Mobile Video to Shake Up Broadcasting, Burgess Says
Mobile video will transform broadcasters the next five to 10 years, shaking up the industry in ways no one can foresee, Ion Chairman Brandon Burgess said Wednesday. TV stations face high debt and vigorous competition for customers as cable, satellite and telco TV sellers vying for market share, he said. “There’s a lot of turbulence in the distribution side” that isn’t likely to abate until 2011, he added. To prosper, broadcasters must sort out their balance sheets and make fuller use of spectrum, Burgess told a Media Institute lunch.
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A “complete changeover” of broadcasting will occur within a decade, Burgess said, declaring the outcome to be “a little bit unclear, scary [and] exciting … That’s all very much in flux.” Sales of ads on “linear” broadcasts won’t cover the costs of making programs aimed at large audiences, added Burgess. “There is not a lot of latitude for independent broadcast entities” such as Ion, the executive said. Under today’s economic conditions, an investor would be unlikely to pony up $2.5 billion for 60 TV stations, about the size of Ion, he said, calling the company a “countercyclical project.”
Big companies with widely varied media investments seem likely to continue to sell or otherwise turn their focus away from broadcast holdings, as General Electric has been doing, Burgess said. He sees more companies “de-emphasizing it to some extent” because cable and film businesses have higher profit margins than broadcasting, Burgess said in an interview. With a “pretty high leverage ratio” in the broadcast industry, “you're going to see some fallout” from seized-up credit markets (CD Oct 1 p2), he added. Ion doesn’t need money now, having refinanced through 2012, but can’t get better terms in this economy, he said. Citadel Investments is the majority owner of Ion.
Broadcasters are progressing toward introducing mobile video nationwide, said Burgess, chairman of the Open Mobile Video Coalition. A test of the technology in Chicago had “pretty good results” and trials in other markets may start Q1 or Q2, depending on equipment availability, he told us. He hopes to have a “soft launch” in time for Christmas 2009 and “more robust service” in 2010. Burgess said cable programmers may be asked to participate by allowing shows to run on portable devices, of which there are approximately 500 million in the U.S. capable of getting TV.