Economics of Cable TV

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Economics of Cable TV

• David G. Loomis
• ECO 235

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Early History

• Started a noncommercial community antenna TV
• As late as 1959, not considered a competitive
  threat to Broadcast TV
• In 1972, FCC required Cable to carry all local
  broadcast channels

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Structure of Industry (3/03)
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Changes over Time
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Market Concentration 2003
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Cable Penetration

• 67 of home passed subscribe to Cable TV (6/02
  FCC Report)
• 97.5 of homes are passed by cable
• 36.4 of homes subscribe to at least one premium
  channel

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Vertical Integration

• Cable Systems own parts of many of the
  programming channels
• American Movie Classics 60 Cablevision
• Discovery Channel 50 Liberty Media, 24.6 Cox
• HBO 100 Time Warner
• Does this make it difficult to enter market?

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Rate Regulation

• 1984 Cable Act removed cable systems from
  municipal rate regulation (rates rose 43 from
  1986 to 1989)
• 1992 Cable Act FCC regulated cable rates
• Telecom Act of 1996 removes rate regulation for
  all but basic tier cable services

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Media industries produce 2 commodities

• Content (TV programs, newspaper articles,
  magazine articles)
• Audiences (access to audiences can be packaged,
  priced and sold to advertisers)

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Competitors

• Satellite Direct TV
• Wireless Cable MMDS
• Videotape and DVDs
• Internet Video?
• Google Video free and pay
• iTunes Video
• Free Video - Disney
• IPTV - RBOCs