6' Economics of Electronic Media

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6. Economics of Electronic Media

• 6.1 Economics of Broadcast TV
• 6.2 Economics of Cable TV

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6.1 Economics of Broadcast TV

• Broadcast TV market structure
• Financial performance
• Globalization
• Public interest and society

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Top 20 TV Networks in the U.S.

• NBC
• QVC
• CBS
• ABC
• ESPN
• Fox
• HBO
• HSN
• TNT
• Nick

• 11. Showtime
• 12. USA
• 13. MTV
• 14. CNN
• 15. Disney
• 16. TBS
• 17. Lifetime
• 18. Discovery
• 19. The WB
• 20. Starz!

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The Hong Kong Broadcast TV Market

• Hong Kong Broadcasting Authority (BA)
• Issues broadcast licenses and penalties
  (equivalent to FCC in the U.S.)
• Television and Entertainment Licensing Authority
  (TELA)
• Monitor TV and radio broadcasting to secure
  proper standards

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The Hong Kong Broadcast TV Market

• Television Broadcasts Limited (TVB)
• Founded in 1967 with a staff of 200
• First over-the-air commercial TV station (????)
• Now the largest commercial Chinese program
  producer worldwide, with a staff of 4,500
• Two free-to-air channels TVB Jade (Cantonese),
  TVB Pearl (English and foreign languages)
• 12 pay-tv channels
• HD Jade
• Foreign markets

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The Hong Kong Broadcast TV Market

• Asia Television Ltd (ATV)
• Hong Kongs first TV station (subscription based,
  wired)
• Was first known as RTV (Rediffusion) in 1957, and
  renamed as ATV in 1982
• Gained access to Pearl River Delta area in 2002
• Recently renewed its broadcasting license for 12
  years
• Required to have bilingual subtitles on news and
  educational programming
• Required to provide more cultural and art shows
• 8 channels
• 2 broadcast Home (Cantonese), World (English)
• 1 satellite (ATV Home America)
• 5 Digital channels

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The Broadcast TV Market

• Television is a business
• Always an oligopoly
• Barriers to entry are high
• Compete with premium services such as cable TV

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Consolidation in the U.S.

• ABC is owned by Disney
• CBS and UPN by Viacom
• Fox by News Corporation
• NBC by General Electric (GE)
• WB by AOL-Time Warner

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Financial Performance

• Basic business model advertising-driven
• Cyclical events Presidential campaigns, Olympics
• Dual markets
• The first and most serious mistake that an
  analyst of the television industry can make is to
  assume that advertising-supported television
  broadcasters are in business to produce programs.
  They are not. Broadcasters are in the business of
  producing audiences. These audiences, or means of
  access to them, are sold to advertisers.

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Advertising

• The cost of advertising is based on actual
  audience size, which is measured by Nielsen Media
  Research
• Rating points 1 point equals to 1 of the total
  number of households in a nation.
• Share percentage of TV sets in use tuned to the
  program.
• The average price for a 30-second commercial
  ranges from 12,871 to 455,700 (much more during
  special events)
• Super Sunday (1, 2, 3, )
• Prices are higher in the early evening and lower
  on Friday and Saturday nights

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Threats to Current Business Model

• New technologies
• Video-on-demand
• TiVo
• Reactions
• Product placement
• Sponsorship
• Direct sales of merchandise related to popular
  programs
• Internet videos

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Globalization

• The global market for TV programs is comparable
  to theatrical movies
• Situation comedies do no do as well as
  action-adventure dramas

13
Public Interest and Society

• Indecent content (7 dirty words)
• Sensational content
• Program diversity
• Ratings vs. journalism

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Public Broadcast

• Radio Television Hong Kong (RTHK)
• 1948 (RHK), then in 1976 changed to RTHK
• An independent government department under BA
• Operates 7 radio stations, and produces
  television programs that are then broadcast
  through local TV stations.
• RTHK vs. BBC NHK vs. PBS NPR
• All supported by public funding
• But funding sources differ
• RTHK is funded directly by annual government
  allocation
• BBC and NHK are funded via a license fee system
• PBS and NPR are funded through membership
  revenues

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Presentations

• Mobile Advertising

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6.2 Economics of Cable TV

• Market structure
• Financial performance
• Government policies

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The Cable TV Market

• Cable began around 1950 in the U.S.
• Start-up costs are high (construction costs at
  US20,000 a mile) operating costs are low a
  natural monopoly
• Increased consolidation
• Top 10 serve 87 of all cable subscribers in the
  U.S.

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Financial Performance

• Revenues
• Subscription (80)
• Subscription tiers basic/premium/pay-per-view
• Advertising
• Leasing channel access
• Advanced services (e.g., cable modem)
• Expenses
• Infrastructure investment
• Acquiring, distributing, and marketing
  programs/services
• Franchise fees

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Regulations

• Rate regulations
• Must-carry ordinance

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Opportunities and Challenges

• Cable as broadband
• Digital packet-switched communications allow
  video, voice, and data to be sent over the cable
• Promise of interactive television services
• Interact with a TV set
• Interact with TV program content
• Interact with content related to what is on TV

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The HK Cable TV Industry

• HK Cable TV (HKCTV) renamed in 1998 the
  first subscription TV service provider in HK
• Serving 1.7 million viewers, or 95 of the local
  households
• Sales revenues more than HK2,000 million, with a
  profit close to HK300 million
• Price discrimination marketing scheme lower
  prices for public estates residents, and higher
  prices for private housing residents

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Competition in the HK Cable TV Market

• Liberalization of the pay-TV market in 2000
• Major players
• HKCTV
• Now TV (by PCCW)
• TVB Pay Vision
• HK Broadband TV