The Rise And Fall Of Cable Television

The ad supported cable industry has been undergoing a transition. The number of subscribers has been steadily declining, affecting revenue. The ratings for many prominent networks have been dropping, also impacting revenue. Most cable network owners have begun streaming services and have pivoted to invest billions on programming on that video platform. However, it wasn’t all that long ago when cable television was at the height of its popularity and revenue prowess.

Golden Age of Cable: In the early 2010s the cable television industry was in its zenith. In October 2010, over 105 million U.S. TV households were pay-TV subscribers, a penetration of over 90% of TV homes. In the 2013-14 upfront, cable TV garnered over $10 billion in ad commitments and surpassed broadcast TV for the first time. By 2013, the average TV household had over 189 channels (although they watched only 17 of them); a large majority of them were cable networks.

In 2012, the number of scripted entertainment shows on basic cable (125), surpassed broadcast TV (119), peaking at 189 in 2015. In the early 2010s, cable viewers could watch such popular scripted programs as The Closer, Sons of Anarchy and Burn Notice. In 2011, Mad Men won its fourth straight Emmy for Outstanding Drama. The series finale of two-time Emmy winner Breaking Bad (with the help of Netflix NFLX ) was the most anticipated scripted program in 2013. In addition, three years after its 2010 debut, The Walking Dead became the top-rated scripted program among Adults 18-49 across all of television and reached an average audience of 17.3 million viewers in 2014. 

There were also a number of popular unscripted shows on cable, too; The Daily Show with Jon Stewart, Pawn Stars, Deadliest Catch and The Real World among many others. Additionally, cable was also offering subscribers a growing number of top tier sporting events and news. For example, ESPN televised the first college football championship game in January 2015, averaging 33.4 million viewers. Later that year, the Republican Presidential debate on Fox News averaged 24 million viewers, making it the most watched news program on cable and most watched primary debate ever.

Cable TV Background: By the early 2010s, cable TV had become a commodity, but its origins had begun decades earlier. Cable TV started as Community Area TV (CATV) in 1948 in the remote areas of Pennsylvania, Oregon and Arkansas. CATV gave households the opportunity to get a TV signal. Antennas were placed in high elevation areas to receive a broadcast signal and a cable wire was then connected into subscribing homes, improving the video reception. In the 1950s, microwave relays were first used allowing cable households to import distant broadcast signals. After pressure from broadcasters, in 1962 the FCC rejected these microwave authorizations and further restrictions ensued.

In the 1970s, the FCC began to deregulate cable. In 1972, Charles Dolan and Gerald Levin thought viewers would want to get unavailable content for a monthly fee and HBO was founded. HBO used microwave and telephone lines to distribute programs. The most important innovation came when the FCC approved the first geostationary communications satellite launched in 1974. In September 1975, HBOs coverage of the heavyweight boxing match between Muhammad Ali and Joe Frazier dubbed “Thrilla in Manila” became cable’s first big live event special.

In 1976, the FCC repealed its distant signaling restrictions. This allowed Ted Turner to distribute his Atlanta based independent station WTBS via satellite across the country. The following year, televangelist Pat Robertson launched the first basic cable network with The Christian Broadcast Network (CBN), now the Disney DIS -owned Freeform. CBN began accepting ads in 1981. After CBN was launched the floodgates opened up and many familiar cable networks started up. In 1979 Nickelodeon and ESPN were launched; in 1980 it was CNN, BET and USA. In 1981, when 25% households had cable, MTV was launched. From 1980 to 1990, the number of cable networks grew from 28 to 79, fragmenting the TV landscape.

Cable also created live events such as the MTV Video Music Awards, begun in 1984. Top tier live sports events began to air on cable. In 1984, TBS began airing NBA games, and the NFL started airing Sunday night football games on ESPN in 1987. 

Cable TV had some noteworthy news events. During the 1991 Persian Gulf War, CNN provided live round-the-clock coverage from Baghdad, establishing the network as an important news source. In 1993, CNN televised a NAFTA debate between Al Gore and H. Ross Perot that averaged a then record 16.8 million viewers. 

Some cable network that were popular soon had brand extensions. For example, there were spin-off networks (i.e., Lifetime Movie Network, MTV2). There were radio networks/programs (i.e., E! Entertainment Radio, CMT Radio); magazines (i.e., ESPN: The Magazine, Nickelodeon Magazine). In 1987, MTV became the first network to be launched globally via satellite and CNN, ESPN and Discovery DISCA , among others, soon followed. In addition, ESPN opened up a number of ESPN Zone restaurants and at one time Discovery had 100+ retail stores. 

At first, cable relied almost entirely on acquired off-net content for ratings and to fill the programming void. In the 1990s, cable, led by top-rated USA, ushered in an era of noteworthy original movies, mini-series and TV programs. Industry recognition and critical acclaim soon followed and cable programming was successfully challenging broadcasters in gaining critical acclaim and industry recognition.

Early on, the broadcast networks recognized the threat posed by cable in siphoning off viewers and ad revenue. By the 1988-89 television season, with cable in well over half the U.S. homes, the audience share of ABC, CBS VIAC and NBC was at 61% and dropping annually. Cable’s audience share had grown to 20%, and was steadily growing. That year, cable generated $1.5 billion in ad revenue, a year-over-year increase of 40%.

At the annual upfront presentation, broadcast executives routinely blasted the cable industry in front of advertisers (more recently, they’ve been critical of Facebook and Google). CBS had published a document called “The Cable Fable,” which pointed out that the bulk of cable’s programming consisted of reruns. Moreover, CBS said, the ratings of any one broadcast prime time program was significantly higher than any cable network show. In addition, broadcast was a better reach vehicle and more effective at building brand awareness.

With media ownership relaxed, consolidation swept the media industry. As a result, the owners of the broadcast networks soon acquired cable networks. At the time, cable TV with its increased subscribers and audiences were revenue growth areas for their new parent companies. 

Cable TV & Streaming Video: Disney, Comcast CMCSA , ViacomCBS and AT&T T now own a number of cable networks and all have launched streaming video services. Additionally, Discovery and AMC are expected to launch online services next year. Streaming has had a significant effect on cable TV, in the same way cable TV had on broadcast TV decades ago. That is, lower ratings for most cable networks. In calendar year 2019, only two of the 40 highest rated cable networks for Adults 18-49 increased their primetime audience year-over-year. With total viewers, AMC’s primetime audience dropped year-over-year by 22%, FX declined by 21%, USA fell by 18%, TBS was off by 17% and TNT was down by 15%.

Streaming video has helped promote cord cutting. There are now only 83 million pay-TV subscribers— and that number is steadily dropping. Conversely, in less than a year, Disney Plus has 60+ million subscribers and in its first six months Comcast’s Peacock has 22 million subscribers. Furthermore, media conglomerates are investing more on streaming video content. Over the next few years, AT&T is expected to invest up to $5 billion in programming for HBO Max. Similarly, Disney and Comcast plan to invest at least $2 billion on Disney Plus and Peacock, respectively, in the next few years. These services will also provide subscribers thousands of movies and TV shows from their extensive programming libraries (many originally on cable).  

As viewers show a preference for on-demand viewing, cable is no longer the “cash cow” it once was for their parent companies. Media conglomerates Comcast, Disney, ViacomCBS and AT&T have changed their strategy to focus more on streaming video. This included massive overhauls and reorganization of their entertainment and media divisions with several high-level executives being replaced. 

As part of the restructuring, cable networks will become a component of broader video offerings to subscribers. In some instances, lower rated cable networks will be shut down. Similar to 30 years ago, cable networks are extending their brand, but now it’s on streaming platforms such as FX on Hulu and National Geographic on Disney Plus.

To illustrate how pay-TV has lost its financial value, consider that AT&T acquired DirecTV in 2015 for a reported $49 billion. With the satellite TV provider shedding subscribers rapidly, AT&T has been looking to unload DirecTV. The selling price could be as little as one-third of what AT&T paid just five years earlier.