CABLE and SATELLITE TELEVISION

1
CABLE and SATELLITE TELEVISION

• What Kind of Alternative?

2
1996-2002 Cable Statistics

• 11,600 Cable TV systems in the U.S., 1996
• Serving 64 mn homes (1996), to 69 mn (2002)
• (DBS 5m in 1996 and 21m in 2002).
• Serving 66 U.S. homes (1996) 85 of TV
  households (2002)
• Passes 97 of all TV households.
• 26 billion revenues.
• 90 of systems owned by 600 MSOs.
• 2 of MS0s serve 42 of all clients.
• Dominant MSOs (1996)TCI, Time Warner (2002)
  ATT Comcast and AOL-Time Warner in 2003. .
• (2003ncta.com/industry_overview/indStats.cfm/indO
  verviewID2)

3
2002

• 76 of all subs to MVPD (multi-channel video
  program distributor) services received
  programming from franchised cable operators
  (78.2001)
• Total MVPD subs 90m 2002 (88m 2001)
• Cable subs 69m 2002 (68.5 2001)
• Non-cable MPVD subs 21m 2002 (19m 2001)
• DBS accounted for 20.3 of all MVPD subs in 2002,
  representing 18m. households

4
Cable Revenues

• Advertising (particularly specialized networks
  targeted to particular demographics).
• Direct payment from subscribers.
• Subscription revenue dominates
• with some channels (e.g. HBO) entirely
  dependent on subscription.

5
The Contribution of Satellite

• Point to multipoint delivery serves many cable
  systems at lower cost
• Provide signal transport to places where
  terrestrial systems are unavailable.
• Promote diversification in program sources
• Also compete with cable by means of DBS
• Satellite construction dominated by Hughes and
  Lockheed Launches dominated by Lockheed and
  Boeing. Delivery of DBS now concentrated between
  DirecTV (sold by GM to NewsCorp, 2003) and
  EchoStar.

6
Content The Basic Tier

• Affiliates of major networks
• Signals of local independents (these now
  stronger as result of cable)
• Imported distant stations
• Super-stations (local signals distributed
  nationally by satellite)
• Local access channels (education,
• government, community sometimes split)
• Text services (news, weather, sports etc.).

7
Content Expanded Basic Tier

• Advertiser-supported networks (e.g. CNN, ESPN,
  MTV, USA Network, BET).
• Shopping Channels (e.g. Home Shopping, QVC).
• C-SPAN 12

8
Content Premium Tier and PPV

• Film channels (e.g. HBO and The Movie Channel
  Showtime and Home Box Office)
• Pay-Per-View (e.g. video on demand for films and
  sports events).
• Audio services.

9
Programming categories

• General entertainment (most watched non-network
  channels) e.g. USA, TNT, TBS.
• News and current affairs e.g. CNN.
• Sports e.g. ESPN.
• Demographics e.g. Nickelodeon, Lifetime.
• Specialty / genre e.g. MTV, Sci-Fi.
• Information and Education e.g. History,
  Discovery
• Improvement, religious, shopping, special
  interest
• Film.

10
Convergence of Cable and Telephony

• POTS will grow only gradually
• Enhanced services (call-waiting, call-forwarding,
  business service etc., wireless and data
  communications).
• Video distribution by cable
• 1996 Telecommunications Act allowed Telco mergers
  with Cable (leading to ATT Broadband takeover of
  MediaOne, but later sold to Comcast).

11
Cable and Network Television

• ABC/NBC/CBS prime time share (of all viewers)
  fell from 90 to 53 in 1979-1995. Network share
  fell below 50 in 2002 ceding to Basic Cable
• Basic Cable share rose from less than 10 to 30
  (and 42 in cable households), to over 50 in
  2002
• But combined prime time ratings of top 20 basic
  cable networks in 1995 was only 22.4, less than
  half the combined ratings for the broadcast
  networks.

12
Expansion of DTH

• 1996 limits on local authority restrictions on
  setting up dishes
• Smaller dishes, with more power and higher
  frequency (C to Ku-band to Ka-band)
• 1999 court permission to DTH services to carry
  local TV signals without payment to broadcasters
• Mass production, lower cost of dishes

13
The Failed Echostar/DirectTV Proposal

• GMs Hughes (owner of DirecTV) sold to EchoStar
  in 2002, pending reg. Approval. Rejected by FCC.
  BUT NewsCorp has now bid successfully for DirecTV
• DirecTVEchoStar combination would have
  controlled 91 of DTH market.
• Would have reached at least 17 mn (10) homes,
  surpassing ATT Broadbands 14m. (but later
  Comcast purchase of ATT Broadband was bigger).
• Presence in 78 of 210 TV markets, with plans to
  serve all
• 42m US homes still without DTH option in 2002
• May have to carry all (1500) local signals
• Would bring broadband to rural U.S.

14
DirecTV and News Corp

• 2003, Murdochs News Corp gets approval to
  purchase a 34 stake in Hughes Electronics.
  Hughes owns DirecTV, for 6bn.
• DirecTV (12 mn subs) now in same stable as Fox
  Network (25 TV stations, 196 affiliates),
  Twentieth Century Fox, ESPN and 19 other cable
  sports channels, and Fox News Cable Channel

15
Implications of merger

• Will News Corp raise prices charged to cable ops
  for Fox programming?
• Murdoch now has strong presence in broadcast,
  cable and satellite TV in U.S. and overseas
• Makes it easier to create new channels (helped by
  fact that Fox affiliates have had to hand over
  their digital channels to Fox)