NEW YORK — Dave Smith has what he calls a “revolutionary” scenario tied to the coming of the digital age of broadcasting — and the industry is listening: Smith is president of Sinclair, the group that owns 33 TV stations, more than any other company in the U.S.
Smith’s goal is to put an end to the monopoly that local cable systems have carved out in most areas of the country. His strategy: Pool the resources of the four TV stations owned by — or affiliated with — the Big Four broadcast networks in each market to grab as big a chunk as possible of the $30 billion a year that cable subscribers pony up to the operators in their monthly cable bills.
The triggering of the plan in at least a few markets could take place as soon as the summer of 1998, when each of the four TV stations is ready to transmit — through digital technology — a multichannel package that Smith is pegging on an eight-to-one ratio. Using that ratio, each market will create a package of 32 channels beamed over the air into the homes of people with a properly equipped indoor antenna and a set-top box to receive the signals, Smith says.
The ad-hoc company set up in each market to sell the 32-channel package of programming to TV homes plans to charge less than the cable operator does, hoping to lure customers into canceling their cable subscriptions and embracing the broadcast service.
“I want to reshape the entire television landscape,” Smith said. And he’s not talking about creating a new array of channels that would further fragment an already splintering viewership.
“For instance,” Smith said, “Fox could bring in the Fox News Channel, FX, the regional Fox sports networks, the Fox Kids Network and the Family Channel” to help fill out the eight channels that would become available to the Fox stations through digital.
None of the cable networks owned by the broadcast networks are exclusive to the cable system, so the broadcast service could get them by paying license fees at market rates. And if the TV stations are successful at getting a digital set-top box into everybody’s home, they’d be giving a bonus to the cable networks of 100% penetration instead of the 65% to 70% that even the most widely circulated channels have to live with.
When asked at a Kagan Digital TV Summit panel session in New York last week whether the broadcasters would run afoul of antitrust laws by banding together to create an alternate cable-type service, Roy Stewart, chief of the mass-media bureau of the Federal Communications Commission, said, “We’d encourage such a pooling of resources” because it would be almost certain to drive down the cost of cable to consumers.
The fostering of competition is also a hobbyhorse of the outgoing chairman of the FCC Reed Hundt, who said in a CNBC interview that he’d look with favor on the creation of a strong rival to the major cable operators.
Smith said the digital pipeline will focus on multichannel services rather than high-definition TV, because “the broadcaster won’t be able to make any money from HDTV.” There are no studies to show, he said, that new viewers will tune into a program they don’t normally watch just because it offers a truer picture and better sound.
And there’s no comparison in the cost of digital multichannel against HDTV. Smith said his research shows that a TV station will have to pay about $1 million for the technology that offers multichannel digital programming in a given market. For the much more technologically sophisticated HDTV, a TV station could be on the hook for tens of million of dollars.
Smith said he’s now working on a multichannel test in Baltimore, where Sinclair has its headquarters, that will prove the feasibility of sending as many as eight signals on the band width formerly occupied by one TV station.
“My mission,” he said, “is to prove to the investment community that digital multichannel works.”
And if it does work, the cable industry may be in for a rude awakening.