Tv/ cable industry

Television Industry Analysis and Report

lakshay Jain

Overview

After decades of experimental broadcasts, the first television became commercialized in the New York City, United States on July 1, 1941, initially by RCA (through NBC, which it owned) via its station WNBT (now WNBC) and CBS, via their station WCBW (now WCBS-TV). Different broadcast systems were developed at the end of the 1930s. The National Television Systems Committee standardized on a 525-line broadcast in 1941 that would provide the basis for television across the nation through the end of the century. This analysis is at this moment set to analyze TV variables in the industry, industry variations from the date of establishment and industry players.

TV industry in the US has been experiencing tremendous positive trends over the past years. However, there have been equally negative factors affecting the industry including the cost of operations as a tax to the government and the stiff competition from other sectors like the film industry.

As industry operators continue to adapt to the changing media landscape and leverage online platforms, the sector prospects indicate that there is a high likelihood to continue growing into the future because more than 116 million of the US homesteads own a TV set. The revenue for the TV industry had grown from 1.9% in 2014 and expected to continue hiking to 3.2% in 2017. Consumers can access TV programs today more than before. Songs and albums are heard and distributed on the Internet, over the radio, in advertisements, in movies, and on TV shows.

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TV Industry’s Main sources of Revenue as per 2015

For organizations to make a profit and to survive in the long run, they must have constant sources of revenue. Revenues may come from sales and the various categories of sales of a service or manufacturing firm they are known as revenue streams. Measuring and reporting revenue is the function of the accounting and finance departments in organizations while determining new streams of revenue is the responsibility of top management, strategic planners, and marketing forecasters. The following are variables and sources of revenue for TV industry and are as discussed below:

Overview	Values
Estimated revenue of the U.S. broadcasting industry	$134.7 bn
Revenue of CBS Corp.	$5.6bn
Revenue of Walt Disney Co.	$11.2bn
Number of TV households in the U.S.	116.4m

Consumption & Programming	Values
Daily time spent with TV per person in the U.S.	299.6 minutes
Average primetime TV audience in the U.S.	187m
Ratings of Super Bowl XLVII	42%
Game of Thrones is most pirated TV show (Bit Torrent downloads)	8.1m
Cost of a 30-second spot during Sunday Night Football (NBC)	$545,142

Advertising	Values
TV advertising revenue in the U.S.	$71.1bn
Advertising expenditure of Procter & Gamble	$1,718.7m

Pay and Online TV	Values
On-demand TV revenues in the U.S.	$1,535
Number of consumers of online TV in the U.S.	95m

This particular statistic presents a forecast of the television industry revenue in the United States in the period between 2012 and 2017, broken down by source. The Media Partners Asia projected that TV advertising revenue in the United States of America would amount to more than 61.9 billion U.S. dollars and would continue to grow, with a compound annual growth rate of an average of 3.2 percent, to 72.3 billion U.S. dollars in 2017.

In the context for today’s audiences, the American TV industry contributes approximately $40 billion per year in payments to more than 330,000 local businesses across the country, according to the latest economic impact figures. In all, the industry’s nationwide economic activity supports 1.9 million workers and generates $47 billion in wages. That language is key to maintaining America’s competitive production climate, which allows the U.S. motion picture and TV industry to film around the entire country, creating local jobs and driving long-term investment.

Like many other American businesses, TV companies operate with tight budget constraints and they make decisions about where to be based and cost. Competitive policies like the domestic production incentive help limit the enormous risk of producing or TV show and allow communities across the country to benefit directly from the economic strength of the American TV industry. These benefits come in a variety of forms including jobs for local workers, revenue for small businesses, infrastructure investment, and film-induced tourism. In fact, a major motion picture shooting on location contributes $225,000 every day to the local economy.

Here is a sample of some the states where the motion picture and TV industry is having a huge impact:

In Georgia, the movie and TV industry supports nearly 23,500 jobs and pays more than $1.6 billion in wages. Recently, the production of Universal Pictures’ “Furious 7” contributed millions to the state’s economy and hired thousands of Georgians. Paramount Pictures’ “Selma” generated more than $10.3 million in statewide economic activity. The industry’s impact is long lasting, as seen by the development of EUE/Screen Gems Studios in Atlanta and the tourists that flock to where “The Walking Dead” filmed.

In Ohio, the TV industry is the source of more than 31,700 jobs and $1.1 billion in total wages. The latest economic figures show that there are more than 2,500 motion picture and TV industry related businesses in Ohio. Those businesses span across all industries and work with productions such as Disney and Marvel Entertainment’s “Captain America: Winter’s Solider,” which spent $31 million throughout Ohio with about 750 different vendors.

In addition to local workers, the production also turned spending towards a wide variety of state vendors and businesses for services and supplies. In particular, “Black Mass” spent over $800,000 on car rentals, paid nearly $560,000 to local wardrobe shops, and purchased more than $450,000 in catering, bakery goods, and other food items. An additional $2.7 million was spent on location fees.

In Amanda’s book, “The Television Will Be Revolutionized was published in late 2014”, explores television’s industrial changes from the mid-1980s through to 2014 and how those changes adjust television’s role as a cultural institution. She was able to publish Cable Guys: Television and American in 2014 that examines the negotiation of masculinities in a range of television programming during the 2000s.

The following are the sources of revenue for the TV industry

1. Subscription revenue from consumers

2. Advertising and

3.Building properties

ADVERTISING

Local TV, buoyed by stabilizing audiences and big increases in the amount spent on political advertisement, took in $17 billion in advertising profits alone in the year 2012, more than 800 news-producing television stations that were identified for this analysis. Pew Research estimates that $8.4 billion of that sum is tied to news a figure that is almost closer to $8.8 billion when the digital advertising estimates are factored in. More than $1.9 billion is generated from advertising on the three major broadcast network newscasts, according to customs data provided to Pew Research by Kantar Media, along with digital projections for broadcast networks by VSS.

In addition to the TV advertisement, there are other three news media sectors where revenue figures of any kind let alone advertising estimates were simply not obtainable: city and regional magazines local cable news operations, and news organizations geared toward specific ethnic groups.While local cable news outlets such as NY1 in New York and NECN in New England are a part of the local TV ecosystem, gathering concrete financial data on these types of stations is a challenge like not a single comprehensive list stations was available from the Radio Television Digital News Association, an industry group to which local cable outlets belong). City and regional magazines such as Washingtonian Magazine or St. Louis Magazine is also difficult to track.

Subscription by market share as per Jan 2016:

Subscription, advertising, and the license fee used to be equal in value. Over the past five years, more revenue has been generated by TV subscription, mainly by Sky, and less by TV advertising. This is a trend media analysts expect to continue to observe.

Subscription - DTH only channels

Positives: Lower costs, ability to convert platform as a distribution mechanism and charge accordingly,

Negatives: Smaller user base, Changes required Greater adoption on part of broadcasters

Potential: Strong earning from retail consumers

Mobile streaming of content

There are about 116 million TV screens in the USA. While there are about more than 500 million handsets. Therefore, even if 40% of these handsets have the ability to stream TV content, thus the number of Mobile TV screens and TV screens are almost equal. MTNL and BSNL already can stream TV and with 3G coming in mobile TV has seen an increase in interest. However, there are issues about the capacity of 3G; the current GSM broadband is said to be more suited. The implications of Mobile TV would mean a significant revenue from subscriptions, and the ability to command higher advertising profits as the number of viewers increase, and there would be major implications for viewership data. The Sports, news and music channel, benefit the more as they are the genre best, thus suited for a small screen and users who are on the go. With VAS revenues amounting to close to 15% of revenues for a player, who is reasonable surrogate to say that consumers are willing to spend ("Roper Technologies Inc., USA").

Online streaming of content

Other firms stream online content and some are a global player known for its online streaming. However, each of these is supported by advertising, and there has been limited if any success on being able to charge the users for content they view. The areas where streaming of content looks likely is in sports and news. However, as of now providers have not been able monetization on this front from the user end. Added to the mere fact that news has not been able to generate a high number of visitors even when an avenue of free streams thus, indicating that this may be an uphill battle. The examples we have seen monetization is for sports where YouTube has paid IPL, however in such deals the IP lies mostly with BCCI and thus, there is nothing for a broadcaster. There has been some success for the audience who are hungry for world content, and one of the reasons for their success is the availability of a very large library. However, even a mix of advertising and content is charged only for the very latest content or on downloads.

Advertising innovations

From previous studies, the following has been finalized about innovations in advertising:

Positives: Creation of new inventory leading to additional revenues, ability to attract newer advertisers, no costs involved, can command premium

Negatives: Nil.

Changes required currently provided as add-on in most cases - should be able to generate revenues separately

Potential: Strong.

These, in turn, means that a media firm which runs and practices some innovation activities has a high likelihood of obtaining higher revenues.

Private treaties.

Positives: ability to attract newer advertisers, barter is only of existing inventory, so there is no cost involved

Negatives: Problems of valuation, bad experience of advertisers with BCCL, unwillingness on part of broadcaster's funder to allow them to venture into private equity, inability to provide diverse inventory

Changes required accepted guidelines on valuation

Potential: Limited for an individual broadcaster, Strong for a PE player who can purchase inventory Solutions

Emerging trends in TV Industry

TV Embraces the Internet.

There are several ways to stream web content to your Television, including the use of connected devices like Boxee Box. The symbiosis relationship that is present between Internet, apps and TV could keep the TV industry on the right path to success. A survey that was conducted by Deloitte “State of the Media Democracy” found out that 71 per cent of the Americans rate watching TV on their devices. They found out that the internet, social media and mobile are greatly enhancing the viewer’s overall experience thus driving people to watch first- run programmes and the live events during their initial broadcast.

The Box Office Pulls People Away From Their Televisions.

3D technology was touted to be the next frontier in the TV industry, but consumers don’t seem to be latching on in a 2010 study, 83% of survey respondents said 3D technology does not give reason enough reason for users want to buy a new TV, and more than one-third of people say 3D does not enhance their viewing experience. The survey finds that 3D technology is mostly preferred on the big screens of movie theaters and not in one's home. Just 3 percent of TV owners own a 3D TV, but there's not much 3D content out there to keep them entertained ("Roper Technologies Inc, USA"). The resistance also can be attributed to the glasses factor: many people find them uncomfortable, inconvenient and, in some cases, nausea inducing. (Study was done by Forbes researchers)

LCD and Flat-Panel Screens Dominate

Despite the spikes in sales for these new TV features, shockingly the average number of TVs per household has not changed the market share is rising because consumers are "trading up" for improved televisions.

TV Is Going Social

According to TV Guide, Twitter has the advantage over Facebook when it comes to social engagement during a show's airtime a phenomenon is known as "social TV." 50% of users said that they tweet about the show they are currently watching while only a mere 36 percent say they post to Facebook. Interestingly, the most social TV shows are not the ones with the highest rankings, but they are the ones that spur conversation and have most passionate fans. American Idol, Glee, and Small Ville cracked the top ten, even though they are all in different echelons of ratings ("Roper Technologies Inc., USA").

Television viewers are often multitasking they watch their favorite shows while on the other hand interacting on social media platforms through their tablets, smartphones, and laptops. Research conducted by Deloitte found that 42% of all Americans surf the web while watching a television program while 29% talk on their phones while the TV is on and 26% of consumers are texting or sending IMs.

Advertising Is More Targeted

Some TV brands have started to target demographics more specifically. While they used to target the “Under 45” crowd, Samsung now targets young families, males under 35 and active and childless 25-34-years old. This is a new development in the television business and it plays a vital role in assisting the business to identify new market that before they could not have concentrated on, this is a new and interesting development.

Demographic Trends and Fun Facts.

The Mintel report has been littered with interesting tidbits and data gleaned from its survey. The report says, "Flat-panel TVs remains most dominant in households with incomes that exceed $100,000. Not surprisingly, this demographic is also more likely to own a TV larger than 50”. Purchasers tend to want the biggest TV screen they can afford, which suggests that size trumps technology and features. Those under 45 or with children are more likely to have a large TV screen. Interest in Netflix is as high among 45-54-year-olds as it is among 25-34-year-olds" ("Roper Technologies Inc., USA").

Other trends that are likely to shape up the TV industry include:

More participants, more creative risks in broadcasting, Binge watching, content delivery optimization, Event-based viewing and Content mobility.

Most Prominent Corporate Entities in TV industry as per 31 Dec 2015.

Based on capital share

Firm	Capital share $bn	Average revenue $bn
1. Walt Disney (DIS)	173.5	48.813
2. Comcast Corp (CMCSA)	72.44	148
3. Twenty-First Century Fox Inc. (FOX)	67.97	31.86
4. Time Warner Inc. (TWX)	67.64	7.53
5. DirecTV (DTV)	44.16	32.9
6. Time Warner Cable (TWC)	40.9	22.81
7. DISH Network Corporation (DISH)	35.5	14.5
8. WPP Plc. (WPPGY) -	29.25	16.98
9. CBS Corporation (CBS):	29.60	14.98
10. Viacom Inc. (VIAB) -	27.62	13.78

TV INDUSTRY COSTS

Acquisition of content and related rights

Acquiring content for broadcast in the television industry is one of the keys to success steps that a broadcaster may take. Any television firm that seeks to air any content must pay the costs of airing that particular content. However, as broadcasting techniques expand concerning digital transformation in the sector, accounting procedures that are acquired for content tend to pose a challenge to the broadcasters. A lot of time is taken to try to understand how acquiring certain content can be so expensive, but when it is time to understand the key players involved in the process, every major and important business decision on television commands affiliate fees of approximately $32 billion. In recent times the cost of acquiring content has escalated, this is mainly attributed to enhanced technology with the introduction of high definition television content. The area of distribution also plays a huge role when it comes to costs involved in acquiring television content.

Government licenses

The federal government has been tasked the sole responsibility of distributing signals and issuance of television frequencies. Before the government issues any licenses, it must check thoroughly the content that a given broadcasting company intends to air to the public and ensure that it is within the regulated guidelines. The broadcasting licenses issued by the government are temporary meaning that it is renewed each time the government reviews the content aired on that particular television network. The cost of acquiring this government television licenses is high thus it requires that a broadcaster has a very good revenue collection process to be able to meet certain thresholds set by the government to acquire the licenses for broadcasting and distributing of signals to its viewers within the agreed geographical locations. If a broadcaster wishes to expand its frequency to occupy a larger zone, the costs are also likely to increase.

Carriage fees

This is the amount paid by any broadcasting firm that wishes to have its channels carried then it is mandatory to pay the carriage fee. The upgrading of signals has enabled an increase in the number of TV channels carried from approximately 5o channels to more than 500 channels at even less cost as compared to analog times. The high amount of carriage fees that has been paid has brought a lot of a great concern to broadcasters who are championing for a fair method of getting the carriage fees reduced and have a large geographical coverage of its content. Carriage fee can be termed as television tax that is paid to television regulatory authority that requires cable and satellite television companies to reimburse conformist, over the air television for the right to carry their local signals.

Cost of any organization in business

Television provides a tough market for any new investor who seeks to establish their broadcasting companies in the industry. The type of rights and licensing handed out is so high and the aired content is subjected to regular scrutiny. If the content aired is found to have a negative influence on viewers especially young generation then the closing of the network is so easy, unlike other business industries where there is initial review before deciding on the step to be taken. Also, the cost of having content aired on television in any network is very costly. Some business entrepreneurs are considering engaging the federal government to try to convince them to lower licensing fees for better and improved service delivery to their consumers. Since televisions, the only way of acquiring revenue is through advertisement, if a television firm has less audience subscribed to its services then it will also be difficult for them to remain operational.

Based on the findings above that advertisement forms the largest portion of Television Industry revenue, it can, therefore, be recommended that it is likely probable that broadcasters relying on TV advertising will need new revenue streams. Though the hard challenge comes in that getting those revenue streams right, as anyone involved in the pay-tv failure that was ITV Digital will tell you.

From another study done by Alps (2015), he suggests that a small one-off payments for programming supplied as and when people want to watch it are a new opportunity for broadcasters. But most commentators agree that the practice of making one-off payments for particular programs won't take off in the next five years and won't make as much money as TV advertising does currently.

Work cited

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“TV & Film Production & Distribution.” First Research. Hoover’s Inc, Jan. 1, 2015. Web. Feb. 2015

"Media performance Production & Distribution." Hoover's. Hoover's Inc, 2015. Web. 21 Feb. 2015.

Crompton, J. (2014, December). Media Publishing in the US. IBISWorld Industry Report 51223. Retrieved February 20, 2014 from IBISWorld database

"Roper Technologies Inc, USA". Pump Industry Analyst 2015.10 (2015): 9. Web.

http://mashable.com/wp-content/uploads/2011/07/flatscreen-lcd-tv-640.jpg

http://www.lirn.net/products/?gclid=CKaAzKShl8sCFcUSwwodHAoH-A

( http://www.investopedia.com/stock-analysis/021815/worlds-top-ten-media-companies-dis-cmcsa-fox.asp )

(http://www.statista.com/statistics/200777/ad-spending-of-leading-tv-advertisers-in-the us/)

Lakshay, you provided a very broad overview of the television industry and I can see that you put a lot of effort and research into the assignment. To make it better, first, choose either broadcast or cable networks and focus on the indicators of that sector. Considering the page limit and the differences in each sector, it’s best to focus on just one. Then, provide an organized content of the revenue, sources of revenue, costs, how the products (shows) are produced, distributed to reach the market –in the specific sector. Also, follow general citation and formatting rules (APA style, double space). You’re more than welcome to speak to me after class if anything is unclear.

Grade: B