CABLE and SATELLITE TELEVISION What Kind of Alternative?
1996-2002 Cable Statistics • 11,600 Cable TV systems in the U.S., 1996 • Serving 64 mn homes (1996), to 69 mn (2002) (DBS: 5m in 1996 and 21m in 2002). • Serving 66% U.S. homes (1996); 85% of TV households (2002) • Passes 97% of all TV households. • $26 billion revenues. • 90% of systems owned by 600 MSOs. • 2% of MS0s serve 42% of all clients. • Dominant MSOs (1996):TCI, Time Warner; (2002): ATT Comcast and AOL-Time Warner in 2003. . (2003:ncta.com/industry_overview/indStats.cfm/indOverviewID=2)
2002 • 76% of all subs to MVPD (multi-channel video program distributor) services received programming from franchised cable operators (78%.2001) • Total MVPD subs 90m 2002 (88m 2001) • Cable subs 69m 2002 (68.5 2001) • Non-cable MPVD subs 21m 2002 (19m 2001) • DBS accounted for 20.3% of all MVPD subs in 2002, representing 18m. households
Cable Revenues • Advertising (particularly specialized networks targeted to particular demographics). • Direct payment from subscribers. Subscription revenue dominates with some channels (e.g. HBO) entirely dependent on subscription.
The Contribution of Satellite • Point to multipoint delivery serves many cable systems at lower cost] • Provide signal transport to places where terrestrial systems are unavailable. • Promote diversification in program sources • Also compete with cable by means of DBS • Satellite construction dominated by Hughes and Lockheed; Launches dominated by Lockheed and Boeing. Delivery of DBS now concentrated between DirecTV (sold by GM to NewsCorp, 2003) and EchoStar.
Content: The Basic Tier Affiliates of major networks Signals of local independents (these now stronger as result of cable) Imported distant stations “Super-stations” (local signals distributed nationally by satellite) Local access channels (education, government, community – sometimes split) Text services (news, weather, sports etc.).
Content: Expanded Basic Tier • Advertiser-supported networks (e.g. CNN, ESPN, MTV, USA Network, BET). • Shopping Channels (e.g. Home Shopping, QVC). • C-SPAN 1+2
Content: Premium Tier and PPV • Film channels (e.g. HBO and The Movie Channel; Showtime and Home Box Office) • Pay-Per-View (e.g. video on demand for films and sports events). • Audio services.
Programming categories • General entertainment (most watched non-network channels): e.g. USA, TNT, TBS. • News and current affairs: e.g. CNN. • Sports: e.g. ESPN. • Demographics: e.g. Nickelodeon, Lifetime. • Specialty / genre: e.g. MTV, Sci-Fi. • Information and Education: e.g. History, Discovery • Improvement, religious, shopping, special interest • Film.
Convergence of Cable and Telephony • POTS will grow only gradually • Enhanced services (call-waiting, call-forwarding, business service etc., wireless and data communications). • Video distribution by cable • 1996 Telecommunications Act allowed Telco mergers with Cable (leading to AT&T Broadband takeover of MediaOne, but later sold to Comcast).
Cable and Network Television • ABC/NBC/CBS prime time share (of all viewers) fell from 90% to 53% in 1979-1995. Network share fell below 50% in 2002 ceding to Basic Cable • Basic Cable share rose from less than 10% to 30% (and 42% in cable households), to over 50% in 2002 • But combined prime time ratings of top 20 basic cable networks in 1995 was only 22.4%, less than half the combined ratings for the broadcast networks.
Expansion of DTH • 1996 limits on local authority restrictions on setting up dishes • Smaller dishes, with more power and higher frequency (C to Ku-band to Ka-band) • 1999 court permission to DTH services to carry local TV signals without payment to broadcasters • Mass production, lower cost of dishes
The Failed Echostar/DirectTV Proposal • GM’s Hughes (owner of DirecTV) sold to EchoStar in 2002, pending reg. Approval. Rejected by FCC. BUT NewsCorp has now bid successfully for DirecTV • DirecTV+EchoStar combination would have controlled 91% of DTH market. • Would have reached at least 17 mn (10%) homes, surpassing AT+T Broadband’s 14m. (but later Comcast purchase of AT+T Broadband was bigger). • Presence in 78 of 210 TV markets, with plans to serve all • 42m US homes still without DTH option in 2002 • May have to carry all (1500) local signals • Would bring broadband to rural U.S.
DirecTV and News Corp • 2003, Murdoch’s News Corp gets approval to purchase a 34% stake in Hughes Electronics. Hughes owns DirecTV, for $6bn. • DirecTV (12 mn subs) now in same stable as Fox Network (25 TV stations, 196 affiliates), Twentieth Century Fox, ESPN and 19 other cable sports channels, and Fox News Cable Channel
Implications of merger • Will News Corp raise prices charged to cable ops for Fox programming? • Murdoch now has strong presence in broadcast, cable and satellite TV in U.S. and overseas • Makes it easier to create new channels (helped by fact that Fox affiliates have had to hand over their digital channels to Fox)