Cable:A Wired versus

Wired World

Chapter 6

“Through satire and sharp-witted lampoon of politics, the ‘fake news’ on The Daily Show has become an effective critic of television and cable news . . .”

Cable Breaks In Cable frustrated by broadcasters

Growth stunted first twenty-five years HBO and WTBS help break in Rapid growth from the 1970s

1977 = 14% penetration 1985 = 46% 1999 = 70% (declining since)

Cable serves rural communities. Cable serves niche communities.

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% 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 are first networks to make use of satellites.

The Mechanics of Cable

Figure 6.1

Cable Threatens Broadcasting

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

Cable offers better-quality image. Cable is 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, Tex.

Franchising

Figure 6.2

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repealed.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

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

The Growing Business of Cable

Cable industry invested $110 billion in technological infrastructure between 1996 and 2007.

By 2007, U.S. cable companies had signed more than thirty-four million households to digital programming packages. “Triple play” of television, Internet, and

telephone

Networks (ABC, NBC, CBS) slipped from 95% to less than 50% 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

100+ 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 (WPIX in New York) 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”

Created in 1981 by Warner Communications Bought by Viacom in 1985

Global offspring and strong international presence: 412 million homes worldwide MTV Asia, MTV Europe, MTV Brasil, 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 Now shows non-music programming to

provide advertisers with constant audience

MTV’s Business Model

HBO Oldest and most influential premium channel Owned by Time Warner Monthly subscriptions to over 28 million homes by 2007 Starting in the mid-1980s developed own original programming

Shows: Fraggle Rock, The Sopranos, The Wire, Entourage

Films: Partner in creation of TriStar Pictures (later bought by Sony)

Now an imitated programming force Liberty Media’s Encore STARZ! Showtime

Other services Pay-per-view Video-on-demand Two-way services: Consumers use television to

bank, shop, play games, and access the Internet.

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

Premium Cable Services

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 DBS’s share of the multichannel video market went

from 13.8% in 2000 to 32% in 2007.

Direct Broadcast Satellite (DBS)

Cell Phones as a Television Portal

Phones not meant to be a mass medium Development of WiMax technology has made cell

phones a place to download music, TV programs, and movies. WiMax (Worldwide Interoperability for Microwave Access):

communication technology that provides data over long distances in multiple ways

2008: Major cable, phone, and Internet companies began talks to create a U.S. wireless network to link computers, televisions, and cell phones using WiMax technology.

Cable Ownership Issues Multiple-system operators (MSOs)

By 2008, Top 5 MSOs served almost 80% of all U.S. cable subscribers.

Comcast and Time Warner two major players

Industry moving toward oligopoly: handful of corporations control most of the programming

Concerns that cable, DBS, computer, and phone services will merge into giant communication overlords, fixing prices without the benefit of competition

Figure 6.3

What Viacom OwnsCable Channels• BET Networks– BET– BET Gospel– BET Hip Hop– BET J• MTV Networks– CMT: Country MusicTelevision– Comedy Central– Logo– MTV International– MTV: Music Television– MTV2– mtvU– The N– Nick at Nite– Nicktoons Network– Nickelodeon– Nickelodeon Movies– Noggin

– Spike TV– TurboNick– TV Land– URGE– VH1– VSPOT

Internet• AtomFilms• iFILM (online video)• Neopets• Quizilla• Web sites for all Viacom ownedcable channels

Movies• Paramount Pictures• Dream Works SKG• Paramount Vantage

• MTV Films• Nickelodeon Movies

Music• Rhapsody

Video Games• AddictingGames.com• GameTrailers• Harmonix• Shockwave• Xfire (online gamingcommunity)

Alternative Voices

Consumers threaten cable companies with alternatives to gain better service. Cedar Falls, Iowa: Citizens create municipal cable

system, forcing provider TCI to upgrade options. Cable still has not developed potential to be

true alternative to network TV. How can cable providers attain this goal?