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Death Spiral for Broadcast TV?

April 25, 2012 | Author: Ibex Marketing

Did you ever hear the squeal of feedback in a public address system? It occurs because a sound coming from the amplified speakers finds its way into a microphone, where it travels to an amplifier that makes it louder. This louder sound comes out of the speaker and goes back into the microphone louder than before, where it gets amplified again. And the cycle repeats until someone turns down the amplifier or the equipment reaches its limits. Or it breaks.

This is called a positive feedback loop, because each time the sound passes through the system, it gets louder. A negative feedback loop does the opposite; it causes the sound (or signal or whatever you’re measuring) to decrease with each cycle, until it finally disappears. We also call this a “death spiral”.

A story in the Washington Post reports that by the third quarter of 2011, we were down to just 5.8 million U.S. homes that rely solely on free, over-the-air broadcasts for their television content. That’s a decline of more than 7% from the 6.25 million of just one year earlier. Many of these viewers are elderly, poor, living in sparsely-populated rural areas, or some combination of those three factors. And from a marketing perspective, these are not demographics that appeal to major advertisers.

It is the advertisers that drive the “free” broadcasts, but smaller television stations have found it increasingly difficult to attract advertising dollars. Companies are already dealing with constraints on their revenues as a result of the down economy, and at the same time, their marketing budget is being stretched to cover new media channels such as the Internet.

Larger stations have been able to replace some lost revenues by demanding larger retransmission licensing fees from subscription television services — though this is coming under increasing scrutiny from Washington D.C. and other quarters — but smaller stations often don’t have this luxury. In fact, many have to forego any retransmission fees at all, trading them instead for a guaranteed slot on the local cable system’s channels which increases their reach and helps improve their appeal to advertisers.

Should we allow the free broadcasts to simply spiral down into oblivion? This is a national question, and one of many similar thorny issues such as preserving the US Postal Service or subsidizing rural air transportation. What would be the impact of a national broadband plan? Is it time to replace the 1930s mandate for free television with a 21st Century mandate for free access to broadband? Six out of 10 U.S. consumers now get their news online in one form or another, according Nielsen. Would free broadband service be enough to provide access to streaming audio and video, replacing current over-the-air radio and television broadcasts?

These are not easy questions, but it’s clear that change is going to come whether we plan for it as a society or not. And we certainly won’t have a plan if we don’t start discussing it.