Cable Television, Programming of

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One of the more challenging tasks faced by cable operators is selecting programming services that meet the particular needs of their cable systems. It is an ongoing concern, one that affects nearly every aspect of a cable system's business operations. The majority of cable subscribers in the United States have fifty-four or more channels from which to choose (NCTA, 2000). This means the cable operator must make fifty-four or more well-reasoned business decisions concerning how best to use a cable system's channel capacity. Channel capacity for the operator is very much like shelf space in the supermarket. It is a finite, limited "good"; once it is dedicated to a product, all other possibilities for uses of that space are eliminated. The cable operators generally seek to use that channel capacity in a way that helps to maximize company profits, adds quality to the overall programming mix, and delivers programming services that are at once desired and enjoyed by cable subscribers.

For the most part, when subscribers buy a multichannel television service, they are primarily concerned with the content or programming that it brings; they are largely indifferent to the technology that is used to deliver it. Cable television has introduced a strong measure of consumer sovereignty into the television programming equation, which means that the consumer has a greater range of choice and influence and that cable companies must respond to this. Unlike "free" local over-the-air broadcast television, cable subscription requires a conscious decision by the consumer to "renew" the cable service each month through a direct payment. When television programming falls short of consumer expectations, this invites the subscriber to begin questioning the wisdom of keeping the cable service. Disconnection then becomes a more attractive option. In cable industry terms, the problem of cable disconnects is referred to as "churn." Developing a quality programming mix is essential for keeping the cable subscriber from churning away from cable.

From the cable operator's perspective, the most important concerns surrounding information and entertainment program selection include: (1) using cable system channel capacity to help maximize returns, (2) creating a proper programming mix for service in their franchise area, (3) obtaining a fair price from programmers for their cable programming networks, (4) promoting a local identity and meeting requirements of the franchise agreement, (5) maximizing company profits on a per channel basis, and (6) maximizing company profits on an overall channel lineup basis.

Programming Tiers

The world of cable programming is divided into separate tiers of service on the local cable system. The basic cable tier generally consists of retransmissions of local over-the-air (broadcast) channels and Public Education Government (PEG) Access channels, along with whatever other channels the operator may wish to include. The extended or enhanced basic tier generally consists of a mix of advertiser-supported, cable-delivered network services (e.g., Lifetime, ESPN, MTV) and other services that may not rely on advertiser support (e.g., American Movie Classics, C-SPAN, Disney). By the end of the 1990s, there were around 150 basic cable channels for operators to choose from; this number continues to change periodically as new networks both appear (e.g. Oxygen) and disappear (e.g., The Military Channel).

In addition to the basic and extended services, there are premium or pay services that require an additional monthly subscription fee. There are more than forty-three premium or pay services, including Home Box Office (HBO), Showtime, and Encore, from which a cable operator may choose. Another type of service is pay-per-view (P-P-V), where viewers pay a separate fee for the one-time viewing of a program. This may involve a motion picture, a concert by a featured performer, or a sporting event, such as a championship-boxing match.

The Economics of Cable Programming

All cable networks have affiliation agreements with cable operators. Cable operators generally compensate the programmer from subscription revenues that come from their customers. In 1999, the average monthly rate for basic cable was $28.92 per month (NCTA, 2000). Income from basic and expanded basic cable accounts for nearly 63 percent of cable's revenue. It is important to remember that cable operators have two separate revenue streams: subscription fees from subscribers and revenue that comes from the sale of advertising.

Until the early 1980s, programmers actually paid cable operators to carry their networks. This circumstance changed as popular, branded networks became key features of cable services in a maturing industry. In addition, as the costs of obtaining and producing more desirable, higher quality programs rose, programmers needed a reliable revenue stream to offset the higher production costs. Some new cable channels still offer cable operators a fee to obtain a channel position on the cable system; a portion of these channels also continue to pay reduced fees for a prescribed time period. This is all done as an incentive to get operators to commit to new, untested program networks in hopes of the programmer acquiring enough cable affiliates to make the new network viable.

A cable operator pays the programmer on a cost-per-subscriber basis for each cable network that is received. These fees can range from a few cents a month for some channels to more than $1 for other channels. Cable systems' programming expenditures in 1999 topped the $8 billion mark (NCTA, 2000). The sports channels (e.g. ESPN, Fox Regional Sports) typically tend to be the most costly because of the high rights fees that must be paid to sports leagues (e.g., Major League Baseball, National Football League).

Deals struck between cable operators and premium service networks usually involve a negotiated split of revenues between the programmer and the operator. For example, if the subscriber cost for a premium service is $12 per month and the negotiated split is 50/50, the operator gets $6 and the programmer gets $6. Certain incentives aimed at increasing the marketing efforts of the operator and increasing the number of subscriptions may also be negotiated between the parties and result in an increased percentage of the "take" for the operator. Around 13 percent of cable's revenues come from pay cable or premium cable (NCTA, 2000).

The larger multiple system operators (MSOs), such as AT&T, Time Warner, and Comcast, can get more favorable terms from programmers in relation to the fees that are paid for affiliation. Large MSOs' program costs tend to be around 10 percent to 20 percent lower than those of smaller operators. MSOs carry clout because in some cases they may deliver ten million or more subscribers/potential viewers for the programmer's network in one fell swoop. This can substantially reduce the transaction costs of the programmer in selling a network service, while it adds to the potential viewer base that the network advertising will reach.

Discounts in affiliation fees are usually granted if the cable operator agrees to carry multiple programming services from the same programmer. For example, an operator that signs on for CNN, CNN Headline News, and Turner Network Television (TNT) from Time Warner Entertainment is likely to receive a "volume discount" that reduces the cost-per-channel amount that is paid. This then becomes part of the programming equation for the cable operator.

In addition, some large media/communications companies are vertically integrated, which means that they are involved in two or more stages of the cable industry. These stages include production, distribution, and exhibition. Production includes those entities that are responsible for producing the television programs (e.g. Paramount Pictures). Distribution includes the programmers, those networks that are responsible for distributing the programs (e.g. Nickelodeon, Lifetime, HBO). Exhibition includes the local cable operation (e.g. Time Warner Cable, AT&T, Cox Communications).

If the company owns cable systems (the exhibition stage) and programming networks (distribution), it is vertically integrated. Vertically integrated companies have obvious incentives for carrying their own programming networks on their own cable systems. These program selections are sometimes referred to as "corporate must carry" channels.

The Windowing Concept

Cable programming categories, especially for pay services, are very often related to the "currency" of the programming (Baldwin, McVoy, and Steinfield, 1996). The windowing process in the case of motion picture products provides a good illustration. Motion pictures are the principal content of premium cable services and P-P-V.

A motion picture is first released to theaters; this is considered to be the initial release window. The home video window, which involves the release of the videocassette and the DVD for the movie, follows the initial release window. Sixty to ninety days after the home video window, the motion picture enters the pay-per-view release window for cable and in-home satellite viewers. The next release window is premium or pay cable services. Later, the same motion picture will move to the broadcast television window and eventually into the syndication market window. As a film moves through each window, time advances and the likelihood of an interested viewer having already seen the motion picture increases.

Premium or pay services are increasingly producing their own original content for use on their networks. These programs supplement the traditional offering of motion pictures. For example, HBO, the first and largest of the pay cable services, produces not only feature films but also regularly scheduled television series such as The Sopranos and Arliss.

There are two distinct kinds of basic cable networks. There are general interest cable networks, which tend to appeal to more broad ranging audience tastes, and there are specialty networks. The general interest programming approach includes movies, drama, off-network reruns, and sports. The USA Network and TNT are two examples of general interest programmers. Specialty networks, as the name suggests, deal with more specialized forms of content. For example, Animal Planet programs mostly animal and pet-related content, and ESPN supplies sports and sports-related programming.

Where do the basic cable channels get their programming content? Programmers have two choices when it comes to obtaining programs: acquire material or produce it themselves. In the acquisition marketplace, networks shop around for content ranging from off-network broadcast reruns (e.g., The Cosby Show, E.R.) to original programs (e.g., South Park) or motion pictures (e.g., Lifetime's movies) from outside producers. Self-produced material involves "in-house" production done by the programmers themselves. For example, MTV uses its production resources to produce such shows as The Real World and Road Rules. Most basic cable networks use a combination of acquisition and self-production to fill program schedules.

The Major Cable Programmers

According to National Cable Television Association figures, the basic cable channels that reached the greatest number of subscribers in the year 2000 are the following:

  1. TBS (78,000,000 subscribers)
  2. Discovery Channel (77,400,000 subscribers)
  3. USA Network (77,181,000 subscribers)
  4. ESPN (77,181,000 subscribers)
  5. C-SPAN (77,000,000 subscribers)
  6. CNN (77,000,000 subscribers)
  7. TNT (76,800,000 subscribers)
  8. Nickelodeon/Nick at Night (76,000,000 subscribers)
  9. Fox Family Channel (75,700,000 subscribers)
  10. TNN (75,000,000 subscribers)

The largest pay service programmers in 1999 (according to Cablevision Magazine) were the following:

  1. HBO (26,659,000 subscribers)
  2. Cinemax (14,820,000 subscribers)
  3. Showtime (13,554,000 subscribers)
  4. Encore (13,170,000 subscribers)
  5. Starz! (9,160,000 subscribers)

In the P-P-V marketplace, In-Demand is the largest programmer and claims more than twenty million subscribers and seventeen hundred affiliated cable systems.

Programming Through the Years

Cable television's earliest programming consisted largely of retransmissions of over-the-air television stations in rural areas that were unable to receive adequate signals. Early on, cable had difficulty making inroads into large, metropolitan areas because of a lack of programming that could substantially differentiate it from already available broadcast television. A series of restrictive regulations from the Federal Communications Commission (FCC) and a number of court rulings that were adverse to the cable industry made it difficult to provide different programming that would attract new subscribers. Eventually, cable was allowed to bring distant independent television stations into certain markets, thereby bringing something "unique" to the market.

The first critical event in creating a unique programming identity that would propel cable to new heights occurred with the creation of HBO in 1972. The service was unique to cable and provided feature films and other programming. The network at first used a series of microwave repeater towers to distribute its signal, but this system was later replaced by satellite distribution via Satcom I in 1975. The use of satellite distribution was a technological breakthrough that pioneered the distribution of cable programming services on a national basis. The costs associated with networking fell precipitously because distance was no longer a major barrier.

Another important milestone occurred when Ted Turner made WTBS in Atlanta a "superstation" in 1975 by putting its signal on the satellite. This made the signal retrievable by cable operators on a national basis. Cable was gaining its own programming identity.

In time, other programming services would be formed. ESPN was launched in 1978, at a time when many people questioned the viability of an entire network dedicated to sports. However, the success of ESPN highlighted the ability of cable to service specialty or niche markets. In 1980, USA Network, a general interest programmer, was created, Black Entertainment Television (BET) was launched, and CNN went on the air as the first twenty-four-hour news channel. CNN had a profound effect on the way in which television news was gathered and presented. It led the way for other news services such as MSNBC (the result of a partnership between NBC and Microsoft) and Fox News (created by the News Corp.). MSNBC and Fox News were both launched in 1996. MTV, aimed at a younger generation, and often cited as the epitome of demographically targeted, specialty cable, began in 1981. It has since evolved from a video music service into a varied programming network that has added youth-oriented original programming. Shopping channels (e.g., QVC, Home Shopping Network) also represent a programming service that grew largely out of cable initiatives.

The range and depth of basic cable programming has grown dramatically since the early 1980s. As channel capacity increases with new digital technologies, the need for even more programming content is likely to create a boom in new networks. Already, familiar brand name networks have cloned new "branded" versions of themselves. For example, the Discovery Channel has created Discovery Kids, Discovery Science, and Discovery Health, further segmenting and targeting its programming strategy to reach new viewers in different ways. The same sort of "multiplexing" has taken place in the pay cable market as well. Each of the major players in that market space has multiplexed their offerings. For example, HBO has HBO Family, HBO Comedy, and others, while the Starz Encore Group offers a Super Pak made of twelve channels.

Cable Programming and the Future

The technology that makes true video-on-demand (VOD) possible exists and will be increasingly deployed as cable systems are upgraded and digital services flourish. This will mean that subscribers will be able to order entertainment or informational programming from vast libraries. Programming will be delivered when and in what manner the customer wants. The viewer at home will have videocassette recorder-like functionality, allowing him or her to edit, store, and retrieve programs at will. The television viewing experience will be changed, but the need for program content will remain.

Cable will be forced to deal with greater competition on all fronts, including direct broadcast satellite. It is likely that the Internet will evolve in some fashion to offer video-streamed content on its own. It could be that the programmer services will evolve into new digital forms across new platforms. The cable industry has created a programming culture of its own, one that will likely serve the varied interests of future information/entertainment seekers quite well.

See also:Broadcasting, Government Regulation of; Cable Television; Cable Television, Careers in; Cable Television, History of; Cable Television, Regulation of; Cable Television, System Technology of; Digital Communication; Ratings for Television Programs; Satellites, Communication; Satellites, History of; Satellites, Technology of; Television Broadcasting; Television Broadcasting, Programming and; Television Broadcasting, Technology of.


Baldwin, Thomas F.; McVoy, D. Stevens; and Steinfield, Charles. (1996). Convergence: Integrating Media, Information & Communication. Thousand Oaks, CA: Sage Publications.

Cahners Business Information. (2001). "Cablevision Magazine." <>.

National Cable Television Association. (2000). Cable Developments. Washington, DC: NCTA.

Parsons, Patrick R., and Frieden, Robert M. (1998). The Cable and Satellite Television Industries. Boston: Allyn & Bacon.

Larry Collette