CBS strategy to compete with the popular radio network NBC was to

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1 Introduction of CBS

2 Market analysis

3 Value Chain of CBS

4 Management and Strategies

Attachment

List of Illustrations

List of tables

List of abbreviations

List of references

1 Introduction of CBS

In the following the company of CBS Cooperation with a focus on CBS Television Network will be explained. After that the market position and therefore the revenues will be examined.

The CBS Cooperation was organized in Delaware in 1986 and operates in five main businesses. The Cooperation sees itself as a “mass media company that creates and distributes industry-leading content across a variety of platforms to audience around the world”[1], which are Network Programming, Network News, Local Television, Radio Stations, Cable and Publishing. The business can be divided in Entertainment 60%, Cable Networks 16%, Publishing 6% and Local Broadcasting 20%. The acronym CBS stands for Columbia Broadcasting System.[2] The cooperation owns 29 TV Stations, 16 of them are part of CBS Television Network which comes down to more than 200 local affiliates.[3]

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Table 1-1 CBS Cooperation Business Parts

Source: own illustration based on CBS Cooperation (2015b)

In the following paper the focus will be on the CBS Television Network which is a part of the Entertainment sector of CBS Cooperation.

The Network was founded in 1928 by William Paley who purchased 16 independent radio stations. Paley united these 16 stations under the name of Columbia Broadcasting System.[4] CBS Television Network is built out of CBS Entertainment, CBS News and CBS Sports. The main task is to schedule news, public affairs broadcasts, sport and entertainment for the program to more than 200 domestic affiliates, they include 16 of the Company´s owned television stations, which are also operated by the company. The CBS Entertainment part of CBS Television Network is basically responsible for the programming which is presented by the network. This also involves the acquiring, developing and scheduling of these. The programing includes primetime comedy and drama series, reality- based programming, specials, children´s programming, daytime dramas, game shows and late night programs. CBS News is a worldwide operating news organization which provides the TV network and as well the Radio Network with news, public affairs and special reports. Programs which are produced are e.g. 60 minutes, 48 hours mystery, CBS Evening News with Scott Pelly, CBS This Morning and Face the Nation. The sport part of the Television Network concentrates on certain games from the NCAA Division Men´s Basketball Tournament, the PGA Golf Tour, PGA Championship and college football and basketball games. Besides that CBS Television Network was able to ensure the rights for broadcasting the AFC through to the season 2022 and as well for the super bowl in 2016, 2019 and 2022.[5] Today the network has more than 200 television stations and affiliates reaching every home in the United states.[6]

In the following the revenue of CBS Cooperation will be examined. For CBS Network the Cooperation does not publish any specific numbers so the revenue and the market position of the Cooperation will be looked at. Therefore, that CBS Television Network is a part of the entertainment sector of the cooperation, this sector will be the focus. In general, the network advertising revenue in 2015 rose 1% despite the fact of broadcasting fewer sporting events.[7] In the past few years, the revenues increased from $4.12 billion in 2008 to $4.8 billion in 2013.

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Illustration 1-1 Revenues by Segment CBS September 2015

Source: CBS Cooperation (2015b): CBS Cooperation Reports Third Quarter 2015 Results in: Q§ 2015 CBS Cooperation Earning Release, http://investors.cbscorporation.com/phoenix.zhtml?c=99462&p=quarterlyearnings 22.12.2015.

The high growth in 2013 came reflecting the benefits of Super Bowl broadcast, more than 50% of the company’s overall revenue accounts from advertising.[8] In 2015 the revenue were $3.3 billion. Compared to the same period one year before the entertainment sector rose 1% to $1.93 billion. The operating revenue for entertainment in the third quarter was $339 million, which is a plus of 12%.[9] However, the broadcasting network is still the most watched network during the season of 2014-2015. With programs such as Mom, The Good Wife and the Mentalist in scripted shows and 60 minutes, undercover boss and 48 hours in unscripted the viewership was growing lately. Especially through its popular shows including The Big Bang Theory and NCIS and the mix of sports programming. That means that the viewership grew and will probably growth during the next seasons.[10]

2 Market analysis

In the following the American TV Market will be explained including the structure of the market and the user behavior. In connection with the topic of the present paper, the competitors of CBS will be shown.

There are three big differences when it comes to television in the united states of America. Which are represented in broadcast networks, cable networks and premium networks. First of all the broadcast networks have a national audience and can be accessed for free all over the country. They air through local TV station with a variety of programming. The network program is mostly shown during prime time or during special times around the day. Even the broadcasting TV can be accessed for free most Americans watch the programs via a third party cable or satellite carrier. This is one of the source of revenue for broadcasting networks. They earn a retransmission fee, which is compared to adverting fees really low. The on-air advertising is the primary source of revenue for the broadcasting networks.[11] Even when there is no difference for viewers between broadcasting and cable the business model is different.[12] One difference is the regulatory the broadcasting networks underlie. In opposition to broadcasting TV, cable TV has the “license of unexpurgated language, nudity and bloody violence“[13]. This is caused through the establishment in the late 1940s, where broadcasting TV was devised “to reach broadest possible audience in order to sell sponsors´ products (…) Broadcast TV trades in a good world filled with good people, a world in which evil is an aberration”[14]. Cable networks are more targeted and have a more specific audience than broadcasting television networks, but they can not be accessed for free, they require a subscription. From the over 100 cable networks Time Warner and HBO are very well known. The primary source of revenue are the subscription fees which is in general charged per month as well as advertising fees, which are compared to broadcasting adverting cost lower. Premium networks such as CBS Showtime are not sold to customer in a bundle of different networks, like e.g. lifetime, they must be purchased separately at additional costs.[15]

In connection with broadcasting it is important to understand the business model of the affiliates for television in the united states. Affiliates are local TV Stations which are usually linked contractual to one of the networks. They are owned by a company, even as the network has some own television stations, the regulation of the FCC limits the numbers of network-owned stations.[16] The networks bring their programs through the affiliates to the consumer. Other than O&O, owned and operated Affiliates which are owned by the parent network, local television stations deliver shows from networks like ABC, CBS, and NBC as well as local news, syndicated reruns and talk shows to the consumer. Justified is this because local stations own the licenses to the airwaves which broadcast TV signals.[17] But the stations, which are owned by the networks, are getting bigger, giving them the possibility to be more independent from the local television stations.[18] Nevertheless the affiliates fee are one of the networks revenue source, lower than the revenue from advertising but for example in 2010 the total affiliates fee was $32 billion high for the networks.[19]

Different from that the public broadcasting is independent and understands itself as “America´s largest classroom, the nation´s largest stage for the arts and a trusted window to the world”[20]. All channels are connected with each other. Firstly through the Cooperation for Public Broadcasting, secondly through the Public Broadcasting Service, which is the satellite carrier who connects all public TV Stations and on the third hand the Association of Pubic Television Stations, which helps devolving and acquiring the programming.[21] The public broadcasting is mainly financed through donation and government subventions.[22]

Since the second world war the television became the most popular medium in the united states.[23] The biggest three broadcasting companies, ABC, NBC and CBS hold up to the 1970ies a market share of almost 90%. In 2011 the numbers dropped for the first time in 20 years. Only 96,7 % of the American households have a television set. One year before that the number was by almost 99%. There are two reasons according to Nielsen. One is that some low-income households are not able to own TV Sets any longer, the other is that young people use mainly their laptop to view shows and programs from the internet[24]. Still the media usage is the highest for TV with 255 minutes per day. Although the mobile use is rising fast in the last years, from 48 minutes in 2011 to 171 minutes in 2015. The internet usage was stable during the last years. In 2011 the usage was by 153 minutes and since 2014 stable at 142 minutes per day.[25] Especially the online TV sector saw a big growth from 69,4 million in 2011 and only 44 million in 2009 to 99,2 million consumer in 2015, which is more than 50% plus in the last 6 years.[26] Referring to the online TV usage its also important to have a look on the streaming usage. According to a survey of Business Insider in the third quarter of 2015 81% of the respondent’s used YouTube, 79% watched shows and programs through Netflix and 37 % watched Hulu.[27]

Also interesting is the user behavior when it comes to time-shift viewing or the usage of multiple media platforms at a time. The usage of TV is especially high for high income households, both live and time shift, is monthly the highest for TV than any other media device. Lower-income households use the most media across all media platforms.[28]

When it comes to specific programs and shows especially in the news sector there are different numbers of viewers through the networks. During the morning news the networks saw an overall growth of 2%. The evening newscast from ABC, CBS and NBC increased 5% from 2013 to 2014. When it comes to political talk shows like Face the nation, 8.6 million people watched these, which is a growth of 2% in 2014, ABC´s This week resisted a plus of 7% while NBCs meet the press lost 4% of its viewer.[29]

In the week of December 14th, the network CBS was with five different programs in the Top 10 of Nielsen’s Prime Broadcast Network TV in the United States. With a Rating of 10.4 and 17.226.000 viewers the Big Bang Theory was the second best show during this week, followed by the CBS programs NCIS with a rating of 9,6 and 15.532.000 viewers, 60 minutes with 7.7 and 12.697.000 viewers, NCIS New Orleans rating of 7.6 and 12.092.000 viewers and Adele live in New York with rating of 6.2 and 10.268.000 viewers. These shows were beaten by NBCs show NBC Sunday night Football with a rating of 10.4 and 18.113.000 viewers like the following illustration shows. Unlikely the networks ABC was not under the top 10.[30]

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Illustration 2-1: Top 10 list for Prime Broadcasting Network TV- United States

Source: Nielsen (2015): Top 10 list for Prime Broadcasting Network TV- United States, http://www.nielsen.com/us/en/top10s.html, 1.1.2016.

With an annual revenue of $41 billion and a growth of 1% the television industry continues to experience a strong completion from the digital cable and satellite industry.[31]

As CBS is described in the first chapter, in the following the main competitors in broadcasting television will be examined.

ABC was established 1943 and is part of the Disney Cooperation.[32] The average viewer is 52 years old.[33] With Programs such as Dancing with the stars, The View, Jimmy Kimmel Live!, and ABC studio production such as Castle, Once upon a time, Grey´s Anatomy and also broadcasting the Oscars, the network shows its wide range of programing.[34] The network generates the main source of its revenues through the sales of time slots to advertisers. The total revenue in the second quarter of 2015 was $1.8 billion. “The (ABC) broadcasting business had an operating income of $302 million, a whopping 90% rise over its operating income for 1Q14. This rise in operating income was driven by an increase in affiliate and advertising revenue and higher program sales to third parties “[35]. Strategically the majority of the program is produced under the ABC studio label. The ABC Studios create around 85% of the programs which are shown through the network.[36]

The Television Network NBC is owned by NBC Universal a media and entertainment company with a portfolio of different networks. NBC Universal is a subsidiary of Comcast Corporation.[37] Comcast reported in October 2015 that the revenues from the Broadcasting Television segment increased with 11.3% to $2 billion compared to the same period one year before with $1.8 billion.[38] With shows like America´s Got Talent, the Biggest Loser, Heroes, Law and Order and Blacklist and Jimmy Fallon or the Ellen DeGeneres Show,[39] NBC reaches viewers with a average age of 50 years. Which is among the big three networks the youngest average user age.[40]

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Illustration 2-2: Primetime Broadcast Network Viewership

Source: Lopez, M.H. (2013): What Univision´s milestone says about U.S. demographics, http://www.pewresearch.org/fact-tank/2013/07/29/what-univisions-milestone-says-about-u-s-demographics/, 1.1.2016.

The networks are as far as possible particularly comparable through their news programs. Each one of them has its own news magazine or show which informs the audience about the latest news in politics, public affairs and even the weather. In the last decades the differences between the news were too small to notice. The audience had to have a very close look to see the differences. But since the influence of cable and the internet the networks and even the public broadcasting try to “distinguish themselves by picking different stories and placing them in different order”[41]. This is not just a matter for the evening news, even in the morning where ABC and NBC have a program of light talk and cooking segments, CBS comes up with a new show which promises more hard news than the other two.[42]

[...]

[1] CBS Cooperation (2015)

[2] cf. CBS Cooperation (2015a), p.4 ff.

[3] cf. CBS Cooperation (2015c)/ CBS Cooperation (2015a).

[4] cf. CBS Cooperation (2015c).

[5] cf. CBS Cooperation (2015a) p. 3f., 19f.

[6] cf. CBS Cooperation (2015c).

[7] cf. Illustration 2-1.

[8] cf. Forbes (2015).

[9] cf. Illustration 2-1.

[10] cf. Forbes (2015)

[11] cf. Pisharody, A. (2013) p. 5ff.