این متن را با ذکر عناوین (تیترها) به انگلیسی خلاصه کن این متن را با ذکر عناوین به انگلیسی خلاصه کن Strategy and Competition in the Multichannel Media Industry

As a relatively newer challenger to traditional media incumbents such as print and broadcast media, multichannel media firms or multichannel video programming distribution (MVPD) services dramatically altered not only the competitive dynamics in the television industry but also audi- ences’ viewing behavior since the 1980s. The MVPD market continues to evolve and remain a powerful contender as technological advances brought forth the Internet, digitization, broadband, and interactivity. Adopting the strategic framework proposed in chapter 2, this chapter first examines the economic, technological, political, and sociocultural changes that have influenced the MVPD industry and continue to discuss the fac- tors that have affected the competitive dynamics of the MVPD market. Be- cause cable television and DBS services comprise more than 96% of all MVPD subscriptions in the United States (Standard & Poor’s, 2004), this chapter focuses on addressing these two multichannel video media.
CHANGES IN THE GENERAL ENVIRONMENT
As discussed in the previous chapter, elements in the broader context of a society influence the operations of industries and the firms within them. Although the general environmental trends are the same for all media industries, their impacts on individual markets are different. In this context, the major environmental developments and their implications to the MVPD sector are presented next.
Economic Changes
The growth of a global economy has substantially contributed to the market potential of MVPD services. The interconnectedness of different

economies, including freer flow of products and the establishment of mechanisms enabling that flow, encourages multinational corporations to invest in communications infrastructures in various countries. The development of network capacities helped establish multichannel media services. The subsequent programming needs then fueled the interna- tional expansion of many MVPD firms. The relatively low interest rates during various time periods between the 1980s and 2000s also fostered a favorable environment for mergers and acquisitions. The M&A activi- ties consolidated many smaller systems into large multiple system op- erators (MSOs), which significantly changed the competitive dynamics of the industry. The relatively robust growth of the U.S. economy from 1980 to 2000 also increased consumers’ disposable income, making MVPD and many of its auxiliary services more affordable. In addition, the increase in consumer spending translated to advertising revenue growth for the cablecasters, which more than tripled over the last 10 years (Standard & Poor’s, 2004).

Technological Changes

Technological advances in the last two decades have fundamentally shaped today’s MVPD market. In fact, technologies underlie the very existence of DBS and cable television and drive the types of MVPD ser- vices that might be available in the future. From addressable converters that catapulted premium services like HBO and optical fibers and com- pression that stimulated the development of new channels to the more recent broadband and digital communication technologies that facili- tate the arrival of better audiovisual quality, more content options, fast data transmissions, and interactivity, technological changes have con- stantly brought forth new business opportunities for MVPD firms. The essentiality of technology in this market also means that there is more strategic heterogeneity among MVPD services. That is, because of the product diversity enabled by technologies, there is more room for stra- tegic competition and differentiation among the MVPD firms. In addi- tion, many of the same technologies have also altered their broadcast counterpart’s conventional capabilities, making the broadcasters more competitive (e.g., HDTV and multicasting).

Political Changes

The Telecommunications Act of 1996 and the recent, more relaxed regu- latory environment has also impacted the MVPD market by fostering an environment for group ownership and technological development. Spe- cifically, the deregulatory climate facilitated the formation of large MSOs, which are able to improve operational efficiency through cluster- ing strategies; have better access to resources such as programming through their increasing corporate relationships with cable networks

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(i.e., vertical integration); and explore potential digital, interactive, and even telephone services via their improving broadband platform. Similar to the effect on broadcasters, the opening of media borders and commer- cialization made possible by the global political changes toward privat- ization and commercialization of media systems also led to the option of global diversification and the increase of programming demands and thus the expansion potential for MVPD firms such as cable networks.
Sociocultural and Demographic Changes
A number of developments in this area have influenced the MVPD mar- ket. The growing income disparity between different socioeconomic au- dience segments discussed earlier has elevated the competitiveness of MVPD firms, which are experienced in market segmentation strategies. More women in the workforce as well as increasing workplace diversity also point to the importance of programming content and scheduling flexibility, which are more feasible in a multichannel setting. The busy lifestyle of today’s families makes more valuable the benefits of on-de- mand services provided by cable and DBS services. Finally, the fast growth of two demographic groups—the Hispanic and African Ameri- can markets—has contributed to the value and development of Span- ish-language and African American–focused programming channels. Besides the established specialty brands such as Univision and Black En- tertainment Television (BET), mainstream networks like ESPN and HBO have extended their brands to include ESPN Deportes and the HBO La- tino channel to target these specific audience segments.
CHANGES IN MULTICHANNEL MEDIA INDUSTRIES
To describe the nature and state of competition in the MVPD industry, we again follow the framework depicted in chapter 5 with a review of five fac- tors that shape the competitive dynamics of a market: bargaining power of suppliers, bargaining power of buyers, threat of substitute products, threat of new market entrants, and rivalry among competing firms.
Bargaining Power of Supplier
In the context of the MVPD market, suppliers are the producers/suppli- ers that make available the MVPD contents like local origination and community access information, audio programming, electronic pro- gram guides, news, weather, sports, original programming, retransmitted broadcast signals, and syndicated, recycled program- ming. From this perspective, the main suppliers include information and audio services (e.g., TV Guide and XM), television syndicators (e.g., WB syndication), studio and independent producers (e.g., Universal Studio), cable networks and systems that produce original contents such as news, weather, public affairs, and sports (e.g., ESPN and CNN), and broadcast television stations. Because the audio and information

components of MVPD services are typically not the primary attraction for an MVPD service (at least currently), our discussion of the bargain- ing power of suppliers focuses on the other four groups.
Because most MVPD services were originally developed as an alterna- tive distribution system for retransmitting broadcast signals, historically studio producers and syndicators did not regard the MVPD market as a primary revenue source. Consequently, the exercise of supplier power has not been as evident as in the broadcast market. Also, because of the nu- merous sources of MVPD programming contents, diversity of MVPD buyers, and their specialized content preferences as a niche medium, there is less domination by a few content suppliers and thus less concentration of supplier power. In addition, the extent of vertical integration between MSOs, cable networks, and studio producers has somewhat neutralized the supplier–buyer power struggle in the market. For example, Time Warner, a major MSO, has ownership interests in movie producers New Line Cinema and Castle Rock Entertainment, news producer CNN, and even the sports teams Atlanta Braves and Atlanta Hawks. In fact, among the 339 cable networks at the end of 2003, about one third of them, with many producing their own original programming, are affiliated by own- ership with an MSO (FCC, 2004). The pervasiveness of vertical integra- tion between cable networks and MSOs actually characterizes the industry and very often changes the dynamics between many MVPD suppliers and buyers from competitive to cooperative.
As the multichannel industry continues to build its own identity, in- vesting more than $11 billion in original programming (Cabletelevision Advertising Bureau, 2004), the linkage between content suppliers and MVPD firms is becoming more strategic. In fact, the success of a content product is no longer dependent simply on generating above-average rev- enues in a particular business sector but also on enhancing other relevant products under the same corporate umbrella. In other words, it is also strategically beneficial for MVPD firms to carry affiliated networks or buy programs from their sister studios. Table 6.1 shows that most cable networks that offer more original programming and/or dominate primetime cable viewing are, in fact, owned by media conglomerates. An examination of the most popular cable networks reveals that they are ba- sically owned by two groups of media conglomerates: one group includes Time Warner and News. Corp., which have powerful MVPD properties along with production holdings, and the other group includes Disney and Viacom, which have powerful broadcast properties with production ca- pabilities. It is clear that the competitive strategies nowadays are corpo- rate and multilateral rather than segmented and vertical.
Another important negotiation power of suppliers that needs to be addressed is that of broadcasters because the carriage of broadcast sig- nals is an essential part of MVPD services. This is indeed a contentious issue amid the expansion of the number of cable networks and the ar- rival of terrestrial digital television that also needs multichannel car- riages. Historically, the broadcasters had more bargaining power over
cable systems when cable-only content was very limited. As cable con- tinues to invest in its own original programming, the power of broad- casters is lessening. Nevertheless, the broadcasters will still have a certain degree of countering power as long as there are differentiated el- ements that cannot be satisfactorily substituted by MVPD program- ming (e.g., the Super Bowl). Finally, it is important to view the relationship between television-broadcasting suppliers and MVPD firms from a corporate perspective, given the fact that many broadcast- ers have corporate owners that are also heavily involved in the MVPD market (e.g., Disney and Viacom); the broadcasters’ bargaining power may materialize as a means to advance other corporate interests.
A final note on the bargaining power of the suppliers is the potential of the pay-per-channel scenario (à la cart program pricing). Technologi- cal advances have made the offering of à la carte programming more feasible. That is, it is now possible for individual consumers to choose to pay for only the channels that they prefer to watch rather than paying by programming tiers. Industry practitioners argued that an à la carte pricing system would result in a restructuring of the cable-program- ming business that would harm consumers by reducing choice, elimi- nating programming diversity, and driving up prices (National Cable & Telecommunications Association, 2004). It is our assertion that such a fundamental change would place a substantial financial burden on the programmers. In other words, the entry barriers to the programming market would likely be raised because of the increased costs in product development and marketing. The need for additional resources (and greater bargaining power) might facilitate more mergers and acquisi- tions in this sector. The pay-per-channel system would also diminish the role of service providers and shift the “value” of the MVPD service to the programming packagers and other facilitators. As a result, competi- tion might heat up between different MVPD service platforms because they would become less differentiated.

Bargaining Power of Buyer

In the context of the MVPD market, buyers include audiences and adver- tisers. From the perspective of the audience buyers, their bargaining power resides in the investment of their “time” in the programming of- fered by MVPD services and the subscription or per-unit fee that they pay to the service providers. It is our assertion that MVPD audiences do not in general possess strong bargaining power over MVPD service pro- viders for the following reasons: (a) Though the audiences directly pay for MVPD services, the pricing structure of most MVPD services some- what insulates consumers from pricing sensitivity through package marketing; (b) the switching cost is relatively high once MVPD sub- scriptions have been established; © most MVPD products are differenti- ated and branded; and finally, (d) there are no substitutes for MVPD

products available in most local markets (note that both DBS and cable are considered MVPD products).
From the perspective of the advertising buyers, MVPD services have become viable commercial outlets over time. In fact, cable network viewership has grown steadily in recent years, largely at the expense of the major broadcast networks. Ad-supported cable had a prime-time audience share of 50.3% in 2003, versus a combined 44.8% for the four major broadcast networks. The growth in viewership has also trans- lated to increased shares of ad dollars as cable services garnered over 33% of total ad spending in 2003 (Cabletelevision Advertising Bureau, 2004). MVPD services, namely cable networks, are now a necessary communications channel for brand marketers because of their ability to target specific audience groups. The essentiality of MVPD services in de- livering defined market segments (e.g., Nickelodeon for children) and the fact that advertising revenue is not the only source of income for MVPD firms means that the bargaining power of advertisers is compar- atively less significant than in the broadcast market.

Threat of Substitute

Substitute products are different goods or services from outside of the MVPD market that perform similar functions. In this context, broad- cast content, video programming provided by local exchange carriers (LECs), Internet video, and home video sales and rental can be viewed as potential substitutes for MVPD services. In the case of broadcast signals, studies have shown that broadcast and cable television are highly substitutable (Waldfogel, 2002). Nevertheless, we believe that the substitutability is becoming moderate because many MVPD channels now offer highly differentiated, niche programming dissimilar to broadcasters’ more mass-appeal content. As for competition from the telephone sector, most large incumbent LECs such as Ameritech (now SBC) and Qwest, despite various attempts to offer video distribution ser- vices via existing copper telephone lines using very high-speed digital subscriber lines (VDSL), have exited the video business, thus presenting limited substitution threats because of unavailability in most local mar- kets (FCC, 2004). In terms of Internet video, notwithstanding the in- creasingly accessible real-time and downloadable online video, near broadcast-quality streaming video is still not widely available, making it a less direct competitor of MVPD services. Finally, the sale and rental of home video, including videocassettes, DVDs, and laser discs, do pose a certain degree of substitution threat for the premium and pay-per-view offerings of MVPD services. To counter such a threat, cable operators have aggressively invested in upgrading their infrastructure to allow for advanced video services such as digital video, video on demand (VOD), and even telephone services. In summary, MVPD services do face some degree of threats posed by a variety of substitutes; however, be-

cause of their continuous investments in original programming, differ- entiation, and technological development, MVPD firms have obtained some competitive advantages over their competitors from other sectors.
Potential Entrants
With the passage of the Telecommunications Act of 1996, the U.S. gov- ernment attempted to create an environment that encourages competi- tion from new entrants outside of the MVPD market. In this context, the potential entrants include LECs, broadband service providers (BSPs), electronic and gas utilities, and new DBS service providers (FCC, 2004). As mentioned previously, most LECs have decided to stay away from a pure video-programming business model or enter the market through comarketing with existing DBS providers. The LECs’ choice to concen- trate on expanding their broadband telecommunications services rather than video-programming products means limited potential addition of competitors from this sector. Another group of potential entrants, BSPs, on the other hand, have grown from simple local overbuilders to state-of-the-art services that offer bundled telecommunications ser- vices including video, voice, and high-speed Internet access. Neverthe- less, there are significant entry barriers for this group of contestants (U.S. General Accounting Office, 2002b). First, BSPs’ access to program- ming products has been difficult due to vertically integrated cable pro- grammers and unaffiliated programmers that make exclusive agreements with cable operators. Second, BSPs often have problems ac- cessing vital sports and regional news programming as a result of ex- emptions to the program access rules. Third, BSPs have difficulties obtaining franchises from local governments or gaining access to VOD equipment, public rights of way, and utility poles needed to expand their systems (FCC, 2002, 2004). As for potential entrants from the utilities sector, although some utility companies have engaged in the provision of video services through overbuilding incumbent cable systems, such services are not widespread. Though characteristics such as ownership of fiber-optic networks and access to public rights-of-way remove some of the entry barriers, in general, the entry by electric and gas utilities is limited mostly to rural areas where other telecommunications firms may not be willing or able to provide the full range of advanced services (FCC, 2004). Finally, the barriers to entry remain substantial for new DBS services. The economies of scale necessary to set up the satellite uplink and distribution system, required capital, access to program- ming, and even expected retaliation from the existing two established DBS services, DirecTV and DISH Network, translate to little incentive for a third DBS service.
Whereas there has been very modest threat of new entrants at the ex-
hibition stage (e.g., distribution systems such as MSOs and DBS ser- vices), we have witnessed a tremendous growth in the number of MVPD programming networks in the last decade. Today’s cable systems offer

an average of 70 analog video channels and approximately 120 digital video channels, with additional bandwidth to provide high-definition television, VOD, and Internet access services. Through this expanding capacity, more MVPD programmers have entered the market, reaching a total number of more than 330 networks by the end of 2004 (by con- trast, most local markets can sustain only one or at most two cable sys- tems because of the extent of investment to wire a community). Nevertheless, it is quite a challenge for new programming networks to survive without the carriage by leading MSOs because the top four MSOs control as many as 56% of nation’s cable subscriptions (FCC, 2004). The extent of vertical integration between MSOs and cable net- works is therefore one of the most significant barriers to entry for stand-alone networks. In essence, the MVPD market is at a stage of de- velopment that represents a maturing industry with relatively high en- try barriers, whereas the competitive dynamics materialize in the rivalry within the market.