Television

THE IMPACT OF CABLE ANDHOME VIDEO FROM 1980–2000

The first three decades of network television in America represent a period of remarkable stability for the television industry. Once the basic structure of the television industry had been established, the television seasons rolled past with comforting familiarity. However, the rapid growth of cable television and home video in the 1980s, followed by a new round of consolidation in the media industries, disrupted the balance of power in the television industry and led to the complete integration of television networks and Hollywood studios.

Cable television began in the 1940s and 1950s as community antenna television (CATV), a solution to reception problems in geographically isolated towns where people had trouble receiving television signals with a home antenna. The turning point for cable television came during the 1970s, when several corporations began to distribute program services by satellite, making it possible to reach audiences on a national—and eventually international—scale without the need for local affiliate stations. Time, Inc. was the first company to launch a satellite-based service when it premiered Home Box Office (HBO) in 1975. The service began on a small scale, with only a few hundred viewers for its initial broadcast, but it demonstrated that a subscription service for movies and special events could be a viable economic alternative to commercial broadcasting. By the end of the decade, other subscription-based movie channels, including Showtime, the Movie Channel, and HBO's own spinoff network, Cinemax, had followed suit. With these movie channels, and many other new cable channels, cable service expanded rapidly. In 1978, only 17 percent of American households had cable; by 1989, cable penetration had reached 57 percent. This new market was a boon for the studios, which benefited from the increased prices that accompanied the competition for television rights to recently released films, and also for viewers, who were finally able to see complete, unedited feature films in their homes.

Videocassette recorders (VCRs) became a common feature in American homes during the 1980s. Videotape was introduced in 1956, but it was initially used only within the television industry. Its widespread use by television viewers awaited the development of the videocassette by Sony during the 1970s. The consumer market for home VCRs developed slowly at first because Sony and its rival Matsushita developed incompatible systems (Betamax and VHS, respectively). The market also stalled because of a lawsuit filed in 1976 by Disney and Universal against Sony, charging that home videotaping represented a violation of copyright laws. The issue was settled in Sony's favor by a 1984 Supreme Court decision, and the consumer market for VCRs exploded. Although in 1982, 4 percent of American households owned a VCR, by 1988, the figure had reached 60 percent.

As a result of the rise of cable and home video, the motion picture industry developed new release patterns that channeled movies from their debut in theaters to their eventual appearance on television through a carefully managed series of exclusive distribution "windows" designed to squeeze the maximum value from each stage of a movie's lifespan in the video age: theatrical release, home video, pay-per-view, pay cable, basic cable, and broadcast television. By the time a movie has made its way down the chain to broadcast TV, and is available for free to television viewers, it has received so much exposure that it is no longer a form of showcase programming.

As these technological developments shook the familiar patterns of the television and movie industries, a series of regulatory changes governing the television industry and relaxed enforcement of antitrust laws by the Reagan-era Justice Department heated up the media industries, subjecting them to a general trend of mergers and acquisitions that swept through corporate America in the 1980s. This climate gave rise to the series of mergers and acquisitions that saw the Big Three networks change hands in 1985 and 1986, which will be discussed in greater detail below. Regulatory changes also produced a sharp increase in the number of television stations, as corporations invested in chains of stations. In 1970, of the 862 stations in the country, only 82 operated independently of the three networks. The number of independent stations doubled in the 1980s. By 1995 there were 1,532 stations, of which 450 were independent of the three major networks. As the number of stations increased, it became possible to create new television networks.

In 1985, the media conglomerate News Corporation, owned by media tycoon Rupert Murdoch, purchased Twentieth Century Fox Studios. Then in 1986, Murdoch purchased six television stations which served as the foundation for launching the Fox Network, led by former Paramount chairman Barry Diller. Because Fox began by programming just a few nights each week, it technically did not meet the FCC definition of a full-fledged network, and therefore was not constrained by FCC rules that prohibited a network from producing its own programs. As a result, Fox served as the paradigm for a new era in the media industries, with a television network stocked with series produced by its corporate sibling, Twentieth Century Fox Television. Programs like The Simpsons (beginning 1989) and The X-Files (1993–2002) grew into network hits and lucrative commercial franchises within a perfect, closed loop of corporate synergy in which all profits remained within the parent company, News Corporation.

Pointing to the loophole that Fox had squeezed through in order to produce its own programs, the networks lobbied for an end to the FCC rules that had kept them from producing programs or sharing in the lucrative syndication market (where programs are sold to local stations and international markets) since the early 1970s. These Financial Interest and Syndication Rules were gradually repealed between 1991 and 1995. The policy change not only gave networks the opportunity to produce their own programs, but it also eliminated the last remaining barriers separating the movie and television industries. Studios quickly formed new television networks or merged with existing networks. Time Warner's WB Network and Viacom's United Paramount Network (UPN) debuted in 1995 (the two were merged into the CW in 2006). ABC came under the control of the Walt Disney Company in August 1995 when Disney acquired the network's parent company, Capital Cities/ABC Television Network for $19 billion. Viacom purchased CBS in 1999, and NBC acquired Vivendi Universal in 2005. In this stage of consolidation, the boundaries between film and television are certainly not perceived as barriers; rather, they represent opportunities for diversifying a media conglomerate's product lines.