THE U.S. TELEVISION INDUSTRY Professor Miriam A. Smith San Francisco State University
The U.S. Television Industry Overview and  Current Issues
U.S. Television Audience <ul><li>Population </li></ul><ul><ul><li>- about 300 million </li></ul></ul><ul><li>Percentage of...
TV Ownership <ul><li>More than one TV </li></ul><ul><ul><li>82% of total households in U.S. </li></ul></ul><ul><li>1 TV </...
Dual TV Broadcast System <ul><li>Large Commercial (Private) Sector </li></ul><ul><ul><li>Advertiser supported </li></ul></...
Television Delivery Options <ul><li>Broadcast </li></ul><ul><ul><li>Free-over-the air </li></ul></ul><ul><li>Cable </li></...
Cable & Satellite <ul><li>Cable </li></ul><ul><ul><li>64% of total U.S. households -- basic cable </li></ul></ul><ul><ul><...
Other Options <ul><li>Remote Control </li></ul><ul><ul><li>93% of total U.S. households </li></ul></ul><ul><li>VCR </li></...
Commercial Broadcast Television <ul><li>National </li></ul><ul><ul><li>5 networks </li></ul></ul><ul><li>Local </li></ul><...
National Networks <ul><li>ABC, CBS, NBC </li></ul><ul><li>Fox </li></ul><ul><li>CW (WB, UPN merger)  </li></ul><ul><li>Com...
Public Broadcasting <ul><li>1 national network -- PBS </li></ul><ul><li>381 television stations </li></ul><ul><ul><li>254 ...
Broadcast Regulation <ul><li>Federal Communications Commission </li></ul>
 
 
Basic Powers of Regulators <ul><li>Licensing </li></ul><ul><li>Supervisory </li></ul><ul><li>Rule-making </li></ul>
FCC Objectives <ul><li>Healthy industries </li></ul><ul><li>Competition </li></ul><ul><ul><li>More choices and lower price...
Rulemaking <ul><li>Notice of Proposed Rulemaking </li></ul><ul><li>Comments </li></ul><ul><li>Promulgate Rule </li></ul><u...
Licensing in U.S. <ul><li>8 year license period </li></ul><ul><li>licensee must serve public interest, convenience and nec...
Basic Qualifications <ul><li>Technology </li></ul><ul><ul><li>comply with FCC technical standards--transmission facilities...
<ul><li>Character </li></ul><ul><ul><li>lack of serious legal violations (don’t lie to commission, engage in fraudulent pr...
Media Concentration <ul><li>Ownership </li></ul><ul><li>Quotas </li></ul>
Spectrum Management <ul><li>spectrum allocation </li></ul><ul><li>band allotment </li></ul><ul><li>channel assignment (lic...
 
Media Ownership Rules Always a debate
Other Things that Are Good to Know
Other Powers of the FCC <ul><li>Warnings </li></ul><ul><li>Fines (forfeitures) </li></ul><ul><li>Revoke Licenses </li></ul...
Specific Rules <ul><li>Ownership </li></ul><ul><ul><li>Concentration </li></ul></ul><ul><ul><li>Foreign ownership </li></u...
More Rules <ul><li>Advanced television (digital; HDTV) </li></ul><ul><li>Close-captioning </li></ul><ul><li>Indecency </li...
Some Background <ul><li>For almost 40 years there were only 3 national networks in the United States. </li></ul><ul><li>To...
Dominance of Big Three <ul><li>In 1983 big 3 had 80% of the prime time viewing audience </li></ul><ul><li>In 1980, network...
<ul><li>Economic </li></ul><ul><li>Technical </li></ul><ul><li>Regulatory </li></ul>
Economic Reasons <ul><li>First networks grew out of existing radio networks </li></ul><ul><ul><li>CBS </li></ul></ul><ul><...
<ul><li>Could use radio profits to finance television </li></ul><ul><li>Had an established program pool to exploit </li></...
Technical Reasons <ul><li>co-channel interference -- need 200 miles between same channel stations </li></ul><ul><li>adjace...
<ul><li>even in largest city, interference would limit number of channels to 7 </li></ul><ul><ul><li>2, 4, 5, 7, 9, 11, 13...
Regulatory reasons <ul><li>FCC decided to assign only limited portions of spectrum. </li></ul><ul><li>FCC wanted to assign...
<ul><ul><li>because most communities close in proximity, in order to avoid interference, had to limit the area television ...
<ul><li>Effect was to limit number of available outlets that the networks might use to reach large numbers of viewers </li...
Alternate:  National Model <ul><li>Put all stations in big cities </li></ul><ul><ul><li>2, 4, 5, 7, 9, 11, 13 </li></ul></...
How Did We Get 4 Networks?
<ul><li>struggle between major movie studios and networks for ownership of television programming </li></ul><ul><li>FCC im...
<ul><li>resulted in increased supply of available programming </li></ul><ul><li>availability of programming led to growth ...
<ul><li>Fall 1986 -- Fox begins </li></ul><ul><ul><li>1 program </li></ul></ul><ul><li>1987 </li></ul><ul><ul><li>single n...
<ul><li>FCC suspended full-regulation of Fox so it could grow. </li></ul>
Why More than 4?
UPN and WB <ul><li>availability of stations </li></ul><ul><li>availability of supply of programming </li></ul><ul><li>repe...
2006 <ul><li>end of UPN and WB </li></ul><ul><li>birth of CW </li></ul>
Four Advantages of Networks <ul><li>Reduced transaction costs </li></ul><ul><ul><li>one network schedule takes care of 200...
Ownership of Local Stations <ul><li>Network </li></ul><ul><ul><li>owned-and-operated (O&O) </li></ul></ul><ul><li>Station ...
Local Station <ul><li>Administration </li></ul><ul><li>Sales </li></ul><ul><li>Programming </li></ul><ul><li>Promotion </l...
Trends <ul><li>Mergers & consolidation leading to vertical integration </li></ul><ul><li>Globalization </li></ul><ul><li>S...
Vertical integration firm controls different aspects of production, distribution and exhibition of its products
Vertical Integration <ul><li>In 1993, vertically-integrated companies (production, distribution, station ownership) had 27...
Current Issues
Current Issues <ul><li>Ownership Restrictions </li></ul><ul><li>Everything is Getting More Expensive </li></ul>
Everything is Getting More Expensive
Programming <ul><li>In the final season, NBC paid Paramount $5.2 million per episode for  Frasier </li></ul><ul><li>Even r...
 
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  • Nielsen
  • FCC as of June 30, 2004
  • FCC as of June 30, 2004
  • Television

    1. 1. THE U.S. TELEVISION INDUSTRY Professor Miriam A. Smith San Francisco State University
    2. 2. The U.S. Television Industry Overview and Current Issues
    3. 3. U.S. Television Audience <ul><li>Population </li></ul><ul><ul><li>- about 300 million </li></ul></ul><ul><li>Percentage of Households with TV </li></ul><ul><ul><li>98% (Nielsen Media Research 1998) </li></ul></ul><ul><li>TV Households </li></ul><ul><ul><li>112.8 million (Jan 2008) </li></ul></ul>
    4. 4. TV Ownership <ul><li>More than one TV </li></ul><ul><ul><li>82% of total households in U.S. </li></ul></ul><ul><li>1 TV </li></ul><ul><ul><li>18% of total households </li></ul></ul><ul><li>3 or more TV’s </li></ul><ul><ul><li>52% of total households </li></ul></ul><ul><li>99% have color television </li></ul><ul><li>85% have a VCR </li></ul>
    5. 5. Dual TV Broadcast System <ul><li>Large Commercial (Private) Sector </li></ul><ul><ul><li>Advertiser supported </li></ul></ul><ul><li>Much Smaller Public Sector </li></ul>
    6. 6. Television Delivery Options <ul><li>Broadcast </li></ul><ul><ul><li>Free-over-the air </li></ul></ul><ul><li>Cable </li></ul><ul><li>Satellite </li></ul><ul><li>Internet </li></ul><ul><li>Mobile </li></ul>
    7. 7. Cable & Satellite <ul><li>Cable </li></ul><ul><ul><li>64% of total U.S. households -- basic cable </li></ul></ul><ul><ul><li>96.6% of TV households passed by cable </li></ul></ul><ul><li>Satellite </li></ul><ul><ul><li>22% of total U.S. households -- DBS </li></ul></ul>
    8. 8. Other Options <ul><li>Remote Control </li></ul><ul><ul><li>93% of total U.S. households </li></ul></ul><ul><li>VCR </li></ul><ul><ul><li>85% of total U.S. households </li></ul></ul><ul><li>DVR </li></ul><ul><li>VOD </li></ul>
    9. 9. Commercial Broadcast Television <ul><li>National </li></ul><ul><ul><li>5 networks </li></ul></ul><ul><li>Local </li></ul><ul><ul><li>1,752 local broadcast stations </li></ul></ul><ul><ul><li>(1,566 digital) </li></ul></ul>
    10. 10. National Networks <ul><li>ABC, CBS, NBC </li></ul><ul><li>Fox </li></ul><ul><li>CW (WB, UPN merger) </li></ul><ul><li>Combined have a 58% market share </li></ul>
    11. 11. Public Broadcasting <ul><li>1 national network -- PBS </li></ul><ul><li>381 television stations </li></ul><ul><ul><li>254 UHF educational stations </li></ul></ul><ul><ul><li>127 VHF educational stations </li></ul></ul>
    12. 12. Broadcast Regulation <ul><li>Federal Communications Commission </li></ul>
    13. 15. Basic Powers of Regulators <ul><li>Licensing </li></ul><ul><li>Supervisory </li></ul><ul><li>Rule-making </li></ul>
    14. 16. FCC Objectives <ul><li>Healthy industries </li></ul><ul><li>Competition </li></ul><ul><ul><li>More choices and lower prices for consumers </li></ul></ul><ul><li>Diversity of voices </li></ul><ul><li>Localism </li></ul><ul><ul><li>Local control </li></ul></ul><ul><ul><li>Local programming </li></ul></ul>
    15. 17. Rulemaking <ul><li>Notice of Proposed Rulemaking </li></ul><ul><li>Comments </li></ul><ul><li>Promulgate Rule </li></ul><ul><li>Requests for Reconsideration </li></ul>
    16. 18. Licensing in U.S. <ul><li>8 year license period </li></ul><ul><li>licensee must serve public interest, convenience and necessity </li></ul><ul><li>availability of frequency </li></ul><ul><li>no opposition </li></ul>
    17. 19. Basic Qualifications <ul><li>Technology </li></ul><ul><ul><li>comply with FCC technical standards--transmission facilities, interference avoidance and signal quality </li></ul></ul><ul><li>Financial </li></ul><ul><ul><li>adequate capital -- sufficient funds to operate station for three months without ad revenue </li></ul></ul>
    18. 20. <ul><li>Character </li></ul><ul><ul><li>lack of serious legal violations (don’t lie to commission, engage in fraudulent programming or commit felonies) </li></ul></ul><ul><li>Citizenship/Ownership </li></ul><ul><ul><li>U.S. citizens </li></ul></ul><ul><ul><li>ownership restrictions </li></ul></ul><ul><li>Equal Employment opportunities </li></ul><ul><ul><li>Don’t discriminate </li></ul></ul>
    19. 21. Media Concentration <ul><li>Ownership </li></ul><ul><li>Quotas </li></ul>
    20. 22. Spectrum Management <ul><li>spectrum allocation </li></ul><ul><li>band allotment </li></ul><ul><li>channel assignment (licensing) </li></ul><ul><li>Berlin International Radio Convention of 1906 </li></ul>
    21. 24. Media Ownership Rules Always a debate
    22. 25. Other Things that Are Good to Know
    23. 26. Other Powers of the FCC <ul><li>Warnings </li></ul><ul><li>Fines (forfeitures) </li></ul><ul><li>Revoke Licenses </li></ul><ul><li>Refuse to Renew Licenses </li></ul><ul><li>Position Papers </li></ul><ul><li>Informal Negotiations </li></ul>
    24. 27. Specific Rules <ul><li>Ownership </li></ul><ul><ul><li>Concentration </li></ul></ul><ul><ul><li>Foreign ownership </li></ul></ul><ul><li>Political Advertising </li></ul><ul><li>Children’s Television </li></ul><ul><li>Cable </li></ul><ul><li>Satellite </li></ul>
    25. 28. More Rules <ul><li>Advanced television (digital; HDTV) </li></ul><ul><li>Close-captioning </li></ul><ul><li>Indecency </li></ul>
    26. 29. Some Background <ul><li>For almost 40 years there were only 3 national networks in the United States. </li></ul><ul><li>Today there are 6 national networks. </li></ul><ul><li>Is the U.S. twice as big today? </li></ul>
    27. 30. Dominance of Big Three <ul><li>In 1983 big 3 had 80% of the prime time viewing audience </li></ul><ul><li>In 1980, networks and their stations and affiliates accounted for about 90% of revenues and profits in broadcast television industry </li></ul>
    28. 31. <ul><li>Economic </li></ul><ul><li>Technical </li></ul><ul><li>Regulatory </li></ul>
    29. 32. Economic Reasons <ul><li>First networks grew out of existing radio networks </li></ul><ul><ul><li>CBS </li></ul></ul><ul><ul><li>NBC Red </li></ul></ul><ul><ul><li>NBC Blue </li></ul></ul>
    30. 33. <ul><li>Could use radio profits to finance television </li></ul><ul><li>Had an established program pool to exploit </li></ul><ul><li>Could shift program, sponsor and audience to television </li></ul><ul><li>Many new tv licensees were long-time radio affiliates </li></ul>
    31. 34. Technical Reasons <ul><li>co-channel interference -- need 200 miles between same channel stations </li></ul><ul><li>adjacent channel interference -- need 60 miles between adjacent channels </li></ul>
    32. 35. <ul><li>even in largest city, interference would limit number of channels to 7 </li></ul><ul><ul><li>2, 4, 5, 7, 9, 11, 13 </li></ul></ul><ul><li>economically, even in large markets only a handful of stations will be successful </li></ul>
    33. 36. Regulatory reasons <ul><li>FCC decided to assign only limited portions of spectrum. </li></ul><ul><li>FCC wanted to assign, wherever possible, at least one television station to each U.S. community (localism). </li></ul>
    34. 37. <ul><ul><li>because most communities close in proximity, in order to avoid interference, had to limit the area television stations serve </li></ul></ul><ul><ul><li>to allow for transmitters in small communities, FCC had to limit number of stations assigned to larger cities </li></ul></ul>
    35. 38. <ul><li>Effect was to limit number of available outlets that the networks might use to reach large numbers of viewers </li></ul><ul><li>Localism model </li></ul><ul><ul><li>criticism: overconfidence in local area’s ability to produce viable programming </li></ul></ul>
    36. 39. Alternate: National Model <ul><li>Put all stations in big cities </li></ul><ul><ul><li>2, 4, 5, 7, 9, 11, 13 </li></ul></ul><ul><li>Practical reach of signal is 50 miles </li></ul><ul><li>Use repeaters to expand reach </li></ul>
    37. 40. How Did We Get 4 Networks?
    38. 41. <ul><li>struggle between major movie studios and networks for ownership of television programming </li></ul><ul><li>FCC imposed rules in early 1970’s </li></ul><ul><ul><li>financial interest and syndication rules, networks could not own any prime time programming it distributed </li></ul></ul>
    39. 42. <ul><li>resulted in increased supply of available programming </li></ul><ul><li>availability of programming led to growth of broadcast television stations -- mostly independents </li></ul><ul><ul><li>1975 -- 80 independents </li></ul></ul><ul><ul><li>1980 -- 121 independents </li></ul></ul><ul><ul><li>1985 -- 241 independents </li></ul></ul>
    40. 43. <ul><li>Fall 1986 -- Fox begins </li></ul><ul><ul><li>1 program </li></ul></ul><ul><li>1987 </li></ul><ul><ul><li>single night of programming </li></ul></ul><ul><li>1993 </li></ul><ul><ul><li>five nights of programming </li></ul></ul>
    41. 44. <ul><li>FCC suspended full-regulation of Fox so it could grow. </li></ul>
    42. 45. Why More than 4?
    43. 46. UPN and WB <ul><li>availability of stations </li></ul><ul><li>availability of supply of programming </li></ul><ul><li>repeal of fin/syn rule </li></ul><ul><ul><li>studios want to distribute their programs and then syndicate same </li></ul></ul><ul><ul><li>weblets are owned, at least in part, by studios/producers </li></ul></ul>
    44. 47. 2006 <ul><li>end of UPN and WB </li></ul><ul><li>birth of CW </li></ul>
    45. 48. Four Advantages of Networks <ul><li>Reduced transaction costs </li></ul><ul><ul><li>one network schedule takes care of 200 affiliates </li></ul></ul><ul><li>Increased efficiency </li></ul><ul><ul><li>advertisers need only deal with one network (who might guarantee the audience) </li></ul></ul><ul><li>Distribution costs reduced </li></ul><ul><ul><li>cost of transmitting signals to affiliates reduced if same program scheduled simultaneously </li></ul></ul><ul><li>Success breeds success in network scheduling of programs </li></ul>
    46. 49. Ownership of Local Stations <ul><li>Network </li></ul><ul><ul><li>owned-and-operated (O&O) </li></ul></ul><ul><li>Station Groups </li></ul><ul><ul><li>Cox Communications </li></ul></ul><ul><ul><li>Hearst </li></ul></ul><ul><li>Business or individual </li></ul>
    47. 50. Local Station <ul><li>Administration </li></ul><ul><li>Sales </li></ul><ul><li>Programming </li></ul><ul><li>Promotion </li></ul><ul><li>Engineering </li></ul><ul><li>Traffic </li></ul><ul><li>News </li></ul>
    48. 51. Trends <ul><li>Mergers & consolidation leading to vertical integration </li></ul><ul><li>Globalization </li></ul><ul><li>Shrinking audience </li></ul><ul><li>Increased options for audience </li></ul><ul><li>Going digital </li></ul>
    49. 52. Vertical integration firm controls different aspects of production, distribution and exhibition of its products
    50. 53. Vertical Integration <ul><li>In 1993, vertically-integrated companies (production, distribution, station ownership) had 27% audience share. </li></ul><ul><li>1n 2003, have 69% audience share. </li></ul>
    51. 54. Current Issues
    52. 55. Current Issues <ul><li>Ownership Restrictions </li></ul><ul><li>Everything is Getting More Expensive </li></ul>
    53. 56. Everything is Getting More Expensive
    54. 57. Programming <ul><li>In the final season, NBC paid Paramount $5.2 million per episode for Frasier </li></ul><ul><li>Even reality shows can cost $1 to $2 million per episode </li></ul>

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