Reshaping the American television market

Giving Gil Scott-Heron’s famous late 1960s song title a new twist, Michigan University Communication Studies professor Amanda D. Lotz titled her 2007 book The Television Will Be Revolutionised.

She examines American television in the post-network era: How the market is adapting to the changes brought on by the increasing number of cable and satellite channels since the 80s, the subsequent audience fragmentation, and to the challenges of online distribution.

With her term “post-network era”, Lotz is referring, of course, to the big national US television networks, namely ABC, CBS, NBC, and later on, FOX, which dominated American television since the 1940s. Somewhat ironically, the post-network era can also be described as the era of networked culture and economy, only that the notion of network has acquired a quite different meaning in times of the Internet.

As Lotz lucidly points out, the changes have been triggered by the special dynamic between the programming industry, the advertisers, and technological opportunities. In the early days, i.e., before cable and direct-to-home satellite TV, the few existing broadcast networks were the only ones to deliver huge mainstream audiences.

In order to better capitalise on their programme’s reach, they switched from selling entire shows to single advertisers to the now-familiar model of inserting advertising breaks with a number of different brand commercials in them. Remarkably, this step first liberated programme content from undue influence of business interests: If you want to attract all kinds of different advertisers, you better not display or discuss any specific brand within the actual show.

This model worked fine until cable television started to bloom in the 1980s. While over-the-air broadcast networks are exclusively financed through advertising, cable created the new opportunity to attract subscription revenues. Most US cable channels subsist on a mix of subscription fees from millions of households and advertising revenue, and some of them, i.e., the premium cable channels such as HBO and Showtime, have no commercials at all, but instead charge their subscribers high monthly fees. Actually, in the US, the share of direct consumer payments in financing television has become higher than the advertising industry’s.

This meant that, once again, programme creators became less dependent from advertisers. For the first time in US television history, they could successfully and sustainably launch shows targeted at all sorts of minorities, or shows that were not popular with manufacturers of consumer products. It also helped that cable is not as much in the sights of moral watchdogs as broadcast TV. The series Sex and the City, The Shield and Survivor are prominent examples of the opportunities created by the changed environment. The book provides enlightening case studies on these and other programmes.

Digitalisation of cable since the 1990s has boosted the number and viability of channels even more. Yet, there remain major competitive differences between the individual channel providers. The big TV networks, for instance, can exert leverage on the cable companies, because their legal must-carry status on cable entitles them to a share of the cable companies’ earnings. The networks waive this payment, but in turn negotiate extensive distribution and high monthly fees for their own subsidiary cable channels, such as FX (a FOX company), or ESPN (from ABC). Independent TV providers, on the other hand, frequently struggle to be widely distributed and to receive a viable monthly fee per household they reach.

Thus, the television industry incumbents have so far managed to stabilise their position. In over-the-air broadcast TV, they have compensated part of the declining advertising revenue through the introduction of cheaper programming – often shows first developed on cable. At the same time, they use their good negotiating position, their programme stocks, and their content-related know-how to push their own cable channels and render themselves less dependent from commercials.

The advertising industry, on the other hand, seems to be somewhat slower in its adaptation process to the new environment. Still, it embraces the classic 30-second commercial on broadcast TV, while demanding ever lower prices and more precise audience measurement. Yet, it has also developed new business models in cooperation with television producers. For example, in a turn back to the origins of advertiser-sponsored television, products and brands have been fully integrated into shows such as The Apprentice or American Idol, and advertisers also took the initiative to create their own, now rather less obtrusive, programming.

With online distribution and personal video recorders such as TiVo, the old ways of doing business disintegrated even further and call now for ever more flexible business and advertising models according to the new paradigm of the network economy.

However, as Lotz points out, it is also necessary to discuss the social and societal dimensions of these changes. Audience fragmentation obviously reduces what was formerly a common public sphere, where almost everybody had seen the same things on TV and had access to the same mainstream information sources. And yet, fragmentation of media usage and the subsequent shift in parts of the advertising budget to smaller target groups has contributed to the self-confidence and social acceptation of minorities. In the logic characteristic of the market economy, a group that is recognised as a marked-off target group for advertising and that merits the production of a designated choice of goods automatically gains a higher status in society.

On the other hand, as I have hinted at before, targeted communication has its risks. As Lotz puts it:

“Television offers its viewers access to profound and meaningful narratives – admittedly interspersed among ample uninspired and mind-numbing drivel – but few members of the audience venture outside of their like-reflecting silos of self-interest, which keeps this programming more constitutive of television’s margins than its core. But it is still out there, and brought to us by television.”