American Television System Overview

Television System Overview

There are three TV systems in the United States—

1) Commercial broadcast system;
2) Commercial cable/satellite system; and
3) Public system.

The differences between the three lie primarily with how each produces revenue.

The commercial system relies solely on advertising,

The cable/satellite system relies on a combination of subscription fees + advertising,

and the public system relies on funding from the CPB (Corporation for Public Broadcasting—a private corporation funded by tax dollars), donations from “viewers like you,” and contributions from foundations.

The dominant system over the past 50+ years has been the commercial broadcast system. This system has five components and they are:

1) networks
2) affiliates

3) studios
4) syndicators
5) advertisers

NETWORKS—

“A network is not much more than several office building in  New York and Los Angeles where highly paid executives package programs they do not own, sell commercial time over airwaves they do not possess to advertising executives they have not met, and provide the programs and ads to a nationwide audience through local stations they do not operate.”

NBC—parent company is Comcast-Universal (affiliated with Universal Studios)

CBS-- parent company is CBS Corp. (affiliated with Paramount Pictures)

ABC -- parent company is Disney (affiliated with Walt Disney Pictures)

FOX--  parent company is 21st Century FOX (formerly Newscorp) (affiliated with 20^th-Century FOX Pictures)

CW—owned by CBS and Warner-Bros. (affiliated with Paramount and Warner Bros.).

Networks purchase programs from Hollywood Studios to air on their affiliate stations.  They then sell commercial time and insert those commercials into the programs they transmit to their affiliates.  The affiliate stations receive payment in two ways from the network.  They receive cash payments and they also receive payment in the form of a couple of blank commercial slots in the network programming.  They can sell these commercial spots locally to make additional money.

AFFILIATE STATIONS

 Affiliate stations-- receive much of their programming from the network.  Other programming is provided via the purchase of syndicated programming or they make their own programming (news programs, public affairs, sports specials, etc.) Affiliated stations have signed exclusive contracts with one of the TV networks.

They promise to broadcast a network's programming line-up-- including
prime time;
morning and evening news programs;
sports (some); and
late-night programming.

The programming from the networks comes with national commercials already inserted.  The affiliates receive direct payments from the networks (the amount is dependent on market size) along with some advertising spots to sell.

The U.S. has 210 television "markets" called "DMAs" by Nielsen-- "designated market areas."
You should know the top 10 markets. They are:

1. New York, NY
2. Los Angeles, CA
3. Chicago, IL
4. Philadelphia, PA
5. Dallas-Fort Worth, TX
6. San Francisco, CA
7. Washington, DC
8. Boston, MA
9. Atlanta, GA
10. Houston, TX

Also, go ahead and look up your hometown DMA by clicking on this link:

https://www.tvb.org/Portals/0/media/file/DMA/2017_2018_DMA_Ranks.pdf

TV PRODUCTION HOUSES/HOLLYWOOD STUDIOS

They make TV shows… (Networks today produce their own news, newsmagazines, sports programming)…

TV Prod Houses sell/lease their shows to the networks…

Studios---  huge businesses—they’re the film studios…  their shows today dominate the market--  Disney, 20^th-Century Fox, Universal, Paramount, Warner Brothers, SONY, CBS-P, Lionsgate… 

TV production houses have been known to lose money for some shows that are leased by the networks. In other words, it often costs more to produce each episode than they can recoup from the network. So why do they bother? Because if they are fortunate enough to get a show into off-network syndication, they get their investment back + enough additional revenue to bankroll all of their other projects.

SYNDICATORS—

“Middlemen”—an exclusive agent that represents a production studio's show to all the TV stations that are constantly shopping around for a product.

They get their money by
1)  a cut of the station license fee (the sum a station pays for the right to air the show); and
2) barter sales (the minute or two of commercial time syndicators sell directly to national advertisers)…

3  types of syndicated programs—

1)    first-run or original syndication (shows like Wheel of Fortune, Jeopardy, Ellen, Judge Judy, etc.)

2)    off-network syndication (shows like Friends, Seinfeld, Everybody Loves Raymond, etc.)

3)    old movies (often seen on cable networks) 

The FCC made syndication companies rich by passing the Prime Time Access Rule.  The PTAR simply states that one hour of prime-time programming each evening (with Sunday being the exception) must be non-network programming.  The networks chose to give up the 7-8 p.m. hour of prime-time.  The Prime Time Access Rule has since been disbanded, but the networks have, for the most part, decided not to air programs between 7-8 p.m., except on Sundays.

ADVERTISERS--

Advertising income finances broadcast media content and supports the commercial broadcast industry…

Dayparts—in TV, dayparts determine advertising rates. The basic dayparts are as follows:

early morning,
day,
early fringe,
prime time,
late night,
overnight.

The most expensive parts of the day for advertisers are prime time and fringe. Afternoon and overnight are the cheapest.

Types of program sales for syndicators—

            1) barter—meaning that a local station agrees to air a syndicator’s program in            exchange for some commercial slots.

            2) cash—meaning that a local station agrees to pay a syndicator cash for the rights to air a certain program.

            3) cash + barter—meaning that a local station agrees to pay some cash (less than in a cash deal) for a program + the station gets a few commercial slots. The syndicator delivers the program with national commercials already inserted (making sure to leave some empty slots for the local station).

            Cash + barter is the most common type of sale.

“O & O” stations—an affiliate that is owned and operated by the network. Networks are allowed, per FCC rule, to own a certain number of their own stations. WABC in NYC, for example, is both owned and operated by ABC.

HUT—“households using television”

Station line-up—a list of the TV markets and the individual TV stations in those markets

Upfronts—refer to when the networks invite advertisers (often media buyers) to preview their new shows in an effort to drum up advertising interest. If the advertisers like a show, they will commit to supporting that show (by buying ads) for a certain amount of episodes. For example, Modern Family was quite popular with advertisers and, consequently, ABC’s upfronts for the show were solid—all before the program aired.

Cable TV System
The difference between the commercial broadcast system and the cable system is how revenue is generated. Most of the revenue in cable TV comes from subscription fees. The more leverage a cable network has, the more that network can command from a cable company. When a home pays a cable bill, a portion of that money goes to the cable company, and the rest is divided among all of the networks offered. ESPN brings in more revenue than any other cable network (close to $12 billion per year). Some other cable networks bring in only pennies per month, but when multiplied by 90 million+ homes, it adds up to millions of dollars of revenue. In addition, cable networks can sell TV commercials to generate additional revenue.

All of the major cable networks are owned by the major media companies (Disney, Viacom, 21st-Century Fox, Time-Warner, Comcast-Universal, SONY).