The future of TV hits another speed bump
Welcome to Lowpass, a newsletter about the future of entertainment and the next big hardware platforms, including smart TVs, ambient computing and AR / VR. This week: ATSC 3.0’s latest troubles, and a poll on all those fancy new headsets.
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ATSC 3.0 hits another speed bump – but its real enemy may be time
Life’s not so great for broadcasters looking to transition to the future of over-the-air television these days: ATSC 3.0, the next-generation broadcast standard, hit another speed bump in recent days when news broke that LG was not going to include ATSC 3.0 technology in its 2024 TV sets due to excessive patent licensing fees.
ATSC 3.0 was supposed to be the next big thing for over-the-air TV. The standard, which got approved by the FCC in 2017, aims to replace existing broadcast tech with an IP-based solution that makes it possible to transmit television signals over the air with better audio, up to 4K HDR video, apps and interactivity. At least that’s the theory.
In practice, ATSC 3.0 hasn’t exactly lived up to its expectations. Most existing TV sets aren’t able to receive ATSC 3.0 broadcasts with their built-in tuners, and there are hardly any solutions available yet for people who want to upgrade their TV set with an external tuner. What’s more, spectrum constraints have forced broadcasters to largely stick with HD video, meaning that the new standard’s marquee feature – 4K video – is all but MIA.
ATSC 3.0 tuners also cost more out of the box than their 1.0 predecessors, which is why many budget TV makers in particular have yet to adopt the new standard. When I wrote about all of this for The Verge earlier this year, both TCL and Vizio told me that they wouldn’t ship any ATSC 3.0-capable TVs this year.
Now, things just got a bit more complicated. LG had been an early backer of the new standard, and one of the major TV manufacturers to ship TVs with ATSC 3.0 tuners built-in. (Others include Samsung, Hisense and Sony, with the latter being the only TV maker to date to add ATSC 3.0 to all of its new TVs.)
In fact, LG co-developed some of the technology behind ATSC 3.0, and as such has been participating in a patent pool to license the tech under what’s known in the industry as “reasonable and non-discriminatory” (RAND) terms. There are two such patent pools in existence right now; licensing their IP costs hardware makers around $3 per unit.
However, LG got sued by a Maryland-based company called Constellation Designs, which doesn’t participate in either pool, over alleged patent infringement related to use of ATSC 3.0 in 2021. LG lost that lawsuit this summer, with a Texas jury awarding Constellation the equivalent of $6.75 per ATSC 3.0-capable TV sold.
Of course, just paying for the use of Constellation’s patents wouldn’t absolve LG from also licensing other essential patents, meaning that the IP licensing price tag for using the next-generation broadcast standard would go up to $9.75 per TV set.
That may not sound a lot when it comes to some of the TVs LG has been shipping – the company’s website currently lists its OLED EVO G3 55” TV for $2099 – but it sure is a big mark-up for the budget TVs that consumers are snapping up in big numbers at Walmart and Best Buy.
Consider this: Vizio shipped one million TVs in its most recent quarter, but only made $300,000 of gross profit on device sales. This means that the company roughly made $0.30 per TV sold – a mind-boggling number that explains why the company isn’t rushing to add a more expensive tuner that would also force it to pay an additional $10 per TV in licensing fees.
Granted, that $6.75 fee is not set in stone. LG is likely going to appeal the ruling, and I’ve heard the theory that pausing ATSC 3.0 deployment may merely be a negotiating tactic meant to pressure Constellation to offer a lower rate. Pearl TV, a consortium of broadcasters pushing for ATSC 3.0 adoption under the Nextgen TV branding, was quick to paint the TV maker’s decision as a minor hiccup.
“LG’s decision to suspend support for NEXTGEN TV products in 2024 because of an ongoing patent dispute is unfortunate, but we are hopeful that the matter can be resolved,” Peal TV’s managing director Anne Schelle told me via email. “We’re anticipating that additional TV manufacturers will be adding NEXTGEN TV as a new feature in the coming months.”
“The industry is on track to cumulatively sell 10 million (ATSC 3.0) receivers by the end of this year,” Schelle added.
Both Schelle and Scripps Networks VP Kerry Oslund also pointed to remarks from Wells Fargo analyst Steven Cahall, who pointed out that “there’s no evidence” that other TV makers may follow LG’s example.
There’s a bigger issue at hand here. We only learned about LG’s decision to hit the brakes on ATSC 3.0 in a filing to the FCC, in which the TV maker urged the commission to figure out whether voluntary, RAND-type licensing agreements really were enough to get this new broadcast tech off the ground. This comes after the FCC asked the industry in July whether it should, maybe, perhaps, force everyone to play nice on the patent front.
LG is just one party suggesting that the FCC might want to play a bigger role when it comes to ATSC 3.0 patents. The App Association, a trade group whose backers include Amazon, Apple and Intel, also is pushing for licensing regulations, as is the Alliance for Automotive Innovation (a lobby group for major automakers including Ford, GM and Nissan), cable TV industry group NCTA and Continental.
Ericsson doesn’t have a horse in this particular race, but is spooked by the idea that the FCC could move on to regulate patent licensing in other areas as well. You know, like, phones, for instance.
It’s not do-or-die, but the clock is ticking. It’s too soon to call ATSC 3.0 a failure just because LG is pausing the deployment of the technology for the time being. However, the uncertainty around ATSC 3.0 patent licensing is likely going to slow down the technology even further, and the fact that it is an issue at all doesn’t bode well for the future of over-the-air TV.
As one industry insider put it to me this week: “If ATSC 3.0 was a must-have feature for LG, they'd pay the increased licensing.”
One of the main reasons it is not a must-have feature for TV makers like LG is that they have found a much more lucrative alternative in free, ad-supported streaming channels.
FAST channels, as they’re called in the industry, are quickly becoming the new basic cable. TV viewers love them because they’re free, and available without subscriptions. TV makers love them because they’re able to actually make money with FAST (Vizio, for instance, generated $109 million of advertising revenue in Q2).
Broadcast TV is still immensely valuable, and fulfills an important role for people who don’t have access to broadband internet. But virtually every smart TV that’s being sold to consumers these days, as well as every streaming dongle, comes with FAST channels built-in – and every set-back for ATSC 3.0, as minor as it may ultimately turn out, will drive more people to these streaming channels, to the point where it may ultimately not matter if and when their next TV has a fancy ATSC 3.0 tuner built-in.
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Which headset are you buying?
I spent some time last week at Meta’s Connect conference, where I chatted with the company’s CTO Andrew Bosworth as well as its director of content ecosystem Chris Pruett; I wrote up my interview with Pruett for Lowpass last week, and included a few choice Bosworth quotes in a story I did for Fast Company.
I’ll have more to say about Meta’s new Quest 3 headset and its approach to mixed reality soon, but I’m also curious: Are you looking to buy a VR or MR headset in the next couple of months? If so: Which one? And if not: Why not?
Please vote in the poll by clicking on one of the choices below, and feel free to share additional thoughts by replying to this email!
Why headset are you planning to buy?
Daniel Ek on Spotify’s new audiobook plan. I talked to Spotify’s CEO about the company’s move to let paying subscribers listen to 15 hours of audiobooks per month; Ek also confirmed that Spotify is talking to Google about in-app payments.
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Netflix may once again raise prices soon. The streamer is reportedly looking to increase the price of its ad-free tier once the Hollywood strike is over.
Meta is laying off people working on AR/VR chips. The company has informed members of its Facebook Agile Silicon Team to expect job cuts, according to Reuters.
Why Disney might want to save the Hulu brand. Disney is set to acquire Comcast’s remaining Hulu stake soon, and is likely going to merge the service with Disney+. Getting rid of the Hulu brand would be a mistake, argues Variety VIP+ analyst Tyler Aquilina.
Generative AI is everywhere these days, and image generation in particular has been getting a second wind of sorts lately. This week, Google announced that Android phone users will soon be able to generate their home screens. Last week, Meta unveiled generative AI for Messenger stickers, which has promptly led to people generating some pretty weird stuff.
I recently began using a new generative AI app called Remix, which combines basic image generation functionality with a social and collaborative layer. Basically, you can remix anyone else’s AI creations, and contribute to AI memes of sorts. It’s fun! And silly. And feels, absent of all the other stuff that usually accompanies social media, oddly relaxing. If you want to follow my hijinks, I’m @jank0 on Remix.
Thanks for reading, have a great weekend!