Television broadcasting industry - Business in United States of America
Definition: Branch of the entertainment industry that consists of organizations primarily engaged in broadcasting video signals that transmit programs to audiences
Significance: During its relatively brief history, the television broadcasting industry has grown from a few experimental networks to become one of the most profitable industries in the United States, producing annual gross revenues of $160 billion during the early twenty-first century. The industry’s versatility and capability to adapt to new technologies has become its greatest growth factor.
The origins of the television broadcast industry are linked to the history of television itself. In 1925, Scottish inventor John Logie Baird broadcast a moving silhouette image. Just two years later, Baird’s company, the Baird Television Development Company, broadcast the first transatlantic television signal, between London and New York.
Bell Laboratories dramatically demonstrated the possibilities of television in 1927, when it transmitted pictures of U.S. Secretary of Commerce Herbert Hoover giving a speech from Washington, D.C., to New York. Bell’s experiment was the first long distance television transmission. That same year, the Columbia Phonographic Broadcasting System (later the Columbia Broadcasting System, or CBS) was founded. One year later, its first television station, W2XBS, was established in New York City, creating television’s first star, Felix the Cat.
In July, 1931, CBS station W2XAB in New York City first began broadcasting regular scheduled programming seven days a week. Don Lee Broadcasting’s station W6XAO in Los Angeles went on the air in December, 1931, with a regular schedule of filmed images every day except Sundays and holidays. The National Broadcasting Company (NBC) began regularly scheduled broadcasts in New York City in April, 1939, with a program dedicated to the opening of the New York World’s Fair.
The Federal Communications Commission (FCC) granted the first commercial television licenses to NBC- and CBS-owned stations in New York in 1941, followed by Philco’s station in Philadelphia, then licensed as WPTZ and later known as KYW-TV. After the U.S. entry into World War II, television stations joined the war effort and included illustrated war news as well as training for air-raid wardens and first-aid providers in their programming. In April of 1942, production of new televisions and other broadcasting equipment for civilian purposes was suspended and did not resume until August of 1945. By 1946, NBC, ABC, and CBS had restored their regular television broadcasts.
After years of experimentation, in 1940, the Radio Corporation of America (RCA) gave the first color television demonstration to members of the FCC board. The first demonstration of color television to the general public was made by CBS in 1950. A musical variety special, shown over a network of five East Coast CBS affiliates, became the world’s first network color broadcast in 1951. However, the number of viewers was extremely limited because few possessed the color receivers necessary to watch the programs.
Since its inception, the television broadcasting industry has had a great influence on politics. During the 1952 U.S. presidential election, the Democratic Party candidate, Adlai Stevenson, bought a half-hour slot, which preempted the broadcast of the popular series I Love Lucy (1951-1957)—a fact that was not well received by the public. By contrast, the Republican candidate, Dwight D. Eisenhower, who used only twenty-second commercial spots, won the election.
Television has also reflected society’s controversies through the decades. For example, in 1956, several Louisiana congressmen promoted a bill to ban all television programs that portray African Americans and whites interacting with one another in a sympathetic manner.
During the 1960’s, when more than 90 percent of American homes had television sets, television became a powerful political tool. During the 1960 presidential election, the debates between candidates John F. Kennedy and Richard M. Nixon were televised. Kennedy appeared to perform much better on television than Nixon, and many believe that the televised debates played a role in Kennedy’s electoral victory.
The 1960’s also were a time when the television broadcasting industry set many new records. Following the news of the assassination of President Kennedy on November 22, 1963, regular television programming was suspended. On the following day, for the first time ever, 96 percent of all American televisions were set on the same program, Kennedy’s funeral. Six years later, on July 20, 1969, the first television transmission from the Moon was seen by 600 million viewers around the world.
The world of television was changed forever with the advent of videocassette recorders (VCRs) during the 1970’s. The first videocassette recorders for home use were launched in 1971, but it was not until Sony’s Betamax (1975) and JVC’s VHS (1976) were launched that videocassette recorders moved into the mass market. Television had been the one medium that forced everybody to watch the same thing at exactly the same moment, but after the arrival of VCRs, viewers could watch whatever they wanted whenever they wanted.
The 1980’s saw the creation of a number of cable networks. The Cable News Network (CNN) was founded by Ted Turner as television’s first twenty four-hour news network in 1980; Music Television (MTV) was launched in 1981; the Weather Channel premiered in 1982; and Rupert Murdoch launched the Fox Network in 1986 as a challenge to the three major networks—NBC, CBS, and ABC.
The 1990’s saw the rise of fast technological developments, including digital technologies such as high-definition television (HDTV), flat panel displays, home theater, and video on demand. Moreover, the rapid growth of the Internet, fast broadband access, and higher powered computers with larger storage capacity have turned Internet television into a reality. Internet television allows content delivery to a huge population with virtually no geographical limitations. Its primary models are streaming Internet television or a choice of videos featured on a Web site.
Television broadcasting is programmed, in that a time and order are assigned to each show to be broadcast. Original or first run describes a program of one or multiple episodes created by a production company and shown for the first time on a station or network that has either paid for the production itself or for a license to broadcast the program. Syndication is the terminology used to describe the sale of the right to broadcast a television show to multiple individual stations. This includes secondary runs in the country of origin, called off-network programming, and international usage. Although it is hard to compete against first-run network programming, it is estimated that stations often capture at least 3 percent of the available audience (a critical figure when it comes to getting advertising) if they run syndicated shows.
Television scheduling strategies are employed to give programs the best possible chance of attracting and retaining an audience. In a strategy called day parting, different types of programming are assigned to different parts of the day. In the strategy called stripping, episodes of the same syndicated series are scheduled Monday through Friday at the same time. Not having to wait an entire week to see the next episode of a series is an attractive option to many viewers. Marathons, in which episodes of a series are run one after the other, are popular on some local stations and on cable and satellite channels. Theming occurs when a station features programs with a specific theme on a particular day or week.
When a station or network schedules a number of programs that have similar demographic appeal to run consecutively, the practice is called stacking. By putting a new or weak show between two popular shows, the number of viewers of the new or weak show is generally increased through what is called the hammock effect. When the weak or new program becomes popular in its own right, it is said to have caught on. Somewhat related is the concept of tent poling, or using popular, well-established television shows scheduled in pivotal time periods to boost the ratings of the shows around them.
Another kind of programming strategy is counterprogramming, or the practice of offering programs to attract a specific audience when another station is airing a major event. For example, if a program appeals to an older audience, a network might want to counterprogram with something that appeals to a younger audience.
Broadcast television is financed by advertising, television licensing, subscription, or any combination of these methods. A television advertisement or commercial is a span of television programming that conveys a message and is produced and paid for by an organization. The first television advertisement was broadcast in the United States in July, 1941, when the Bulova Watch Company paid $9 to NBC affiliate WNBT (later WNBC) in New York City for a twenty-second spot aired before a baseball game between the Brooklyn Dodgers and Philadelphia Phillies.
In the United States, television advertisements are the most effective method of selling products, especially consumer goods. This is reflected by the high prices television networks charge for commercial airtime during popular television events. A thirty-second commercial spot during the 2008 Super Bowl, an event watched by more than 90 million viewers, cost $2.7 million. Television advertising is also such a pervasive vehicle that it is considered impossible for an American politician to wage a successful election campaign without use of television advertising.
Estimated Revenue and Expenses for Television Broadcasting, 2004-2005, in Millions of Dollars
Source: Data from the Statistical Abstract of the United States, 2008 (Washington, D.C.: Department of Commerce, Economics and Statistics Administration, Bureau of the Census, Data User Services Division, 2008)
Television advertisements are regulated by state and national laws designed to protect viewers. For example, since the 1970’s, advertisements featuring cigarettes have been banned from American television. Advertisements for alcoholic beverages are allowed, but these commercials must not show the consumption of any alcoholic beverage.
Advertisement revenue provides a significant portion of the funding for most television networks. In 1977, gross television advertising revenues rose to $7.5 billion, 20 percent of all U.S. advertising. In 2006, net advertising revenues reached $26.5 billion in the United States and $123 billion worldwide. In comparison, the industry’s gross revenues in the United States in 2007 were $160 billion. Television advertising is usually categorized into two levels: local and national. Local advertising makes up roughly 55 percent of all advertising revenue. In 2003, gross local advertising revenue amounted to $13.6 billion and reached $22 billion in 2007. National advertising accounts for approximately 45 percent of advertising revenue. Gross national advertising revenue came to $10.6 billion in 2003 and was estimated at $15 billion in 2007.
Political advertising accounts for more than 6 percent of total gross advertising revenue. In 2004, advertising for congressional, gubernatorial, and local races reached an estimated $1.6 billion. However, automobile makers and dealers provide the largest share of revenue from television advertising, accounting for more than a fourth of all advertising revenue.
Another source of income for the television broadcasting industry is product placement. Product placement occurs when a brand logo is plainly visible or a character makes a favorable mention of a product in a program. It has become more prominent since the mid-1980’s, but this practice can be traced to the 1940’s. In 2007, revenues from product placement were estimated at $300 million.
In some countries, such as Great Britain, Australia, and South Africa, the television broadcasting industry gets most its funding from licenses, which are a form of taxation for television reception. This allows public broadcasting stations to transmit programs without, or with only supplemental, funding from advertisements.
Another method of financing for the television broadcast industry is subscription. Subscription channels are usually encrypted to ensure that only those who pay the subscription can view the channel.
Blumenthal, Howard J., and Oliver R. Goodenough. This Business of Television. New York: Billboard Books, 2006. This guide analyzes the legal, economic, and production aspects of the television industry. It includes directories of associations, governmental agencies, and production and distribution companies.
Hoskins, Colin, and Stuart McFadyen. Global Television and Film: An Introduction to the Economics of the Business. New York: Oxford University Press, 1998. Structured introduction to the economics of the contemporary film and television business.
Lotz, Amanda. The Television Will Be Revolutionized. New York: New York University Press, 2007. Accessible analysis of the technological innovations that are transforming the medium. Includes interviews, surveys, and other firsthand research.
McDowell, Walter S. Broadcast Television: A Complete Guide to the Industry. New York: Peter Lang, 2006. Concise in-depth look at the business of commercial television, explained here as a dynamic and interdependent system of technology, economics, and regulation.
Trost, Scott, and Gail Resnik. All You Need to Know About the Movie and TV Business. New York: Simon & Schuster, 1996. Reference book on practicalities of the film and television industry, but it is for the most part centered on Los Angeles.
See also: advertising industry; Walt Disney; electronics industry; motion-picture industry; Radio broadcasting industry; Intercollegiate sports; Sports franchises; Martha Stewart; telecommunications industry; Television programming with business themes.