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The Growth of Communications Media

I define ''communications media" as all of those delivery systems through which information and entertainment are transmitted to and among businesses and consumers. These include traditional print media (newspapers, magazines, journals, etc.), broadcasting, cable television, satellites, and traditional and newer wireless forms of telephone service. Historically, these various media occupied somewhat independent markets in the United States. The print media provided information and advertising aimed at specialized national markets or at decidedly local markets. Radio broadcasting provided entertainment services for which it had little direct competition other than records, but it competed with print media in disseminating local and national news. When television broadcasting emerged, it began to offer entertainment that competed with motion picture theaters, but it too became an important distribution medium for national and local news. Cable television developed as a simple form of television-broadcasting retransmission, but—when allowed to develop without regulatory controls—rapidly became a medium for distributing a wide range of entertainment and information services. More recently, direct satellite transmissions have begun to compete with cable television and broadcasting in the distribution of national entertainment and information services.

Virtually all of the above media have developed with at least some form of advertiser support. In the case of cable television, it was the FCC's decision to allow cable operators to import distant advertiser-supported signals that provided the impetus for cable systems to expand into large urban markets and to increase their channel capacity. These expansion decisions, in turn, facilitated the development of new basic cable networks that were also supported by advertising.

The telephone industry, on the other hand, has traditionally been supported by direct customer access and usage payments. The only source of advertiser support for traditional telephone carriers has been from the publication of Yellow Pages directories. This reliance upon direct customer support was dictated by the nature of the service: two-way switched voice communications. It would have been difficult and disruptive to have advertisements interspersed with these conversations. However, with the development of computer connections through modems or local-area networks, the delivery of information and entertainment services over telephone circuits became possible. As with other communications services (other than voice telephony), customers may now be offered a choice: pay for these services directly, accept advertisements in them, or accept some combination of the two. For example, electronic Yellow Pages may be advertiser supported, require a subscriber usage charge, or both. Similar options may be available for electronic want ads, home-shopping services, or even electronically delivered financial services.

The role of advertising revenues in the growth of the various media is evident in Table 1. Since 1970, there has been substantial growth in all media that offer advertiser-supported content. Video markets, in particular, have grown substantially, but even the print media have enjoyed an expansion of total revenues from advertising and direct circulation fees. In recent years, multichannel video media, such as cable television and direct broadcast satellite (DBS), have grown more rapidly than traditional radio-television broadcasting. In the next few years, as additional DBS services and even terrestrial multichannel wireless systems are built, video service revenues are likely to continue to grow, supported by both advertising and direct consumer outlays.

For more than a decade, regulation restricted the growth of pay or subscription television services in order to protect off-the-air broadcasters. This, in turn, limited cable television to the retransmission of advertiser-supported off-the-air television broadcasting. This repressive regulation was slowly eliminated by the courts, the FCC, and the Congress in the period from 1977 to 1984, spurring cable to grow very rapidly and to expand its channel capacity.

Even though cable subscription revenues grew very rapidly, however, broadcasting revenues continued to expand, in part because cable retransmissions made marginal UHF stations more viable, a result predicted by academic studies of the medium.2 Thus, cable subscription growth induced further growth of advertiser-supported broadcasting. But even though cable operators would be able to survive and even expand by relying solely on direct subscriber revenues, they also found that they could now tap advertising markets to grow even more rapidly. Direct cable television advertising expenditures began to grow very rapidly in the 1980s, increasing from virtually nothing in 1980 to nearly 20 percent of total cable revenues in 1993.

TABLE 1 The Growth of Communications Media Revenues Since 1970

Year

TV Homes (million)

TV Advertising Revenue (billion $)

Cable TV Homes (million)

Cable TV Subscriber Revenues (billion $)

Cable TV Advertising Revenues (billion $)

TV/Cable Revenues per TV Household ($)

Newspaper & Periodical Circulation Revenues (billion $)

Newspaper & Periodicals Advertising Revenues (billion $)

Telephone Industry Total Revenues (billion $)

Telephone Industry Directory Advertising (billion $)

1970

58.5

3.6

5.1

0.3

62

3.0a

7.0

19.4

0.7

1975

68.5

5.3

9.8

0.8

77

5.3a

9.7

33.4

1.1

1980

76.3

11.4

17.5

2.4

149

9.2a

18.1

59.8

2.3

1985

84.9

20.3

36.7

8.8

0.8

249

13.2

30.9

92.3

2.3

1990

90.8

26.8

51.7

17.2

2.5

323

17.9

40.1

114.6

2.6

1993

93.9

28.7

57.2

22.2

4.0

348

20.3

41.2

128.7

2.9

(a) Estimated by the author from Census data.
SOURCES: Paul Kagan Associates; Statistical Abstract of the United States; FCC, Statistics of Communications Common Carriers.



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