Broadcasters vs MVPDs: economic effects of digital transition on television program supply

Abstract

PurposeAlthough FCC policy has mostly focused on broadcasters, the digital transition of television has involved a number of other players, notably cable television, DBS, and other multi‐channel video providers (MVPDs). What have been the economic effects of this transition on these various industry players and on viewers? The paper aims to answer this question.Design/methodology/approachThis paper assembles an historical database to compare changes over time in consumer spending, television advertising revenue and related economic data extending back to the 1950s.FindingsThe authors show that non‐broadcast suppliers of TV programming, especially cable operators, have been able to take much greater economic advantage of the digital television transition than have broadcasters. Cable and DBS systems have used digital technology to greatly expand the amount of programming available and to more efficiently price discriminate on the basis of program quality – including the direct sale to consumers of broadcast and other HD programming. The result has been rapidly rising cable and DBS revenues since the mid‐1990s, and a general shift from advertiser to direct payment support for television services. Overall, digital transition has enhanced the economic viability of cable and DBS delivery, and decreased that of broadcasting. It is evident that consumers have much higher quality and variety of programming available as a result, though usually at higher prices.Research limitations/implicationsThe statistical analysis of this paper has been broad. Other factors have undoubtedly affected the aggregate trends.Originality/valueThe overall pattern of television industry trends makes evident that FCC digital conversion policies have worked to the disadvantage of the traditional broadcast model.