Cable television matches muscle with the networks
The last time the National Cable Television Association held its annual convention in Los Angeles, back in 1981, cable TV was a flyweight. Only 26 percent of American homes had cable, and industry revenues were less than $4 billion a year.
But the industry that met here this month, seven years later, has put on an impressive amount of muscle. Cable now reaches 51 percent of homes, and annual revenues have tripled to more than $11 billion. Cable programs capture an average 20 percent of TV viewers, almost double the share of five years ago.
As the Big Three TV networks are all too aware, cable is fast developing into a heavyweight contender.
With the costly cable-laying phase mostly behind them, cable operators suddenly have more cash than they know what to do with. And government deregulation early last year has added to the money flow by allowing cable companies to raise subscriber rates.
To the benefit of consumers, much of this new wealth is being plowed into programming. Along with top-draw movies, home shopping, live news coverage, and music videos, prime-time network fare is beginning to appear on cable. Some of the big-ticket attractions include National Football League games on ESPN, ``Miami Vice'' and ``Murder, She Wrote'' on USA Network, and ``Cagney & Lacey'' on Lifetime.
Cable is also working hard to shed its rerun image by generating programs of its own. ``Double Dare,'' a game show for kids, and ``It's Garry Shandling's Show'' are examples of successful programs that originated on cable and are now being syndicated or sold as reruns to broadcast stations.
At this year's ``Cable 88'' convention, the need for quality in programming was an oft-sung theme. ``In our opinion, the key to continued growth and prosperity is programming,'' says I. Martin Pompadur of ML Media Partners, a cable operator. ``The industry must do whatever it can to encourage the development of more and more original, creative programming and innovative channels.''
Frank Biondi Jr., CEO of the communications and entertainment company Viacom International, predicts that in 10 years programming will come predominantly from cable rather than the broadcast networks. ``As the learning curve and the ability to pay for it and innovate continues,'' he says, ``I don't think there's any question that you'll see more and more of the mass of successful programming coming out of cable.''
With better programming and a steady increase in viewers, cable is luring more and more advertisers. Ad revenue last year exceeded $1.1 billion, a 19 percent increase over sales in 1986. Paul Kagan Associates, the media research firm, estimates that ad sales for cable networks will increase another 20 percent this year, to a record total of $1.45 billion.
Cable TV is one of the big competitors draining audiences and revenues from the broadcast networks. The networks were shocked last fall when the A.C. Nielsen Company, which measures television viewership, reported a 10 percent drop last year in audiences for ABC, NBC, and CBS. Network executives claim the findings were a distortion caused by Nielsen's switch from the diary method of measuring viewing to high-tech, push-button people-meters. But that explanation will not likely be much comfort in the long run.
``We expect the erosion of the three network audience shares to continue dramatically for another four or five years as we build cable out to a 75 percent penetration,'' says N.J. Nicholas Jr., president of Time Inc.
The broadcast networks aren't sitting around waiting for cable to take over their turf. NBC has staked out its own piece of the cable business, recently announcing plans to buy the Tempo channel from Tele-Communications Inc. and to start two new programming services. The all-sports network ESPN is already 80 percent owned by ABC, and the Arts & Entertainment cable network is partly owned by ABC and NBC.
Cable's rivals, which include the motion picture studios and independent broadcasters, are worried by its growing might and have been calling for reregulation of the industry. They've gotten at least part of their wish: reimposition of ``syndicated exclusivity'' abandoned in 1980. The Federal Communications Commission this month again adopted rules requiring cable operators to ``black out'' programs on distant broadcast signals before feeding them to areas where local stations have purchased exclusive rights to those shows.
This ruling means that the so-called superstations, like entrepreneur Ted Turner's WTBS, may have a hard time showing popular reruns like ``The Andy Griffith Show'' and ``The Flintstones.''
James P. Mooney, president of the National Cable Television Association, has issued a statement saying the FCC ``pulled the plug on the favorite TV programs of millions of people.'' The association plans to take the matter to court.
Looking at the buyouts and mergers that have taken place in the industry, as well as cable operators' increasing investments in programming interests, rivals worry that David has grown into a Goliath.
James S. Cownie, president of Heritage Communications, defends this consolidation. ``Two of the three basic services that enjoy the widest circulation in our business are owned by institutions that represent our biggest sources of competition. I think our industry would be absolutely stupid and shortsighted if it used muscle. We'd be asking for trouble. And I don't think we have used that as much as many of our competitors would have Congress and other people believe.''