Mike Reynolds: Hi, I'm Mike Reynolds, a senior reporter covering the media industry with S&P Global Market Intelligence Tech, Media and Telecom News Team. Welcome to "MediaTalk," a podcast hosted by S&P Global, where the news and research staff explore issues in the evolving media landscape. Today, I'm joined by S&P Global Market Intelligence Kagan principal analyst Justin Nielson and Kagan research analyst Peter Leitzinger, both of whom specialize in the broadcast industry. Hey, Justin.

Justin Nielson: Hey, Mike glad to be here.

Reynolds: How's it going, Peter?

Peter Leitzinger: It's going well. Thanks for having me.

Reynolds: All right. Peter and Justin were just at the recent National Association of Broadcasters convention in Las Vegas. I'm hoping they can give us a sense for what was happening out there across the different aspects of the business. First, I wanted to ask you guys as show veterans to give us some sense of the crowd and atmosphere. It's been a couple of years removed from the pandemic. Justin, what was it like in Vegas?

Nielson: Yeah, thanks, Mike. It was my 16th NAB Show. So I've seen the peaks and valleys in terms of audience. I think we're back past COVID and back where we were before in terms of engagement — the showroom floor was buzzing about AI, NextGen TV and then also just linear versus streaming in general.

Reynolds: Peter how did things stack up compared to some of your earlier NAB visits?

Leitzinger: So this is my 12th, a little bit behind Justin, but I thought it was a really good turnout this year. And I thought that there was a lot of buzz surrounding broadcast TV and streaming TV specifically with GenAI pumping some of the life into some of the panel sessions and creating discussions about some of the overarching impact. And I thought it was exciting to see some of the new technology and broadcasting as well.

Reynolds: Justin, you did a couple of presentations at the show sharing some of your thoughts and projections about the TV and radio industries. Can you talk a little bit about the TV world, Justin?

Nielson: Yeah, just briefly on the TV side of the business. From our viewpoint, it's expected to be a very good year in terms of political and Olympic advertising. And for the second half, our expectations are up about 8% to right around $25 billion in advertising for TV stations. And then looking at it from the political side of the business, up about 10% to almost $4 billion from the last presidential election year. Looking at it from a national/local standpoint, local has continued to be stronger for broadcast stations as opposed to national, which is seeing some erosion that's going to streaming, going to social media platforms and influencers and other avenues. But still, political, sports — that's the strength of broadcast TV.

But outside of that, looking at some slowing in retransmission consent fees and virtual sub fees. A lot of that has to do with the fact that consumers are cutting the cord and moving to streaming platforms for their TV needs. But you see some resurgence in over-the-air, which is very interesting. And we can talk a little bit later about some of the sports teams that are adding over-the-air — [broadcast] is another delivery method for their games.

Reynolds: All right. Peter, we spoke a little while ago on a "MediaTalk" episode about political [ad spending] right after Super Tuesday. Any big changes on the horizon since then?

Leitzinger: Not right now. The fundraising numbers for the presidential race are still at an all-time high. The first half of the year has been slower on the political spending side than what some broadcasters may have thought, probably due to a lack of some of the primaries. But if you look at the cash on hand, there's a lot on both sides, and that's all going to be spent before Election Day.

So I expect political advertising to pick up heavily as we get closer to the second half of the year and ultimately stay on pace with our projections.

Reynolds: So that'd be kicking in big time around Labor Day?

Leitzinger: Yeah, that's traditionally the most lucrative portion of the political spend, where ad spots come in and offer a lot of the premium that TV brings. And polls right now are very close between former President Trump and President Biden. So I expect them to spend heavily both on TV ads in the back half of the summer and ultimately give TV the political windfall that they're hoping for.

Reynolds: Interesting. Again, it's an even year. So that also means the Olympics are in tow. This year's Summer Games are going to be in Paris. NBCU, the longtime us rights holder, they said they've sold $1.2 billion worth of ads nationally. Justin, what are you seeing in terms of opportunities for NBC affiliates and other local stations as the games come up starting in the end of July?

Nielson: Yeah. And I would add Telemundo affiliates as well, so you've got the Spanish-language side of the media business. But, from NBC affiliates' perspective, the last Olympics, just because of where it was located and the timing issues wasn't as popular for some of the live events. But with Paris, I think there's going to be a lot of appetite for the games, especially around the US teams here in the States. But it is going to be interesting because with the pandemic and everything, I feel like this Summer Olympics is either going to go all in in terms of not only covering the games but t also the little local news hours where they talk about potential athletes in their area and building that personal side of the Olympics.

Reynolds: Justin, you talked earlier about maybe the local side of the ad business is a little stronger and the national is more diffused with different options outside of the traditional broadcast networks. Kagan's made some projections going out about the ad side of the business through 2028, which again would be another presidential cycle. And the Summer Games will be in Los Angeles at that point.

Nielson: Yeah. That's going to be another big year for broadcast in '28. But talking about this year, looking at the core ad categories, we still see that pharmaceuticals, telecom, professional services, law firms are still relatively strong where automotive, retail and travel categories remain soft. A lot of that has to do with inflationary pressures as well as just consumer spending. The real estate category has traditionally been very strong in the past on the local side of the business. With interest rates as they are right now and just a low supply of inventory in the housing market, that hasn't been the case. There's a lot of expectations that if interest rates were to be cut by the Fed in the second half of the year and mortgage rates went down, that the real estate category may come back a little bit stronger. And then on the automotive side, it's interesting because a lot was pushed out in terms of EVs and the new models that were coming out from the major manufacturers. But there's been some pullback on that just because of where interest rates are and then also the consumer appetite and interest for EVs has waned a little bit.

Reynolds: Yeah. It's also, if you live in an apartment, how do you charge it? It's a tough thing to deal with. Justin we've written a lot about this, about the changing world of the regional sports networks and how some of the broadcast stations have picked up some of the local rights. Was that a thing on the show floor out in Vegas?

Nielson: Yeah in some aspects, I would say it was the case. There was a lot of talk — from the Brightcove Inc.'s and the other kind of media supply chain providers — in terms of moving to live media sports on streaming. But from the broadcaster's perspective, I think they tapped the brakes a little bit because there are complications involved in terms of bringing on a full slate of, let's say, baseball MLB games or even in the case of the NBA when bringing on the four years or so of games in a local package. From that perspective, we've seen what has happened with the Phoenix Suns and the Utah Jazz and the Las Vegas Golden Knights. I think there's going to be other opportunities in that space for broadcasters to get live games. But I don't think it's going to be the windfall that maybe we were expecting with the Ballys restructuring.

Reynolds: All right. Let's change gears a little bit, guys. Talk about generative AI. Peter, what's your take on the usage of GenAI based on talking with folks and your tour around the floor out in Las Vegas?

Leitzinger: Yeah. So my take is that AI is still very much in its infancy, but it is going to be a great tool and it's already currently a great tool for broadcasters. Especially for local TV, where it can do things like upgrade video, help aid in script writing, and just generally making editing quicker and more efficient and customizing content in new ways that we haven't seen yet.

I think that most broadcasters are on board. I do think that there are still some reservations about relying on AI too much. There is a certain amount of TV that just needs to still be authentic for its viewers. And then there's intellectual property issues as well that need to be sorted out with AI. But I think with all those things, AI isn't perfect yet. But it is definitely getting there and will get better with time.

Reynolds: Yeah. It's interesting in that it's not human, but we need humans to manage it. Peter, what about NextGen TV? Been talking about it for years now. In '24, anything new or exciting caught your eye when you were out there?

Leitzinger: Yeah. So NextGen TV hit a milestone of 75% of US households with the recent launches in Chicago and San Antonio. And that milestone is big for traction with some of the big TV manufacturers and tech companies starting to take notice of NextGen TV. There are some interesting developments on the consumer side with companies like Run3TV and Roxy, which are developing technology around NextGen TV streams. One example is the development of starting and stopping live over-the-air TV, pausing and even starting the broadcast over, which is interesting. Another focus is the streaming music channels using over-the-air TV. They also are incorporating Dolby audio into that, which is one of the standards of ATSC 3.0. So that's really interesting to see. So overall, I thought all that was very positive for the consumer side.

Reynolds: When we talk about NextGen TV and the new standard, there's been some projections about its place with datacasting, how this could become a big business. There's some estimates out there that talk about datacasting revenue at about $5 billion maybe in 2027, and then closer to $11 billion three years after that. Peter, does that make sense?

Leitzinger: I think that those estimates were bullish, but I think that there's still numerous possibilities with datacasting. And I think that datacasting will boost broadcast revenue in more ways than just ad revenue. There's one example called OTA Wireless, which is a The E.W. Scripps Co. joint venture with Nexstar Media Group Inc. They're already datacasting, and they're covering about 6% of the country. So, there's still a lot of untapped potential. And I think also another thing is the backend data from NextGen TV that will give broadcasters real-time measurements to tap into specifically for ad targeting. That will free them from some of the outdated measurement models that they're currently using. If you look at NextGen TV holistically from those revenue numbers, I think they do start to make more sense over the long term.

Reynolds: Justin, you mentioned retransmission consent fees a little while ago. I think the idea is that perhaps that revenue stream is going to slow a little bit, so it could be good timing that way.

Nielson: Yeah, absolutely. The TV station owners have seen the benefit of that nice revenue stream from retransmission consent fees that has grown substantially over the past decade or so. We see that slowing. We saw a bit of that slowing over the last few quarters and going back to even last year. I'm looking at it from a perspective of the renewals that are happening. Some of the disruptions that are happening across the broadcasters and the multichannel operators and the shift that I identified from more of traditional multichannel into either virtual multichannel or direct-to-consumer or OTT-type product.

From our projections we're looking at about $15 billion in retrans fees, which would be up about 1% from year prior. And honestly, looking forward, we see it flattish, just slightly up because of those rate increases, just keeping pace with the subscriber churn that's happening on the traditional side.

Reynolds: And that's through the end of the decade, thereabouts.

Nielson: Thereabouts. Yeah, we do five-year projections for retrans, so that would be out to 2028.

Reynolds: All right, guys, we're getting to the end here. Back to NextGen TV. ATSC 3.0 for consumers has been a bit slow to develop. Peter, any signs that we're going to see more content from that?

Leitzinger: Yeah, I think on the consumer side, the focus of NextGen TV is still on HDR and not 4K. But that's a good thing because it's still very high resolution, it allows for more channels with less strain on the spectrum. And so I think sports and other major events are going to be a big draw for NextGen TV on the consumer side. Events like the Olympics and NFL. The Kentucky Derby was mentioned — the latency on NextGen TV is very low compared to streaming, and that's a big advantage. It may help it become the driver of some of the sports betting initiatives that I've seen. I know that Sinclair Inc. seems to be one of the broadcast groups most interested in that segment. And so I think we start to see some of those types of models in areas where that is legal.

Reynolds: All right. And that concludes this episode of "MediaTalk." I just wanted to thank Justin and Peter for spending a lot of time sharing their views on the broadcast industry and their most recent tours of NAB in Vegas. Thanks guys.

Nielson: Thanks, Mike.

Leitzinger: Thank you.

Reynolds: Appreciate it, and thanks to all of you for listening. This is Mike Reynolds. We'll catch up soon on the next edition of "MediaTalk."