Cable: A Wired versus Wired World

1. Cable:A Wired versus Wired World Chapter 6

2. “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 . . .”

3. 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.

4. 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

5. CATV: Community Antenna TV • 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

6. 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 are first networks to make use of satellites.

7. Figure 6.1

8. 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

9. 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

10. 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, Tex.

11. Figure 6.2

12. New Rules Aid Cable’s Growth • 1934 Communications Act insufficient • By mid-1980s, most early cable regulations repealed.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.

13. 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

14. 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

15. Cable Comes of Age • 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.

16. Basic Cable Services • 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.

17. 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

18. 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

19. We Want Our MTV • 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

20. 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 • Now shows non-music programming to provide advertisers with constant audience

21. 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

22. Premium Cable Services • 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.

23. Direct Broadcast Satellite (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 • DBS’s share of the multichannel video market went from 13.8% in 2000 to 32% in 2007.

24. 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.

25. 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

26. Figure 6.3

27. What Viacom Owns – Spike TV – TurboNick – TV Land – URGE – VH1 – VSPOT Internet • AtomFilms • iFILM (online video) • Neopets • Quizilla • Web sites for all Viacom owned cable channels Movies • Paramount Pictures • Dream Works SKG • Paramount Vantage • MTV Films • Nickelodeon Movies Music • Rhapsody Video Games • AddictingGames.com • GameTrailers • Harmonix • Shockwave • Xfire (online gaming community) Cable Channels • BET Networks – BET – BET Gospel – BET Hip Hop – BET J • MTV Networks – CMT: Country Music Television – Comedy Central – Logo – MTV International – MTV: Music Television – MTV2 – mtvU – The N – Nick at Nite – Nicktoons Network – Nickelodeon – Nickelodeon Movies – Noggin

28. 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?