When we first got cable in the late 70’s I marveled at HBO. They provided interesting programming with no ads and you paid a premium for it. The fact that it thrives today is a testament to the model. People dislike ads and will pony up cash if the programming is worth it.
So it dawned on me, why doesn’t ABC/CBS/NBC rid themselves of the “advertiser” apron-strings and go the way of HBO. Each network has a set of shows with hardcore followers; do the networks think the transition is impossible, or is it a simple matter of “it ain’t broken - don’t fix it”? I would think eliminating the entire advertiser seeking wing of the business would save them untold amounts of expense.
I can’t imagine cable providers balking at the transition. A channel is a channel.
Anyone out there a network person who could shed light on this?
The broadcast spectrum is considered to be owned by the public not by the networks. So they’re required to offer free broadcasts to the public as part of the agreement when they are granted the use of a portion of the spectrum.
ABC, CBS, and NBC are all broadcast channels. They are required to make their programming available to the public, they’d lose the right to broadcast if they didn’t (and probably pay a ton of fines). While it’s technically possible that they could ditch broadcasting and try to move to a ‘premium channel’ model, it would require them to completely overhaul their identity and business model. A good chunk of their audience is people who watch them without cable, and they’d have to simply ditch them. They also present themselves as better than ‘just another cable channel’, but they’d become just another cable channel if they ditched broadcasting.
And the biggest thing is that all of the broadcast channels MAKE money off of advertising, if they didn’t they wouldn’t have a way to be in business, so it’s not like they’re sitting around looking for a way to unshackle themselves from the cash cow. The ‘advertising seeking wing’ of the business is the piece that actually produces profits, not an expense!
In one sense all the broadcast transmission costs could be considered another expense that could be jettisoned.
But it’s way more complicated than that. The networks have extensive and complex financial ties to local broadcasters. Going to an HBO model might mean the end of local broadcast news, for instance, because many of them couldn’t survive without network programming.
And the local broadcasters are also paying the cable companies for transmission via cable, which they maybe couldn’t afford to do.
I’m not saying it would be impossible to do, but converting from one model to another would be nightmarishly complicated with all kinds of unforeseeable consequences.
Besides, the networks do this by owning cable channels or more precisely the corporations that own the broadcasters also own other channels. If I recall correctly, Disney owns ABC, A&E, the Disney Channel, ESPN, and probably others.
This is the real heart of the matter. The broadcast networks are all parts of larger holding companies that also own cable channels and other media. For the big four:
CBS is a subsidiary of CBS Corporation (formerly Viacom) which also owns cable channels CBS Sports, premium cable channels Showtime and TMC, a number of O&O broadcast stations, and 50% of minor broadcast network The CW.
NBC is wholly owned by NBCUniversal, which is majority owned by Comcast (formerly GE ). NBCU also owns cable channels NBC Sports, Golf Channel, SyFy, USA, CNBC, MSNBC, E!, premium cable channel Bravo, a number of O&O broadcast stations, and minor broadcast network Telemundo.
ABC is wholly owned by Disney, which through their 50% stake in A&E Networks owns cable channels A&E, History Channel, and Lifetime, and through their wholly-owned cable division they own Disney Channel, Freeform (formerly ABC Family), and ESPN. Like the others they also have a number of O&O broadcast stations, plus their minority stake in Hulu.
Fox is wholly owned by Fox Entertainment, which also owns cable channels FX, FXX, Fox News, Nat Geo, Fox Sports, a small number of O&O broadcast stations (largely inherited from the short-lived DuMont Network) and minor broadcast network MyNetworkTV.
[sub](Can you tell I used to have a job where I researched this stuff? It was dull.)[/sub]
Exactly. The broadcast “networks” are just one arm of major media companies that do all sorts of things. If they wanted to create a premium channel they’d create a premium channel. But why would they ditch a money-making advertising billboard? If they were losing money they could just sell the broadcast entity to some other media company who thought they could make it work.
It’s somewhat difficult to figure out how the networks make money, but let’s give it a shot.
Here’s HBO and Netflix (notice these are worldwide totals, not just U.S.) HBO’s revenues were $4.7 billion in 2015.
Meanwhile, here’s CBS. Its advertising revenues alone weremore than $7 billion, and it gets about another $6 billion from other sources, making it nearly three times as large as HBO.
If CBS were to drop the traditional model and go to subscription-based cable, we could project a few things happening:
They would immeidately lose roughly 15% of their potential audience, who don’t have cable or satellite service.
They’d lose their relationship with local (over the air) affiliates, which brings them at least some percentage of viewers
In 1994 some CBS stations changed their affiliation to Fox, forcing CBS to make new affiliations with less popular stations.CBS ratings in those cities dropped,often dramatically, even though all viewers had to do was literally change the channel.
How many hours of new programming does HBO present each week? Compare that just to a network’s news and sports programming. Even counting reruns, probably at least 50% of network entertainment programming (daytime, prime-time and late-night) is new every day.
In other words, the changes would be so profound as to be a complete reinvention.
In short, converting to an HBO-style subscription model would immediately cost the networks viewers, and then cost them again when viewers refuse to pay the $10 (or whatever) per month.
One more point to add: Most cable channels are supported by subscription, not just HBO. Comcast pays $x to Disney for their dozen channels and passes on the cost to you in your cable package. That’s why you pay more for the cable package that has 100 channels instead of just 50.
I don’t know how much this applies to the ABC/CBS broadcast stations specifically, but channels like A&E, Disney, History, Food Network are already a hybrid revenue model between subscription fees and advertising revenue.
This is also worth mentioning. The big three each produce about 20 hours of primetime programming for their network feed every week. (Fox still uses an abbreviated primetime model and puts out far less.) Add in daytime syndication packages, late-night talk shows, morning shows, and network news, and the total goes up to something like 40-50 hours a week of network programming which is made available to affiliates and O&O’s. That volume of product is necessary to earn the network advertising dollars and keep eyeballs on the affiliates so they can get their share of advertising dollars.
Remember, the broadcast networks have a symbiotic relationship with their affiliates. For ratings they rely on primetime and late-night lead-ins from local news and programming, and the network in turn splits their advertising revenue with the affiliates. (Yes, even in the age of DVRs and streaming, lead-ins are still very important.)
HBO airs something like six hours of original programming every week. That means if a broadcast network were to go off the air and become a premium cable channel, without advertisers, and without a built-in lead-in mechanism, they would likely have to dump a huge amount of production apparatus to remain profitable. That’s would result in lot of production companies and a huge chunk of institutional knowledge in LA and New York disappearing overnight. It would cause a lot of harm, with no real purpose, to a huge industry that is otherwise functioning reasonably well.
I question the premise. My family didn’t subscribe to HBO, but as I understand it, in those early days, the primary purpose and selling point of HBO (and its rivals, like Showtime) was movies. They produced little or no original programming, but they offered lots of movies, in those days when your options for seeing movies were very limited. That those movies were uninterrupted by commercials was part of the appeal, but so was the fact that they were shown unedited and uncensored (in those days when the “adult conrtent” in R- or even PG-rated movies would have to be removed for broadcast TV).
This can actually get very complicated, with some (popular) cable channels charging the cable companies for their content, and others (not as popular) paying the cable companies for carriage. In some cases you even have cable channels paying for carriage on one company and charging for content on another simultaneously!
Every few years these contracts expire and the cable companies sometimes drop a channel - or vice versa - to persuade the other party to come back to the negotiating table.
Episodes will still be produced at 22 or 44 minutes, if for no other reason than to make them compliant with syndication on ad-driven independent stations after first-run. So you would trade off fresh and imaginative and well-produced ads, and instead get excruciatingly repetitious and intelligence-insulting network promos in the ad spaces. Personally, I’ll take the ads every time.
I watch a lot of live-stream sports. I’d rather see the ads, than the card saying “commercial break in progress”.
). NBCU also owns cable channels NBC Sports, Golf Channel, SyFy, USA, CNBC, MSNBC, E!, premium cable channel Bravo, a number of O&O broadcast stations, and minor broadcast network Telemundo.