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Is Felix Salmon wrong on free TV?

rabbit-ears

Mark Palko writes:

Salmon is dismissive of the claim that there are fifty million over-the-air television viewers:

The 50 million number, by the way, should not be considered particularly reliable: it’s Aereo’s guess as to the number of people who ever watch free-to-air TV, even if they mainly watch cable or satellite. (Maybe they have a hut somewhere with an old rabbit-ear TV in it.)

And he strongly suggests the number is not only smaller but shrinking. By comparison, here’s a story from the broadcasting news site TV News Check from June of last year (if anyone has more recent numbers please let me know):

According to new research by GfK Media, the number of Americans now relying solely on over-the-air (OTA) television reception increased to almost 54 million, up from 46 million just a year ago. The recently completed survey also found that the demographics of broadcast-only households skew towards younger adults, minorities and lower-income families.

As Palko says, Salmon is usually a pretty careful reporter. And this one should be right up his alley. Here’s Palko again:

We’ve talked about how well over-the-air television compares to cable (for some people), how new and apparently successful businesses are springing up around OTA, and how the number of viewers getting their television through antennas appears to have been growing substantially since the introduction of digital. What we haven’t covered so far is the potential social impact of killing broadcast television.

It is almost axiomatic that, if you have a resource that is used in one way by people at the top of the economic ladder and in another way by people on the bottom and you “let the market decide” what to do with the resource, it will go with the people who have the money. . . .

This becomes particularly troubling when we’re talking about a publicly held resource. . . . What groups rely heavily on broadcast television? What groups would have the most difficulty finding alternatives?

People in the bottom one or two deciles are going to be in trouble. Even the lowest tier of cable would represent a significant monthly expense. People with limited residential security will be even worse off. People with limited income security will face a difficult choice: sign up for exorbitant no-contract plans or commit to a financial obligation they may not be able to fulfill. People with poor credit histories will have to come up with large deposits every time they move. . . .

Palko summarizes:

OTA [over-the-air television] is a promising technology supporting an innovative and growing industry, serving important economic and social roles.

The technology is doing fine in the marketplace. It’s lobbyists who are likely to kill it.

I wonder what Salmon’s take is on this. Is Palko missing something, or does he just happen to be sharing a perspective that is different from that of NYC-based financial journalists?

P.S. Let me emphasize that this post is not some sort of trolling of Felix Salmon. I’m a big fan of his quantitatively sophisticated reporting, which is why it’s interesting if he’s getting something wrong.

P.P.S. There’s some dispute about that 54 million number. Salmon points to this news article by Michael Grotticelli:

Free, over-the-air television viewing of broadcast TV signals are now watched by only 9 percent of the U.S. population — down from 16 percent in 2003, according to Nielsen, the major TV and radio rating service. . . .

The Nielsen numbers are certain to cause a dispute with the NAB, which has insisted the amount of over-the-air viewing is increasing in an era of cord-cutting. Last summer, the NAB produced a survey by Knowledge Networks citing about 18 percent as “broadcast exclusive” households. That total was 54 million Americans — up from 46 million in 2011.

So, one claim is that 9% watch any over-the-air TV, the other is that 18% only watch over-the-air TV. That’s a big gap.

24 Comments

  1. Rajiv Sethi says:

    Palko is right, and Salmon is frankly clueless about this. I really wish people would stop assuming that the OTA audience is impoverished and reliant on rabbit ears and obsolete sets. I’ve been exclusively OTA for many years now, with a powered antenna providing better-than-cable HD image quality in Manhattan. The growth in OTA is not coming from those who can’t afford cable, it’s from folks who are happy with a relatively narrow range of channels delivered with high picture quality. An old post on this is here:

    http://rajivsethi.blogspot.com/2010/02/is-over-air-television-broadcasting.html

  2. zbicyclist says:

    I’m either underqualified or overqualified on this. I’ve never had cable TV. Neither of my grown children have cable. Compared to a fast internet connection and maybe a Netflix subscription, cable seems quaint and cable bills a rip off. Sure, there’s live sports, but there’s still enough live sports for my meager needs on free TV. And would watching more TV improve my life?

    But I’m skeptical of the 54 million household number. There are about 120 million households in the U.S., so this would be over 40%. I don’t know a random set of people, but when I mention I don’t have cable (in response, say, to whether I saw “Mad Men” last week), I’m invariably the only one in the group who doesn’t. This is in Chicago, where the flat terrain doesn’t interfere with the signal.

    • zbicyclist says:

      Correction: I see it’s 54 million Americans, not households, so that would be 1 in 6. Maybe.

  3. Entsophy says:

    Andrew I hope that’s a picture of Felix Salmon in the post. Some readers are highly sensitive to the correlation between pictures and the people you’re talking about. Recall http://andrewgelman.com/2013/04/19/chomsky-chomsky-chomsky-chomsky-furiously/#comment-145089

    I for one can contemplate people not having access to TV or cable of any kind with complete serenity.

    • My understanding is that it’s actually Rajiv Sethi holding his fancy antenna ;-)

      I have never had a TV (capable of receiving TV programming) in my life. I would love it if the TV spectrum were completely devoted to an advanced unlicensed WiFi type networking technology, and everyone who wanted to get actual programming had to multicast IPv6 it. Now THAT would be awesome.

      • Entsophy says:

        I came from a poorer family where the TV was always on. But after I left home at 16, I never owned a TV set of any kind.

        Getting rid of the TV is easily the simplest, cheapest, and most effective method for most Americans to improving their quality of life. It’s not even very good for mindless entertainment.

  4. jonathan says:

    I don’t know about the aggregates but to add anecdote along cultural lines. I live in a high income part of Boston. I know a number of families – 2 income, upper middle class – that don’t have cable. They can afford it. My rough analysis is that this group lives in an area where there are a number of other ways to spend money: lots of options for going out. Cable TV has become expensive enough, even when bundled, that the cost has become noticeable and thus has become part of the choice process. For these people, the few shows they might watch on cable aren’t worth the large recurring cost. And given the density of the area, they can find a place to watch something essential to them. And they still have computers.

    I offer this to contrast with the notion that over the air is solely a lower income issue.

  5. Felix Salmon says:

    I don’t like it when people criticize me without linking to me. It makes it hard for readers to judge for themselves whether I’m being accurately represented. In fact, here’s what I conclude:

    The losers in this process will be Aereo, of course, and also the households which still rely on broadcast TV — somewhere between 10% and 15% of the total. I suspect, however, that those households are precisely the ones with the least amount of political clout. Which means that sooner or later, they’re going to lose their access to free-to-air broadcast TV. They won’t like it, but there’s pretty much nothing they can do to prevent it.

    This is almost exactly the same as Palko’s conclusion, so I’m not sure why anybody thinks that if Palko is right I must be wrong. In order to say that I’m wrong, you need to react not to what I wrote, but rather to something I “strongly suggest”, which in fact I don’t strongly suggest — or even suggest — at all.

    Measuring the number of households reliant solely on OTA broadcasts is extremely difficult, and I don’t actually think that the GfK number says what TV News Check says it says. Although I don’t have the GfK research in front of me, so it’s hard to tell. I’m just saying that I’m not taking the 54 million number at face value, and have not been able to reassure myself that it’s accurate. How is that being wrong?

    • Andrew says:

      Felix:

      Just to be clear, I’m not criticizing you or even saying that you’re wrong. I’m reporting Palko’s claim that you’re wrong, hence linking to Palko. He does link to specific things you wrote.

      There seem to be three issues: (1) the number of people who watch over-the-air TV, (2) the social/technological merits of over-the-air TV, and (3) the anticipated political results. You discuss these things here (linked by Palko).

      In summary, here are the points of disagreement:

      (1) You write that “somewhere between 10% and 15%” of U.S. households rely on broadcast TV. Assuming these households have average size (on average), this would correspond to somewhere between 31 and 47 million Americans. Palko links to a report from TV News Check stating that the number was 46 million in 2011 and 54 million in 2012. If this number were correct, than your estimate is on the low end. But perhaps, as you note, TV News Check is itself wrong. Your linked article didn’t mention TV News Check’s claim of a large and increasing number of OTA watchers, so Palko was perhaps unaware that you knew about but disagreed with that claim.

      It also looked to me that you implied that over-the-air TV watching was in decline when you wrote of “That trend is only going to strengthen going forwards.” But, looking carefully, I see that you are making a claim about relatively declining revenues, not about declining numbers of users.

      (2) You wrote that “broadcast TV is rapidly becoming an obsolete technology” and you joke about “a hut somewhere with an old rabbit-ear TV.” So your take on it is that over-the-air TV is a technological loser. That’s been my experience too; I plugged a plastic home antenna into my computer and could only receive a few crap channels. But Palko and Sethi report OTA digital TV as being as good or better than cable TV. So this seems to be a key point of disagreement: is broadcast TV becoming “obsolete” or not?

      (3) You wrote that “sooner or later, they’re going to lose their access to free-to-air broadcast TV. They won’t like it, but there’s pretty much nothing they can do to prevent it.” Palko writes, “The technology is doing fine in the marketplace.” His story of a successful technology and a busy market that might be killed by lobbyists, is a bit different from your story of a declining technology which can’t be propped up because its users have little political clout. Same projected outcome, perhaps, but a much different story.

  6. Rajiv Sethi says:

    Felix, here’s what you wrote about people who ever watch free-to-air TV:

    “Maybe they have a hut somewhere with an old rabbit-ear TV in it.”

    If this your perception of the OTA audience, you’re completely missing the source of its growth. There’s huge potential consumers’ surplus in OTA TV broadcasts, just as there continues to be in OTA radio. This is especially true for mass audience events. Broadcasters cannot capture OTA consumers’ surplus the way that cellphone companies can, which constrains the amount that they can bid for spectrum. But this is precisely why the highest bidder does not reflect a proper accounting of costs and benefits, and why an open auction is not the most efficient way to allocate spectrum.

    • Rahul says:

      Can you elaborate on why a spectrum auction is not efficient here? I do not understand your argument.

      • Rajiv Sethi says:

        Because bidders differ in the extent to which they can appropriate the value that their activity creates. If broadcast TV generates high value but only a small portion of this can be recouped by the provider through advertising revenues, then bids by broadcasters will be low. Most of the value created accrues to consumers and not providers. If cell phone providers can charge for service and appropriate a greater portion of the value they create, they could bid higher even if they generate less value in the aggregate. See the update to this post for more details:

        http://rajivsethi.blogspot.com/2010/02/is-over-air-television-broadcasting.html

        And follow the link to my exchange with Robin Hanson on this topic. It’s an important issue that is mostly neglected in this debate.

        • Another way to describe it is that the FCC is selling off this spectrum *for us*. But they don’t get to know how much we value the services that will be provided by the winner. so they go based just on the up front money.

          In my mind however, the big problem is the idea of the spectrum as something we should reserve for a fixed use. In 1900 this made a ton of sense since we didn’t have appropriate technology. But now, it makes a lot more sense to instead regulate the output power, and spectrum usage negotiation protocol and policy, and let Electrical Engineers maximize the usage of the spectrum for everyone via innovative modulation techniques and dynamic interference negotiation. It’s virtually guaranteed to provide more benefits than any single licensee could, and the innovation this would allow would rapidly advance technology.

  7. Felix Salmon says:

    So here’s the thing: every reliable number for the number of households reliant on OTA television, at least that I’ve found, is in the 10-15% range. I’m pretty sure that the 54 million number is (contra TV News Check) NOT the number of households who only watch OTA; instead, it’s the number of people who watch OTA *at all*. Hence the hut with the TV with rabbit ears. Maybe if one of you tracks down the original report we’ll be able to find out who’s right.

    My line about the hut with the rabbit ears was NOT trying to characterize the OTA audience as a whole, but rather the *difference* between the 54 million number and the 10-15% number. (Which, incidentally, was being generous: Nielsen puts it at 9%.)
    http://broadcastengineering.com/transmitters/over-air-tv-market-continues-shrink

    As for digital OTA TV, do any of you have numbers for that? I think they’re very small. It’s a great technology, and it’s huge in my native UK. But I don’t see it disrupting anybody in the US.

    Rajiv’s point about capturing consumer surplus, however, is a good one.

    • Anonymous says:

      Felix, there are about 114 million households in the US, of which 15% is 17 million. Average household size is about 2.5, giving us almost 43 million persons reliant on OTA. This takes us most of the way to 54 million. The difference between the 54 million number and the 10-15% could therefore be as low as 11 million, or as high as 25 million.

      The quality of digital OTA is superior to cable, for reasons discussed here:

      http://www.tvtechnology.com/opinions/0087/are-viewers-rediscovering-over-the-air-tv/204736

      And growth in the market is currently very uneven across regions because of big differences in content availability. Here’s some anecdotal evidence on the LA market:

      http://articles.latimes.com/2009/dec/25/business/la-fi-rabbit-ears25-2009dec25

      The point is that this is far from an obsolete technology, and it is generating innovation. It’s by no means clear to me that the best use of spectrum lies elsewhere, especially under a full accounting of costs and benefits.

    • Joseph says:

      Hi Felix:

      I co-blog with Mark and we were just talking about this over the weekend.

      Hopefully he can weigh in at some point with the numbers but it has been a very useful exercise to see how the same underlying data can be detailed differently. I think that Mark’s concern was one of regulatory capture; he has been following OTA media for years now and I think he was suspicious about how the issue spectrum allocation came up again just as a wave of innovation was striking the medium. OTA broadcast has a couple of nice features relative to cable. In particular, I think it has less of the “utility” issues than cable does (where the number of providers is limited due to infrastructure). I am not sure, I came from a country that I suspect has even less broadcast OTA than the US. Or at least it did where I lived (2 channels, bad fuzzy, if I recall correctly).

      Whether that is a sufficient cause for trying to preserve this as a competitive industry is another point. But I think that was the conversation that Mark was trying to start.

      Myself, I would prefer stable internet, in a lot of ways, and streaming (myself). But then I am an Amazon Instant video addict and thus, I suspect, from an even more niche population than OTA TV watchers.

    • Rajiv Sethi says:

      That last comment posted as anonymous but it was me (as you might have guessed).

    • Mark Palko says:

      Felix,

      A few quick points

      1. Here was the viewership quote from your post: “The 50 million number, by the way, should not be considered particularly reliable: it’s Aereo’s guess as to the number of people who ever watch free-to-air TV, even if they mainly watch cable or satellite” You can argue that you don’t trust the NAB number but you can’t say it’s “Aereo’s guess.”

      2. You also said “That plan can’t be put in place too quickly: the fact is that we’re living in a world where TV broadcasts create much less value than wireless companies could realize with a fraction of the bandwidth.” which does differ sharply with my conclusion.

      3. “As for digital OTA TV, do any of you have numbers for that?” The post Andrew links to (Free TV blogging — betting against Felix Salmon) argues that Fox and NBCUniversal are making significant investments in OTA channels that absolutely cannot break even if, as you believe, the audience is small and shrinking (not to mention demographically unattractive), hence the title.

      4. This argument is also supported by the rise of the terrestrial superstations from companies like Weigel, companies you would have to add to the losers list. Weigel is probably the most important player in this story, a claim supported by Fox’s surprising decision to partner with the Chicago independent.

      For the record, I am very reluctant to bet against Felix Salmon, but in this case I have to go with Fox.

      Mark

      p.s. Here are some other relevant posts in the thread.

      http://observationalepidemiology.blogspot.com/2013/04/free-tv-blogging-suspicion-confirmed.html

      http://observationalepidemiology.blogspot.com/2013/04/free-tv-blogging-results-may-vary.html

      http://observationalepidemiology.blogspot.com/2013/04/terrestrial-superstations.html

  8. Suppose we eliminated the TV spectrum, currently this means somewhere between 50Mhz and 700Mhz. Let’s suppose we could get rid of this reserved spectrum entirely by somehow buying out existing broadcasters.

    according to wikipedia: https://en.wikipedia.org/wiki/Spectral_efficiency TV spectral efficiency is around 3 bps/Hz, and WiFi as is goes up to around 7-10 with current or about to be available technology. WiFi spectral efficiency has also increased since 2000 by a factor of 10 or so.

    Now suppose that this entire spectrum were given up to unlicensed digital networking technology. Suppose that there were a mechanism in place for competing standards to cooperate dynamically on frequency allocation, dynamic power output, and soforth, so that participants can broadcast this meta information on a shared channel and help avoid interference. I would not be at all surprised if in this competitive and innovative environment we could see in the near future (say 5 to 10 years) a spectral efficiency of 15 to 20 or more. Furthermore, with IPv6 multicast it would be possible to send a broadcast like signal once to every participant rather than having to stream the bitstream to everyone separately.

    In that environment, the current terrestrial TV content could STILL be broadcast to people but it would become about 1/10 of the total information being shuffled around, the other content could include telephony, on-demand streaming, emergency services, and huge numbers of other things.

    The modern capacity for Electrical Engineers to use bandwidth efficiently SOOOOO outdates the FCC licensing scheme that it just does not make sense to be reserving these swaths of spectrum in a fixed manner for some licensed use like this (and that goes for military, commercial, and pretty much any other usage as well).

    Some day, perhaps we’ll have a system where there are a few fixed channels between 50Mhz and 50 Ghz whose sole purpose is to coordinate the local and regional usage of the spectrum via some relatively simple negotiation protocol, and then we’ll have something like frequency hopping spread spectrum for the rest. Under such a system I would not be surprised if we could increase the efficiency of our spectral allocation by a million times or more

    In 2000 or so WiFi equipment cost a couple hundred bucks. Thanks to the enormous demand created by this unlicensed spectrum, today a wifi chip is built into $20 raspberry pi computers. If they had any redeeming toy value, they’d give them away in cereal boxes. WiFi has essentially NO automated anti-interference negotiation built in, but the future I’m imagining here is not limited by our ability to create technology, it’s entirely limited by our ability to move beyond 1920’s era regulations.

    • Ok, slight exaggeration about the raspberry pi, but TI produces a $10 wifi chip: http://hackaday.com/2013/01/12/finally-ti-is-producing-simple-cheap-wifi-modules/

    • Nameless says:

      Spectral efficiency is constrained by signal to noise ratio at the location of the receiver. Signal 15 feet from a Wi-Fi access point transmitting at 200 mW is 200 times stronger than signal 30 miles from a 100 kW television transmitter. It is a tradeoff between having higher spectral efficiency vs. having more transmitters.

      One aspect on which I’d agree with you is that we are moving towards the system with a network-linked transmitter on each house anyway – they are called “cell towers” – and the cost of sending one bit over this network is falling exponentially, so we will eventually get to the point where it costs pennies per month to send current over-the-air TV content to subscribers on demand via the cell network.

      • My point wasn’t that we should somehow have TV stations improve their spectral efficiency and thereby become network providers or whatever, it was that we should stop broadcasting TV signals on a few reserved channels, and give that spectrum back to the people to use in an unlicensed (but not unregulated!) manner to send arbitrary data over more intermediate distances than WiFi using IPv6 (as long as you’re going to make such a big switch in usage, might as well require IPv6 for the networking protocol for the new users and solve the problem of being unable to handle such a large number of new network nodes).

        They’re already experimenting with this using “white spaces” but that is irrelevant in the dense areas where there are no white spaces available. Turn the whole thing into white space and feed TV over the network.