In 1948, cable television became available in the United States for the first time. By 1989, 53 million American households had subscribed to cable television, with 60 percent of all American households having done so by 1992. with According to SNL Kagan data, around 58.4 percent of all American homes subscribed to basic cable television services in 2006. The majority of cable viewers in the United States are middle-class and live in the suburbs; cable television is less frequent in low-income, urban, and rural areas.
The 1940s and 1950s
In 1948, cable television began in Arkansas, Oregon, and Pennsylvania, almost simultaneously, to improve poor reception of over-the-air television signals in mountainous or geographically remote areas “To receive the broadcast signals, community antennas were erected on mountain tops or other high points, and homes were connected to the antenna towers.
Cable operators began to use their abilities to pick up broadcast signals from hundreds of miles away in the late 1950s. These are available to you “The focus of cable’s role began to shift from delivering local broadcast signals to providing new content options as distant feeds became more prevalent.
The 1960s
By 1962, there were around 800 cable systems in operation, serving 850,000 users. Westinghouse, TelePrompTer, and Cox were among the first companies to invest in the company, supplementing the efforts of early entrepreneurs like Bill Daniels, Martin Malarkey, and Jack Kent Cooke.
Local television stations saw the growth of cable as a threat since it allowed them to import distant signals. The Federal Communications Commission (FCC) increased its jurisdiction and set restrictions on cable providers’ capacity to import distant television broadcasts in response to broadcast sector concerns. As a result of these constraints, there was a “freeze effect” on cable system expansion in large areas that lasted into the early 1970s (see below).
The 1970s
The FCC continued its stringent tactics in the early 1970s, implementing regulations that limited cable providers’ ability to offer movies, sporting events, and syndicated programs.
The halt in cable expansion lasted until 1972, when a program of gradual cable deregulation resulted in new constraints on the importation of distant signals, among other things. The stifling of growth had negative financial consequences, particularly in terms of capital access. For several years, funding for cable development and growth was virtually non-existent.
Industry-led efforts at the federal, state, and local levels, on the other hand, have resulted in continuous reductions.
Throughout the decade, there have been a number of limits on cable. These innovations, combined with cable’s pioneering of satellite communications technology, resulted in a significant expansion in consumer services and cable customers.
Home Box Office, the nation’s first pay-TV network, was created in 1972 by Sterling Manhattan Cable’s Charles Dolan and Gerald Levin (HBO). This partnership resulted in the establishment of a nationwide satellite distribution system that utilized a newly approved domestic satellite transmission. Satellites revolutionized the industry, paving the stage for the rapid expansion of program networks.
The second service to make use of the satellite was a local Atlanta television station that largely broadcasted sports and old films. The station, owned by R.E. “Ted Turner, was delivered statewide via satellite to cable systems and was quickly dubbed “WTBS,” the first “superstation.”
By the end of the decade, growth had resumed, and cable had reached roughly 16 million households.
The 1980s
The 1984 Cable Act created a more favorable regulatory environment for the business, resulting in unprecedented investment in cable infrastructure and programming.
The 1984 Act’s deregulation had a significant positive impact on the rapid growth of cable services. The industry spent more than $15 billion on the wiring of America from 1984 to 1992, and billions more on software development. Since World War II, this was the largest private construction project.
The cable sector was able to become a major player in supplying high-quality video entertainment and information to consumers because to satellite distribution and the federal government’s relaxing of cable’s restrictive regulatory structure. Nearly 53 million households had cable by the end of the decade, and cable program networks had grown from 28 in 1980 to 79 in 1989. However, some of this expansion was accompanied by rising consumer costs, causing policymakers to become increasingly concerned.
The 1990s
In response to rising cable prices and other market factors, Congress passed legislation in 1992 that stifled cable growth once more and opened up previously “exclusive cable programming” to other competitive distribution technologies such as “wireless cable” and the emerging direct satellite broadcast (DBS) business.
Despite the 92 Act’s impact, the number of satellite networks continued to explode, owing partly to the alternative concept of targeting programs to a specified audience “a specific target market There were 139 cable programming services operating nationwide by the end of 1995, in addition to numerous regional programming networks. The number of national cable TV networks had increased to 171 by the spring of 1998.
More than 57 percent of all customers received at least 54 channels by that time, up from 47 in 1996. By the end of the decade, about 7 out of 10 television households, or more than 65 million people, had chosen cable.
Cable operators began a massive upgrade of their distribution networks in the later half of the decade, investing $65 billion between 1996 and 2002 to develop greater capacity hybrid fiber optic and coaxial cable networks. These include “On a single line into the home, broadband networks can provide multichannel video, two-way voice, high-speed Internet access, and high definition and advanced digital video services.
Cable providers were able to offer clients high-speed Internet access in the mid-1990s, as well as competitive local telephone and digital cable services later in the decade, thanks to the upgrade to broadband networks.
With the passage of the Telecommunications Act of 1996, the regulatory and public policy landscape for telecommunications services was once again radically altered, resulting in new competition and greater customer choice. It also prompted significant new investment, with AT&T, America’s then-largest telecommunications behemoth, entering the market in 1998 and quitting four years later (see below). Paul Allen, a Microsoft co-founder, began collecting his own stable of cable properties almost around the same time. And America On-Line merged with Time Warner and its cable businesses to form AOL Time Warner, a historic merger.
The cable sector was able to speed the rollout of broadband services thanks to a generally deregulated environment for cable operating and programming firms, giving consumers in urban, suburban, and rural areas additional choices in information, communications, and entertainment services.
and Beyond
With the arrival of the new millennium came fresh hopes and plans for the advancement of advanced services across cable’s broadband networks.
Cable providers began pilot testing video services that could transform the way people watch television as the new millennium began. Video on demand, subscription video on demand, and interactive TV are just a few examples. The industry was treading carefully in these areas since the expense of upgrading customer-premise equipment to make it compatible with these services was enormous, and it necessitated new, vast, and costly business models.
In 2001, partly in reaction to these pressures, AT&T decided to merge its cable systems with those of Comcast Corp., resulting in the creation of the world’s largest cable operator, with more than 22 million subscribers.
Lower-cost digital set-top boxes, which became commonplace in customer homes in the mid-1990s, were successful in facilitating the launch of many new video services. However, more expensive technology would be required for cable to begin delivering innovations such as high definition television services, which are being gradually supplied by off-air broadcast stations as well as cable networks like HBO, Showtime, Discovery, and ESPN.
The findings of a research funded by the Cable & Telecommunications Association for Marketing in 2002 were mainly reflected in the cable landscape by 2002. (CTAM). According to the survey, almost two out of every three households in the United States had access to three cutting-edge communication tools: cable television, cell phones, and personal computers. Digital cable was identified in 18 percent of U.S. television homes, implying a 27 percent overall digital cable penetration among cable users. In terms of data services, the study found that 20% of cable customers with PCs now use high-speed modems.
Cable operators with updated two-way plant have seen a significant increase in revenue “Broadband information. Cable has quickly surpassed other technologies, such as phone companies’ digital subscriber line (DSL) service, as the technology of choice for such services, outperforming them by a factor of two. By the end of the third quarter of 2002, more than 10 million people had signed up for high-speed Internet access via cable modems.
In all of the restricted market locations where cable-based telephone service was available, there was noticeable growth. By the middle of 2002, more than 2 million subscribers had switched to cable for their phone service.
Cable companies are aggressively increasing their digital cable offerings in order to meet rising demand. Around 280 nationally-delivered cable networks were available in 2002, with the number rapidly increasing.
The consumer electronics and cable sectors came to an agreement at the end of 2002 that allowed “one-way digital television sets to be connected directly to cable systems without the requirement for a set-top box.” Digital Cable Ready television sets are the brand name for these new TVs (DCRs). Cable operators supply cable customers with a security device known as a CableCARD that allows them to access encrypted digital programming after the cable operator has given them permission to do so. Discussions to overcome difficulties relating to “Two-way digital television sets were first introduced in 2003 and are still in use today.
In 2003, significant progress was achieved in the implementation of High-Definition Television (HDTV), Video-on-Demand (VOD), digital cable, and other sophisticated services, propelling the digital TV transition forward. With the introduction of Voice over Internet Protocol (VoIP) telephone services by cable, competitive digital phone service gained traction. At the beginning of 2006, cable providers had a total of around 5 million telephone users, which included both VoIP and classic circuit switched telephone consumers.
According to an NCTA assessment of the top ten MSOs, 700 CableCARDs had been installed by September 1, 2004. By mid-November, the total number of CableCARDs had risen to over 5,000. NCTA predicted that number had risen to 100,000 a year later, at the end of 2005.
The results at the conclusion of the third quarter of 2005 show that cable’s new role as a broadband provider has a lot of room for expansion. Cable has spent more than $100 billion on capital projects. Cable’s high-speed Internet service had 24.3 million users at the end of the quarter, while the number of digital cable consumers had increased to 27.6 million.
Cable now serves millions of people with visual entertainment, Internet access, and digital phone service. What started with a few visionary pioneers over half a century ago has resulted in the creation of over 800 programming networks that are watched by over 93 percent of Americans. They also offer fantastic Internet speeds of up to 2 GBPS, with those speeds steadily increasing.
Cable operators have reimagined television, creating programming that follows our customers wherever they go.
It doesn’t matter where you are or what gadget you’re using.
In the previous 20 years, cable operators have invested over $275 billion in infrastructure and supported over 2.9 million employment.
In the 1980s, how much did cable TV cost?
Furthermore, pay television is also competing with a broader range of “basic cable networks” and regional pay sports channels, which are attracting an increasing number of viewers.
“Pay TV is flat to down,” says Tony Cox, president of Showtime, “because to the proliferation of more networks and more alternatives consumers have.” There were just four cable networks when paid television began in the mid-1970s. There are now 69.
Pay-per-view, which can transport movies into the home before they are accessible on pay TV, is also in the future.
As a result, the two major pay television networks are pursuing different tactics to slowing their expansion.
Showtime is pursuing drastic changes in pay TV pricing, while HBO is marketing itself as a “brand name,” expanding increasingly into original programming.
The current troubles of pay television may be traced back to the heady days of the 1980s, when HBO and Showtime waged “exclusivity wars” to win pay TV rights to Hollywood films. The policy, which aimed to set itself apart from the competition by ensuring that the same film did not air on both channels, did not come without a cost.
Over the next seven years, Showtime plans to spend $2.3 billion on movies. Showtime Networks Inc., which is owned by Viacom Inc. and includes Showtime and the Movie Channel, lost money between 1987 and 1989 as a result of these programming costs. It hopes to be moderately profitable this year.
“It’s not a fantastic business even in good times,” admits one senior Showtime executive.
HBO, which is owned by Time Warner Inc. and has yearly revenues of more than $1 billion, has seen its pretax profit margin fluctuate between 9% and 13% in previous years.
However, the two pay television competitors can no longer compete by slamming each other (although Viacom still has a $2.4 billion antitrust lawsuit against Time Warner and HBO ongoing).
HBO and Showtime are attempting to persuade the cable industry that paid television is still feasible in the face of increased competition from upstart cable channels.
HBO and Showtime, for example, are not concerned about their programming. They continue to receive high ratings, frequently outperforming one of the Big Three networks during prime time among pay TV households.
“Hundreds of millions of homes still don’t have HBO,” Fuchs says. ” However, I am not going to obtain that business by making another made-for-TV film. It’s only through slamming into those folks that I’m able to do so.
Showtime and HBO are now working on subscriber retention in addition to increased pounding. Each month, up to 4.5 percent of HBO’s customers unsubscribe, implying that the pay TV channel must replace almost half of its subscriber base on an annual basisratios comparable to the mature magazine industry.
Pay TV CEOs are ready to point the finger at deregulation as the root of their troubles. “The problem with our growth is entirely due to marketing and positioning.” The hike in cable rates has harmed us, according to Cox.
According to Paul Kagan Associates, the average monthly cost of basic cable increased from $8 to $16 between 1980 and 1989. Customers must “buy through the basic package” on most local cable systems before they can purchase their first pay TV channel, which normally costs an extra $10 per month.
According to HBO’s Fuchs, “basic costs have gone up considerably, and that is the primary cause for the pay TV slowdown.”
In certain regions, forcing users to acquire a package of basic channelswhich may include channels they don’t want to watchhas reached absurd levels. Cable consumers in several New York suburbs on Long Island and in Connecticut, for example, must spend $60 per month to get Showtime.
However, according to Robert Klingensmith, head of Paramount Video, the studio’s arm that sells movies to pay television, VCRs have harmed pay television as well. “Because these films are no longer first in the home with home video, customers are saying, ‘I don’t need all of these things.'”
Nonetheless, most cable executives believe that “marketplace mechanics” are impeding pay television, which is why marketing has become the new motto for pay television. In fact, the pay services are having to spend ever-increasing quantities of money just to stay afloat. Pay TV executives point out that this is similar to many mature products, which require companies to budget 15% of sales just to maintain market share.
Part of the reason why pay TV channels rely on marketing is that they have no other option.
According to analyst Gerbrandt, “one of pay TV’s biggest concerns is that the programming can’t be changed because the majority of the expense is long-term production arrangements with the studios.”
“They have no flexibility in that sense,” he argues, “therefore the only thing they can directly control is the product’s marketing.”
HBO will spend $150 million on marketing next year, primarily on advertising and promotion. One-third of money is set aside for buying broadcast network advertisement time for a “image campaign.” HBO has also grown to be one of the country’s largest direct-mail advertisers.
While HBO spends money to promote itself, Showtime is working behind the scenes to modify the way basic and pay TV channels are packaged by local cable operators. “I don’t believe any amount of advertising on behalf of our brand will be enough to solve our industry’s inherent difficulties,” Cox says.
Showtime has suggested a major overhaul of the wholesale license payments it charges local cable companies. Showtime and HBO have traditionally charged local cable systems between $4 and $5 per subscriber. At the retail level, the local system frequently more than doubles that rate.
However, a new concept floated by Showtime in recent weeks would levy a tiny cost to all basic subscribers rather than the $4 to $5 price charged solely to those who pay for the pay channel.
“The assumption is that by lowering the price, Showtime can significantly improve its penetration,” says Mark Riely, a partner at MacDonald Gripo Riely, a New York investment firm.
Most local cable operators have resisted the Showtime proposal so far because it threatens their short-term profit margins. Few local systems, many of which are highly leveraged because to recent ownership changes, can afford to make such a sacrifice in the current economic climate.
Local systems, the bulk of which are controlled by or linked with huge “multiple system operators, or MSOs,” are instead experimenting with their own methods of marketing pay television. United Artist Entertainment, a Denver-based MSO, is now selling pay channel annual subscriptions at certain of its local systems across the country. Customers will receive a discount if they purchase a year’s worth of pay channel service in advance, similar to how periodicals have done for years.
Jerry Maglio, senior vice president of marketing at United Artist Entertainment, says, “When a category matures, it is imperative to come up with marketing innovations.”
HBO and Showtime’s fate is largely in the hands of MSOs and local cable companies, over which they have no control. “The issue is that the pay networks have to promote around the operators, and the operators have never been very effective marketers,” says one studio executive with experience in the pay TV industry.
Pay TV executives also believe that MSOs and local cable systems prefer basic channels to pay channels because MSOs often hold one or more of the basic channels.
Local cable systems really generate more money through basic than they do from pay because basic has considerably greater margins. Basic revenue accounts for roughly 70% of a local system’s revenue, while pay accounts for 30%. In addition, half of off-air pay TV income go to the network, compared to 20% to 25% for basic channels.
HBO and Showtime were commonly used as an incentive to get cable TV in the early to mid-1980s, along with greater reception. CNN, ESPN, USA Network, Discovery Channel, and TNT were either not yet started or couldn’t afford the type of programming that would draw people.
According to Marc Nathanson, president of Los Angeles-based Falcon Cable TV, “when basic channels become more successful and offer better programming, it takes viewers away from both broadcast networks and pay channels.”
HBO and Showtime did not face as much competition from cable five years ago.
Pay-per-view television may be more problematic. For $3 to $5 per viewing, PPV, which is now accessible in 27% of cable TV homes, allows viewers access to blockbuster films several months before they air on pay TV.
According to Riely, “PPV will take over the function that pay TV began with in the 1970s and 1980s: premium exposure of unedited films on television.” Pay TV, he believes, will become more like basic networks in the future, with a greater selection of shows than movies and probably some type of advertising.
HBO has already taken the first steps in this manner. Despite the fact that large Hollywood movies will continue to be the channel’s backbone, Fuchs is pushing the channel towards original programming, high-profile specials, and sports. These shows, particularly comedy specials and boxing fights, are then promoted as “events” and used to entice viewers to subscribe.
“We have to offer more daring programming now,” Fuchs says, referring to adult sitcom “Dream On” and documentary series like “Real Sex.” One lasting benefit of paid television is that it may air programs with violence or nudity that networks and basic cable channels would not touch.
However, few experts believe that sex, violence, and sports will be enough to propel pay television to the same levels of popularity as it was in the 1980s. Furthermore, HBO and Showtime have long-term contracts to purchase Hollywood films, leaving little money for alternative programming.
Analyst Gerbrandt observes, “Nobody put a gun to their heads.”
They each held a gun to the other’s head.