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Cable and the Specialization of Television

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

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Cable and the Specialization of Television

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  1. Cable and the Specialization of Television Chapter 6

  2. 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

  3. Cable Origins • 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

  4. CATV: Community Antenna TV • 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

  5. The Mechanics of Cable • 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

  6. 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

  7. 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 accesschannels and leased channels • Electronic publishers vs. common carriers

  8. Franchising • 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

  9. New Rules Aid Cable’s Growth • 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.

  10. 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.

  11. 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

  12. 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.

  13. Cable Comes of Age • 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.

  14. Basic Cable Services • 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.

  15. The CNN Revolution • 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

  16. CNN’s “Formula” • 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

  17. We Want Our MTV • 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

  18. MTV’s Business Model • 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

  19. 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

  20. Premium Cable Services • 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.

  21. 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?

  22. Direct Broadcast Satellites (DBS) • 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

  23. Media Giant

  24. 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?

  25. 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?

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