Once upon a time, DirecTV Group Inc. included an antenna in its satellite TV set-tops to let customers tune in free broadcast channels over the air (OTA). With content licensing fees on the rise, those days may return.
At the 41st annual J.P. Morgan Global Technology, Media and Telecom Conference, DirecTV Executive Vice President and Chief Financial Officer Patrick Doyle said the company is exploring options for bypassing broadcast retransmission fees. Along those lines, Doyle expects the company to test a new set-top with an integrated tuner designed to capture both OTA and satellite signals.
Adding an OTA receiver into its set-tops could save DirecTV a significant sum on a per-subscriber basis. NBC alone expects to see a 400 percent rise in retransmission revenue this year, which translates into steep cost increases for pay-TV providers, and subsequently their subscribers. (See To Bundle or Not to Bundle.)
"We're spending a lot more time looking at over-the-air solutions," said Doyle. "Where if you go back three, or four, or five years ago before retrans started to grow like it did, it didn't make sense for us … Now we're spending a fair amount of time on the technology side of taking an over-the-air signal, integrating it in our set-top boxes, and not paying a retrans cost."
While DirecTV would likely sacrifice broadcast quality in some regions by turning to an OTA tuner, Doyle notes that consumers wouldn't see a difference in the user interface, which would still list local channels alongside pay-TV options.
And unlike Aereo Inc.'s controversial transcoding solution, the addition of an antenna into DirecTV set-tops would have the advantage of being definitively legal from day one. (See Aereo: Suited Up to Disrupt Pay TV.)
To be clear, Doyle hasn't confirmed that DirecTV will actually go through with set-top deployments that include OTA antennas.
"We'll probably test in some markets an over-the-air, integrated tuner set-up, and make sure that the customer experience is there," said Doyle.
It's not clear if other pay-TV providers, including cable operators, are also considering an OTA option. One industry source has only heard similar discussions in international markets, while a second confirms there have been some domestic conversations, but nothing suggesting any near-term action.
In any case, DirecTV's willingness to experiment reveals just how fragile broadcasters' retransmission revenue stream could become.
— Mari Silbey, Special to Light Reading Cable