1. 0 Economics and Management of Communication Business Prof. David Bogi LUISS - a.a 2007-2008

2. 1 Economics and Management of Communication Business Prof. David Bogi Birth of television service and its evolution

3. 2 Birth of TV service and its evolution  The birth of TV service –Like any other goods or services production, the TV industry got an economic dimension as soon as processes of exchange rose developing a market where some actors where ready to buy products or services from other actors. –The TV industry can be defined trough the concept of broadcasting: a system of transmission based on the diffusion and the electronic reception (trough a terminal) of images and/or sounds doomed to a public (target to an audience). TV production Definition of Broadcasting: System of transmission based on the diffusion and the electronic reception (trough a terminal) of images and/or sounds target to an audience

4. 3 Definition of Broadcasting: System of transmission based on the diffusion and the electronic reception (trough a terminal) of images and/or sounds target to an audience Sounds and images Transmitted trough hertzian waves RADIO TV AUDIENCE –Broadcasting traditionally is a category only applied to the on air transmissions and it regards to two different kinds of production: the radio production the TV production these two techniques transmit a different kind of information (just sound the first one, images and sounds the second one) received by different electronic devices even if they are both based on the same business model Birth of TV service and its evolution

5. 4 –The definition of broadcasting let us distinguish between radio/television activities and telecommunications activities. –Telecommunications are based on the transmission of sounds and images but do not contemplate the idea of a public. They are indeed based on a one to one communication, this way excluding the idea of an active actor (the broadcaster) that transmit a service (composed by sounds and images) to an audience of passive users. Birth of TV service and its evolution

6. 5 –Moreover this definition helps to distinguish the radio and television activities from other sectors which could be similar for conveyed type of information. –For instance music and movie industries share the concept of public but they do not cast any piece of information whereas they reach their publics trough physical device (for instance the screening of a film in a theater). –TV + RADIO, Music and Cinema industries share the same target audience for their products but do not share distribution channels:  TV + RADIO: hertzian waves  MUSIC: retail distribution  CINEMA: movie theaters Birth of TV service and its evolution

7. 6  The TV production –The television production can be divided in 3 main historical phases: 1.The prototypical phase: the TV is still a technology to develop. The first experiments of images broadcasting to a distant receiver are tested; 2.The experimental phase: TV production is doomed to a public and can therefore be consider a proper broadcasting activity even if a productive standard still does not exist. This phase of the TV industry is mainly a support of the hardware manufacturers (TV sets industry), a specific TV market still has to come; 3.The commercial phase: a productive standard has been chosen and TV production is doomed to a specific market and it has become a source of revenues. Birth of TV service and its evolution

8. 7 1.The prototypical phase  The concept of television based on the transmission of images to a remote receiver was predicted since Alexander Bell’s discover of the telephone in 1875.  Only Maurice Leblanc’s invention of a transmission and reception system based on a mechanism of reading and scanning images gave to the television project some bases to start from.  The first projects of scanner where based on a mechanic solution realized trough vibrant mirrors on an idea of Leblanc himself. Another mechanic approach was developed by William Lucas who used a system based on turning lenses. Both systems were too complex to be implemented and remained a theoretical exercise. Birth of TV service and its evolution

9. 8 1.The prototypical phase  In 1884 a German student named Paul Nipkow proposed a simpler solution based on two turning disks pierced in spirals. The first one was the transmitter whereas the second one was the receiver. This system was to complex to be carried out but it was a fundamental hint for the following studies.  The turning point from a research perspective was represented by the discover of two new systems in 1925: a) John Logie Baird in Scotland developed a model based on the same Nipkow disks; b) Francis Jenkins in the US experimented a new system not based on the one developed in Germany 40 years before.  Television became reality even if, in comparison to the current definition, both systems had a disappointing result in terms of images definition, respectively 30 and 48 vertical lines instead of the present 525 and 625 lines. Birth of TV service and its evolution

10. 9 2.The experimental phase  In 1928 the first TV station appeared in the United States.  In may 1928 General Electric started its regular broadcasts (Tuesday-Thursday-Friday form 1 p.m. to 2 p.m.) using a new system developed by its engineers and not based on Nipkow disks.  Jenkins started broadcasting in July 1928 from the W3XK station of Washington D.C.  These two experiences together with the very positive results recorded by the radio business started an authentic TV rush in the United States in order to develop the first experimental stations (18 by the end of 1928). Birth of TV service and its evolution

11. 10 2.The experimental phase  In Europe BBC began its transmissions in 1929 using Baird’s system.  The only income for the first American TV broadcasts came from the sale of TV sets. This business model pushed the first broadcasters to act as device producers as well and, on the other hand, the device producers to enter in the broadcasting business.  Even in the United Kingdom TV experimental broadcasts were financed by Baird himself trough the sales of TV Sets.  TV sets sales were not sufficient to finance TV shows both in Europe and in the United States. Birth of TV service and its evolution

12. 11 2.The experimental phase  TV sets sales were not sufficient to finance TV shows both in Europe and in the United States. The reasons for this missed take off were several: –Radio was still booming –The Big Depression of the thirties began –TV was still in an experimental phase and images had a really low definition  The organizations supposed to regulate and to license the broadcasting frequencies (the FCC in the US and the Post Office in the U.K.) judged the technology not ready to shift to the commercial phase.  In 1929, Philo Farnsworth's Image Dissector camera tube transmitted its first image, using a electromechanical system. The first live human images was transmitted by a television system. Birth of TV service and its evolution

13. 12 2.The experimental phase.  In 1932, BBC launched its own regular service using Baird's 30-line electromechanical system, continuing until 1936 when the BBC began broadcasting in Marconi-EMI's 405-line standard  In 1939, RCA demonstrated an all-electronic television system at the New York World’s Fair and developed the USA's first-ever television test pattern.  The FCC (Federal Communication Commission) introduced the National Television System Committee (NTSC) in order to set a common standard while in the US 23 experimental TV station were broadcasting at the time.  The Federal Communication Commission authorized the start of commercial television transmission on July1, 1941. Birth of TV service and its evolution

14. 13 3.The commercial phase  The commercial phase is the very moment the television production was finally put on a specific market, whether it is the advertising market (commercial TV) or the monopolistic Government-run market as in Europe (public TV) or the end user spending market (pay TV) as in a following development of the American and European market. In other words it is the phase where software (TV programs) is not just a promotional content driving the hardware sales (TV sets) but can find its own way to an autonomous market and thus can become a clear source of revenues. –In the United Kingdom the commercial phase began in 1938 when BBC opens the world's first regular high-definition television service and the Government imposed a television license fee on owners of television reception equipment. –In the United States it began in 1941 when NBC and CBS aired their first broadcasts selling ads to sponsors extending to the new medium the business model used for the radio. Birth of TV service and its evolution

15. 14 3.The commercial phase. –In both continents though the commercial phase began only after the end of of the Second World War. –The first American TV networks took shape just after 1953, their programming was extended to more slots, the TV consumptions grew among Americans and the sponsors began to plan more and more the new mean. –The economic boom that sprang in the USA in 1956/1957 became a TV networks boom as well. TV station bloomed passing from 108 to more than 500, households overtook the 40 milion (85% on total households) and advertisers’ TV spending grew till 1 billion US$. –In Europe Television broadcasting was suspended from 1939 because of the Second World War. In Great Britain the resumption of broadcasting was in 1946, in France in 1949, in Germany in 1952 and in Italy in 1954. Birth of TV service and its evolution

16. 15 3.The commercial phase –The evolution of the TV industry has followed different paths in each nation. We can point out two main paths, the European path and American one. These two approaches are the by- product of two different industrial models that appeared almost at the same time: The commercial model appeared at first in the United States; The public model appeared at first in UK and then in all the European continent. –The difference between the two models is linked to the birth and introduction of the TV sets (and radio sets before it). –It was not technically feasible to broadcast encrypted signal at the time also because this kind of transmission would have obliged the viewers to buy a decrypting device. Thus all over the world was developed a universal free to air service easy to access for everybody. Birth of TV service and its evolution

17. 16 3.The commercial phase –There were two possible paths to recover the costs: 1.National governments intervened on the market with a public financing that was justified by the political, economical and social relevance of the new media. This approach end up creating a TV business that did not respond to the market rules. 2.Private organizations paid to convey their messages trough television. Advertisement revenue provided the funding for most privately owned television networks and linked the television industry to a parallel market, the advertisement one. –Two different models were beginning to shape up: 1.the commercial TV model, based on the competition among TV enterprises funded trough advertisement 2.the public model, initially based on a monopoly funded by the government trough a license fee paid by the TV set owners. Birth of TV service and its evolution

18. 17  Commercial phase –The 2 different financing models supporting TV production: USA first and Europe afterwards 1. TV programming is a mere support to TV set sales 2. Advertising does not cover TV programming costs (Europe) Birth of TV service and its evolution

19. 18 3. The commercial phase –This approach followed the structure of the radio industry. The shared technological and productive background between the two different means made immediate the extension of the consolidated radio business model to the developing TV industry, giving them a common economical structure. –In this perspective the structural diversity between the American TV industry and European one mirrored a pre-existent diversity in their national radio industries. –The radio has risen in the United States and in Europe at the same time. At the very beginning the radio stations were owned or controlled directly from the receivers producing industry. The concentration of the industrial production of the devices and the programming transmission by unique actor was due to the fact that programs were the unique driver to buy a receiver. Birth of TV service and its evolution

20. 19 3. The commercial phase –The software component (programs), which was the true pulling element of the hardware one (receiving devices), was considered a promotional cost at the beginning. This cost was a must and it was totally up to the electronic industry. –The aired programs were indeed supposed to spur the receivers’ sales in order to let the manufacturers take advantage of learning curves, economies of scale and the consequent price cut. This would have developed the market making easier for the manufacturer to gain new revenues and reach the breakeven point. –In the United States the presence of a spread consumer goods industry searching media to promote sales sparked and strengthened the development of the radio industrial activity. Birth of TV service and its evolution

21. 20 3. The commercial phase –Mass market industry was the first to realize the new media’s potential seeing its capability to reach the entire population including the not alphabetized part of it - which was not contactable through the press – –For this reason destined an important part of its media spending to plan the struggling commercial TV. –Therefore advertising resources were the key element that made possible to new subjects not linked to the receivers’ manufacturers to enter in the sector. This was the beginning of the independent development of radio broadcasting in the United States. –In Europe the radio business model began to differ from the American one just after its introduction. Birth of TV service and its evolution

22. 21 3. The commercial phase –These differences were due to a different economical, social and cultural context: 1.The dimensions of the national markets and - as a consequence - of the European electronic enterprises were smaller than the American ones. These limited dimensions did not immediately make possible the necessary scale economies to cut the price of the receivers and the necessary financial resources to fund radio broadcasts.. 2.The consumer goods European industry was not developed enough to invest in advertisement. –These factors originated the European radio receivers market’s crisis. To end the crisis governments intervened in order to grant sufficient funds to broadcasters. Through this crisis the public broadcasting model based on a license fee paid by receivers’ owners shaped up. –During the post-war period regular television transmissions began both in Europe and in the United States, their organizational and business model trod the ones developed for radio broadcasting during the previous decades. Birth of TV service and its evolution

23. 22 3. The commercial phase –For those reasons the commercial model developed in Europe just in a following phase in comparison to the United States. This model rose in Europe when the economic development (productive and distributive) reached a level able to supply the required advertisement resources and when the cultural, political and ideological context became more favorable. –The rise of the commercial model was realized in different timings and models in Europe: in the United Kingdom the first commercial network was on air in 1955, in Italy in 1976, in France and in Germany 1984, in Spain in 1989. –While in Italy the passage to the commercial model was not ruled by the government and was chaotically driven by subjective interpretation of the legislative blank spots, in other European countries the new model was introduced trough a clear roadmap composed of spectrum licenses granted to the private actors according to transparent plans and auctions. Birth of TV service and its evolution

24. 23 3. The commercial phase –The development of the commercial model in Europe was therefore different in the diverse European country and in comparison to the United States. –Both in the commercial and in the public model the consumers of the product – the viewers – do not coincide with its acquirer. Because of this peculiarity often TV products and programming composition do not answer to the viewers’ needs. This phenomenon increases the distance between the demand and the offer of public broadcasting. –This unfaithfulness to the viewers of the public TV offer and – even if just partially – of the commercial one made possible the birth of the pay TV model, transforming the viewer from simple consumer to consumer and buyer at the same time. The viewer becomes a broadcaster’s costumer and directly pays the enterprise to access the programs. This model presumes a conditional access system (CAS) in order to distribute the content just to the users endowed with a receiver and that paid the subscription fee. –The pay TV model has developed when the number of viewers willing to pay directly their TV programs’ consumption rather than watching public or commercial TV, has become relevant and sufficient. Birth of TV service and its evolution

25. 24  Commercial: PAY TV model Audience = consumer who pays to have access to TV programs -Decoder -Selective broadcasting USA 1972: HBO France 1984: CANAL Plus Birth of TV service and its evolution

26. 25 3. The commercial phase –The Pay TV business model was launched in the United States in 1972 when HBO (Home Box office) aired the first encrypted film Sometimes a Great Notion, starring Paul Newman and Henry Fonda. –The first European media actor to start a premium pay television was Canal Plus in 1984. –The American advantage for what concerns timing and relevance was due to several factors linked to the intense competition between the commercial networks. The competition emphasized the negative aspects of their programming: overwhelming advertising schedule; low quality broadcasts; focus shifted on the few slots capable of collecting as many people as possible. As a consequence of this, more and more households were ready to pay directly for their TV consumption (end user spending). –The reasons for the European delay on pay TV can be explained by the different configuration of the system. The public television system is already funded by viewers and thus the ads in programs are either limited or absent. Moreover the late introduction of commercial TV in Europe recently widened the offer. –We can describe the different evolution – structure wise and time wise - in Europe and in the United States using the concepts and the instruments given by the theory of sector's transformation cycle. This theory describes and deduce a sector’s dynamics isolating a rundown of stages that mark supply and demand. Birth of TV service and its evolution

27. 26  Commercial: PAY TV diffusion: In the US market Pay TV was spread 10 years before Europe. EUR - Competition among TV newtork causes: Advertising overachieving, BDC concentrated in restricted timing slots, poor programming quality - People willing to pay for television consumption are constantly growing USA -Strong Public TV service financed by public licence fee - Recent and fast Commercial TV growth Birth of TV service and its evolution

28. 27 3. The commercial phase –The stages that are have marked the demand are analyzed according to two different variables: 1.Quantitative variable that defines the product/service consumption degree on the total potential demand and varies in a range from a minimum represented by an elitist consumption (a narrow group of consumers) to a maximum represented by a mass consumption (market saturation). 2.Qualitative variable that defines the segmentation degree of TV consumption in terms of age, wealth and gender and cultural models. This variable distinguish two categories: undistinguished homogenous consumption and segmented consumption. This last one differs on one or more of these dimensions. Birth of TV service and its evolution

29. 28  TV Demand: quantitative Defines the degree of diffusion of TV consumption with respect to the potential demand and ranges between: qualitative Measure the segmentation of TV consumption in age, wealth, sex group. DEMAND changes according to a set of variables: Elìte Consumption Segmented consumption Mass consumption MIN MAX Homogenous consumption Birth of TV service and its evolution

30. 29 3. The commercial phase –The features of the offer are linked to a complex system of variables like: market structure productive structure technological component –The different business model is the dimension that marks and influence the TV offer and that better allow us to highlight the differences among the different models presented so far (for instance: public license Vs advertisement or subscription). OFFER consists of a mix of variables but Financing rules Marketproductiontechnology Financing: public subscription advertising pay tv subscription Birth of TV service and its evolution

31. 30 3. The commercial phase –We can show the evolution of the American and European TV sector focusing on this last dimension and putting in a matrix the two typical stages of supply and demand THE EVOLUTION OF THE AMERICAN TV SECTOR Table 1.1 1 2 3 4 5 5 5 Birth of TV service and its evolution

32. 31 3. The commercial phase –The analysis of these two different paths of development gives evidence for two fundamental considerations: 1.There are differences of timing and structure between each country’s TV markets 2.Some deep common trends emerge in diversity –To analyze the TV activity is therefore necessary to adopt a double perspective that must be both universal and partial and that follows a common economic logic applied to the specific context of each nation The evolution of the European TV Sector Table 1.1 1 23 4 5 6 78 88 consumptionPublic TVCommercial TVPAY TV Elite homogeneous 1936-54 BBC, TF1, RAI, ARD 1984-89 Canal+, BSkyB, Premiere, Tele+ Mass homogeneous 1961-66 RAI2, A2, ZDF, BBC2 1980-86 Canale5, Channel4, La Cinq, RTL 1992-96 Elìte segmented 1991-92 Arte, Euronews 1995-97 MTV Europe 1998-99 Mass segmented 1998-99 NBC, CBS, ABC 1998-99 1 2 Birth of TV service and its evolution

33. 32  The product of the TV company –The company is an economic institution designed to exchange or provide goods and/or services to consumers. The company related economical phenomenon can be divided in two macro dimensions: the productive phenomenon (internal) that transform the factors and the raw materials in goods and services with an economic value and the exchange phenomenon (external) that buy factors and sells the produced goods and services. –TV company core activities can be divided in 4 main functions: 1.Acquisition, the function that acquires the production factors; 2.Production, the function that rework and assemble the acquired components; 3.Distribution, the function that distribute the product to the final consumer; 4.Sales, the function that sells items to the final consumer. Every company goal is to earn profit and create added value (the difference between the value of goods and services and the value of the productive factors to make them). –Each company can be classified and included in a precise sector according to its kind of offer in terms of product and services. Each sector has its own structure and economic logic. Moreover each sector tend to coincide with a product and it is built on the demand and the offer of a considered product –To understand the economics features of broadcast tv is therefore necessary to define which is the product or service offered. Birth of TV service and its evolution

34. 33  The 4 main elements of TV company core activity: ACQUISITIONPRODUCTIONDISTRIBUTIONSALES Acquiring production factors Reworking and assemblying of the acquired components Distributing the product to the final consumer Selling items to the final consumer Birth of TV service and its evolution

35. 34  The product of the TV company –The main product of the TV company is the schedule, meaning the group of different audio visual programs organized in a line up that can be received by the viewers trough a terminal (TV set). Therefore the TV company belongs to the tertiary sector and in particular to the information and communication industry. The information consist in three fundamental elements: 1.content 2.device 3.media that isolate three distinct economic functions each of which comprehend a blurred cluster of subjects dealing with it. Birth of TV service and its evolution

36. 35  The product of the TV company –Some subjects acquire and develop information organizing it in a content, other subjects reverse it on a device with some recalibration and repackaging while other ones air or distribute it trough a delivery mean. –the publishing business could be an example where authors write essays or novels (produce the content), the publisher publish the books (transform the content in a transmittable good, the device) and bookstores or whole sale retailers distribute and sell to readers (transmit the device trough a mean). –Moreover there are other subjects producing goods or services to allow those other ones to carry out the functions of production, re-elaboration and transmission of the information. The sector can be divided in two segments: a) communication sector, in which we find subjects that produce or make accessible the information b) information technology sector, in which we find subjects that supply the systems and products to manage the information. Birth of TV service and its evolution

37. 36  The main TV Company product is the schedule: group of different audio visual programs organized in a line up that can be received by the viewers trough a terminal (TV set). The TV business belongs to the entertainment and information market INFORMATION contentmediadevice Each of them represents a different economic function Birth of TV service and its evolution

38. 37  The product of the TV company –Looking at the core of the TV business we can define it as: “the editorial activity of composing a sequence of audio-visual programs based on qualitative and quantitative forecasts of the public’s demand and the transmission of these programs to users”. The TV company is therefore the institutional and economical actor that organize when, how and where of the TV offer, choosing the group of viewers to convey to and deciding the programming composition. –The programs that can be part of the schedule could be divided in several categories: News (newscasts, in depth analysis, weather and so forth); Fiction (film, telefilm / TV-movie / TV series, soap operas / telenovelas, cartoons and so on); Entertainment (stand-up comedy, talk shows, game shows, music, teen programs, etc.); Sport (sport events, programs of events analysis and comment); Culture (documentaries, educational programs, drama, classical music, etc.); Advertisement (spot, tele-selling, etc.); Self promotion (promo, etc.); Other services (teletext, etc.) Birth of TV service and its evolution

39. 38  The programs that can be part of the schedule could be divided in several categories News (News, Reportage, Weather etc) Fiction (feature film, tv- movies, series, soap, cartoons) Entertainment (talk shows, variety, trivia games, Sport Advertising (spot, TLP, sales) Auto Promo (Channel and format promo) Broadcast Birth of TV service and its evolution

40. 39 –The analysis of the programs composing the line up points out that the TV activity is both an alternative mean of distribution (to movie theaters) and a specific one (quizzes o telefim). In the first case it is competing with other media, in the second one must face other entertainment formats. –Looking at it from a product perspective – given that the programming is the product – the TV offer kept on evolving in time and we can distinguish three focal models: 1.Mainstream programming 2.Specialized programming 3.Personalized programming, distinct on the wideness and depth of the programming offer Archetype of TV BDC Horizontal scheduling Non-unifom target Public TV (education) Commercial TV (entertaiment) Basic content No decoder MainstreamSpecializedPersonalized Vertical scheduling Uniform target PAY TV Commercial TV Public TV Premium and basic content Decoder On-demand scheduling Pay per view model VOD PAY TV Commercial TV Premium Content Decoder Birth of TV service and its evolution

41. 40 1.The mainstream programming –The mainstream programming is the first model of TV offer to emerge. The mainstream approach to programming is based on a vast and articulated composition both for what concerns the genres selected and the programs aired, in order to satisfy the needs of the entire population. The range of programs is wide because the public is heterogeneous in terms of age, gender, cultural models and so forth. –This kind of programming has been influenced at first by the transmission solution used at the beginning. Terrestrial transmission is indeed based on a scarce resource (air waves) and, at the time it was launched, it did not allow the broadcasters to exclude users (for instance through a decrypting device) from the programming receiving. Therefore it was automatically target to the whole population, proposing programs that could be aired and managed by either a public or private subject. Birth of TV service and its evolution

42. 41 1.The mainstream programming –The two distinct television business models (the public model and the commercial model) interpreted the mainstream programming and offer in different ways. The two approaches lead to different outcomes in terms of editorial profile, social function and reason to be. –Public television, being funded by a mandatory license, had a pedagogic and cultural function since its birth. According to John Reith’s (the first BBC’s Managing Director) paradigm in order of importance the role of a public broadcaster must be to inform, to educate and to entertain. –The by products of that approach can be recognized in the offer of a wide and articulated programming, able to both represent the national population, to satisfy the interests of minorities (linguistic, religious, political and social) and to engage the public broadcaster directly in the programs’ production in order to guarantee a fair balance among the categories of information, education and entertainment. Birth of TV service and its evolution

43. 42  Mainstream Programming – Public TV Public TV STATE FINANCING + SUBSCRIPTION FEE Need for satisfying nation and minority groups main goals: to inform educate and entertain Need for content balance in TV programming wider undistignuished audience and multiple-content schedule Focus on format production rather than acquisition (MAKE) Birth of TV service and its evolution

44. 43 1.The mainstream programming –Commercial TV develops a different business model and different mainstream programming based on the airing of programs capable of producing the audiences requested by the advertisers. –The product of commercial television, looking at it as a good of exchange, is not the programming itself anymore but it is the public of viewer, the audience, sold to investors as potential consumer of other goods. Birth of TV service and its evolution

45. 44 1.The mainstream programming –Thus the programming schedule is transformed from a product to a production factor and it is deeply modified in shape (in terms of continuous stream of programs, increasing the synergies among the different parts of it and valorizing the secondary slots) and in content (giving a primary role to serial products, underlining the driving potential of certain products and developing a programming logic based on fixed scheduled appointments), in order to segment the public in macro categories that differ in order to their willing to buy certain promoted products. –The commercial television initially developed as an entertainment programming provider instead of a news or cultural programming provider and for that reason started to privileged the acquisition of programs (fiction, the key attraction for the mainstream audience) rather than their production (daily news broadcast generates high costs and requires the development of complex organizations while cultural programs are doomed to a very narrow target). Birth of TV service and its evolution

46. 45  Mainstream Programming – Commercial TV Commercial TV ADVERTISING $$$ Need for producing formats able to collect audience Main goal: to offer categorized audiences to advertisers Need for giving value to time slots and related audience segmented audience and coherent-content schedule Focus on acquired format rather than on productions (BUY) Birth of TV service and its evolution

47. 46 1.The mainstream programming –Even if commercial and public tv have different business models and pursue different objectives - the public model’s key objective is to realize its mission maximizing the positive effects on the citizens and on the society and to run, in the same time, the business on a breakeven rational - - the commercial model’s key objective is to reach the larger possible number of viewers in order to have the best relation between revenues and costs - when a given TV sector comprehend both models there is a comparison between the two and a partial overlap of the two different kind of offer. –Both models belong to the mainstream programming approach and are based on the same rational: to aggregate and satisfy the majority of viewers. Though the aims of the two models are different: - the commercial model’s aim is to attract advertising investors - the public service model’s aim is to justify its existence and therefore the license –The overlap sharply increases when the public TV is allowed to search incremental revenues trough advertisement. Birth of TV service and its evolution

48. 47  Mainstream broadcasting – Commercial and Public TV in the same market Public TV target: Commercial TV target: maximize positive effects on the citizens and run, in the same time, the business on a breakeven rational reach the larger possible number of viewers in order to have the best relation between revenues and costs When a given TV sector comprehends both models there is a partial overlap of the two different kind of offer MARKET Same rational: to aggregate and satisfy the majority of viewers Different aims: to justify its existence and therefore the license (public model) and to attract advertising investors (commercial model) Birth of TV service and its evolution

49. 48 2. The specialized programming –The specialized programming was launched after the mainstream one and its offer is focused on: 1.A specific sort of programs (for instance movies, sports or documentary) targeted to an heterogeneous public (thematic programming); 2.A specific segment of homogeneous public in terms of age (children, kids, adults), gender, lifestyle, or specific group of belonging (technical, etc..) based on a range of focused programs (segmented programming). –Both of them rose when some segments of population became a target with a sufficient potential to reach an economic breakeven. Birth of TV service and its evolution

50. 49 2. The specialized programming –The specialized programming has represented, and represents now, the most used offer model among the cable or satellite operators and, generally speaking, the easier way for a broadcaster to find a distinctive positioning in comparison to the incumbent mainstream tv operators. –It is the typical pay TV offer’s model that usually comprehend both blockbuster programs (the so called premium contents like movies, sports, music, etc..) and programs that cannot be aired in a mainstream line-up ( the so called basic content like essay films, TV series, non-mainstream sports, cultural events, etc...)- –The pay TV business model guarantee a precise knowledge of the subscribers demand and tastes letting the broadcasters produce programs and reduce the risks of mis-positioning and insufficient audience. Birth of TV service and its evolution

51. 50  Specialized programming model The specialized programming provide an offer focused on: A specific sort of programs (for instance movies, sports or documentary) targeted to an heterogeneous public (thematic programming) Specialized programming is the easier way for a broadcaster to find a distinctive positioning in comparison to the incumbent mainstream tv operators Specialised programming is the typical PAY TV scheduling model A specific segment of homogeneous public in terms of age (children, kids, adults), gender, lifestyle, or specific group of belonging (technical, etc..) based on a range of focused programs (segmented programming) Birth of TV service and its evolution

52. 51 2. The specialized programming –The specialized programming was adopted also by commercial broadcasters (which usually chose the segmented approach) and by public broadcasters (which usually chose the thematic one). –The adoption of the specialized programming by commercial subjects became feasible when: - enough advertising investors became interested to more target focused media; - the segments reached a suitable dimension in terms of viewers’ composition and volume; - the TV industry was meanwhile able to offer to some specific targets of public a programming strictly focused on their needs and to offer to the investors proportionate and homogeneous segments of audience. Birth of TV service and its evolution

53. 52 2. The specialized programming –In the adoption of specialized programming, the public broadcasters choose the thematic approach focusing on: - news programs in order to echo the CNN international success - other kind of thematic offers based on their productions’ library The specialized programming schedule model was first applied in the United Stated in the mid-eighties and it took advantage of two concurrent circumstances: 1.The existence of a TV demand partially unsatisfied of the mainstream offer; 2.A mature demand both in terms of advertisers and viewers. Birth of TV service and its evolution

54. 53  Specialized programming is also adopted by public and commercials broadcasters. Thematic content offer Segmented content offer NATIONAL PUBLIC BROADCASTERS COMMERCIAL BROADCASTERS What: -NEWS (answering to CNN Model) -Library formats (re-issue of old prog for PUBLIC) -Specific target audience formats (COMM.) When: -ADV opted to more focused markets -Specific audience groups were relevant to market Where: -USA mid 80s when mainstream TV lacked in satisfying audience demand and audience was mature to pay per view more specific programming. -EUR: 10 years later. EU Market is limited because of diverse language and nationality and mainstream TV persisted longer than in the US market. Birth of TV service and its evolution

55. 54 2. The specialized programming –In Europe the specialized schedule wasn’t adopted readily mainly because of the late introduction of the mainstream commercial TV that entered in its mature phase after it did in the United States. –The main difference between the United States and Europe is the dimension of the national market. The dimensions of the different single European markets limit the chances of investors to reach a wide audience. Though the main difference in comparison to the United States is the small dimension of each national market that limit the possibility of reaching a suitable group of users both from a viewers and from an investors’ perspective. This pushed the enterprises to deal with cross national viewers with all the problems implied from attracting public and resources from different countries. Birth of TV service and its evolution

56. 55 3. The personalized programming –The personalized programming is based on a catalogue of titles referred to programs of different genre that can be chosen directly by the viewer. The TV company does not built one ore more programming schedules organized in one or more channels but offer a video service making available a more or less vast catalogue of audiovisual programs. –The programs proposed can either be exclusive (first run movies, live events, etc.) or library broadcasts missed in their first run by the viewer (catch up TV). The viewer can access to the programs: a) in slots defined by the broadcasters: pay per view b) in slots defined by the viewer: video on demand Birth of TV service and its evolution

57. 56 3. The personalized programming –The personalized programming has mainly been offered so far by the pay TV industry. The personalized programming has developed when new transmission solutions were available (cable, satellite, DTT, IPTV) and when the growth of home video made feasible the development of other systems of distribution out of the traditional video rentals. –When the TV company evolved as an alternative distributive platform in comparison with some existing other (in particular home video), the offer of a personalized programming depends on several factors like: a) broadband capacity (both in up-stream and in back-stream) to transmit and storage capacity to archive a range of titles comparable to a video store; b) a flexible usability in order to give an home video experience to the viewer (personalized view in any moment of the day, chance to pause the transmission, rewind and forward images, etc.); c) a cheaper price than average video rentals. Birth of TV service and its evolution

58. 57  Classification of the TV enterprises and sector’s configuration –TV Companies can be classified in different ways according to four variables: 1.Revenue model (public fee, advertising, subscrisption) 2.Programming schedule 3.Transmission platform 4.Geographical market public feeADVsubscription localterrestrial nationalcable internationalsatellite mainstreamthematicon deman platfom revenue model TV Company classification programming schedule market Birth of TV service and its evolution

59. 58  Classification of the TV companies and sector’s configuration –Given that any production activity does not assume an economic structure unless its goal is the exchange of goods or services, therefore the productive stream must be linked to a financial stream of monetary exchange marked by the acquiring and, most of all, sales functions. –The TV industry assumes economical and entrepreneurial features as well when a market exists, meaning that two subjects, that buy and sell the offered product/service, exist. –The word market, In relation to the demand side, has two different meanings: a) the group of subjects that consume a certain product or take advantage of a specific service: the consumers; b) the group of subjects that pay money in order to buy a certain product or a specific service: the acquirers or buyers. –The two concepts not always coincide because there are situations where a subject acts as a consumer but not as an acquirer (for instance when you receive a gift) or vice versa; moreover there are situations where the subject is an acquirer and a consumer at the same time –In the TV offer case the two concepts rarely coincide, way less than for any other business Birth of TV service and its evolution

60. 59  Classification of the tv companies and sector’s configuration 1. Examining the tv market from an acquirer and a revenues sources perspective, we can distinguish three main sources of income: a) public license fee; b) advertising; c) subscription. Each source can be represented by a subject acting as product’s buyer/customer: a) Government; b) Companies; c) Families. a) Television license (or broadcast receiver license) is an official license required in many countries for all owners of television receivers. It is a form of hypothecation tax that provides the incomes to fund public broadcasting service. b) Advertisement is the amount of money that a company is supposed to pay for a communication spot scheduled in the programming whose purpose is to inform potential customers about the company’s products and services and how to obtain and use them. c) Subscription is the price that families pay to some TV companies to receive their television service based on specialized programming. Birth of TV service and its evolution

61. 60 1. TV Company classification from an acquirer and a revenues sources perspective  We can distinguish three main sources of income represented by a subject acting as product’s buyer/customer : Public licence fee Advertising Subscription GOVERNMENT Tax paid in many countries tv set owners to fund public broadcasting service. COMPANIES Amount of money paid by a company for a communication slot in the TV programming FAMILIES Price that families pay to some TV companies to receive their television service ACQUIRER AND REVENUES SOURCES PERSPECTIVE Birth of TV service and its evolution

62. 61  Classification of the TV companies and sector’s configuration 2. Looking at the TV market from a consumer perspective, TV companies can be classified on the basis of that programming offered to satisfy demand. As pointed out before three main kinds of programming exist and they differ in the width and depth of the programs offered: a) mainstream programming b) specialized programming c) personalized programming MAINSTREAMSPECIALIZEDPERSONALIZED CONSUMER PERSPECTIVE Birth of TV service and its evolution

63. 62  Classification of the TV companies and sector’s configuration 3.Examining the transmission platform used to diffuse their services TV companies can be distinguish in: a) terrestrial b) satellite c) cable – IP protocol TERRESTRIALSATELLITECABLE – IP TRANSMISSION PLATFORM Birth of TV service and its evolution

64. 63  Classification of the TV companies and sector’s configuration 4. Moreover there is a distinction among TV companies in order to the different markets or territories in which they operate: a) local b) national c) international LOCALNATIONALINTERNATIONAL MARKETS AND TERRITORIES Birth of TV service and its evolution

65. 64  Classification of the TV companies and sector’s configuration –The group of these four dimensions, often interdependent, defines the type of company and allow to single out the different “strategic groups” meaning the television companies that adopt similar strategies, are influenced by the same variables in taking their decisions and compete on similar combinations of segments/products/geographic markets and resources of the TV sector. In Italy, for instance, we can distinguish five main TV groups: 1.a first group of national mainstream terrestrial networks which consist in three different subjects: a public one, RAI, and two commercial ones, Mediaset e La 7. 2.a second group of national thematic terrestrial networks consisting in two commercial subjects, MTV and Rete A All Music (both offer a segmented product focused on younger audience). 3.a third group of local commercial terrestrial companies that offer both mainstream and thematic programming. 4.a fourth group of national pay TV operators, which consist in three subjects that compete on the segment terrestrial/satellite: Sky Italia, Mediaset (with its digital terrestrial pay per view offer Mediaset Premium) and La7 (with its DTT pay per view offer La 7 Carta Più). 5.a fifth group of telecommunications enterprises offering a pay tv service via IPTV: Fastweb, Telecom Italia (with its Alice Home TV service), Wind - Infostrada (with Infostrada TV service) and Tiscali (with its Tiscali TV service). Birth of TV service and its evolution

66. 65  Classification of the TV companies and sector’s configuration RAI Mediaset La7 Companies Group 1: National Mainstream Public Commercial Terrestrial MTV ReteA All Music Companies Group 2: National Thematic Commercial Terrestrial Local TV Companies Group 3: Local Mainstream Public Commercial Terrestrial SKY Mediaset La7 Companies Group 4: National Thematic Pay Commercial Satellite/DTT Telecom Fastweb Tiscali Wind Companies Group 5: National Thematic Pay Commercial IPTV Television comapanies groups in the italian market Birth of TV service and its evolution

67. 66  TV Company classification: RAI MEDIASET LA7 SKY LOCAL NATIONAL INTER NATIONAL MARKETS AND TERRITORIES FEEADVSUBSCRIPTION REVENUE MODEL PROGRAMMING MODEL MAINSTREAMTHEMATICON DEMAND TERRESTRIAL SATELLITE CABLE TRANSMISSION PLATFORM LOCAL TVs Birth of TV service and its evolution

68. 67 Economics and Management of Communication Business Prof. David Bogi Programming schedule building process

69. 68  Programming and the reference market –The TV characteristic activity consist in the programming building and in positioning a group of programs of a given length (content) inside a temporal grill (form) following a given disposition scheme (logic) –The elements on which the programming building is based are therefore: a) a range of time; b) a group of programs; c) a scheduling logic. –Considering these three elements, each enterprise must choose: a) the programs’ length; b) the type of programs they want to broadcast; c) the collocation of the events in time, the scheduling structure and the frequency of the aired programs. –After all the TV enterprise must choose the type and the feature of the product they want to offer considering the market that demand it which is based both on who consume the product or utilizes a service (consumers or users) and on who buys a product or service (buyers, customer). Programming schedule building process

70. 69 Program 1 Program 2 Program 3 Program 4 Program 5 9.00 – 10.00 10.00 – 11.00 11.00 – 12.00 12.00 – 13.00 13.00 – 14.00 Schedule is composed of three elements: 1.Time 2.Set of programs 3.Scheduling logic Each broadcaster makes a scheduling choice according to: Transmission lenght Transmission kind transmission timing Programming schedule building process

71. 70  Programming and TV business models –The TV enterprise must therefore distinguish the consumers and the acquirers to whom convey and offer a product that can satisfy their needs. Examining the TV product we can point out that the consumers are the viewers (families), whereas the acquirers can be distinguish in three different categories that can be linked to different sources of revenues : a) the Government: public financing, mandatory license fee; b) the Enterprises: advertisement; c) the Families: subscriptions. –As it is easy to point out, the considered universes are not supposed to always coincide. For instance considering both public financing and advertisement, viewers do not pay for the products they are watching at. –When these universes do not coincide, we must analyze the going on relation between these and understand which universe constitutes the main reference for the enterprise in its product strategy and therefore in programming building. –In the TV sectors the acquirer are the reference on which determine the borders and the type of viewers. The product strategy consist in those. –Since programming is built in relation to the segment of viewers pointed out by subjects connected to the revenue of the TV business, it is fundamental to analyze the idea of viewer singled out by these subjects and how the TV enterprise deal with it Programming schedule building process

72. 71 TV COMPANIES SCOUT THE MARKET FOR: Consumers Buyers $ Audience State Market Families State financing Fee advertising subscription $ $ Buyers determine programming Programming schedule building process

73. 72  The idea of viewer and the TV business models –The government, as a political organization of a community living in a certain territory, finances the TV activity both directly (license) or indirectly (budget cost) though tax-payers’ funds. The Public Service pursue the objective of financing universal access programs and that these programs promote and support the social community recognized by the constitution. The viewer and the citizen correspond. –The enterprises, as subjects that pursue economical aims, finance the TV activity through advertisement, meaning the acquisition of commercial slots during the programming in order to air their messages and influence the consumers’ buying behavior. Usually TV spots are used to introduce a new brand/product or to recall an existent brand/product with the objective of spur the viewer to the acquisition of it. The idea of viewer is therefore coinciding with the consumer’s one and it is mainly addressed to the family’s decision maker or the buyer. Thus the TV enterprise is asked to insert spots in programs capable to reach those segments. –The families finance the TV activity though private funds (subscriptions) doomed to the TV consumption, meaning that they are ready to directly pay the TV enterprise (PAY TV) to buy a type of programming seized on their interests and needs. In this situation viewers are potential consumers of TV broadcasts, ready to pay in order to have access to that service. Programming schedule building process

74. 73 State Market Families State financing Fee (Canone) TV BuyersFinancing Model Citizen Audience Advertising subscription ADV Consumer Goal Information Education Commercial Information (custom) TV Consumer Where financing models may affect tv companies functional structure, there is no direct correlation between financing sources and TV Companies model. Advertising may be common to all models. Programming schedule building process

75. 74  The TV’s business models –The type and the composition of the sources of revenues connected to the programming offer influence the whole TV enterprise activity: from the programming logic to the acquiring of programs and their distribution. –There is not a two-way correspondence between sources of revenue and TV business model. While the public funds and the subscriptions can be respectively linked to either public tv companies or to pay TV ones, the advertising investors can be common for all the models. –It is therefore appropriate when analyzing the TV system to distinguish between public subjects, who are aiming to diverse sources of business (public TV enterprises) and private subjects that aim exclusively to the advertisement investment (commercial TV enterprises) or that aim mainly to the end user spending (pay TV enterprises). Programming schedule building process

76. 75  The public TV’s business model –The reason to involve the government in the TV activities has changed in time. At the beginning it was justified by the absence, in some countries, of the private funds necessary to finance the TV service. Today it is accepted by the citizens because it has been capable to satisfy their demand of distinctive content in comparison to the private sector. –The public service’s landmark, beyond the government ownership, is in the features of the role that it was assigned it like the universal access to receiving, editorial independence, balance in the programming composition, quality of the programs, historical heritage and cultural promotion. –In terms of revenues we can point out 4 main sources: a) license fee b) Government given budget funds c) Philanthropic donations d) Commercial revenues (shared with the commercial broadcasters and the pay TV operators). –Most of the public subjects work with a mixed business model which is based on several sources of revenues. Programming schedule building process

77. 76  The public TV’s business model –There is relationship between the sources of revenues and the type of service offered by the broadcasters that impacts on the composition of the programming. According to John Reith the TV programming can be divided in three segments: a) news (newscasts, soft news, etc.); b) education (documentaries, cultural oriented broadcast); c) entertainment (film, shows, etc.). –Given that the public service has the triple objective of inform, teach and entertain, the programming should balance these three features. Examining the prime-time schedule of the major television subjects we can point out a different composition of the programming. –The enterprises with predominant component of the commercial revenues offer more entertainment while the ones that have a prevalent component of the license connected revenues tend to offer more new and edutainment. The fundamental link between source of revenue and programming is thus confirmed. –Several factors influence the decision about which source of revenue the broadcaster want to pursue: the degree of competition in the sector and the availability and importance of each source. The first one determines the financial need required to reach the defined objectives, the second one shows the qualitative and quantitative limits to the advertising driven revenues. Programming schedule building process

78. 77 Public TV scheduling has the following goals: informationeducationentertaiment These goals have an impact on scheduling which may change according to financing: ADVERTISING + - STATE FINANCING - + entertainment information education Financing and scheduling are strictly connected in determining TV Model Programming schedule building process

79. 78  The public TV’s business model –The possible alternatives are marked by several points of strength and weakness towards the duties and the objectives of the public service. Advertisement gives to the public service a significant income that make possible for it to buy and produce expensive broadcasts in order to conserve its share in a very competitive market. –Nevertheless a dependence, even if minimal, on the commercial revenues can create a conflict of interests that mislead the public broadcaster from its main objectives and standards. The growth of advertisement revenues implies in most cases a parallel growth of entertainment programs reducing the news and educational ones. –The license fee is usually a mandatory tax for all the owners of a device for TV reception and it assures to broadcasters an independent source of revenues. Programming schedule building process

80. 79  The public TV’s business model –This model works when two conditions happens: 1.The existence of sufficient number of people willing to pay This condition requires an high level of license payers and a government commitment towards bad payers’ elusion. 2.The correlation between the license fee and inflation It requires an immediate link between the amount of the license and prices’ dynamic in the general economy. In this case the amount is determined by government run autorithy and therefore the broadcaster cannot control it. –Usually not the entire license fee revenues are addressed to the public TV service: in Italy, for instance, RAI gets the 85% of it whereas the other part is given to the interested public authorities (ex. Communication Ministry or tax collecting agency). Programming schedule building process

81. 80  The public TV’s business model –The government’s funds are not related to commercial interests. However the government authorities meant to attribute those funds (parliament or government) can exercise their power to impose their political interests. –Moreover the budget assigned each year must compete with many other public support’s request coming for several institutional actors. It is therefore likely that funds will be cut in high taxation or low government budget periods. –The voluntary donations grant an high degree of independence both from the commercial and the political interests. However the amount of money is not stable because it is just a by-product of the donors’ wills. These make quite likely the programming to end up being a praise towards the potential donors. –The rise of commercial TV was a significant threat to the position acquired by public TV and it the public broadcasters were under pressure. The first reason was the increase of programs’ cost while the second one was the increase of people’s resistance towards the license needed to fund public service even when completely free offer was available Programming schedule building process

82. 81  The commercial model: the advertisement market and the commercial TV –The presence of private subjects in the TV sector is essentially determined by chances of profit related to two markets: a) the advertisement market b) the TV market –The advertisement market is based on investments by enterprises that are promoting their products or their brands towards consumers. The enterprises’ external communication is based on buying air time usually sold by mass media (radio, cinema, TV, press, etc..) and insert there their promotional message. –The commercial TV enterprise represents, together with commercial radio, the mean that got the function of unique advertisement vehicle in the media sector. For other means of communication advertisement is indeed a integrative source of revenue in comparison to the traditional one that remains selling products (movie o newspapers for instance) to their customer. For commercial TV or radio the advertisement represented the only source of revenue. Programming schedule building process

83. 82  Commercial model: Adv and Commercial TV Market Private profit is drag in the TV sector by two factors: Advertising market TV market Private and public companies promote goods and/or services through the purchase of advertising slots in the TV industry. Commercial TV (together with Commercial Radio) represents the natural media to broadcast advertising and the only source of financing Programming schedule building process

84. 83  The commercial model: the advertisement market and the commercial TV –The commercial TV acts on two segments, the television one and advertisement one but its revenues come from a single market: the advertisement one. In the TV segment the programs represent production factors, the programming represents the product and the viewers correspond to consumers. –In the advertisement market the programming is the production factor, the viewers are the product and the investors are the customers. –Six main subjects operates the advertisement market: 1.The advertisement means (including mass media). 2.The advertisement sellers (that manage the sales of the media they represent). 3.The advertisement agencies (that manage the enterprises’ external communication and define the messages). 4.The media planner (that plan and check for the users the transmission of the advertising messages on different media). 5.The monitoring agencies (that give enterprises the data to evaluate their return on advertising investment). 6.The users, represented by the subjects that want to convey their message (enterprises and organizations). Programming schedule building process

85. 84  Commercial model: TV segments and market Programming schedule building process

86. 85  Commercial model: Advertising market Communication Media Sales reps manage slot sales Agencies prepare campaigns Media Center plan campaigns Metering Audience share Investors purchase ADV slots Programming schedule building process

87. 86  The commercial model: the advertisement market and the commercial TV –Tv advertisement can be classified in three main categories : 1.Tradition advertisement (spot). 2.Sponsorship 3.New kind of commercial promotion (info show, telepromotion, teleselling, interactive advertisement, etc.) 1. The spot represents an advertising message that lasts thirty seconds and aim to promote a product or a service, to support a cause or an idea or to generate another effect desired by the investor. 2. The sponsorship represents a message that aim to enforce the product image (brand identity) or institutional (corporate identity) and that do not contain a call to buy, to sell or rent a product. The message can be inserted at the beginning or a the end of programs, inside trailers (sponsorized trailers) or inside spot-jingles (recall at the beginning of adv slot), inside the programs (limited quotations represented by over impression) and in elements of the scenes. 3. The new forms of commercial promotion are mainly connected to telepromotion (on air quotations) and teleselling. The telepromotion consists in a message that is not directly managed by the investor but by the broadcaster and it is linked to a program where is positioned. The teleselling presents an offer to the public for buying, selling or renting a product or a service, in which are presented to the viewers also prices and a telephone number to call. Programming schedule building process

88. 87  Commercial model: advertising slot may be divided in 3 main categories ADV Slot Tradition Advertisement (Spot) Sponsorship (Billboard) New kind of promotion (Info show or Tele Promo) Programming schedule building process

89. 88  The commercial model: the advertisement market and the commercial TV –The market value of an advertisement slot is a function of the audience, both in quantitative and i qualitative way: larger and more homogenous is the reach, more the slot is valuable and higher is its price: –The value of an advertisement slot varies following several factors: 1.Time segment collocation (hour and season of the year). 2.Program type collocation 3.length and type of slot (spot, teleselling, etc.). –These factors affect the differentiation of price lists. On the other hand the price level is determined by each country’s economical situation, market structure and selling proposition (discounts, mark-ups). –The commercial TV enterprise must determine with a sufficient degree of precision the quantity and qualitative composition of their reach because it represents the “product” sold to investors. Both subjects are interested in pointing out those features: the TV enterprise in order to define the relation between obtainable audience and advertisement slots’ price; the investors in order to verify the consistency between what they got and what they paid for. Programming schedule building process

90. 89  The Commercial model: spot value A commercial spot value changes according to 3 different factors: Timing is a valuable asset in valuing a commercial spot. A prime time (dinner time) placement is more effective in reaching the widest number of people and consequently has an higher value compared to a day time placement when the audience is lower. Placement is also to consider when planning a media campaign. The trend is to place spots in programs with high share or a very profiled target to reach higher number of people or specific targets. The lenght of a spot may affer its value. Longer the spot, higher the value is a common rule but typology of the spot (break, billboard, Info show, Tele promo) also significantly vary the value. 1. Timing 2. Placement3. Length and typology Programming schedule building process

91. 90  The commercial model: the advertisement market and the commercial TV –Being the TV market and non direct one the commercial TV enterprises cannot quantify or qualify their public according to the product/service’ sell out information, whereas this is feasible for other media like the press or movie theatre. This has implied the need to obtain the information through statistical methods based on a panel of the population and through othe particular instriments and systems run by third party enterprises (auditel). –Given that the presence of commercial TV is a function of the opportunities offered from the advertisement market, the assigned objective is to achieve a certain level of profit and this means to sell at the highest price all the adv slots that the law allow to air. –This commercial logic implies that the broadcaster is selling contacts (viewers) to adv investors and more contacts the broadcaster reach and more they are homogeneous, more the advertisement slots’ price is high. A higher price means more revenues and, therefore, more profit. –The advertisement market affect the logic and the activity of an enterprise in the TV segment. First of all, the production and the composition of the programming aim to attract the largest number of viewers and therefore are focused on those programs with an high audience potential and on a collocation that allow them to take it to fruition in the best way. –The distribution, moreover, is not linked to the imperative of the universal service (public TV) but to the economical principle that maintains that the coverage of an area depends on the population density index. Programming schedule building process

92. 91  The commercial model: the advertisement market and the commercial TV –Considering the TV consumption we can use the word “market” only when there is a relation of buying and sell between viewers and the TV enterprises, concerning the programs aired by the last one and based on a price ruled mechanism. From an economical point of view the consumption of a product or a service can be classified on two features: rivalry and excludability –Rivalry classified the goods on whether they can be consumed simultaneously by more individuals (non rival goods, indivisible, collective consumption goods or rival, divisible, individual consumption). –Considering the consumption’s rivalry, the product the TV enterprise represent a collective good, that can be used by more viewer at the same time. The increase of the number of viewers, therefore, does not comprehend an increase of the costs of production or distribution. –The technical and economical excludability distinguish between the goods that can be consumed in an exclusive way and the one that do not. –Considering the consumption excludability the TV product represents at the beginning a non excludible good. Whereas at the movie theater the projections is in a close enviroment somehow separated from the extern that oblige the viewer to buy a ticket, in TV the broadcast did not allow to exclude anybody at the beginning. Because of that it could not work of price based mechanism like the movie theatre model. –The TV enterprise must therefore act in a semi-direct way (public enterprise) or operates on a parallel market: the advertisement one (commercial enterprise). Programming schedule building process

93. 92  The private model: TV market and PAY TV The direct market can develop under two conditions: 1.A technological exclusion from the TV consumption that at the biginning happens through the introduction of cable distribution or through the development conditional access transmission techniques. 2.The transformation of the viewers from consumers to customers, that happen when there is a sufficient number of viewers willing to pay for their TV consumption. The customers can either pay for the entire programming (pay TV) or for the single program (pay per view). –Subscriptions therefore represent the main source of revenues for the pay TV enterprise and they are usually managed by a specific business unit that does not deal with programming, this division manage all the streams between the pay TV and the subscriber (CRM, call center, billing, marketing and customer acquisition cost). –Subscription’s main feature is a fix rate of a stander length (a month, six month, a year, ecc.) at the end of this period you can decide to either interrupt or to renew the subscription. The price of a subscription varies according to the competitive scenario, the quality and the number of channel or programs offered and the chosen signal distribution technique (satellite, terrestrial, cable, IPTV and so on) Programming schedule building process

94. 93  The private model: TV market and PAY TV –The aim of a pay TV is to be able to obtain a customer base wide enough to reach the break even point, but it should not overtake a certain percentage of the total TV viewer in order to keep the rights’ cost down and the “membership of an exclusive club” effect towards customer. Moreover, if the subs base become too wide the pay TV will start to compete with FTA broadcasters that could push the government to cut off pay TV’s privileges. –The economic logic of a pay TV is therefore focused on acquisition (new subscribers) and retention (subscribers that renew their subscription). After having reach the break even point, the strategy should be more focused on the retention rather than the acquisition. –The success of a pay TV is therefore based on its capability of offer a line up of programs (programming) that differ from those aired by FTA TV and that have a high interest among customers, –This two features’ consequence was that the pay TV programming has always been focused on premium content that have high top of mind among viewers: movies, sports and series. The viewer is already used to pay for these contents through audio-video consumption (renting or buying DVDs) or other kinds of consumptions ( sport events’ or movie theatres’ tickets) Programming schedule building process

95. 94  The private model: TV market and PAY TV –The critical factors in a pay TV service are: 1.To grant the exclusive of premium contents (main cinematographic production’s titles, TV series and sport events, etc..); 2.To extend the exclusive of movies for the longest period and to abridge the interval between the theatres’ exclusive period and the pay TV one. –The acquisition of programs is therefore fundamental like their positioning in the programming. The programming building activity is based on the minimal subscription interval on which the price is calculated (a month). This means offering packages able to attract new subscribers, to satisfy the subscribers base and to justify the amount of the subscription. –The programming is no longer focused on achieving the best audience share per segment, it becomes the subscription and churn rate that is a function of the availability of contents and leave the enterprise free to not consider the audience objectives as the main ones. Audience is indeed an important achievement because they influence the advertisement driven revenues (even for pay TV broadcasters) but their importance is not comparable to the subscription revenues. –The sustainability of the pay TV economic model is a function of the ability of attracting new subscribers and keep the old ones. Programming schedule building process

96. 95  The private model: TV market and PAY TV –The model that derives from it is the by-product of the management of the cited activities with marketing ones, decoders management’s activities and relations with manufacturers, the subscription’s dealers activities and the one oriented to manage the customer base. –The marketing activities can be divided in two categories: 1.External Marketing that contacts new potential subscribers through traditional advertisement activities and/or through sponsorship of events related to the channel’s programming 2.Internal Marketing that looks at the existing customer base and uses instruments like channel self promotion, teletext and monthly TV guide (both in the traditional magazine format and in the electronic one, the so called EPG or Electronic Programming Guide) that is sent to the whole customer base and is available on the TV set using the remote control. –The business model of a pay TV is based on the chance of excluding non subscribers from the consumption of the aired contents. This happens trough a conditional access system and a decoder able to decrypt the codified signals making possible for the subscriber to watch those content on the TV set. The decoder or Set Top Box is given to customer in a point of purchase or delivered at home at the beginning of the subscription contract. –The STB can be sold, rented or fully subsidized by the pay TV operators. Programming schedule building process

97. 96  The private model: TV market and PAY TV –The critical factors in the STB management are: 1.The supply chain management toward the manufacturers in order to avoid overstock or stockout 2.The construction of a dealers’ network in order to make the STB available to the potential customers in the easiest possible way. –The customer base management that must offer to subscribers technical assistance (to install, to fix or substitute a STB). This activity implies managing outbound or inboud calls, a network of specialized centers and an administrative service that deals with all the billing issues. Programming schedule building process

98. 97  The private model: TV market and PAY TV. –The critical factor in managing a subscribers base are: 1.Order delivery and assistance capability and assistance quality focused on making as easy as possible the usage of the STB (user friendly). 2.Billing capability in order to make efficient the process in order to have a positive impact on the financial balance. –The competitive success of the pay TV enterprise, meaning the ability of offer a product/service able to compete on the market, is determined by its capability of attracting subscribers. –The activities of retail and STB management because they determine the potential customer base and are responsible of building the request conditions to build the pay TV offer on. –The activities of rights buying (and demand monitoring), meaning the product/service sold to subscribers. Programming schedule building process

99. 98  Theory of programming schedule building –To build a TV programming schedule means to decide, with reference to a specific time interval (form) and a certain criterion (logic):  allocation,  sequence,  frequency of a group of programs (content) The consumption of such programs (Content) is able to boost - directly on indirectly - TV company’s revenues. Programming schedule building process

100. 99  Theory of programming schedule building Content: programming schedule composition –Regarding programming schedule, any TV company will choose titles to broadcast and their sequence and airing time slot. Schedule composition pass through two different dimensions: wideness and deepness. –Wideness is equal to the number of categories of programs broadcasted while deepness is the average number of titles in each category. As TV broadcast time is limited to 24 hours per day, wideness and deepness have an inverse relationship where if one grows, the other one has to be reduced. –A broadcaster which prefers wideness, normally wants to reach a very articulated and wide audience, who favors deepness generally wants to reach for a more specific and narrow public. –Programs composition normally depends on viewers typology and purchasers of TV product. State financed TV companies - such as public broadcasters – have a programming schedule composition quite wide. Public TV service achieve its mission when becomes accessible by all the citizens and is able to reach different social categories (also including language and cultural minorities). To fulfil the mission, has to offer a wide range of programs (fiction, general entertainment, news, sport, culture, kids etc.) to satisfy the entire population needs. – Public programming schedule composition also experiences the historical role of public TV service in any specific country or TV market: in Europe at the origins, represented the unique service of the market and its proposition was based on a very large composition. Programming schedule building process

101. 100  Theory of programming schedule building Content: programming schedule composition. Programming schedule building process As scheduling, deepness and wideness are inversedly correlated – if one grows the other will be reduced

102. 101  Theory of programming schedule building Content: programming schedule composition –In the US market, public TV has always played a complementary role if compared with the commercial TV since matured in a second phase and its offer was focused on programming formats about culture and education that were not enough covered by private broadcasters. –For advertising based TV company, in which the acquirers are represented by mass market goods companies, wideness of TV schedule composition depends on purchasing. Schedule composition is large and very articulated to reach more viewers and collect higher amounts of investment from the advertisers. –For the subscription based TV company, in which the acquirers are represented by the viewers themselves, schedule composition is limited and concentrated on specific typologies of programs. This to satisfy the demand of “difference” when compared to the traditional TV offer. –The specific programming is called “premium” content: movies, sports, TV series etc. The scheduling is influenced by different factors: a) budget b) programs rights markets access c) programs potential audience d) channel’s identity Programming schedule building process

103. 102  Theory of programming schedule building Content: programming schedule composition a) Budget represents the fundamental constraint for the programming schedule, since only high investments allow the acquisition or the production of compelling contents with good audience potentiality. b) Programs access concerns the possibility - of the broadcasters - to have access to the programs rights markets or to the production facilities and infrastructures. The availability of certain programs or of production infrastructures, represents the most important access barrier in the TV market for a new comer. c) Programs potential audience refers to the possibility to have different viewers with any different programming schedule. Some programs have more chanches than others to generate audience: movie, sports and variety usually get higher audiences in comparison with quiz, classic music, education etc. TV core target audience has a strong influence on its programming schedule composition. d) Channel’s identity. Each TV channel has its own identity coherent with its target (male/female, young/adult etc.) and with a specific style (conservative/progressive, individualistic/social etc.). The channel identity building process is very important since allow TV companies to create a fidelity relationship with the audience and also provides added value to the entire schedule programs. Channel identity is not only built with broadcasted programs but also with the frame in which they are located. Any decision token regarding the first ones has to be suitable with the second one. Programming schedule building process

104. 103  Theory of programming schedule building Content: programming schedule composition Programming schedule building process Accessing the main TV markets to acquire formats Reflecting target audience needs Reaching potential audience for any program is best Budget limit is king in determing programming quality level SCHEDULE KEY FACTORS

105. 104  Theory of programming schedule building Form: television time and social time  Programming form results from the programs availability process within maximum one day extension. Building a programming schedule means choosing time segments where to allocate different programs. Bearing in mind that the goal is to let the target to access them. As TV consumption is operated through a TV set, it is very important to allocate programs in the time slots where a broadcaster thinks its core target is at home and watching television.  Any TV company needs to tune television time with social time. The broadcaster also needs to determine: a) different TV audience targets addressable during the entire day; b) their main TV consumption behaviors.  People time availability is traditionally higher during evening and night of working days, with the week- end and with the holidays. Time availability is spent partially at home and partially outside. Personal decisions depend on different factors like age, wealth, personal interests, periods of the year, weather and cultural conditions of each Country. Programming schedule building process

106. 105  Theory of programming schedule building Form: television time and social time Programming schedule building process WHEN PROGRAMMING, MAIN TARGET IS: GIVE THE PROGRAMS THE HIGHEST NUMBERS OF WATCHERS by determining: 1. different target audience groups (on a daily basis) 2. Audience consumption behavior

107. 106  Theory of programming schedule building Form: television time and social time  The time budget allocated to TV consumption varies according to: hours of the day, days of the week and period of the year. TV offer can not ignore these variations which can be observed referring to the audience curve on the basis of three different time measure units: a) the day b) the week c) the year a) During the day, TV consumption presents, on a quantitative point of view, two different peak times: lunch and dinner time (where the second one is more important). In addition to a quantitative dimension, a qualitative dimension refers to different viewers profiles (gender, age education):  during daytime, audience is mainly composed by females, kids and elders;  during the week, males adults presence grows and all the other audience groups are present.  during late evening and night, there is a majority of male adult public. Programming schedule building process

108. 107  Theory of programming schedule building Form: television time and social time Programming schedule building process - + AUDIENCE 7.00 19.0023.00 7.00 male female Prime time Night time Day time

109. 108  Theory of programming schedule building Form: television time and social time TV programming share daily schedule in three main programming slots: - daytime, from morning until early evening, is characterized by a medium audience share; - prime time (the maximum audience share slot) is set during dinner time; - night time, corresponds to the night slot and has got minimum audience share. Start time and extension of each programming slot vary according to any Country TV consumption behavior. Furthermore, each slot is shared in different narrower segments coherent with any sub-targets so to better satisfy possible more detailed behaviors. b) On a weekly basis, TV consumption underlines quality and quantity difference according to working days and week-ends. In the first case, daytime audience is mostly composed by not occupied people while during the week-end, the public is much articulated. This distinction is also reflected in the schedule which is traditionally weekly based or week-end based. For example, working days daytime is mainly composed by a daily slot of serial programs broadcasted on a day by day time frame. On the other hand, week-end daytime varies partially or totally (especially on Sunday) from the working days one and follows a weekly refreshing cycle. Programming schedule building process

110. 109  Theory of programming schedule building Form: television time and social time Programming schedule building process - + AUDIENCE 23.00 Non-working Working Week end Working days 19.00-23.00

111. 110  Theory of programming schedule building Form: television time and social time c) TV consumption behavior varies during the different phases of the year according to working periods and seasons. Basically there are three different TV seasons, each one is characterized by a specific programming schedule both in the structure and in the contents: - Fall (from October to February) - Springtime (from March to mid-June) - Summer (from mid-June to September) Seasonal differences concern much more the content and the typology than the form of the broadcasted programs. Programming schedule building process

112. 111  Theory of programming schedule building Logic: companies and programming schedule typologies Usually, schedule building logic is most influenced by different revenue sources of TV market. For the advertising based TV companies, the main objective is to gather the highest number of advertisers who want to maximize promotion and visibility of their products through TV messages (spots, info shows, TLP, product placement etc.). Advertisers usually follow three key factors when acquiring advertising slots, : a) number of viewers b) audience composition c) viewer connection cost a) Potential audience is determined by the number of people watching TV in a specific time slot (Households Using Television, HUT). The number of HUT cannot be more than the number of houses equipped by a TV set (Total TV Households, TTH) in the same territory. The number of people watching an advertisement spot depends on to the audience of the TV program where it is inserted (Households Tuned to Channel, HTC). Audience can be measured by two different indicators: - rating represented by viewers percentage (households) tuned to a broadcaster in a specific time interval/slot, in comparison with all the viewers (households) equipped with a TV set. Programming schedule building process

113. 112  Theory of programming schedule building Logic: advertising key factors – Number of viewers Programming schedule building process A. HUT – Household Using TV: n° of people watching TV at the same time B. TTH – Total TV Households: n° of houses with TV sets - Rule 1. A is never more than B C. HTC –Households tuned to Channel: n° of houses watching THAT specific AUDIENCE is measured by 2 indicators: rating R = % of HTC/TTH share S = % of HTC/HUT Also consider: reach = number of unique viewers frequency = n° of times a viewer is tuned to a channel in a specific slot

114. 113  Theory of programming schedule building Logic: companies and programming schedule typologies -Rating is the viewers percentage (households) tuned to a broadcaster in a specific time slot in comparison with all the viewers (households) equipped with a TV set (R=HTC/TTH). -Share equals to the viewers percentage (households) tuned to a broadcaster in a specific time slot in comparison with all the viewers (households) watching TV (S=HTC/HUT). From an advertiser perspective rating is the main indicator to consider although two other elements are quite important: -Reach, number of unique viewers -Frequency, number of times a viewer is tuned to a channel in a specific time slot. Reach per frequency generates the total amount of contacts (points), or Gross Rating Points (GRP) which represents the most relevant indicator for the advertisers that usually look at the highest viewers coverage level. Programming schedule building process

115. 114  Theory of programming schedule building Logic: advertising key factors – Number of viewers Programming schedule building process Advertisers also consider: reach = number of unique viewers frequency = n° of times a viewer is tuned to a channel in a specific slot Reach X frequency = GRP Gross Rating Points

116. 115  Theory of programming schedule building Logic: companies and programming schedule typologies b) Regarding audience composition, television audience is divided in three different categories of variables: - demographic variables: age, gender, race, education, personal income etc. - geographical variables: State, area, city etc. - behavior variables: sport players, smokers, car drivers etc. The principal variables to consider are demographics (in particular age and gender) and the geographical ones. c) Concerning viewer connection cost, the price of a schedule time slot where advertisement spots are located varies according to audience dimension (rating/contacts) and composition. Prime time, Fall and Springtime are the most expensive periods because they register very high ratings. Programming schedule building process

117. 116  Theory of programming schedule building Logic: advertising key factors – audience compisition Programming schedule building process Audience is composed of: Demographics: Age, gender, race, education, wealth Geographics: State, region, city Behavior: Personal attitudes like smoking, playing sports, games etc

118. 117  Theory of programming schedule building Logic: companies and programming schedule typologies Price of an advertisement schedule time slot is also determined by two factors: - broadcasters commercial policies regarding advertising spot position within an advertising break, acquired advertisements time slots volume, advertisements time slots acquiring time. - supply and demand structural elements. In general, spots allocated at the beginning and at the end of each advertising break have an higher cost while the advertising slots reaching a certain minimum volume (of income) are normally discounted by the broadcaster. Advertisers tend to calculate their costs using two indicators: - Cost Per Thousand (CPT) - Cost Per Point (CPP) They represent the cost of the acquired advertisements time slots divided by audience expressed in thousands (in the case of CPT) or by audience expressed by rating or by contacts (in the case of CPP). Programming schedule building process

119. 118  Theory of programming schedule building Logic: advertising key factors – connection cost Programming schedule building process Connection cost is more expensive in: Prime time Fall or Spring + Beginning and End of a break Advertisers calculate costs according to: CPT = cost per thousand CPP = cost per point Fall and Spring usually count up to 80-90% of a TV annual ADV budget Prime time count for 50% of scheduling investments Day time 40% and Night time 10%

120. 119  Theory of programming schedule building Logic: companies and programming schedule typologies Schedule building logic in advertising based TV companies can not ignore some elements which influence advertisers investment decisions. In particular, programs identification and their schedule allocation are targeted to the audience maximization to offer to the advertisers. This logic let us better understand the schedule budget allocation and articulation: the two main television seasons (Fall and Springtime) get, generally, the 80-90% of the total TV companies annual budget, while concerning the time slots, daytime usually gets the 40%, prime time 50% and night time 10%. It is also clear the reason why big TV productions (TV series, variety) or the movies are scheduled only on certain periods (Fall/Springtime) and on certain time slots (prime time) and why during the Summer and the night time, are mainly broadcasted library programs. Furthermore, programs not able to reach their audience objectives are frequently moved to other schedule time slots or definitively cancelled. Programming schedule building process

121. 120  Theory of programming schedule building Logic: companies and programming schedule typologies Public broadcasters market is represented by citizens who (directly or indirectly) finance TV service. The main objective is to guarantee the widest access to such TV offer. Public broadcasters are mainly focused on quantity to get as many average viewers they can with less attention to target qualification elements. Commercial broadcasters on the contrary, pay very much attention to audience composition and strive to maximize the audience of any program they air (even if they are addressed to a low remunerative target). Pay TV market is represented by potential subscribers, people willing to pay to access The building schedule logic is driven by the objective to offer, within a certain time unit (day, week, month), the highest number of new premium contents (sports, blockbuster movies, TV series etc) able to convince viewers to acquire or to renew a pay TV subscription. Pay TV is primary based on a monthly schedule time frame, during which the same titles are re- broadcasted in different days and start time slots (multiprogramming solution). This allows pay TV operators to adapt to subscribers viewing attitudes and habits and to guarantee them a satisfactory fruition of the service they have paid for. Programming schedule building process

122. 121  Theory of programming schedule building Logic: TV companies and programming schedule typologies The critical point in schedule management is to allocate the most compelling programs to always reach high and uniform appeal within the different monthly and weekly schedules and, moreover to avoid any risk of consumption repetition (the same viewer has more than one watching experience of the same program). Consumption repetition is more acceptable only when two consumption experience are quite far from each other and represent a more addressable objective for those broadcaster which have an huge amount of new and attracting titles to use on a yearly basis. Thus, multiprogramming solution needs to focus, according to each premium title, on the possibility to reach the entire subscribers base (reach) avoiding, as much as possible, consumption repetition (frequency). Programming schedule building process

123. 122  Theory of programming schedule building An integrated programming schedule model Potential channel audience within a certain time segment depends on individual and structural factors connected to the demand expressed by the viewers and, in the same time, to the TV offer provided by the different broadcasters. TV programs demand depends on the level of potential population reached by TV signal (potential audience) and on the population which, during the different periods of the year and of the day, effectively watch television (effective audience). TV programs offer depends on coverage level (territory and population) of the different TV channels and on the programming schedule decisions of each single broadcaster. Viewers decision to tune on a specific channel depends on the different options available and on specific individual inclinations. Options available are determined by: -existing technologies (cable, satellite, DTT, IPTV ect.), -the number of channel accessible -viewer’s knowledge of the different available alternatives. Programming schedule building process

124. 123  Theory of programming schedule building An integrated programming schedule model Viewers decisions can be analyzed using traditional economic categories applying to any types of products. We can use two different categories of economic models to understand TV programs decision phenomenon: a)Viewers choose to only watch the programs which satisfy their preferences; b)Viewers are also willing to watch the program which do not completely satisfy their preference. a) In the first option, TV audience is defined as a group of active individuals whose TV consumption decisions strictly depend on TV offer composition (strong investments in communication and promotion by the broadcasters are needed). b) In the second option, TV audience is defined as a group of passive individuals used to watch TV independently from the real offer broadcasted (broadcasters have to focus on programming schedule strategies to be sure to reach the audience of viewers in front of TV set in any case). Programming schedule building process

125. 124  Theory of programming schedule building An integrated programming schedule model TV companies programming strategies depend on two different decisions: a)Which programs b)For which target audience (on a quantitative and a qualitative point of view). In the programming logic, a broadcaster needs also to consider three other main elements: a)Programs cost b)Programs audience potentiality c)Specific time slot in which eventually allocate programs To build a programming schedule means to allocate the different programs into the different available time slots defined by specific potential audience levels. Effective audience, in fact, depends on the potential audience of each time slot and on the potential audience of each program offered in a precise time slot. Programming schedule building process

126. 125  Theory of programming schedule building Programminig strategies depend on programs, target audience, costs and available time slot Programming schedule building process Programs Target audience Programming strategies Costs + Time slot

127. 126  Theory of programming schedule building An integrated programming schedule model TV companies revenues, in particular advertising based companies revenues, depend on their effective audience. For that reason in reality audience competition is in the meantime a revenues competition. In theory the relationship between audience share and revenues share should be a one to one relationship and, in the cases in which is not directly proportional, we are in front of a premium price or a discount solution due to particular audience compositions. On a strictly economical approach, the basic logic to allocate the different programs in a schedule is to try to maximize the difference between costs and revenues. While costs are directly related to each single program, the incomes depend on the different revenue streams of a TV company. Advertising revenues vary according to the effective audience of each time slot which has a different commercial value. Public revenues depend on the amount of people that could have access to the public broadcasters programming, because under a minimum audience level is quite hard to justify the public fee payment by the citizens. In any case, public revenues refer to a very wide temporal interval (normally one year, coinciding with the public fee payment frequency) and so they’re not depending on single schedule time slots or on different programs. Programming schedule building process

128. 127  Theory of programming schedule building An integrated programming schedule model End user spending revenues are mainly determined by the number of people who pay a subscription to have access to TV offer. Normally, pay TV operators total incomes are more subscriptions based than advertising based (in average 80% versus 20%) and so single time slots audience performances are less important than in the case of commercial free to air broadcasters. In all the cases in which revenues depend on time segments, programming should be founded on each program effective audience estimation within the different schedule time slots, days, weeks, seasons etc. Obviously is better to identify and consequently to choose the time segment that allows to maximize the difference between costs and revenues. Another solution used by the TV companies is the minimization of audience costs: the point is to identify the slot which permits to get the lowest expenditure. This method allows to individuate ex post the more convenient programming slots in which cost is less than the average one and audience is more than the average one, and the less convenient programming, in which cost is to high in comparison with audience obtainable. Both those two models have a number of constraints and simplifications. In terms of constraints a program can not be allocated in any time segment, but is characterized by a limited space determined by its typology and content. In term of simplifications, schedule can not be considered as a group of totally indipendent time segments, but must be considered from a perspective able to understand horizontal and vertical audience trends developing inside it. Programming schedule building process

129. 128  Theory of programming schedule building An integrated programming schedule model If a broadcaster has a substantially homogenous audience, its objective will be to build a programming schedule able to keep and lead-in all along the day (in a vertical sense) and week (in an horizontal sense) the same public. If, at the contrary, the audience of the different time slots and of the various days of the week is not the same, broadcaster objective will be to build a separated blocks schedule addressed to specific target segments. TV companies developed different programming strategies in order to intercept the various audience trends: the main important strategies are: a)Lead-in: a program has an impact on the audience of the following one which, for that reason, receives part of the audience accumulated by the previous one. b)Hammocking: a relatively “weak” program is allocated between two strong programs, to let it optimize the lead-in effects coming from the first and to get the audience waiting to watch the second. c)Separated blocks programming: programs of the same category and genre are allocated in sequence. d)Bridging, programs are allocated between start times and end times of competitors programs, so to minimize audience quit trends Programming schedule building process

130. 129  Theory of programming schedule building An integrated programming schedule model Another fundamental variable, not considered by the economical criteria used so far, is represented by competition. In fact, on a programming schedule level, a TV company has to consider its offer in comparison with the competitors one and, in order to this objective, two are the main strategies to follow: a)Competitive programming: to allocate the same program typology in the same time segment. b)Counter programming: to allocate a different program typology in the same time segment. The adopting of the first solution causes a competition for the same audience segment and produces a progressive TV landscape simplification. The second solution causes a competition for different audience segments and gives more choice options to the viewer. In addition to the traditional competition (coming from the other actors of the market), multichannel TV companies have to consider also another type of competition: the internal one. In particular the advertising based multichannel TV companies have to consider their entire and articulated offer from an unique view angle. The single channels programming schedules are in fact inserted in a single TV package and inside an integrated advertising offer. If some programs pass their predefined qualitative and quantitative audience borders, invading other channel targets, becomes necessary to reconsider every single channels positioning within the package or to change some programs schedule allocation and transfer them in more appropriate channels. Programming schedule building process

131. 130  Theory of programming schedule building TV Companies when consider their competitors’ offer have two choices: Programming schedule building process 1. Competitive programming: Broadcasting the same program typology in the same time segment (slot) 2. Counter programming: Broadcasting a different program typology in the same time segment (slot)

132. 131  Theory of programming schedule building Schedule building process Programming schedule building is the result of a long and articulated process that can be analyzed according two different dimension: 1)Time development 2)Structures and organs involved Between schedule headlines definition and effective programs broadcasting there are some intermediate phases in which programming decisions are represented and put in clear by some particular documents more and more detailed while launching date becomes closer and closer. Principal documents are the following: 1)Annual schedule 2)Seasonal schedule (main time measure unit for commercial and public broadcasters) 3)Monthly schedule (main time measure unit for pay TV operators) 4)Weekly schedule 5)Operative schedule Programming schedule building process

133. 132  Theory of programming schedule building Schedule building process 1)In the annual schedule are defined the editorials headlines, generally close to broadcaster historical traditions, a schematic programming profile is designed and productions and acquisitions investments are planned. In the case of public broadcasters, annual programming is normally subject to the Board of Directors approval to verify the public service objectives respect and for the yearly budget assignment. 2)In the seasonal schedule, structure of programming stripes, titles and typology of programs within a three month time interval are defined. Certain programming slots and programs are scheduled as in the previous season (for example news bulletins, some daytime programs etc.) and others that are otherwise modified or substituted with new titles, especially during the prime time. In the case of commercial TV, seasonal schedule is a fundamental element, presented to the advertisers some months before the programming airing: it represents the document on the basis of which advertisers can evaluate programs audience potentiality so to define their advertising investments. 3)Monthly and 4) Weekly schedule are elaborated in order to their publication on specialized press and represent an important information and promotion instrument. Both offer the indication of all the titles aired and start times. Pay TV operators usually adopt the monthly schedule because they present their offer month by month to send it to the subscribers base. The other broadcasters usually adopt the weekly schedule. Programming schedule building process

134. 133  Theory of programming schedule building Schedule building process 5) The operative schedule is an internal document in which is indicated a very detailed sequence of programs, events (i.e. spots, promo, etc.) and other information like cassette codes, types of connections etc. Operative schedule is sent to the broadcasting centre which is responsible for the airing. Programming schedule building process

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