SIC 4833

This category covers establishments primarily broadcasting visual programs by television to the public, except cable and other pay television services (discussed in SIC 4841: Cable and Other Pay Television Services . Included in this industry are commercial, religious, educational, and other television stations. Also included are establishments primarily engaged in television broadcasting and that produce taped television program materials. Separate establishments primarily engaged in producing taped television program materials are classified in SIC 7812: Motion Picture and Video Tape Production.

NAICS Code(s)

513120 (Television Broadcasting)

Industry Snapshot

During the early 2000s, the television broadcasting industry was challenged by weak economic conditions that had a negative impact on corporate spending and thus advertising revenues. This decline included the fall of many "dot-com" companies that previously had spent hefty sums on advertising. These conditions were made even worse by the terrorist attacks against the United States on September 11, 2001. While the industry achieved positive growth during most of the 1990s, in 2001 revenues fell for the first time in 10 years, dropping from $44.8 billion in 2000 to $38.9 billion in 2001. In addition to a difficult economic climate, the industry has faced a number of other challenges brought on by new competition, regulatory changes, and technological developments.

In recent years, the long-established networks—ABC, CBS, and NBC—have struggled for the top ratings position, as two of the three acquired new owners. In 1995, Disney purchased ABC and Westinghouse purchased CBS. CBS subsequently merged with Viacom Inc. in 1999. The established networks also had to contend with Fox Broadcasting, which established itself in the 1990s as the fourth major broadcast network. Smaller "netlets," not yet meeting the Federal Communications Commission's definition of a network, were established by Paramount and Warner Brothers in 1995, and in 1997 Pax Communications launched a seventh network, PAX TV. The increased reach of cable television, direct broadcast satellite operators, and even the Internet are eroding audiences for network broadcasts. New federal rules regarding ownership, programming content, and digital transmission continue to reshape the competitive landscape.

In this frenetic atmosphere, the once-bleak outlook of the networks in the early 1990s improved considerably later in the decade. Although they continued to see a drop in audience share from the 1980s, the networks still held a strong position in prime-time ratings and saw increased advertising revenues. Beginning in 1995, the major networks gained new syndication revenues resulting from a relaxation of federal regulations. They also began creating their own cable networks, such as ESPN2 and MSNBC, using their considerable production resources. Furthermore, viewing audiences had made it clear that they did not want cable television service that did not include local broadcast network affiliates. Thus, the networks became increasingly concerned with production and programming, as they created a strong role for themselves in the growing system of television delivery and services. Writing for Time, Richard Zoglin commented, "If the network business is thriving, it is as a radically different sort of business. The line between distributors (the networks) and suppliers (outside producers) is being blurred. The networks, given the chance to produce and own their own shows, are acting more like studios, while the studios, afraid of being squeezed out, are trying to become networks."

Organization and Structure

The networks include in their stables both network-owned stations, which are often flagship stations in major media markets, and affiliated stations, independently owned stations that have contractual agreements with a network to broadcast their lines of programming. Variety noted in December 1996 that the merger of Westinghouse with CBS "had no greater impact than on the station side, where both companies had established strong station businesses long before their teaming." At the same time, the acquisition of New World Communications by Fox Televisions Stations Group contributed to the radical changes that took place among station holdings. Fox vaulted from being a medium-sized group to being the largest operation by the end of 1998, with 23 stations (including channels in New York, Los Angeles, Chicago, and Philadelphia) and 35 percent penetration of U.S. television households.

In early 2002, Viacom (home to CBS and UPN) was the industry leader, with 39 stations reaching almost 40 percent of the U.S. market. Fox was second, with 35 stations reaching about 38 percent of the market. Paxson Communications ranked third with 69 stations reaching some 33 percent of U.S. television homes. NBC followed with 13 network-owned stations reaching slightly more than 30 percent of all American homes. Tribune Broadcasting ranked fifth with 23 stations and almost 29 percent penetration. Other industry leaders included ABC, with 10 stations and almost 24 percent market coverage; Univision (33 stations, 21 percent coverage); Gannett Broadcasting (22 stations, 18 percent coverage); Hearst-Argyle (34 stations, 16 percent coverage); and Trinity Broadcasting (23 stations, 16 percent coverage).

A shake-up in station ownership started in May 1994 when Fox lured 12 stations affiliated with the other networks to its side, including several in major markets. This affiliation switch, the biggest in television history, signaled a significant change in the balance of power between the networks and individual television stations. Dennis FitzSimons, president of Tribune Television, noted in Business Week that the deal highlighted "the importance of the distribution of programming—something that has been ignored recently. Furthermore, it gives the control back to the stations." Fox's success in these matters subsequently inspired the creation of additional netlets, the United Paramount Network (UPN) and the Warner Brothers (WB) Television Network, which launched in January 1995 with more than 80 percent national coverage.

Background and Development

The first television networks in America—NBC, ABC, CBS, and DuMont—were actually divisions of major radio networks or subsidiaries of television and radio manufacturers. Recognizing that centralized sales and distribution companies could be more profitable than scattered businesses, networks offered programs to individual stations that the affiliates could not afford to underwrite individually. Advertisers were fond of the network arrangement as well, for it enabled them to reach the entire nation with one commercial contract rather than dozens.

In the early years of television, the networks competed for programs, viewers, and advertisers in much the same manner as they do today. CBS was the recognized leader of the networks by any measure, while a number of other fledgling networks failed to crack the wall separating the leading triumvirate from the rest of the pack. The DuMont Network was the hardiest of the challengers; at one point DuMont had 80 stations under its banner and twice that many part-time affiliate subscribers. The company's financial fortunes fell, however, and ABC plucked a number of the network's chief attractions. By 1955 the company folded; the affiliates it owned became the Metromedia chain of independent stations.

With the outbreak of World War II, England and Germany, America's chief competitors in television technology, halted their research programs. By remaining at peace for two additional years before entering that conflict, by continuing government-sponsored television research even during the war, and by realizing the benefits of advances in electronics that resulted from the war effort, the United States took a major lead in this technology.

The Federal Communications Commission (FCC) then sought nationwide standards guaranteeing that all Americans could enjoy equal access to television and that no single television company, beginning with industry pioneer NBC, could achieve a monopoly. From this point on, much of the government's regulation of the limited available airwave space reflected the dichotomy of television being a public service people were entitled to, as well as big business.

Initially, the high costs of establishing a television station and the paucity of television sets meant that losses far outweighed profits. The popularity of the television increased dramatically in a very short time, however, and profits in the industry grew every year between 1951 and 1986, at which point growth was stalled. Network growth was also radically affected by the growing pay television industry that, by the early 1990s, established itself as a major rival. The big three broadcast networks had a 91 percent share of the prime-time television audience during the 1978-79 season, which dropped to 75 percent in 1986-87, and further to 61 percent in 1993-94. Part of an overall loss in audience share, however, was credited to the success of Fox Broadcasting, which drew viewers with its coverage of National Football League (NFL) games and strong children's shows.

Competition. In 1995 cable systems actually experienced a drop in subscribers and reached about 65 percent of television homes. Subscribers balked at price hikes that followed rate deregulation, and some opted for satellite television services. In order to give broadcasters the chance to compete against pay television services and the netlets, the FCC agreed to gradually lift a ban on the syndication of network programming. Previously, networks were wholly dependent on advertisers for their revenue and had access to the airwaves only by permission of the government, whereas cable companies could charge subscribers as well as advertisers. In 1993 the networks gained rights to profit from reruns of their prime-time shows. This triumph for the networks affected the outside producers that made and financed much of the prime-time programming. Permitted to undertake a greater proportion of in-house production of prime-time programming, the networks could now negotiate for more financially rewarding deals with outside producers. By 1995 all such restrictions on network ownership of programming and on their right to syndicate programs were lifted.

Networks War with Nielsen. With an eye on advertising revenues, the networks found fault with Nielsen Media Research, the company that had long provided the broadcasters and advertisers with viewer ratings. Changes in Nielsen methodology coincided with a reported decline in NFL football ratings, which caused both NBC and Fox to question their validity. CBS also complained about the accuracy of ratings for the CBS Evening News. The networks were concerned that Nielsen's new methods of selecting participants and an increased sample size were skewing the resulting ratings. In December 1996, Fox, CBS, NBC, and ABC joined ranks to criticize the research company by placing ads in media and advertising trade publications that denounced Nielsen's claims of reliability. As Broadcasting and Cable reported, the ads read "Our confidence in Nielsen is DOWN" and "There is a growing disparity between local overnight ratings and national ratings." At the same time, the FCC was asked to investigate Nielsen's services.

Programming Content Debate. Another issue that the networks and the cable television industries faced was that of violent programming content. Under pressure from the federal government, CBS, ABC, NBC, and Fox all agreed to place parental advisory labels on violent programming—in order to avoid having a system imposed upon them. The group unveiled its age-based ratings system that was similar to that of the movie industry in December 1996, which labeled programs (with the exception of news) with one of six categories ranging from children's programming to shows for mature audiences: TV-Y, TV-Y7, TV-G, TV-PG, TV-14, and TVM. Viewers saw the appropriate icon in the upper left corner of the television screen at the beginning of the program and, if the program exceeded one hour in length, at the beginning of subsequent hours. On June 4, 1997, television executives met with representatives of the American Medical Association and the National PTA to review the ratings system. Several networks agreed to add V (for violence), S (for sexual content), and L (for language) to the age-based system.

At the same time, the federal government was proceeding with plans to give parents the ability to black out violent programming with a device called the V-chip. Mandated by the White House and Congress in 1996, television manufacturers were waiting for FCC specifications before adding the chip to new television models and designing V-chip converter boxes. By 1999 V-chips were being installed in new television sets, and the broadcast networks were implementing a system that would help parents select programs based on their content. Many of the major cable networks were also committed to designing their own rating system, although some refused to comply based on First Amendment issues.

During 1999 several major deals were announced that would further concentrate the industry. Viacom announced a $35.9 billion buyout of CBS. NBC announced it would acquire a 32 percent interest in Paxson Communications, which owned or had a significant financial stake in 72 television stations, for $415 million. Following its announced merger with Viacom, CBS offered $2.15 billion to acquire Chris-Craft Industries, which operated 10 television stations (including stations in New York City and Los Angeles) and owned 50 percent of UPN.

In late 1999 current FCC regulations limited companies from owning stations that reached more than 35 percent of the national television audience. The industry, however, expected the ownership limit to be raised, sooner if not later. NBC, for example, could not acquire more than a one-third interest in Paxson under FCC ownership limits, because Paxson-owned stations were already reaching more than 34 percent of television viewers. NBC, however, had an option to acquire up to 49 percent of Paxson after February 1, 2002, if the FCC raised its current ownership limit.

The top four networks experienced declining viewerships from 1997 to 1999 and, for the future, faced the possibility of an explosion of competitors. The advent of digital television will boost channel capacity, making cable networks even more formidable competitors. For the 1999-2000 season, fewer than half of the new network shows were expected to achieve a double-digit share of audience, compared to 1997-98 when 76 per cent of the new network shows achieved a 10 or better audience share.

Among the major networks the battle for prime-time ratings continued to be very intense and very close. In the 1998-99 season CBS barely edged NBC for the top spot with a 9 household rating and 14.3 audience share, compared to NBC's 8.9 household rating and 15 percent audience share. ABC ranked third, followed by Fox, WB, and UPN.

Current Conditions

After rising from $40 billion in 1999 to $44.8 billion in 2000, industry revenues fell to $38.9 billion in 2001 in the wake of a sluggish economy that included the fall of dot-com advertisers and overall reductions in corporate spending. The terrorist attacks of September 11, 2001, only made these conditions worse. However, by 2002 conditions began to improve. Standard & Poor's estimated that revenues would reach $40.5 billion that year.

Major developments like the terrorist attacks of September 11 and the U.S.-led war with Iraq, which began in March 2003, impacted the way broadcast networks delivered news, as well as the costs involved. According to Broadcasting & Cable , a survey conducted by Frank N. Magid Associates revealed that 45 percent of viewers turned to cable news first for the latest information about the war, whereas 22 percent turned first to the so-called "Big Three" networks' evening news broadcasts first. Local TV news came in third, at 20 percent. In addition to lost advertising revenue due to periods of commercial-free coverage, the conflict in Iraq was expected to cost broadcasting networks $30 to $40 million. The publication explained that networks had trained "correspondents for combat and for chemical and biological attacks, outfitting them with military-grade gas masks and chemical suits. Nearly every aspect of coverage, from new technology to deployment, has been rehearsed and tested. …TV and print journalists are traveling with military units, embedded into military units, and, in some cases, they have the ability to televise their reports live."

During the early 2000s, the industry faced many of the same challenges that were evident in the late 1990s. Network broadcasters continued to slowly lose viewers to cable operators offering digital services like video-on-demand and high-speed Internet access. In addition to cable companies, other forms of competition included the Internet, film studios, telephone companies, computer companies, consumer-electronics companies, and publishers.

Industry Consolidation. Consistent with past trends, consolidation continued to affect the industry. ABC, CBS, and NBC took in more than 40 percent of the advertising revenue for the television broadcast industry during the early 2000s, and they were expected to continue to lead the industry in both television advertising and viewership. In addition to providing programming, the networks also owned television stations. By the early 2000s there were approximately 1,290 individual broadcast stations operating in the United States, up from about 1,200 in 1998. The top 25 owners controlled 36 percent of the nation's commercial stations in 1998. However, by 2001 the 10 leading owners controlled 23 percent of all stations (up from 19 percent the previous year).

Digital Television. At the close of 1996 the industry moved one step closer to digital transmission of television signals, as the FCC selected a DTV standard. The "Grand Alliance Standard" was adopted minus specifications regarding picture formats on which the broadcast, computer, and film industries could not agree. Video compression, sound delivery, and transmission of signals were part of the specifications. The commission still needed to determine how long broadcasters could use existing analog channels, how digital channels would be assigned, and if high-definition programming would be required. Although the FCC initially mandated that all television stations be capable of transmitting high-definition television by May 2002, this deadline was not enforced and conversion became voluntary. In addition, some industry analysts indicated that consumer adoption of HDTV, which requires the purchase of relatively expensive television sets, would likely take a great deal of time before it reached a high percentage. More specifically, some estimated that it could take 20 years or more before adoption levels reached the 80 percent range.

Industry Leaders

The three leading broadcast networks—ABC, CBS, and NBC—are also the longest established. In terms of prime-time ratings, ABC was the leading network at the beginning of the 1990s, but by the decade's end it had been overtaken by both NBC and CBS. By 2001-2002, NBC led the industry in the ratings race, followed by CBS, ABC, and Fox. By station ownership, Viacom (which owns CBS and UPN) led the industry with 39 stations and 39.5 percent market penetration at the beginning of 2002. NBC owned 13 stations with a market penetration of 30.4 percent, and ABC owned 10 stations with 23.8 percent market penetration. ABC was owned by the Walt Disney Co., NBC by General Electric, and CBS was acquired by Viacom in 1999. All three broadcast networks and their parent companies had ownership interests in cable television networks or other media properties.

The Fox Broadcasting Company was launched in 1986 and aggressively pursued young viewers, especially teenagers and adults ages 18 to 34. By the 1998-99 season, Fox was established as the fourth broadcast network; it finished second to NBC in the key demographic of adults ages 18 to 49 and first among teenagers. Fox Broadcasting was part of the Fox Entertainment Group, which also included Fox Filmed Entertainment; Fox Sports Networks, LLC; and baseball's Los Angeles Dodgers, Inc. Through Fox Television Studios, the company owned 35 television stations. Fox's parent company was Rupert Murdoch's News Corporation, which owned 81.4 percent of Fox Entertainment following an initial public offering that made 18.6 percent of the company's stock available to the public.

With an interest in 69 television stations, Paxson Communications owns the largest broadcast television station group. In 1999 NBC invested $415 million in Paxson and took a 32 percent ownership interest in the company. In 1997 Paxson launched a new network, PAX TV. PAX TV reached approximately 85 percent of U.S. households in 2002 through 69 company-owned stations and 63 network affiliates. In 2002, the company recorded annual sales of $277 million.

In addition to its ownership of CBS, several cable channels, and a variety of other entertainment subsidiaries, Viacom is the parent company of the Paramount Television Group. It owns 39 stations and is the largest television broadcasting group in the United States by reach, covering 39.5 percent of all U.S. viewing households. In 2002, the company recorded annual sales of $24.6 billion and employed 120,630 people.

Other major television station owners include Tribune Broadcasting, a subsidiary of the Tribune Co., which owns and operates 26 major market television stations reaching more than 80 percent of U.S. television households. By the early 2000s, Tribune Company was part owner of the WB Television Network.

Further Reading

Accas, Gene. "Divining Prime Time 1999-2000." Broadcasting & Cable, 16 August 1999.

Boliek, Brooks. "Paxson-NBC Heats Up Ownership Debate." Back Stage, 24 September 1999.

Broadcasting & Cable Yearbook 1999. New Providence, NJ: R.R. Bowker, 1999.

Flint, Joe. "Fox Clan Grows." Variety, 16-22 December 1996.

Fox Entertainment Group. "Overview and Chairman's Review." Available from .

Freeman, Michael. "Tribune Agrees to Buyout of the Rest of Qwest." Mediaweek, 15 November 1999.

Knestout, Brian P. "Viacom and CBS Make it a Blockbuster Night." Kiplinger's Personal Finance Magazine, November 1999.

Lesly, Elizabeth. "Six Months after Westinghouse Took Over, the Network May Be Waking Up." Business Week, 3 June 1996.

Levin, Gary. "Eye Web Marriage Survives First Year." Variety, 16-22 December 1996.

McClellan, Steve. "CBS Bids $2 Billion for Chris-Craft." Broadcasting & Cable, 8 November 1999.

——. "Combined Nets Take Aim at Nielsen." Broadcasting & Cable, 30 December 1996.

——. "How High is Upfront? At Least $8.3B, Most Say." Broadcasting & Cable, 17 March 2003.

——. "War at NBC, ABC at Peace." Broadcasting & Cable, 5 July 1999.

"NBC-Paxson $415-Million Deal Designed to Avoid FCC." Television Digest, 20 September 1999.

Paxson Communications. "NBC Makes Strategic Investment in Paxson Communications," 16 September 1999. Available from .

Romano, Allison. "Embedded and Embattled: With More Access Than Ever in Iraq, Networks Adapt to Cover the War." Broadcasting & Cable, 24 March 2003.

Schlosser, Joe. "Disney Closes TV Ranks." Broadcasting & Cable, 12 July 1999.

——. "Reinventing ABC." Broadcasting & Cable, 30 August 1999.

Standard & Poor's Industry Surveys: Broadcasting & Cable. New York: Standard & Poor's, 1999.

——. New York: Standard & Poor's, 25 July 2002.

Torpey-Kemph, Anne. "Belo Wraps Phoenix Buys." Mediaweek, 8 November 1999.

——. "Cable Nets OK V-Chip Ratings System." Mediaweek, 26 July 1999.

Tribune Company. "Company Overview." Available from .

Zoglin, Richard. "Network Crazy." Time, 16 January 1995.

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