powerpoint presentation: sept. 8, 2004 -- tv 2010
TRANSCRIPT
1
TV 2010Communications Studies
197C
Sept. 6, 2004
2
Communications Studies 197C Summer 2004
Consumer Good to Divisible, Editable Asset
1980’s 1990’s 2000’s 2010’s 2020’s
Ninte
ndo
hom
e vide
o ga
me
-- 19
81
Inte
rnet
Bub
ble
Block
bust
er e
xpan
sion
star
ts 1
987
Broad
band
AOL Fo
unde
d - 1
985
Pay
per v
iew s
tarts
- 19
85
????
??
Meg
aplexe
s - 1
995
Mergers
PVR’s
Wire
less
med
ia?
Consumer ProductsChannel Explosions
Digital
3
Communications Studies 197C Summer 2004
How Did We Get Here?
Changing economics of television networksRegulation and Technologies…
Cable
Satellite
PVRs
4
Communications Studies 197C Summer 2004
How Do I Receive Thee?
• Over the Air?
• Cable?
• C-Band?
• Ku-Band – DirecTV, Dish (Echostar)?
• Cable Modem or DSL?
5
Communications Studies 197C Summer 2004
New Distribution Windows
• 1889: Kinetoscope• 1895: Cinematographe (exhibition)• 1939: NBC Television (network television)• 1975: HBO (pay television)• 1976: TBS Superstation (basic cable)• 1976: Betamax (home video)• 1985: Viewer’s Choice (pay-per-view)• 2001: CinemaNow; MovieLink (internet
downloading)
6
Communications Studies 197C Summer 2004
Video Media: Time Shift from Broadcast TV to Cable &
Satellite
Source: Veronis Suhler Stevenson, MPAA
Hours Spent Per Year By Media
667
884
936
283
851
8101001
228 185
125
120
43
5413 36
175
107 84
117
13 15777
Cable & Satellite TV
Broadcast TV
Consumer Internet
Home Video,prerecorded
Box Office
Video on Demand
Radio
Recorded Music
Daily Newspapers
Consumer Magazines
1988
2002p
7
Communications Studies 197C Summer 2004
History of Cable – 1948 Birth to 1960’s Halt by FCC
• 1948 --Arkansas, Oregon and Pennsylvania -- enhance reception of over-the-air TV mountainous or remote areas
• “Community antennas” (CATV) on mountain tops or high points; homes connected to antenna towers to receive signals
• 1952 – 70 “cable” systems served 14,000 subs, mostly 100 mile radii
• 1953 – Microwave relays began• Late 1950’s – Carriage begins of “distant signals”• 1962 – Almost 800 cable systems served 850,000 subscribers
o Westinghouse, TelePrompTer and Cox investedo Entrepreneurs: Bill Daniels, Martin Malarkey, Jack Kent
Cookeo 1963 -- Carter Mountain Transmission Corp. v. FCC • 1966/68 -- FCC restricted carriage of distant signals in top
100 markets
8
Communications Studies 197C Summer 2004
1970-80’s – FCC and Satellite Effects
• 1972 -- Cable Television Report and Order -- FCC gradual deregulation; protected local stations' exclusive rights to syndicated programming
• 1972 -- Charles Dolan & Gerald Levin of Sterling Manhattan Cable launched Home Box Office (HBO).
• National satellite distribution system used a newly approved domestic satellite transmission
• TV station, owned by R.E. "Ted" Turner, was distributed by satellite to cable systems nationwide, and soon became known as the first "superstation," WTBS
9
Communications Studies 197C Summer 2004
Compulsory License – Key in the Lock
• 1976 – Law granted cable operators compulsory license to make distant broadcast signals available to its subscribers and to establish royalty rates to be paid by cable operators
• At that time, many copyright owners and broadcasters were unwilling to make their programming available to cable subscribers.
• Congress created a statutory licensing mechanism that provided an efficient way to license copyrighted material and ensured that copyright owners received payment for use of their programming
10
Communications Studies 197C Summer 2004
1980s/90s – The Cable Act(s)
• 1980 – nearly 16 million households subscribed• 1984 – 1984 Cable Act – relaxed framework,
attracted investment; 1984-1992, $15 billion was spent on wiring systems
• 1989 – nearly 53 million households subscribed; cable networks increased from 28 in 1980 to 79 by 1989
• 1992 – 1992 Cable Act – enabled competition from wireless cable and DBS, responding to price increases
• 1995 – 139 national cable networks available
11
Communications Studies 197C Summer 2004
1990s -- New Money & Businesses
• 1996 – Telecommunications Act of 1996 – increased competition
o AT&T entering the business in 1998, though exiting four years later by merging with Comcast in 2001
o Paul Allen, a founder of Microsoft, began acquiring his own stable of cable properties.
o America On-Line merged with Time Warner and its cable properties
• 1998 – 171 national cable networks available• 1996-2002 -- $65 billion spent on upgrading systems with
fiber optic and coaxial cable – “broadband” networks
12
Communications Studies 197C Summer 2004
Cable Now
• 73.7 million basic subscribers as of 1Q04• Digital cable could be found in 22.9 million
homes (31%)• Subscribership to high-speed Internet access
service via cable modems had grown to 17.3 million by 1Q04 (up 35% vs 1Q03)
• 2.7 million customers were using cable for their phone connections 1Q04 (up slightly)
• By 2002, about 280 nationally-delivered cable networks were available, with that number growing steadily
13
Communications Studies 197C Summer 2004
US HH Penetration of Video Media
0
20
40
60
80
100
12019
50
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2002
US
HH
(m
illio
ns)
HH
TV HH
Cable HH
Pay Cable HH
VCR HH
Addressable HH
Digital Cable
Satellite
VOD HH
Sources: Nielsen Media Research-NTI; TVB; Census Bureau; MPAA; Kagan; NCTA, Adams Research
14
Communications Studies 197C Summer 2004
Cable Numbers You Should Know
• U.S. HH -- 110.4 million (Jan. 2004)• U.S. TV HH – 108.4 million (Jan. 2004) (98% of HH)
• 1 rating point = 1% of TV HH• Basic cable HH – 73.9 million (Jan. 2004)(68% of TVHH)• VCR/DVD Homes – 98.4 million (91% of TVHH)• Digital cable HH – 20.6 million (est. as of June 2003)• Satellite (DSS) – 20.35 million (est. as of March 2003)
• Includes 11.4 million DirecTV subs and 8.4 million Dish Network subs
• DVR penetration = 2% of TVHH (as of Aug. 2003, Yankee Group)
15
Communications Studies 197C Summer 2004
Cable Systems: Different Economics than TV Stations
• Monthly Fees by Tier• Basic Tier(s)• Pay Services
• Multiplexing• Pay per View, VOD, Other Services
• Advertising• By Network• “Interconnect” by Local Systems
• Fractured Ownership by Market• Installation• Late Fees
16
Communications Studies 197C Summer 2004
Avg. Basic Cable Network: 50/50 Split
Gross Ad Revenue 53%Net Ad Revenue 45%License Fees 52%Other Revenue 3% Total 100%SG&A 21%Programming 46%"Cash Flow" 33%
Source: Kagan Research; 2003
17
Communications Studies 197C Summer 2004
A Large Ad Pie to be Fighting Over
2003 U.S. Advertising, $ million
Source: Universal McCann/TVB
15,030
9,948
13,520
3,434
13,954
4,860 Network TV
Spot (nat'l)
Spot (local)
Syndication
Cable Network
Cable (non-net)
18
Communications Studies 197C Summer 2004
Cable Advertising – Growth
TV/Cable Ad Revenue
0
2,000
4,000
6,000
8,000
10,00012,000
14,000
16,000
18,000
20,000
1997 1998 1999 2000 2001 2002 2003
$ m
illio
n
Network
Spot (nat'l)
Spot (local)
Syndication
Cable Total
Cable Network
Cable (non-net)
Source: TVB
19
Communications Studies 197C Summer 2004
Cable Advertising – Long-Term Growth
Source: TVB/Universal McCann
TV/Cable Ad Revenue
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000
$ m
illio
n
Network
Spot (nat'l)
Spot (local)
Syndication
Cable Total
Cable Network
Cable (non-net)
20
Communications Studies 197C Summer 2004
Dominant Cable Operators (MSOs)
Rank MSO Subscribers
1 Comcast Cable Communications (info)
21,468,000
2 Time Warner Cable 10,919,000
3 Charter Communications 6,431,300
4 Cox Communications 6,338,300
5 Adelphia Communications 5,469,800
6 Cablevision Systems Corporation
2,944,000
7 Bright House Networks 2,167,000
8 Mediacom Communications Corporations
1,543,000
9 Insight Communications 1,293,600
10 CableOne 720,800
59,294,800Source: Kagan Research, LLC
Top 10: 49% of HUT; 81% of Cable
HH
21
Communications Studies 197C Summer 2004
Concentration of U.S. Distribution Pipes
MSO’s (Multiple System Operator) In millions
Comcast (ATT)
Time Warner
Charter Cox Adelphia Cablevision
Echostar Dish
DirecTV
21.4 11 6.5 6.3 5.2 3
“Voom”
8.8 11.5
= 54 million
= 80 % of the cable subscriber universe
22
Communications Studies 197C Summer 2004
Top Cable Networks by RatingsCable Network Primetime
RatingTVHH
TNT 1.7 1,984,000
USA 1.7 1,828,000
Nick/NAN 1.6 1,742,000
Disney 1.3 1,391,000
TBS 1.2 1,319,000
Lifetime 1.2 1,247,000
Toon Disney 1.1 1,243,000
ESPN 0.9 1,018,000
Fox News 0.9 1,010,000
Discovery 0.9 986,000
Source: Kagan Research, LLC
23
Communications Studies 197C Summer 2004
Top Cable Networks by Revenue
Cable Network 2002 Revenue 2003 Revenue
ESPN $2,449.1 MM $2,871.6 MM
TNT $1,320.8 MM $1,502.1 MM
Nickelodeon $1,088.0 MM $1,244.1 MM
Fox Sports $1,022.4 MM $1,189.5 MM
MTV $860.2 MM $998.5 MM
USA $883.2 MM $933.1 MM
CNN $798.3 MM $858.2 MM
Lifetime $744.8 MM $790.0 MM
TBS $763.1 MM $776.2 MM
Disney Channel $735.6 MM $762.7 MM
Source: Kagan Research, LLC
24
Communications Studies 197C Summer 2004
Important Facts: Cable Financial Model
• Cable financial model depends on popularity of net
• New nets typically have to pay per sub fee to get carriage
• Popular nets (ESPN) get per sub fee from MSO•ESPN rates at around $2/subscriber (or
more)•Comcast’s total programming costs per sub
per month (as of 1/13/2003) were $14.87
25
Communications Studies 197C Summer 2004
Satellite – Late to the Party
• 1988 – Congress enacted the Satellite Home Viewer Act (“SHVA”) to ensure that subscribers to satellite services would have access to broadcast signals.
• At that time, satellite TV service consisted of the large C-Band dishes that were primarily in rural areas.
• C-Band peaked at 2.4 million subscribers in 1995, but has dropped to below 500,000
• In 1994, the Direct Broadcast Satellite (DBS) service became available to consumers – has grown to over 21 million subscribers
26
Communications Studies 197C Summer 2004
Reaching the US TV Consumer
Cume Penetration of US Households by Channel
-10.020.030.040.050.060.070.080.090.0
Channel
% A
vg W
eekl
y C
um
e
Source: Nielsen 2002; weekly cume
27
Communications Studies 197C Summer 2004
Fragmented Competition: Number of US Cable & Satellite
Channels
6072 78
91
113130
155168
202
227235
250267
0
50
100
150
200
250
300
Nu
mb
er o
f C
han
nel
s
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Year
Source: Screen Digest
1994: Launch of
Digital Satellite
1997: Launch of
Digital Cable
28
Communications Studies 197C Summer 2004
Cable TV & Satellite -- US
• Direct Broadcast Satellite – 15.8% US households (up from 13.8% 7/02)
• Wired Cable - 70.3% of US Households, down from 67.9% 7/02 (back to 4/96 levels)
• 58 TV markets now have Alternate Delivery system penetration of 25% or more
• Springfield, MO 46%• Dallas/Ft. Worth 38%
29
Communications Studies 197C Summer 2004
US Channels Available Doesn’t Materially Impact 14-19 Channels
Watched
195
115.5
104.895
8475.5
66.156.3
45.636.2
15.624.4
17.919.116.115.916.615.615.6151412.37.15.80
50
100
150
200
250
11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-100 101-110 111-120 121+
Channels Available
Nu
mb
er o
f Ch
ann
els
Avg Receivable Avg Viewed
Source: Nielsen, National People Meter Sample 8/01; TVB
30
Communications Studies 197C Summer 2004
How Do Cable Channels Compete?
• Marketing• Niche Programming – repackaged, syndicated, used
across platforms• HGTV, Discovery, History, MTV, ESPN
• Repurposing (co-owned networks; quick reruns)• Original Programming
• FX: The Shield, Nip/Tuck• Bravo: Queer Eye for the Straight Guy• ESPN/Fox: Sports programming
• More Expensive!• Off-Network Programs
31
Communications Studies 197C Summer 2004
Network Concentrated Landscape
Turner ABC/ESPN MTV Networks
Discovery Fox NBC Scripps
10 10 19 13 8 6 4
• CNN Fin
• CNN Int
• Cartoon
• TBS
• TNN
• TNT
• CNN
• TCM
• Disney
• ESPN
• Toon Disney
• SoapNet
• VH1
• Comedy
• MTV
• Nick
• TV Land
• Spike
• Noggin
• Animal Planet
•En Español
•Learning
• Discovery
• excluding regional)
• Fox Movie
• FX
• Fox News
• Fox Sports
• Nat Geo
• CNBC
• CNBC world
• MSNBC
•Bravo
• Food
• HGTV
• DIY
• Fine Living
32
Communications Studies 197C Summer 2004
2 3 2 3 3
• A & E• Histor
y
A & E AMC E! Lifetime USA
• WE
• AMC
• Lifetime
• LMN
• USA
• SCI Fi
• HSN
Independent Channels
Golf Channel
Hallmark
Weather
QVC
Oxygen
IFC
• Style
• E!
33
Communications Studies 197C Summer 2004
Recent Off-network Programs to Cable
Year Avail.
Program
Syndicator
Cable Network
Orig. Network
Eps. Fee/episode
2006 Frasier Paramount
Lifetime NBC 264 $600K
2004 Smallville
Warner ABC Family
WB 66 $400K
2004 Fear Factor
NBC FX NBC 100 $280K
2005 Alias Buena Vista
TNT ABC 66 $200K
2004 Jamie Kennedy
Warner ABC Family
WB 61 $150K
2004 Yes, Dear
Fox TBS CBS 96 $75K
Source: Kagan Research, LLC
34
Communications Studies 197C Summer 2004
U.S. Changing – How about other Countries?
• Different cable/satellite mix• National programming – culture• Reality Show – Global Impact• Ownership concentration• Interactive TV – U.K. (Sky TV), Israel (cable)
• Competitive advantages
35
Communications Studies 197C Summer 2004
Digital Customization for Local Appetites –
MTV brand extensions
36
Communications Studies 197C Summer 2004
Current Challenges?
• Vertical & Horizontal Integration• New Services• Reality (previous kings included game show)• Advertiser support – Integration – Product
Placement• Reruns & Cable Repurposing
37
Communications Studies 197C Summer 2004
Vertical & Horizontal Integration
• Comcast - AT&T (failed bid for Disney)• News Corp. buys DirecTV• Adelphia up for sale• Intensifies competition: more at stake,
more pieces to maneuver
38
Communications Studies 197C Summer 2004
Competition Driving New Services
• Cable launching VOD (difficult for satellite, inefficient upstream path)
• Satellite counters with DVR, calls it VOD (cable launching DVR too)
• Cable offers broadband and voice (satellite teams with DSL, RBOCs)
• HDTV - advantage for satellite in short-run, capacity issues later; regulatory local “must-carry” considerations
• ITV and custom IPGs next (Murdoch’s success with BSkyB)
Retail prices kept at bay for now
39
Communications Studies 197C Summer 2004
People Meter Controversy
• Nielsen is trying to record what people watch every 15 minutes to determine rating with 2,000 households
• Challenges now that sample is unrepresentative of total population (higher end house skew).
• Boxes just tell if the TV set is on, not whether a person is there actually watching it or not.
• Issues that have arisen with technology is that there are multi-set households, VCR and Tivo which alter when people watch, etc.
40
Communications Studies 197C Summer 2004
Reality Show – Winner of 2003/04 Season
• 9 of the top 20 top-rated shows among adults 18-49 were reality shows.
• A reality show was the top-rated show in the key demo for ABC ("The Bachelor“), NBC ("The Apprentice," tied with "Friends"), Fox ("American Idol") and UPN ("America's Next Top Model").
Source: Variety 5/27/04
41
Communications Studies 197C Summer 2004
Reality Show Economics
How American Idol makes $• Ad spots (network, national spot, local spot, cable
insertions)• Sponsors• Concerts• Albums• Cell phone• Syndication of idea to other countries• Low Cost & No Reruns or Traditional Syndication
(except Reality Show Network)
42
Communications Studies 197C Summer 2004
DVDs -- TV Episodics Releases
Source: Video Store Magazine Market Research 2003
TV Episodics are the latest goldmine for Studios who will be expanding the category for the next few years as they mine their deep TV catalogs.
Top 10 Television DVD Sellers
Rank Title Supplier Index1 Family Guy Vol. 1 Seasons 1 & 2 Fox 1002 Osbournes: Season 1 (Uncensored) BVHE 85.43 Simpsons Season 3 Fox 72.04 Sex and the City: Season 4 HBO 63.15 Friends: Season 3 Warner 51.46 Family Guy Vol. 2: Season 3 Fox 49.37 Buffy the Vampire Slayer: Season 3 Fox 47.88 Band of Brothers HBO 43.19 South Park: Season 1 Warner 37.2
10 Buffy the Vampire Slayer: Season 4 Fox 35.7
43
Communications Studies 197C Summer 2004
Digital Television & High Def (HDTV)
• Rule change in 1997 allowed broadcasters to hold onto their analog channel until 85 percent of Americans have made the DTV transition.
• End of transition• December 31, 2006 or when 85 percent of
U.S. TV households have the capability to receive Digital TV signals (whichever is later)
• Digital Must Carry??
44
Communications Studies 197C Summer 2004
Distribution: Changing the Basic Economics of Television?
•
Broadband: 24% of households
•
Cable 15.9 mm, DSL 10.4 MM 1Q94
•
Cable 60+% of all broadband customers in U.S
•
Voice over IP (VoIP)
•
Video On Demand (VOD)
•
Satellite Surge
•
Cable TV Subs declined 63,000 1Q04
•
DirecTV -- Murdoch took over Dec. 03
•
Europe -- Sky TV
•
Asia -- STAR TV
•
Echostar (Dish+)
•
Tivo / PVRs
45
Communications Studies 197C Summer 2004
Media 2010
• How fragmented?• How much piracy?• How much band to the home? Who controls it?• How much will the consumer be willing to
spend each month?• How do advertisers get their impressions to the
home?• How much band OUTSIDE the home? • How portable does media become? • How personalized?