Television Industry: major business entities

Local broadcast stations are are licensed by the FCC and assigned a local channel. In 2009 analog channels were replaced by new digital ones. Capacity is limited. Commercial broadcast stations are dependent on advertising for revenue.

Cable and satellite networks are mostly national and regional. Capacity has grown dramatically over the last 40 years. Cable/satellite networks receive a share of subscriber revenue, and most also sell advertising.

 While broadcast stations have been around longer and have larger individual audiences, the cable/satellite networks benefit greatly from their dual revenue stream and there are so many of them that their audience is greater in total.

The "dual revenue stream" means advertising revenue plus subscriber generated revenue. Popular basic cable networks like ESPN and TNT receive considerable support from cable and satellite operators who collect monthly subscriptions from consumer. New processes called "authentication" and "TV Everywhere" will enable authenticated, paying subscribers to watch these channels on mobile devices as well. This is crucial to the future of the industry, because without revenue there can be no program production

Commercial Broadcast Television Networks

• Own & operate (O&O)local broadcast television stations covering major markets covering up to 39% of the population; and partner with affiliated stations covering the rest of the country. The new digital stations can have multiple local channels.
• Produce news, sports, and entertainment programming.
• License programs from production companies.
• Sell a schedule of national programming to advertisers.
• Negotiate for "retransmission consent" payments from satellite and cable operators willing to pay for retransmitting channels.
• ABC (Disney); CBS; NBC (Comcast); and FOX (News Corp.) are the major broadcast networks.  The CW (Warner Bros./CBS) is a newer, emerging broadcast network. Telemundo (NBC) and Univision are Spanish language networks more popular in particular regions of the country.
  There are also several mini-networks offering programming like home shopping and religion, and some "ad hoc" sports, entertainment and news networks which do not program a full broadcast schedule.

• Owned by large station groups or independently.
• Agree to run network programs with national ads intact.
• Some negotiate for "compensation" payments from networks, but this practice is declining.
• Sell local advertising locally, and "spot" ads to national sponsors thru national rep firms.
• Produce local news.
• Buy additional programming from syndicators.

• Run syndicated programming, local news, shopping, religious, &/or ethnic programming.
• There are few strong unaffiliated stations left.

• Licensed to educational and non-profit institutions.
• Affiliated with PBS programming network
• Supported by viewers, taxpayers, corporate underwriting and foundations.

Make overall development and production deals with talent, hiring actors, writers, etc.

Produce and own shows, which they lease to networks or stations. The studios sometimes "self-sell" programs to mutually owned networks, such as ABC/Disney; Fox; and NBC/Universal. Sony Television has no internal market because it is owned by a foreign entity not permitted to own U.S. broadcast stations.

Studios sell programs internationally, and syndicate reruns and some original programs to local stations & cable.

In addition to the major studio production companies, independent producers try to sell programs (often non-fiction or international co-productions) to networks and stations.

Production Companies: Major Studios

The agencies represent creative talent (writers, directors, actors, etc.). But they do more than negotiate deals. Sometimes agencies "package" talent together. Their role in the development process is crucial. Some of the important agencies:

CAA Creative Artists Agency
ICM International Creative Management
WME William Morris E ndeavor

Cable Operators

* charge a monthly fee to subscribing households
* began as antenna services
* at first, imported local & distant broadcast signals
* programming deregulated by FCC & courts in ‘70s
* local or regional news and sports channels have always been popular offerings
* HBO and superstation TBS began first satellite distribution to operators in 1970's
* "narrowcasting" philosophy spurred growth beginning in 1980
* major tech investment in 1990's expanded bandwith for new services
* subscriber packages include data (broadband) and telephone services
* cable operators historically paid fees to cable/satellite program networks
* went from 13% to around 80% of homes between 1975-2009;
* video services include broadcast, basic (ad supported), premium, shopping and pay-per-view channels
* newer video service include video-on-demand and internet video for subscribers
* sometimes pay "retransmission consent" fees to broadcast stations
* cable operators often invest in basic networks
* broadcast networks and foreign companies may not own local U.S. cable systems
* regionally based, but compete with national satellite systems
* channel capacity is finally leveling as high definition video consumes bandwidth
* audience erosion due to cable and satellite channels has hurt broadcasters severely
* cable operators have consolidated into a few major companies:

Comcast
Time-Warner Cable (no longer a part of Time Warner, Inc.)
Cox
Charter
Cablevision
 

Satellite Operators

* similar business model to cable, but with national rather than local coverage
* Two major companies: DirecTV (now controlled by Liberty Media) and Dish Network (EchoStar)
* lower total U.S. penetration than cable, but close to the cable leaders in household reach
 

Some leading basic cable/satellite program networks

"Basic" cable program networks are supported by advertising and subscriber fees.

Time Warner Inc. owns:
CNN, TBS, TNT, CNN/HN, Cartoon, TCM, truTV

Disney owns:
Disney Channel, ABC Family, Toon Disney and Disney Junior. Disney also owns 80% of ESPN, ESPN2, ESPN Classic, ESPNEWS, ESPN Deportes, ESPN HD, etc. with Hearst Corp. owning the other 20%

Disney and Hearst (with NBC/U owning a smaller piece) share ownership of:
A&E, History Channel, Biography Channel, Lifetime, Lifetime Movie Network

Univision Communications:
Galavision

Viacom owns:
Nickelodeon/Nick @ Nite, Nick Jr., TV Land, MTV, VH-1, Comedy Central, Spike, CMTV, BET

NewsCorp owns:
FX, Fox News Channel, Fox Movie Channel, Fox Sports Nets, and part ownership of Nat Geo and Nat Geo Wild.  

Scripps Networks owns:
HGTV, Food Network, DIY, Cooking Channel, Great American Country and part of The Travel Channel, co-owned by Cox.

Comcast:
E!, Golf, Versus, Style, G4, TV One, PBS Kids Sprout, ten regional SportsNets, and Comcast Interactive  

NBC/Universal:
USA, SyFy, CNBC, Bravo, The Weather Channel, MSNBC, Oxygen

Rainbow Media Holdings (Cablevision):
AMC, WE: Women's Entertainment, IFC and Sundance
 

Liberty Media:
Discovery, TLC, Animal Planet, OWN, QVC; and in co-ownership with Sony: GSN
 

Some leading premium program networks

Premium networks are supported by subscriber fees.

Time Warner Inc. owns:
HBO(HBO+, HBO Signature, HBO Family, etc.); Cinemax

CBS owns:
Showtime Networks

Liberty Media owns:
Starz, Encore, Encore Multiplex
 

Issues and Trends

Current Business issues

• Less costly reality programming undermining fiction
• Difficulty monetizing internet video distribution
• Advertiser support can wane during economic downturns
• Growing importance of international markets
• Audience erosion to internet, mobile, and new media usage
• Escalating talent and license fee costs
• DVRs and internet shaking up foundations of advertising
• Web convergence, mobile platforms, and HD content may alter living room viewing patterns
• New media are making viewing habits, attention spans less predictable
• File sharing threatens value of program libraries

• How will new platforms (e.g. YouTube) and production techniques dislocate audience tastes?
• Will participatory social media mean less interest in centralized high end video?
• Do "Hollywood elitism" and Madison Avenue's demographic preferences put programming out of touch with large segments of the audience?

How is the introduction of high definition television playing out?

How will DVRs, video-on-demand, and new devices change the business?

Will DVRs force major changes in advertiser support?

When will internet video converge and emerge in the living room?  
 

OVERVIEW OF AUDIENCE RESEARCH

The A.C. Nielsen Company provides tv ratings, although they are being challenged by a new major media company research consortium.

Diaries and a device called a People Meter are used to compile data.

All ratings are estimates, with a statistically computable margin of error.

Ratings are compiled by a methodology called sampling.

Nielsen provides metered overnight research for the national networks.

The top Designated Market Areas (DMAs) in the country also receive daily information from meters.

The remaining markets receive weekly reports on household viewership, and detailed data on audience composition, (compiled from diaries) during the key ratings "Sweeps" periods: February, May, July, and November.

Nielsen also provides separate services for syndicated and cable programming.

The Nielsen Universe: for the 2009-10 season there are 114.9 million homes in the U.S. with television.
 

Demographics

Advertisers are most interested in demographics, the composition of an audience by age, sex, income, etc.

A program with a higher household rating and share may be less desirable to advertisers than a program with a smaller number of households, but a large concentration of viewers desirable to that particular advertiser.

Commercial ratings are now available, a DVR recordings are measured from same day through seven day intervals.