innovative advertising and marketing initiatives. As marketers incorporate digital into their overall advertising campaigns earlier than others-similar to what we witnessed with the growth of online several years ago-their leading position in the area will place them at the forefront of their respective fields.
On the other side of the table, stations are also afforded the prospect to develop creative endeavors for their newfound digital feeds in terms of programming, promotion and ad sales, which will be a meaningful source of revenue to help offset the investments associated with converting from analog to digital. Among its new feeds, a station could, at the very least, create and schedule themed paid-programming blocks throughout various dayparts. These could be dedicated to, for example, home shopping, infomercials or episodic program time buys.
Interactive television is yet another attractive development that if incorporated properly can enhance a station’s bottom line. Because most direct marketers have open-ended budgets, if a medium performs, they have the means to pursue these opportunities without negatively impacting their existing analog budgets. There are many promising sources of revenue direct marketers have identified as digital television grows in prominence with consumers. In due time, while digital television grows in popularity and effectiveness for marketers and distribution continues to grow, general market advertisers will follow suit.
Of course, the conversion from analog to digital will require significant capital, as well as patience and flexibility among stations, advertisers, producers and distributors alike. During this time, there is a unique opportunity to experiment with groundbreaking programming initiatives and create new business models. It is as clear as its image and audio that digital television-like numerous other new technology developments that have changed our industry-will present significantly more benefits and added revenues to those who initiate a digital transition strategy into their business plans.
Toni Knight is founder and CEO of Los Angeles-based media sales firm WorldLink.