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The Development of Cable

Most historians mark the period from the late 1950s, when the networks gained control over TV’s content, to the end of the 1970s as the network era. Except for British and American anthology dramas on PBS, this was a time when the Big Three broadcast networks—CBS, NBC, and ABC—dictated virtually every trend in programming and collectively accounted for more than 95 percent of all prime-time TV viewing. In 2012, however, this figure was less than 40 percent. Why the drastic drop? Because cable television systems—along with VCRs and DVD players—had cut into the broadcast networks’ audience.

CATV—Community Antenna Television

The first small cable systems—called CATV, or community antenna television—originated in the late 1940s in Oregon, Pennsylvania, and New York City, where mountains or tall buildings blocked TV signals. These systems served roughly 10 percent of the country and, because of early technical and regulatory limits, contained only twelve channels. Even at this early stage, though, TV sales personnel, broadcasters, and electronics firms recognized two big advantages of cable. First, by routing and reamplifying each channel in a separate wire, cable eliminated over-the-air interference. Second, running signals through coaxial cable increased channel capacity.

In the beginning, small communities with CATV often received twice as many channels as were available over the air in much larger cities. That technological advantage, combined with cable’s ability to deliver clear reception, would soon propel the new cable industry into competition with conventional broadcast television. But unlike radio, which freed mass communication from unwieldy wires, early cable technology relied on wires.

The Wires and Satellites behind Cable Television

The idea of using space satellites to receive and transmit communication signals is right out of science fiction: In 1945, Arthur C. Clarke (who studied physics and mathematics and would later write dozens of sci-fi books, including 2001: A Space Odyssey) published the original theories for a global communications system based on three satellites equally spaced from one another, rotating with the earth’s orbit. In the mid-1950s, these theories became reality, as the Soviet Union and then the United States successfully sent satellites into orbit around the earth.

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In 1960, AT&T launched Telstar, the first communication satellite capable of receiving, amplifying, and returning signals. Telstar was able to process and relay telephone and occasional television signals between the United States and Europe. By the mid-1960s, scientists had figured out how to lock communication satellites into geosynchronous orbit. Hovering 22,300 miles above the earth, satellites travel at nearly 7,000 mph and circle the earth at the same speed at which the earth revolves on its axis. For cable television, the breakthrough was the launch of domestic communication satellites: Canada’s Anik in 1972 and the United States’ Westar in 1974.

Cable TV signals are processed at a computerized nerve center, or headend, which operates various large satellite dishes that receive and distribute long-distance signals from, say, CNN in Atlanta or ESPN in Connecticut. In addition, the headend’s receiving equipment can pick up an area’s local signals or a nearby city’s PBS station. The headend relays each channel, local network affiliate, or public TV signal along its own separate line. Headend computers relay the channels in the same way that telephone calls and electric power reach individual households: through trunk and feeder cables attached to existing utility poles. Cable companies rent space on these poles from phone and electric companies. Signals are then transmitted to drop or tap lines that run from the utility poles into subscribers’ homes (see Figure 6.1).

Advances in satellite technology in the 1970s dramatically changed the fortunes of cable by creating a reliable system for the distribution of programming to cable companies across the nation. The first cable network to use satellites for regular transmission of TV programming was Home Box Office (HBO), which began delivering programming such as uncut, commercial-free movies and exclusive live coverage of major boxing matches for a monthly fee in 1975. The second cable network began in 1976, when media owner Ted Turner distributed his small Atlanta broadcast TV station, WTBS, to cable systems across the country.

Cable Threatens Broadcasting

While only 14 percent of all U.S. homes received cable in 1977, by 1985 that percentage had climbed to 46. By the summer of 1997, basic cable channels had captured a larger prime-time audience than the broadcast networks had. The cable industry’s rapid rise to prominence was partly due to the shortcomings of broadcast television. Beyond improving signal reception in most communities, the cable era introduced narrowcasting—the providing of specialized programming for diverse and fragmented groups. Attracting both advertisers and audiences, cable programs provide access to certain target audiences that cannot be guaranteed in broadcasting. For example, a golf-equipment manufacturer can buy ads on the Golf Channel and reach only golf enthusiasts. (See “Case Study: ESPN: Sports and Stories” on page 198 for more on narrowcasting.)

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Figure 6.1: FIGURE 6.1A BASIC CABLE TELEVISION SYSTEMData from: Clear Creek Telephone & Television, www.ccmtc.com.

As cable channels have become more and more like specialized magazines or radio formats, they have siphoned off network viewers, and the networks’ role as the chief programmer of our shared culture has eroded. For example, back in 1980, the Big Three evening news programs had a combined audience of more than fifty million on a typical weekday evening. By 2012 and 2013, though, that audience had shrunk to twenty million.2 In addition, through its greater channel capacity, cable has provided more access. In many communities, various public, government, and educational channels have made it possible for anyone to air a point of view or produce a TV program. When it has lived up to its potential, cable has offered the public opportunities to participate more fully in the democratic promise of television.

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Cable Services

Cable consumers usually choose programming from a two-tiered structure: basic cable services like CNN and premium cable services like HBO. These services are the production arm of the cable industry, supplying programming to the nation’s six-thousand-plus cable operations, which function as program distributors to cable households.

Basic Cable Services

A typical basic cable system today includes a hundred-plus channel lineup composed of local broadcast signals; access channels (for local government, education, and general public use); regional PBS stations; and a variety of cable channels, such as ESPN, CNN, MTV, USA, Bravo, Nickelodeon, Disney, Comedy Central, BET, Telemundo, the Weather Channel, superstations (independent TV stations uplinked to a satellite, such as WGN in Chicago), and others, depending on the cable system’s capacity and regional interests. Typically, local cable companies pay each of these satellite-delivered services between a few cents per month per subscriber ($.06 per month per subscriber for low-cost, low-demand channels like C-SPAN) and over $4 per month per subscriber (for high-cost, high-demand channels like ESPN). That fee is passed along to consumers as part of their basic monthly cable rate, which averaged—depending on the study and the location—between $70 and $90 per month by 2014. In addition, cable system capacities continue to increase as a result of high-bandwidth fiber-optic cable and digital cable, allowing for expanded offerings such as premium channels, pay-per-view programs, and video-on-demand.

Premium Cable Services

Besides basic programming, cable offers a wide range of special channels, known as premium channels, which lure customers with the promise of no advertising; recent and classic Hollywood movies; and original movies or series, like HBO’s Game of Thrones, True Detective, or Girls, and Showtime’s Homeland, Masters of Sex, or Penny Dreadful. These channels are a major source of revenue for cable companies: The cost to them is $4 to $6 per month per subscriber to carry a premium channel, but the cable company can charge customers $10 or more per month and reap a nice profit. Premium services also include pay-per-view (PPV) programs; video-on-demand (VOD); and interactive services that enable consumers to use their televisions to bank, shop, play games, and access the Internet.

Beginning in 1985, cable companies began introducing new viewing options for their customers. Pay-per-view (PPV) channels came first, offering recently released movies or special one-time sporting events to subscribers who paid a designated charge to their cable company, allowing them to view the program. In the early 2000s, cable companies introduced video-on-demand (VOD). This service enables customers to choose among hundreds of titles and watch their selection whenever they want in the same way as a video, pausing and fast-forwarding when desired. Along with online downloading and streaming services and digital video recorders (DVRs), VOD services today are ending the era of the local video store.

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“FAKE NEWS” SHOWS like The Nightly Show and Last Week Tonight are available on the basic cable channel Comedy Central and the premium channel HBO, respectively. While their audiences are not as large as those of other basic cable news shows like The O’Reilly Factor, critics argue that the satiric shows have become a major source of news for the eighteen- to thirty-four-year-old age group because of their satire and sharp-witted lampoon of politics and the news media.

Stephen Lovekin/Getty Images for Comedy Central

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CASE STUDY

ESPN: Sports and Stories

A common way many of us satisfy our cultural and personal need for storytelling is through sports: We form loyalties to local and national teams. We follow the exploits of favorite players. We boo our team’s rivals. We suffer with our team when the players have a bad game or an awful season. We celebrate the victories.

The appeal of sports is similar to the appeal of our favorite books, TV shows, and movies—we are interested in characters, in plot development, in conflict and drama. Sporting events have all of this. The NBA finals in 2015 drew the largest audiences in years—mostly because of an intriguing story line. The Golden State Warriors (who did win) had not reached the finals in forty years and had the league’s MVP in Stephan Curry—arguably the best shooter in the history of the NBA. The Cleveland Cavaliers, on the other hand, reached the finals on the back of star player LeBron James, who had left the Miami Heat (where he won two championships) to try to bring victory to his hometown Cavs—who have never won a championship.

One of the best sports stories on television over the past thirty years, though, may be not a single sporting event but the tale of an upstart cable network based in Bristol, Connecticut. ESPN (Entertainment Sports Programming Network) began in 1979 and has now surpassed all the major broadcast networks as the “brand” that frames and presents sports on TV. In fact, cable operators around the country regard ESPN as the top service when it comes to helping them “gain and retain customers.”1 One of ESPN’s main attractions is its “live” aspect and its ability to draw large TV and cable audiences—many of them young men—to events in real time. In a third-screen world full of mobile devices, this is a big plus for ESPN and something that advertisers especially like.

Today, the ESPN flagship channel reaches more than 100 million U.S. homes. And ESPN, Inc., now provides a sports smorgasbord—a menu of media offerings that includes ESPN2 (sporting events, news, and original programs), ESPN Classic (historic sporting events), ESPN Deportes (Spanish-language sports network), ESPN HD (high-definition channel), ESPNEWS (twenty-four-hour sports news channel), ESPNU (college games), ESPN Radio, and ESPN Outdoors. ESPN also creates original programming for TV and radio and operates ESPN.com, which is among the most popular sites on the Internet. ESPN makes its various channels available in more than two hundred countries.

Each year, ESPN’s channels air more than five thousand live and original hours of sports programming, covering more than sixty-five different sports. In 2002, ESPN even outbid NBC for six years of NBA games—offering $2.4 billion, which at the time was just over a year’s worth of ESPN revenues. ESPN’s major triumph was probably wrestling the Monday Night Football contract away from its sports partner, ABC (both ESPN and ABC are owned by Disney). For eight years, starting in 2006, ESPN agreed to pay the NFL $1.1 billion a year for the broadcasting rights to MNF, the most highly rated sports series in prime-time TV history. In 2006, ABC turned over control of its sports programming division, ABC Sports, to ESPN, which now carries games on ABC under the ESPN logo.

The story of ESPN’s birth also has its share of drama. The creator of ESPN was Bill Rasmussen, an out-of-work sports announcer who had been fired in 1978 by the New England Whalers (now the Carolina Hurricanes), a professional hockey team. Rasmussen wanted to bring sports programs to cable TV, which was just emerging from the shadow of broadcast television. But few backers thought this would be a good idea. Eventually, Rasmussen managed to land a contract with the NCAA to cover college games. He also lured Anheuser-Busch to become cable’s first million-dollar advertiser. Getty Oil then agreed to put up $10 million to finance this sports adventure, and ESPN took off.

Today, ESPN is 80 percent owned by the Disney Company, while the Hearst Corporation holds the other 20 percent interest. The sports giant earned over $14 billion in worldwide revenue in 2013, and ESPN’s cable ad sales and higher subscription fees continue to pad Disney’s revenues.

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Data from: Rani Molla, “How Much Cable Subscribers Pay Per Channel,” The Numbers (Wall Street Journal Blog), August 5, 2014, http://blogs.wsj.com/numbers/how-much-cable-subscribers-pay-per-channel-1626/

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DBS: Cable without Wires

By 1999, cable penetration had hit 70 percent. But direct broadcast satellite (DBS) services presented a big challenge to cable—especially in regions with rugged terrain and isolated homes, where the installation of cable wiring hasn’t always been possible or profitable. Instead of using wires, DBS transmits its signal directly to small satellite dishes near or on customers’ homes. As a result, cable penetration dropped to 44 percent by 2012. In addition, new over-the-air digital signals and better online options meant that many customers began moving away from either cable or DBS subscriptions.

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THE WALKING DEAD, AMC’s hit drama about a zombie apocalypse, has consistently set records for highest Nielsen ratings of a cable series. It also attracts positive buzz and pay-channel subscribers.

Gene Page/© AMC/Everett Collection

Satellite service began in the mid-1970s, when satellite dishes were set up to receive cable programming. Small-town and rural residents bypassed FCC restrictions by buying receiving dishes and downlinking, for free, the same channels that cable companies were supplying to wired communities. Not surprisingly, satellite programmers filed a flurry of legal challenges against those who were receiving their signals for free. Rural communities countered that they had the rights to the airspace above their own property; the satellite firms contended that their signals were being stolen. Because the law was unclear, a number of cable channels began scrambling their signals, and most satellite users had to buy or rent descramblers and subscribe to services, just as cable customers did.

Signal scrambling spawned companies that provided both receiving dishes and satellite program services for a monthly fee. In 1978, Japanese companies, which had been experimenting with “wireless cable” alternatives for years, started the first DBS system in Florida. By 1994, full-scale DBS service was available. Today, DBS companies like DirecTV and Dish (formerly the Dish Network) offer consumers most of the channels and tiers of service that cable companies carry (including Internet, television, and phone services) at a comparable and often cheaper monthly cost.

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