Cable TV: The Lure of Diversity
A fifth of all viewers--and nearing the real takeoff point
In Boston on most nights through the spring and summer, TV baseball fans can alternate between cheering for their beloved Red Sox on Channel 38 and booing the hated Yankees, playing a different team in a different city, on Channel 11. In New York suburbs, minority audiences or the merely curious can sample Spanish-language interview shows or a Korean variety hour or instruction in yoga. In Castro Valley, Calif., older viewers can tune in a weekly program of panel discussions and entertainment produced by and for senior citizens, sometimes featuring performers in their 80s. And all over the country, movie buffs can see at home such recent films as High Anxiety and Invasion of the Body Snatchers, presented on the tube uncut and uninterrupted by commercials.
Is there such diversity on TV, a medium notorious for the numbing, copycat sameness of so many of its programs? Yes--for those viewers whose sets are hooked up not to antennas that pull TV signals out of the air, but to cables that transmit images and sound over as many as 36 channels in the way that the telephone wires running alongside those cables carry phone calls.
Already cable TV reaches about a fifth of the national television audience: 14.5 million out of roughly 73 million households that have one or more sets. The numbers are growing so rapidly that Young and Rubicam, the ad agency, predicts that almost one of three TV households will be on cable by 1981. Says Vice President William Donnelly: "Thirty percent is the magic number that made regular TV a mass medium and that later made color matter to advertisers." After reaching that point, cable would have a potential for further fast expansion. By industry count, TV cables (made of copper wire wrapped in plastic foam and an outer layer of aluminum) have been strung past just about half of all the TV homes in the U.S. Cable operators could multiply their audience overnight at minimum expense if someone in each of those homes would pick up the phone and order a hookup. Though most viewers ordering cable do so to see late movies or sports events, or simply to get clearer pictures, programmers are putting together ever more innovative packages of shows that cannot be seen on regular TV.
The regulatory climate is turning more favorable for cable operators too, after many years during which the Federal Communications Commission almost strangled the industry's growth by severely restricting the number of signals that cable operators could transmit. The FCC began to ease up in 1972, and last week it took a long further step: the agency's commissioners voted 6 to 1 in favor of a proposal to allow cable operators to pick up signals from as many distant broadcast-TV stations as they wish. Currently, there is in most cities a limit of two--so that a cable operator in Peoria, Ill., say, may show its viewers programs from stations in Chicago and Milwaukee that it thinks may interest them, but no more. If the FCC's proposal is adopted as a formal rule, the cable operator will be able to add programs from stations in Indianapolis, Sioux City, Iowa, and several other points. Moreover, it will not need to get the consent of, or make any payment to, the broadcaster whose signal it picks up, though the cable operator will have to pay small copyright fees to the owner of the program. Broadcasters are sure to make an angry challenge of this aspect of the proposed FCC ruling in Congress. Quite as important as the effect of the proposed ruling is the shift in FCC philosophy that it indicates. The FCC had always been eager to shield local broadcasters from cable competition. But Philip Verveer, director of the FCC cable bureau, now justifies the proposed new ruling with a rhetorical question: "Why interfere with consumer preference?"
Earlier in April, cable operators were partly freed of an obligation to broadcast shows they did not want to carry. The FCC had long required cable stations to provide "public access" air time to just about any group that put together a show. Though some of the programs perform a real public service (consumer-advice shows, for example), many are excruciatingly dull (talk shows on which people-in-the-street rattle on about nothing in particular) and a few border on pornography (nude dancing on Midnight Blue over Manhattan's Channel J).
The Supreme Court struck down the public-access obligation on a federal level in early April. Local authorities can still compel cable operators to make available public-access air time, and cable companies cannot legally remove the raunchier shows. Still, the Supreme Court ruling gave cable operators somewhat more authority to choose from among programs that they think will actually arouse some interest.
All this growth and change, reports TIME Correspondent Mary Cronin, is symptomatic of a major development in U.S. television: cable is at last taking off. After several false starts, it is poised for the rapid, nationwide expansion that regular television achieved three decades ago. As Russell Karp, president and chief operating officer of Teleprompter Inc., the biggest cable-system operator, told Cronin: "We are at the point now that network TV was at in 1949."
The analogy is both apt and ironic.
In 1949, broadcast TV was only beginning to reach a large audience, and newspapers were just starting to carry listings of the times when Comedian Milton Berle and Wrestler Gorgeous George would be performing on the tube--just as newspapers and weekly TV magazines are now starting to list cable offerings. Also, though there is much dispute when cable started, 1949 may have been the year of its birth. One version is that Robert J. Tarlton, owner of a radio and TV repair shop in Lansford, Pa., could sell few TV sets because a mountain outside town blocked signals coming in from Philadelphia, 65 miles away.
Tarlton organized viewers into the Panther Valley Television Co., whose members chipped in to build an antenna on the mountain and string cables from it into their homes. Thus a name that cable still goes by: CATV, for Community Antenna Television.
CATV quickly caught on in other communities where reception was poor. Antenna builders soon noticed that if they made the towers tall enough, they could pull in signals from distant as well as nearby stations, thereby offering viewers greater variety as well as clearer pictures. But the road from Panther Valley to national prominence was long blocked by the FCC. Not until the 1970s did two events combine to broaden the cable audience dramatically: the FCC's first steps toward deregulation and, more important, the coming of satellite transmission. Since 1975, cable programmers (Home Box Office, a subsidiary of Time Inc., was the first) have been bouncing signals off an RCA communications satellite, Satcom 1, which hovers 22,300 miles above the equator. That makes it easy for programmers to send signals from a single studio via satellite and earth stations into cable systems all over the country. It also enables cable operators to add sophisticated national programming on pay-cable channels to their once heavily local basic-cable offerings.
Since satellite programming began, the industry has expanded with a rush. As recently as 1974-75, Teleprompter was losing money, and some other cable operators were also in financial trouble; they had borrowed heavily to expand after the FCC loosened regulations but got squeezed by high interest rates. Now the industry is bringing in $1.4 billion in revenue a year and posting profits high enough to catch the eye of multinational giants. General Electric has bought into a cable operator and Getty Oil into a programming company. RCA plans this December to send up another Satcom satellite that will carry more cable programs, even though some of the cable operators might take viewers away from the NBC network, which RCA owns.
What does all this mean to the viewer? Generally, programming of greater diversity and sophistication than can be seen on network TV. What exactly the viewer sees, however, varies with the type of cable service offered in a new subscriber's neighborhood, and also with his or her choice. Essentially, there are two kinds of hookups:
P: Basic cable. For a one-time fee averaging $15, the cable company that has the franchise for the subscriber's area will run a wire from the nearest telephone pole into the house and attach it to the back of the TV set, much as the Bell System installs a new phone. For a monthly fee averaging $7, the viewer can watch up to 36 channels, vs. a maximum of twelve on a set wired to a rooftop antenna. The cable brings in sharp, clear pictures and often enables a viewer to pick up out-of-the-area stations that may show on, say, Wednesday night a movie he missed on the local outlets on Tuesday.
The basic-cable viewer can also tune in a clutch of UHF channels featuring the offerings of stations whose signals are too weak to be picked up ordinarily by antenna. These programs make up a bewildering smorgasbord: sports events (Madison Square Garden, for example, offers to basic cable many basketball and hockey games and boxing matches not shown on broadcast TV), educational, and religious shows. All channels viewable on basic cable can carry advertising.
Another source of programming for basic cable is the superstations--independent broadcast-TV stations that also lease space on Satcom, whose signals bounce to the earth stations of cable systems all over the country. At present there are four: WTCG in Atlanta, WOR in New York, WON in Chicago and KTVU in the San Francisco-Oakland area. They and their cable customers should benefit especially from the FCC'S proposal last week that cable operators be permitted to pick up as many signals as they like from anywhere, and a companion proposal that cable companies be permitted to air shows even if the same programs are being carried by local broadcasters.
The superstations' offerings to cable now consist largely of sports events and reruns of once popular network shows. But Ted Turner, the flamboyant yachtsman and owner of WTCG, promised last week to introduce some more appealing programs: original children's shows, reruns of highly rated public-broadcasting programs (e.g., The Ascent of Man) that may not have been seen in some areas that cable now reaches. Superstations, however, are running into furious opposition from conventional broadcasters and their allies in the sports and entertainment worlds. MCA-Universal and Paramount are balking at selling any of their TV shows to Turner's Atlanta station, and the Los Angeles Dodgers are threatening to withdraw broadcast rights from KTTV if that Los Angeles station also goes on the satellite.
P: Pay cable. For an additional $8 to $10 a month, a subscriber gets a decoder box. It unscrambles pictures transmitted over a special channel by a for-cable-only programming company that sells its service to the local cable operator. Main offerings: recent movies, some of the quality of Annie Hall, The Turning Point and The Goodbye Girl, often shown just after they have finished running in local theaters; sports events (e.g., a U.S.-Soviet track meet not carried on regular TV or even basic cable); and entertainment specials, often Las Vegas-type revues built around a single star such as Barry Manilow, Steve Martin or Crystal Gayle.
No advertising is seen on pay cable, so all shows run without interruption. Consequently they are not tailored to arbitrary time slots; if a movie runs 2 hr. 16 min., so be it. Also, the shows are presented unedited: an R-rated movie contains the scenes that regular TV censors out, if it ever gets to the networks. Watchers of a 2 1/2-hr. Bette Midler special over Home Box Office channels as long ago as June 1976, for example, heard the raunchy language that convulses her nightclub fans but that was greatly toned down in a network TV special aired over NBC in early 1978. Much of the excitement and the growth are in pay cable, which has rocketed from 978,000 subscribers at the end of 1976 to 3.8 million today.
In some areas, viewers have a third choice: subscription TV. A subscription operator subleases a UHF channel and sends signals through the air that are picked up by a rooftop antenna and unscrambled by a decoder box. The viewer pays a $25 installation charge and then puts up between $16 and $18 a month for a package of movies and ball games.
Subscription TV of course, is not cable at all, since it sends signals through the air. For the viewer, the main difference between this and pay cable is that subscription offerings are far more limited, since the service is only beginning in a few areas. Paul Kagan, publisher of several newsletters on non-network TV, believes that subscription TV could become important, largely because new companies can get into it quickly; they do not have to buy a franchise or string cable.
How fast cable continues to grow will depend heavily on how fast and well programming is broadened. Though the range of programs that can be seen at some time or other is wide, most viewing hours are now filled by movies, and not always recent or absorbing ones; such forgettable flicks as The Choirboys and Ace High abound. Production of more original shows was long held back because cable companies lacked the money to bid for talent. Even now they cannot move ahead full speed because there is a dispute over the take. The Directors' Guild is negotiating with Home Box Office, seeking a portion of HBO's revenues for original shows on pay cable.
When that problem is resolved, cable programmers will have a big advantage: they will be able to offer an audience to producers, writers and directors who find network TV's incessant search for the broadest common denominator of popular taste dulling to creativity. Says Teleprompter's Karp: "I look for the time when suppliers will come to us and say, 'We have this new idea and we think it will attract 4 million homes. We can't sell it to ABC because they need 20 million homes, but it is perfect for you people.' "
Monroe Rifkin, chairman and president of American Television and Communications Corp. (A.T.C.), a subsidiary of Time Inc. and the second biggest cable operator after Teleprompter, believes that the future of cable TV lies in multi-tiered programming--"everything from artsy-craftsy services for the highbrows to macho-violent shows for the lowbrows."
Cable operators and programmers are developing some intriguing program ideas. Jerrold Electronics and Mattel, the toymaker, are putting together a package of games and educational courses, called Play Cable, that the viewer can participate in by using a Jerrold home minicomputer (price: $400). The package includes gambling games and a football game for armchair quarterbacks.
Warner Cable Corp. is testing in Columbus a "two-way" cable system that enables viewers to talk back to their sets by pressing buttons on a hand-held console (price: $10.95). The programs are local news and talk shows on which performers ask questions of the audience. Every seven seconds a master computer scans the 30,000 homes getting the service and tallies how many are pressing a yes and how many a no button; the response totals are flashed on the screen.
Thus, at a town meeting last July, a local planning body took votes on zoning and other questions among citizens watching at home as well as those in the hall. Later, Ralph Nader, visiting Columbus, asked how many watchers would back a petition to change children's advertising (an overwhelming majority pushed the yes button). Advertisers are also making heavy use of the system. Bill Cosby, pitching for Ford Pintos, asks how many viewers want more information on the car; Ford gets a computer printout of hot prospects who voted yes.
The system is very expensive, and rival cable operators doubt that it can be made to pay. But it is already having an impact on cable programming outside Columbus. In March, Warner began selling to cable operators nationwide 13 hours a day of children's programming, approved by Columbus viewers, under the general name Nickelodeon. Sample shows: Pinwheel for preschoolers, featuring puppets, mime and dance; Video Comic Books, showing pages of the Green Lantern and Space Ranger with dialogue balloons, voice-overs and sound effects; and America Goes Bananaz for teenagers, a mix of zany comedy and rap sessions about drugs, birth control, sibling rivalry.
HBO has begun transmitting on a second channel, offering a selection of family programs: G and PG movies rather than the R-rated flicks often seen on the parent service, and a series of quality children's programs. That, says Chairman Gerald Levin, is only the start: "The consumer will be presented with many services from which to choose, each slightly less broad-based, until we get down to a pottery channel."
Anthony Hoffman, cable-TV analyst for Bache, Halsey Stuart Shields Inc., the brokerage house, foresees shows produced by special-interest magazines. "There will be a Popular Mechanics of the Air and a Skiing of the Air," he predicts, and they will reach huge audiences of cultists who rarely read but who watch a lot of TV.
So far, relatively impartial studies indicate that all this poses little threat to the networks. Cable appeals to viewers uninterested or only mildly interested in the networks' sitcoms, cop shows and soap operas. Cable fans tend to be older than the Three's Company-Happy Days buffs; Showtime, HBO's biggest rival in pay-cable programming, aims many of its specials at an audience aged 40 to 45. A 1978 survey by Young & Rubicam and A.C. Nielsen Co. found that people whose sets are hooked to cable have highly "fragmented" viewing habits. They switch a lot from channel to channel rather than keeping their eyes glued to one for hours. But the survey concluded that viewers do not tune out network shows to tune in cable. Rather they watch cable at times that they otherwise would have the set turned off. Ratings for network shows tended to be quite as high in cities where they faced cable competition as in areas that cable has not yet reached. Nor is cable cutting into the flow of network advertising dollars ($4.1 billion last year). Pay cable, of course, makes the absence of commercials one of its main selling points. The advertising on basic cable is heavily local, though a few national advertisers do appear.
Talking publicly, some network executives complain that cable may take away so many viewers and dollars that the networks may not be able to afford their expensive news-gathering operations and may even be outbid in the future for such attractions as the World Series and Super Bowl; viewers who now see them free would then have to pay to watch. Speaking privately, however, other network bosses often boast that their operations so dwarf those of any cable operator that for the moment they can loftily ignore cable. Nonetheless, predicts HBO's Levin, as cable presents better programming, "it will be harder for the networks to aggregate the kind of audiences they are accustomed to." In other words, the hot new network sitcom of, say, 1985 may draw a few million fewer viewers than the 50 million who now watch Mork & Mindy, and the networks may have to charge less for each minute of prime commercial time.
Cable operators do face some serious obstacles to further growth. The cost of wiring major cities, where cables cannot be strung from poles but must be run underground, is extremely high (as much as $100,000 a mile). Partly for that reason, Chicago does not yet have a cable system and Manhattan is the only one of New York City's five boroughs where viewers can watch cable TV.
The high mobility of the U.S. population is a double source of frustration to cable operators. About 2% of cable subscribers disconnect from the service every month; most are people who move and have to be wooed to cable all over again in their new homes. Also, someone moving into the house or apartment of a person who had cable service finds it a relatively simple matter to hook up the wires again and watch cable TV for free; only the most elementary knowledge of electronics is required. The National Cable Television Association estimates that, besides the 14.5 million paid-for sets, 1.5 million other sets are hooked to cable illegally, and their owners' nonpayments cost cable operators $126 million worth of revenues a year--an ironic tribute to cable's popularity.
Thievery aggravates another nagging problem: service. When something goes wrong with a cable-attached set, there may well be a problem determining whether the trouble is in the set, the cable hookup or the decoder box. If the latter two, the cable operator must provide service; some operators are quick in responding to calls, others are not. Thieves tapping ineptly into a cable system can ruin cable reception for everyone on a block.
One dream of cable TV subscribers--the regular transmission of high-quality cultural events such as the operas, ballets and concerts staged at New York's Lincoln Center for the Performing Arts--is still an unfulfilled promise. John W. Mazzola, president of Lincoln Center, professes himself "totally confident that we will be on a pay-cable system in a couple of years," but indications are that Lincoln Center officials are waiting until cable hits the "magic number" of 30% of all TV households reached--which could be in 198 lor later.
For all the problems, the cable industry's leaders are producing a business success story that, if it were a show, would be billed as an extravaganza. The industry has three main branches: cable companies, called MSOs (for multiple-system operators); programming companies; and equipment suppliers. All are booming.
The MSOs bid for franchises from local governments to service a city or town, and in support of their bids line up stations whose programming will be transmitted by cable. The MSO that promises the most interesting programming often gets the franchise.
Teleprompter, the biggest MSO, with 1.2 million subscribers and revenues of $147 million last year, has had a yo-yo history. Founded in 1967 by Cable Visionary Irving Kahn, it expanded furiously by acquisition. Then, in 1971, Kahn went to prison, convicted of bribing officials in Johnstown, Pa., in order to get a franchise. Overexpansion and overborrowing from banks at high interest caught up with the company; in 1973 it lost $31 million. A new management team headed by Karp, a former treasurer of Columbia Pictures, has brought the company solidly back into the black. Last year it earned $14.2 million, up 58% from 1977.
Karp was quick to appreciate the advantages of pay cable. As soon as HBO went on the satellite he bought its service to offer to Teleprompter subscribers. "Before the satellite," he says, "we had to rely on bicycling tapes and film around the country. Suddenly the satellite made possible the idea of buying programming for the entire nation. We could offer new services and look to new sources of income." Teleprompter has invested heavily in earth stations for satellite transmission and now has 80 of them; in January it bought half of Showtime, HBO's rival pay-cable service.
American Television and Communications, the No. 2 MSO, with nearly 1 million subscribers, has been growing continuously since Rifkin put it together in 1968. During the last fiscal year, it increased revenues 34%, to $71 million, and profit 65%, to $10 million. At the end of 1978, Time Inc. completed a buyout of A.T.C. for a total price of $179.6 million. Among other things the acquisition added to A.T.C. the 100,000 subscribers of Manhattan Cable, which Time Inc. had bought earlier. Unlike Teleprompter, which is concentrating largely on adding subscribers in areas where it already operates, A.T.C. is eagerly bidding for new franchises. It is now building or about to build in 15 new areas, including Memphis (250,000 houses reachable by cable), Jacksonville (200,000) and Kansas City (165,000). Says Rifkin: "While it is not necessarily our objective to be No. 1, we think that it is inevitable within two years, considering the numbers and sizes of the systems we are building."
The ranks of the other MSOs are being shaken up by mergers prompted by the industry's growth. General Electric Cable, a subsidiary of GE, is about to acquire Cox Broadcasting for roughly $560 million if shareholders and the FCC approve. The merge would create the third biggest MSO, with 745,000 subscribers. Tele-Communications, Inc. (700,000 subscribers) would be pushed down to fourth, and Warner (620,000 subscribers) to fifth. Times-Mirror Corp., the publisher of the Los Angeles Times, has just bought Communications Properties Inc. for $128 million. Consequently, Times-Mirror has jumped from 26th to sixth biggest MSO (415,000 subscribers).
The programming companies, which put together shows to be seen on pay cable, are divided into two leading national firms, HBO and Showtime, and a bunch of smaller ones serving mostly local audiences. Among them: Prism, Hollywood Home Theater and Cinemerica.
HBO, which was founded in 1972 and leaped audaciously aboard the satellite in 1975, more than doubled its business last year. Its programs now reach 2.4 million subscribers, vs. 1 million at the end of 1977. HBO's sports programming leans largely to documentaries of a sort; for example, an April baseball preview in which American League managers and players discussed the Yankees' chances of whining a fourth straight league pennant. HBO will also spend $13 million on original programming this year. Sample: National Lampoon Presents Disco Beaver from Outer Space, a satirical revue that was shown in February and included skits racier than any seen on regular TV. One was The Breast Game, starring Lynn Redgrave in a parody of TV game shows. An interview show called Upclose went on the air last October; first guests included Woody Allen and John Travolta.
HBO employees read original scripts for movies, with a view toward helping producers finance those that look good. The purpose is to assure a supply of movies for HBO customers. Results of the first few films that have been produced with HBO's help have been mixed: Who Is Killing the Great Chefs of Europe? was a moderate success; Magic and The Bell Jar were panned by many critics, including those writing for Tune Inc. magazines.
Showtime, started and still half-owned by Viacom, a company active in many entertainment fields, has leaped from 92,000 subscribers in 1977 to 675,000 now. Many had watched HBO programs until January, when Teleprompter bought half of Showtime and switched from HBO's service to Showtime's on all Teleprompter cable systems. Showtime does not offer sports; it concentrates on movies and entertainment specials, many for an older audience attuned to country and western music. But it is trying more adventurous approaches too. In March it treated viewers to a peek at the topless chorus girls of the Folies Bergere in Paris (a similar show had been on HBO earlier). Its other offerings have included What's Up, America?, a magazine-type show taking looks at Americana (a honeymoon hotel, an erotic bakery), and specials featuring Lola Falana, Engelbert Humperdinck and Debbie Reynolds.
The manufacturers of hardware for cable TV are enjoying the most astonishing boom of all. Scientific-Atlanta, maker of a broad range of communications equipment, designed its first earth station to receive satellite-transmitted signals in 1974, and by the end of 1975 had not sold one. In 1977 it sold 65; last year 125; this year it expects to sell 1,000. Cable-TV gear accounted for 75% of the company's 1978 sales of $94 million. Jerrold Electronics in January booked three tunes as many orders for decoder boxes and other cable equipment BRIAN R. WOLFF as ft did in the whole fourth quarter last year. Its sales of cable gear have multiplied 4 1/2 times since 1975.
Oak Industries, another maker of decoders, almost tripled its sales of pay-cable equipment last year to $32 million.
Growth might well speed up even further if Washington would strip away its remaining regulations. Cable TV still faces bewilderingly complex rules on the duration of its franchises, how rapidly a company must wire an area after it has swung a franchise, and other matters.
Last week's FCC ruling could spur a move in Congress to deregulate both cable and broadcast TV.
Just about all the elements seem to be in place for a further growth of cable TV dwarfing anything yet seen. Technology is improving: the cost of an earth station to receive satellite signals is down from $100,000 in 1975 to as little as $12,000 today. Programming is becoming more diverse and imaginative. Indeed, the stage is set for a classic scrap for top industry positions, as befits a business in which technology, creative talent and entrepreneurial leadership open a new market.
In the process, the viewer should benefit. To be sure, cable TV may never win mass audiences for many programs. Its leaders have no intention of even trying to do so. That would mean duplicating network fare--and who would pay to watch something akin to the shows he now sees free? The networks are unrivaled at concocting programs that appeal to tens of millions, but in the process they have ignored the specialized interests that every member of the TV audience also possesses. Cable TV, in contrast, offers for profit the potential choice of programs to suit every taste.
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