Cable and the Specialization of Television

Chapter 6

Cable Breaks In

Cable frustrated by broadcast– Growth stunted first twenty-five years

HBO and WTBS help break in Rapid growth from the 1970s

– 1977 = 14% penetration– 1985 = 46%– 2003 = 70% (declining since)

Cable serves rural Cable serves niche

Devised by appliance store dealers and electronics firms, 1940s– Needed to get TV programming to rural,

remote areas

Built antenna relay towers in remote rural communities

Ran wires to homes

Cable Origins

First small cable systems In communities where mountains or tall

buildings blocked broadcast signals Served 10 percent of U.S., with twelve

channels Advantages:

– No over-the-air interference– Increased channel capacity

CATV: Community Antenna TV

Headend: computerized nerve center Downlinks program channels from satellite Relays programming through coaxial or fiber-

optic cables attached to utility poles Signals run through drop lines into homes

through converter boxes. Satellites

– HBO and WTBS first networks to make use of satellites

The Mechanics of Cable

Cable Threatens Broadcasting

NAB resists cable.– Competition– Diminished local control– Frustrates local advertisers– Potential breakdown of network system

Cable offers better quality image. Cable not owned by broadcasters.

– Monopoly considerations

Cable Regulations, 1972

Must-carry rules– Required cable operators to carry all local TV broadcasts– Local stations benefited from cable’s clearer reception.

Limited number of distant commercial stations carried

Mandate for public access channels and leased channels

Electronic publishers vs. common carriers

Local communities awarded monopoly to selected cable company.

– Late 1970s through early 1990s

Franchises awarded by local municipalities and sometimes, state governments

– Franchise fee: money the cable company would pay the city annually for the right to operate

Opportunities for corruption in bidding– Example: Sammon Communication bid in Fort Worth, TX

Franchising

1934 Communications Act insufficient By mid-1980s, most early cable regulations

repealed.– Stimulated growth– Triggered rate increases

1992 act required must-carry rules or retransmission consent.– Broadcasters could ask cable companies for

fees to carry their channels.

New Rules Aid Cable’s Growth

The Growing Business of Cable

In 1978, the cable industry employed about 23,000 people.

By 2006, the cable industry employed over 137,000 people.

Telecommunications Act of 1996

First major change since 1934, finally incorporating cable under federal regulation

Removed market barriers between phone companies, long-distance carriers, and cable operators

Reaffirmed must-carry rules to protect local broadcasters

Merger Mania

Buyouts among telephone, hardware, and cable– Companies claim mergers lead to innovations

in programming, services, and technology.

Risk of vertical monopoly– About 98 percent of American homes have

only one choice for cable TV.– Rates have risen by 54 percent since 1996.

Networks (ABC, NBC, CBS) slipped from 95 percent to less than 50 percent of prime-time audience.

Networks join cable world: e.g., CNBC, MSNBC, Fox News

Narrowcasting– Specialized programming for diverse and fragmented

groups– Advertisers access niche audiences.

E.g., golf-equipment manufacturer buys ads on the Golf Channel.

Cable Comes of Age

Thirty-six to seventy-two channels– Local broadcast signals– Nonbroadcast access channels

E.g., local government and public use

– Regional PBS stations– Services retrieved from national communications

satellites E.g., ESPN, CNN, MTV, the Weather Channel, and

superstations (WTBS in Atlanta)

Consumers pay one monthly fee.

Basic Cable Services

24-hour TV news channel, 1980 1982: Turner launched Headline News

channel as well. Lost money until 1985 Emerged as major news competitor

during Persian Gulf War (1991) with 24-hour coverage– Maintained live phone links from downtown

Baghdad hotel during initial U.S. bombing

The CNN Revolution

24-hour format allowed unprecedented viewer access.

Changed the rules of the news business Delivers timely news in greater detail Offers live, unedited continuous coverage of

breaking events Emphasizes international news

CNN’s “Formula”

1981, Warner Communications– Bought by Viacom in 1985

Global offspring and strong international presence:– 440 million homes worldwide– MTV Asia, MTV Europe, MTV Brazil, MTV

Japan, MTV Africa, MTV Russia, MTV Latin America

We Want Our MTV

Rotation of music videos– A new media form in 1981

In early 1990s, added original programming Partnership with recording industry

– MTV bought exclusive rights to music videos.

Exclusive agreements with cable systems to limit competition

MTV’s Business Model

HBO

Oldest and most influential premium channel Owned by Time Warner Monthly subscriptions to over 27 million homes by 2006 Starting in the mid-1980s developed own original

programming– Shows: Fraggle Rock, The Sopranos, Deadwood,

Entourage– Films: Partner in creation of TriStar Pictures (later

bought by Sony) Now an imitated programming force

– Liberty Media’s Encore– STARZ!– Showtime

Premium channels– E.g., HBO, Showtime

Other services– Pay-per-view– Video-on-demand– Two-way services

Consumers use television to bank, shop, play games, and access the Internet.

– Cable music

Subscribers pay extra fees in addition to the fee for basic cable.

Premium Cable Services

Cable TV a la Carte

Most Americans watch only 15-17 channels per month.

Disney is already offering a la carte downloads of Lost, Desperate Housewives, and other ABC shows.

Are “expanded-basic” channel packages fading into history?

DBS bypasses cable to get programming directly from satellite.

Legal issues– Who owns the satellite signals?

Early satellite dishes huge and expensive FCC restricted DBS services in 1970s and

1980s. Full, legalized DBS services in 1994

– DirecTV and EchoStar industry leaders

Direct Broadcast Satellites (DBS)

Media Giant

Cable Ownership Issues

Multiple-system operators (MSOs) Oligopoly: handful of corporations control most of

the programming– By 2006, Top 5 MSOs served almost 70 percent of all

U.S. cable subscribers.– Comcast and Time Warner two major players

In such domination, is there room for alternative voices?

Cable Ownership Issues

Multiple-system operators (MSOs) Oligopoly: handful of corporations control most of

the programming– By 2006, Top 5 MSOs served almost 70 percent of all

U.S. cable subscribers.– Comcast and Time Warner two major players

In such domination, is there room for alternative voices?