Basic Networks

The majority of channels on most cable systems are devoted to basic cable networks. These are termed "basic" because the subscriber can obtain a large number of them for a low price. There are over sixty basic networks including:

Arts and Entertainment (A&E)--cultural fiction and non-fiction.

Black Entertainment Television (BET)--talk shows, children's programs, game shows and other fare particularly aimed at people of color.

Bravo--cultural programming.

Cable News Network (CNN)--24 hours a day of news and information.

Consumer News and Business Channel (CNBC)--primarily business news.

Comedy Central--situation comedies, stand-up comedians, comedy movies and similar fare.

Courtroom Television--coverage of cases being tried in the courts.

C-SPAN--coverage of Congress and other political bodies and events.

The Discovery Channel--documentaries and informational programming.

E! Entertainment TV--programming by and about entertainment.

ESPN--24 hour sports programming.

The Family Channel (formerly CBN, the Christian Broadcasting Network)--wholesome programming including reruns of older commercial TV series.

Home Shopping Network--demonstrations of products people can buy by calling the network.

The Learning Channel--formal college credit courses and general education material.

Lifetime Television--information and entertainment shows aimed primarily at women.

MTV--music videos and music-related material aimed at teenagers.

Nickelodeon--children's and family programming.

Nostalgia Television--TV programming from the past, particularly old commercial network series.

QVC Network--a home shopping service.

TNN: Nashville Net--music and other country related programming.

Turner Network TV (TNT)--old movies and some original programming.

Univision--a general Spanish language service.

USA Network--a general service that includes network reruns, children's programs, and originally produced material.

VH-1--primarily music videos for people who are older than teenagers.

The Weather Channel--24 hours a day of weather information.

Most basic cable networks charge the cable systems for their service. The fee is based on the number of subscribers the cable system has. A typical basic network charges a cable system an amount between 3 and 25 cents per month per subscriber, depending on its popularity. ESPN, for example, can charge more than Nostalgia Television.

The systems must recoup their expenses, and potentially garner some profit, by selling the cable TV service to consumer households. Most cable systems offer a "basic service" as a package to their subscribers. This includes all local origination and public access channels, all local broadcast stations, and all basic networks for a cost of about $15 a month. Some cable systems divide this basic package into two or more "tiers." They offer local origination, public access, local broadcast stations, and some of the public service and less glamorous basic networks (C-SPAN, The Learning Channel) for a very inexpensive price, about $5. The second, and more expensive, tier may include MTV, ESPN, USA, A&E, and other more entertainment-oriented basic networks.

Most basic networks sell advertising. As a result they have two sources of income--cable system subscriber fees and fees paid by advertisers. Cable advertising rates are not as high as those for commercial networks such as NBC, ABC, or CBS because audiences are not as large. Most cable networks are delighted if they obtain a rating of 4, whereas commercial network program ratings tend to be in the 11-15 range. One reason cable network audiences are low is that many cable networks program for relatively specific audiences--Lifetime to women, ESPN to sports fans, Nickelodeon to children. These and other program suppliers were created specifically as cable television entities.

Superstations, however, such as WTBS from Atlanta, WOR from Chicago, and WGN from New York, are a special type of basic service. They are not really networks. Rather they are local television stations that have been placed on the satellite for national distribution. The stations themselves do not earn direct money from becoming a superstation. They are placed on the satellite by other companies such as United Video. These companies collect the fees from the cable systems. The superstations make additional money because they can set advertising rates based on a national rather than local audience.

Among the more than 60 basic networks, there is considerable variation in operating procedure. C-SPAN, which features the proceedings of the House and Senate, is non-commercial. All revenue comes from money paid to it by the cable systems. The home shopping networks, which make their money because viewers call in and buy the products shown, are usually provided to cable systems free of charge. As an initial enticement to try its material, networks sometimes pay systems to carry their programming. If the system later decides to carry the network on a regular basis it must start paying the networks.

In addition to "moving picture" networks, other services are offered to cable systems as part of the basic package. These include digital sound services such as Home Music Store and electronic text services such as news bulletins from Associated Press and Reuters.

Some basic channels produce most of their own programming. ESPN, for example, provides its own coverage of sporting events, and CNN produces its own newscasts. The same applies to C-SPAN, Courtroom Television, The Weather Channel, and the home shopping channels. Many networks, however, acquire programming from other sources. Lifetime, The Family Channel, Nickelodeon and others often contract with independent producers to develop movies or series for them. Other channels obtain movies from the major motion picture studios. A and E and Discovery buy some of their programming from the British Broadcasting Corporation. Many channels program old commercial network series. USA Network, for example, has programmed Murder, She Wrote, and Lifetime has used Cagney and Lacey. In a few instances cable networks have picked up commercial series canceled by the major broadcast networks (Paper Chase, The Days and Nights of Molly Dodd), produced new episodes, and aired them as a series.

Pay Networks

Pay cable networks, such as HBO, The Movie Channel, Showtime, Cinemax, and The Disney Channel, do not sell advertising. They derive all income from the cable systems that carry them. The systems, in turn, charge consumers subscription fees for each pay network, usually at a rate of $10 to $20 per month per pay service. In other words, the pay services are on a more expensive tier than basic services. The systems and the networks divide the consumer fee, usually about 50-50, but this ratio is subject to negotiation. Consumers who do not subscribe to the pay services receive scrambled signals on channels occupied by those services. To justify their additional monthly fees, pay channels must offer subscribers programming or services they can not receive for free. Most of these channels present feature films. The networks purchase rights from motion picture studios allowing them to show feature films shortly after their theatrical runs and prior to their availability to broadcast networks. They show the films uncut and without commercial interruptions. To many viewers this programming policy is worth the extra dollars they pay each month. Some pay channels also offer commercial-free specials such as sporting events, documentaries, miniseries, comedy specials, musical concerts, and original movies created for the pay service. Some of the channels, primarily HBO and Showtime, produce their own television series. These programs usually contain language or themes that commercial networks do not present to their larger, general audiences. Some of these original programs are created by network personnel, some by outside production companies.

Pay-per-View Networks

Of all forms of cable networks, pay-per-view networks are the newest, and therefore the most unsettled. With these systems, subscribers pay only for those programs they actually watch. If they have not paid for a particular program, a scrambled signal appears on the pay-per-view channel. The network and the system divide the subscriber fees, based on a negotiated percentage. The subscriber pays what the market will bear. Movies can be seen for a few dollars, while major sports events may have a price tag in the $20 to $50 range.

Most cable systems that offer pay-per-view programming employ addressable technology that allows for interaction. Viewers who want to see a particular program can press a button on a remote control device that sends a signal back through the wire to the cable system. The program is then unscrambled or otherwise made viewable by the consumer. A computer also notes that the subscriber should be billed for the program and this amount is added to the monthly amount the subscriber must pay. Systems without addressable technology can operate pay-per-view options by having subscribers call an 800 number to order a particular program, but the instant access provided by the remote control works better.

The two main pay-per-view services, Request Television and Viewer's Choice, program twenty-four hours a day. Their staple programming is newly released hit movies, but they also present sports and entertainment specials. Both these services provide multiple channels that repeatedly run the same movie (or the same ten or fifteen movies). The fundamental plan of pay-per-view television is to compete with the video rental business. Pay-per-view services want to enable viewers to see movies at their convenience without having to leave their homes.

Playboy at Night cablecasts each evening and is the oldest of the services that are now pay-per-view. Originally a pay cable service, many community groups objected to the "adult entertainment" content of the material. They pointed out that if parents subscribed to The Playboy Channel on a monthly basis, unsupervised children could easily tune in--accidentally or on purpose. As a pay-per-view option, each Playboy program must be specifically requested.

Other pay-per-view networks do not cablecast on a regular basis--they feature special events, primarily sports and concerts. TVKO, for example, programs a boxing event the second Friday of each month. The Wrestling Federation supplies occasional wrestling matches. And Forum Boxing shows events from the Los Angeles Great Western Forum.

Regional Networks

Regional networks that supply programming to a limited geographic area are fairly numerous in the cable world. Almost all of them are sports or news oriented (e.g. Home Team Sports, Prime Ticket, Madison Square Garden Network, and Orange County Now). Sports networks are active only when games are in progress, but most of the news services provide 24 hours a day of regional news information. Some of these news services are operated in conjunction with a local newspaper or local TV station.

Some regional sports networks are considered pay or pay-per-view services even though they contain advertisements. Usually the placement of such sports channels in the "basic" or "pay" category depends on the particular system. Some systems juggle regional sports networks between basic and pay. If the system can obtain greater revenue by offering a pay service, it may do so. If there is little interest among consumers, the network is placed in the basic tier.

 

 

History

The first cable network was Home Box Office (HBO). This service was established in 1972 by Time, Inc. as a movie/special service for Time's local cable system in New York City. The company then decided to expand the service to other cable systems and set up a traditional broadcast-style microwave link to a cable system in Wilkes-Barre, Pennsylvania. In November of 1972, HBO sent its first programming from New York to Wilkes-Barre. During the next several years HBO expanded its microwave system to include about fourteen cable companies The venture was not overly successful, nor was it profitable for Time.

In 1975, however, shortly after domestic satellites were launched, Time used satellite transmission from Manila to program the Muhammad Ali-Joe Frazier heavyweight championship match for two of its U.S. cable systems. The experiment was technically and financially successful and HBO decided to distribute all its programming by satellite. The satellite distribution system was easier and cheaper than the microwave system. It also made it possible for HBO signals to be received throughout the country by any cable system willing and able to buy an earth station satellite receiving dish.

HBO began marketing its service to cable systems nationwide, but initially was not very successful. Few local systems were willing to pay the almost $150,000 required for the technology required to receive the signal. But satellite technology changed quickly, and by 1977 dishes sold for less than $10,000. Other pricing and programming problems had to be overcome as well. But once the service reached consumers, it was readily accepted. Viewers were willing to pay to watch uncut movies without commercial interruptions. By October of 1977, Time was able to announce that HBO had turned its first profit.

Shortly after HBO beamed onto the satellite, Ted Turner, who owned WTBS, a low-rated UHF station in Atlanta, Georgia, decided to put his station's signal on the same satellite as HBO. Cable operators who had installed a receiving dish for HBO could now also place Turner's station, complete with network reruns and the Atlanta Braves baseball games, on one of their channels. This placement created the first superstation. A company transmitting the station charged cable operators ten cents a month per subscriber for the signal, but the systems provided WTBS free to their subscribers. The rationale for presenting the superstation in this manner was that the extra program service would entice more subscribers. The charge to the cable companies did not cover the WTBS's own costs, but the station was now able to set higher advertising rates because its audience was spread over the entire country.

With two successful programming services on the satellite, the floodgates opened and many other companies set up cable networks. Viacom launched a pay-cable service, Showtime, to compete with HBO. Like Time, Viacom owned various cable systems throughout the country and had been feeding them movies and special events through a network that involved shipping the tapes by mail for microwave relay. Following the launching of Showtime, Warner Amex began The Movie Channel, a pay service that provided movies 24 hours a day. Not to be outdone, Time established a second network, Cinemax, a service that consisted mostly of movies programmed at times complementary to HBO. Other pay services that sprung up were Galavision, a Spanish-language movie service; Spotlight, a Times-Mirror movie service; Bravo and The Entertainment Channel, both cultural programming services; and Playboy, an adult service that entered the cable business by joining forces with an already established network, Escapade.

Services that accepted commercials (later to be known as basic services) also exploded in number. ESPN was an early entry, and its sports programming was much in demand. Other basic services that appeared by the early 1980s were CNN (also owned by Turner), the Christian Broadcasting Network (CBN), USA, MTV, and C-SPAN. Two basic cultural services were formed. One, owned by ABC, was called ARTS. The other was CBS Cable, a service very expensive for its broadcast network owner because it featured a great deal of originally-produced material. Satellite News Channel (SNC), a twenty-four hour news joint venture between Westinghouse and ABC was established to compete with CNN. Daytime was a service geared toward women, and Cable Health Network programmed material dealing with physical and mental health. The number of superstations also grew as WGN in Chicago and WWOR in New York joined WTBS.

For several years in the early 1980s, both new pay and basic networks were announced at a rapid rate--sometimes several in one day. Some of these never materialized, some existed only for short periods, but many showed signs of longevity. The entire cable TV industry was growing. Revenues and profits increased over 100% a year.

Of course, this could not last forever. In the mid-1980's cable growth began to decline and the entire cable industry went through a period of retrenchment. Many cable networks consolidated or went out of business. Both Galavision and Bravo converted from pay services to basic services. Spotlight went out of business. The Entertainment Channel turned its pay programming over to the basic network ARTS, which then became Arts and Entertainment. The Playboy Channel shifted programming between hard-core and soft pornography, caught between angry citizens who objected to televised nudity and a small but loyal group of viewers who wanted access to it. This shifting strategy angered its partner, Escapade, and the two parted company with Playboy paying Escapade $3 million dollars. MTV's ownership changed from Warner-Amex to Viacom, as did Nickelodeon's. Getty Oil, which owned ESPN, was purchased by Texaco. The new owner had no interest in the sports network and sold it to ABC. CBN changed from a strictly religious format to a broader, family-oriented format, and became The Family Channel. Daytime and Cable Health Network joined to form Lifetime.

The most highly touted failure was that of the CBS-owned cultural channel, CBS Cable, which ended programming in 1983 after losing $50 million. The service did not receive sufficient financial support from either subscribers or advertisers. Its demise was almost applauded by some cable companies who resented the encroachment of the broadcast networks into their business. Another well-publicized coup occurred when Ted Turner's Cable News Network bought out the Westinghouse/ABC Satellite News Channel. This meant less competition for CNN, which proceeded on less tenuous financial footing. The Turner organization then established CNN2, a headline service that used the same writers and reporters as the original CNN.

Very few new cable networks were introduced in the mid to late 1980s, in part because many cable systems had filled all their channels and had no room for newcomers. One notable exception was The Discovery Channel, launched in 1985, which became quite successful.

The cable network landscape changed somewhat in the 1990s. The downsizing of the late 1980s allowed for moderate growth in the next decade. In addition, in 1992, Congress passed a bill requiring cable networks to sell their programming to services in competition with cable, such as direct broadcast satellite (DBS) and multichannel multipoint distribution services (MMDS). Prior to this time, cable systems had tried to keep cable network programming to themselves. In fact, many cable system owners also owned all or part of cable networks, making it convenient and financially rewarding to make sure their cable networks provided content for their own cable systems. For example, TCI (Telecommunications, Inc.), the largest cable system owner, had a financial stake in American Movie Classics, Black Entertainment Television, CNN, The Discovery Channel, The Family Channel, QVC Home Shopping, Turner Network TV, and WTBS.

Probably the greatest threats to the cable system structure (but not necessarily the cable networks) are Congressional actions of the 1990s that have opened the door for telephone companies to enter the cable TV business. Phone companies hope to become the "one wire into the home." If this happens, cable systems will suffer, or perhaps disappear. But the phone companies will have to turn somewhere for programming, no doubt to entities that closely resemble the present cable networks.

Technology also improved in the 1990s, and the prospect of digital signals delivered over fiber optic lines meant cable systems (or phone companies) would be able to deliver more than 500 channels to the home. All these channels would need programming.

With new markets and new technologies in mind, a number of companies launched new networks. NBC started Consumer News and Business Channel (CNBC) in 1991, and was followed by Courtroom TV and two new Turner services, TNT (Turner Network Television) and the Cartoon Channel. Several comedy channels started and eventually merged into Comedy Central. A science fiction network, a game show network, a history network, and many others appeared.

The proposed change in programming most likely to affect cable networks is video-on-demand (VOD). This type of distribution allows consumers to select and view a program or movie at any time. Now in the experimental stage, this process will probably involve a system that can receive and store an entire movie in a device in or on the TV set and play it from there at the viewer's convenience. Closer to reality is near-video-on demand (NVOD). A cable system with 500 channels could easily devote twelve channels to one two-hour movie and start the movie on a different channel every ten minutes. In this way any viewer could have the movie within ten minutes of when he or she wanted it. Twenty or thirty movies could be running this way at the same time. The present pay-per-view services engage in a limited version of near-video-on-demand, but true VOD might very well change the nature of both pay and pay-per-view services.

These changes in both technology and policy will continue to keep cable television services at the center of issues surrounding television. Just as early cable networks transformed the meaning and experience of television programming and viewing, the newer practices will undoubtedly continue to alter our understanding and use of the medium.

-Lynn Schafer Gross

Cable networks are programming services that deliver packages of information or entertainment by satellite to local cable television systems. The cable systems then redistribute the network programs, through wires, to individual residences in their local franchise areas. The number of cable networks carried by any particular cable system varies, and is based on the channel capacity of the system. Older cable systems may have as few as twenty channels while newer ones may have more than 150 channels. Cable system managers decide which cable networks will be carried. Their decisions are based on analyses of the requirements of their franchise agreement with the local community they serve, on their own economic needs and abilities, and on local audience needs and wishes. Cable networks can be divided into three major types: basic, pay, and pay-per-view.