The head of Sinclair Broadcast Group has a definite idea about television's future: It will be a mobile medium. And he doesn't need industry research to tell him so.
David D. Smith, president and chief executive of the Hunt Valley-based broadcaster, recalls an experiment he conducted during a trade show: He set a portable TV down in a bar and then watched as people gathered around, asking where they could get one.
"People who say they won't watch are the same people who said they wouldn't use a cellphone," Smith said of mobile TV.
A lot of people, Smith and other broadcasters believe, will change their minds once they get their hands on the new technology.
"Look at people riding the subway or walking on the street," said Dennis Wharton, a spokesman for the National Association of Broadcasters. "People are looking down at a mobile device that features content. We want live, local TV to be part of that and part of the programming."
Once the technology catches on, Smith said, "it means we'll be able to talk to people all the time, everywhere and not be confined to the house."
Mobile digital television technology, which sends signals to cellphones, laptops or mobile devices, is still in the test phase and at least a year away from being available in the marketplace, industry experts say.
It is unclear how much advertising revenue Sinclair and other television station owners can expect from the emerging technology. But it's not surprising that the 25-year-old Sinclair, which reported $648 million in net revenue last year, has been an early proponent of mobile TV, analysts say.
The expanding company, which owns or programs 74 stations in 45 markets, including WBFF Fox 45 in Baltimore, has typically taken an industry lead in developing new sources of revenue, analysts say. As a result, the company has emerged from the recession in better shape than many competitors.
"They are always trying to push the envelope in terms of embracing new technology and making sure broadcasting stays relevant," Wharton said of Sinclair.
Despite economic and advertising volatility over the past year, the company has stepped up its pace of acquisitions, and its stations — affiliates of Fox, ABC, MyTV, CW, CBS, NBC, NTN and Azteca — now reach more than a quarter of the television viewers in the United States.
As one of the first broadcasters to demand "retransmission" fees from cable companies such as Comcast, Sinclair has developed a revenue source that now accounts for about one-fifth of its broadcast revenue, or nearly $120 million, estimated Edward J. Atorino, a New York-based analyst with The Benchmark Company LLC. Cable companies pay the fees to carry Sinclair channels.
Sinclair is a founding member of the Open Mobile Video Coalition, an alliance of commercial and public broadcasters with about 1,000 stations that are researching mobile TV technology and business models, Wharton said. The coalition is working with MetroPCS, a cellphone carrier that has agreed to be part of the rollout. Samsung and LG, among others, have invested in the technology.
The goal, Wharton said, is to start bringing mobile TV to the marketplace within the next year or so, offering local, live production of news, weather, sports and entertainment 24 hours a day.
"The future of broadcasting is to be on as many platforms as possible and to be where the people are, whether that's on smartphones, on laptops or in the back seats of cars, and also in the home, obviously, because there's still a tremendous amount of viewership in the home," Wharton said.
But the signal will take some tuning.
"One of the big problems is the distribution — who's going to be the middle man between the broadcaster and your phone," Atorino said. "Sinclair is ready, but unless the market really takes off, there will not be an impact for a long time."
The technology is already available to enable broadcasters to transmit signals to mobile devices, but the new devices would need receivers and chips installed to process and show the video.
Technical issues aside, it is really more the complex business arrangements that would need to be established between sometimes competing interests — the owners of the programming, the broadcasters, wireless carriers and mobile device manufacturers — before the technology can be viable in the marketplace, Atorino said.
He warned that a slower-than-expected economic recovery could lead to further cuts in advertising and marketing budgets, hindering the company's revenue growth. Meanwhile, advertisers have migrated from traditional media to the Internet.
"Advertisers may view alternative options as more cost-effective, limiting Sinclair's growth and growth potential," Atorino said in a report last month.
Sinclair's Smith says the company remains focused on increasing advertising by maintaining strong programming. With so much material vying for consumers' attention, he said, "the relevant content will win."
Thanks to a growing concentration of Fox stations, Sinclair has been able to consistently outperform other local television broadcasting companies, Atorino said.
"They've got mostly Fox and CBS affiliates, and Fox and CBS have had the strongest ratings, particularly in prime time, and [Sinclair benefits] from that," Atorino said. "They are generally [No.] 1 and 2 in their markets. They have a diversified group of medium cities, and they don't compete against the big guys."
In January, Sinclair completed the purchase of Four Points Media for $200 million, including television stations in Salt Lake City; Austin, Texas; West Palm Beach, Fla.; Providence, R.I.; and New Bedford, Mass. In November, Sinclair bought eight television stations for $385 million from Freedom Communications, including two in the West Palm Beach market.
Smith said the company waited out the market and took advantage of inexpensive financing to acquire the television stations at what he called a fair price. And it's still looking for more.
Last year, the company banked on the popularity of wrestling when it acquired the Ring of Honor wrestling league. Sinclair now broadcasts weekly matches, some from the Du Burns Arena in Canton, to homes in 40 cities.
Owning and controlling the distribution of wrestling programs has enabled Sinclair to capture an attractive but often elusive viewership: young men. Ratings have been twice as strong as expected, said David Amy, a Sinclair executive vice president.
The company also stands to benefit this year from record levels of political advertising. An analysis by Wells Fargo early this year placed Sinclair near the top of the media industry in its ability to capitalize on hotly contested races.
Still, Sinclair has not been immune to the economic slump and the weakening of the advertising market. In July 2009, after the company was unable to restructure its debt, it said it might consider filing for bankruptcy protection.
Smith says now that Sinclair was never in financial distress.
"We had bank [notes] come due at the worst time in history," he said, explaining that the company could not refinance those loans but that later in the year it was able to restructure its balance sheet and improve cash flow.
Today, Sinclair is back on its feet and looking to broaden or add local news shows, for instance, expanding the Fox 45 local news program in the afternoon. Local news eventually will be broadcast live up to 12 hours a day in many markets, Smith said, a development driven partly by the proliferation of mobile devices.
As advertising revenue has begun to pick up, especially in the crucial auto industry sector, Smith remains convinced that live, real-time, local content is what consumers crave, whether at home or on the go, and that advertisers will follow those consumers.
And he thinks consumers will embrace mobile television.
"TV will be ubiquitous to every device in the marketplace," Smith said. "We'll be everywhere."
Sinclair Broadcast Group
History: Founded in 1986 by the four sons of UHF pioneer Julian Sinclair Smith, who had put WBFF-TV on the air in Baltimore in 1971 as the city's first UHF station and one of the first in the country.
First acquisition: WPGH-TV in Pittsburgh in 1991.
Number of properties: 74 television stations owned, operated, programmed or provided sales service.
Flagship station: WBFF Fox 45
Corporate offices: Hunt Valley
2011 annual revenue: $648 million from continuing operations
Source: Sinclair Broadcast Group