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Cable TV Adapting To New Realities

7 min read

(Editor’s Note: This is the latest in a series of business history feature stories. Suggestions for future Fifth Monday articles are welcome. Please contact Gwen Moritz at (501) 372-1443 or GMoritz@ABPG.com.)

(A correction has been made to this article. See end for details.)

The Arkansas Cable Telecommunications Association’s website — ARCTA.org — includes a history of cable television that starts with its almost simultaneous development in Oregon, Pennsylvania and Arkansas.

That was in 1948, five years Arkansas’ first commercial television stations signed on.

Sixty-seven years of technological development later, cable TV is old-school. The industry and business plan that Arkansas helped create are under pressure from then unimaginable competitors, and the infrastructure developed to deliver a broad menu of programming is being converted to other uses.

First, some history.

In 1946, 24-year-old James Yates “Jimmy” Davidson was discharged from the Navy Signal Corps and returned to Tuckerman, north of Newport in Jackson County, where he reopened a radio and photography shop he had operated before World War II. The following year, according to an interview he gave in 1999, he learned that radio station WMC in Memphis had applied for a permit for a television station.

Although Davidson had never seen a TV, he wanted to add the new gadgets to the merchandise mix at his store. There was a huge problem with that plan, however: Memphis was 90 miles away, and early television signals weren’t strong. Tuckerman was not a particularly good market for a receiver that had nothing to receive.

So Davidson built a 100-foot antenna at Tuckerman and began running cables from it to customers of his “Community Antenna” — CATV. Davidson’s obituary from 2012 identified the Carl Toler family as his first paying customer in October 1948, two months before WMCT began regular broadcasts from downtown Memphis.

In Tuckerman, the Toler residence, Davidson’s shop and the American Legion building that he had outfitted with cables and TVs attracted standing-room-only crowds to watch the Nov. 13, 1948, football matchup between the University of Tennessee and Ole Miss.

Roy Ockert, an independent journalist and former editor of the Jonesboro Sun, worked with Davidson’s grandson and interviewed and wrote about the cable visionary, who almost singlehandedly created the cable television industry in Arkansas. And it was vital, even after KFSA-TV (now KFSM) signed on in Fort Smith in July 1953 and the three network affiliates signed on in the Little Rock-Pine Bluff corridor — KATV in December 1953; KARK-TV, Channel 4, in April 1954 and KTHV-TV, Channel 11, in November 1955.

“It was the only way for much of Arkansas to get television,” Ockert said last week. “There were only three stations in Arkansas, and those of us who lived in central Arkansas could get those stations with a rooftop antenna or, if you were close enough, rabbit ears.

“But in northeast Arkansas and elsewhere, there was no such thing as a signal to get television,” Ockert continued.

Davidson’s development “saved you from having to put an antenna on your house that still might not get very good reception … He just built a big antenna, and the secret is to get it higher. And that’s easier over here in the Delta.”

The densely populated center of the state, where signals from the local stations were strong and reliable, wouldn’t get cable television until the 1970s, when cable meant more programming options. But in the meantime, Davidson brought cable TV to small cities in northeast Arkansas — Newport, Cave City, Pocahontas — and in other states, inventing and manufacturing much of the equipment used by the industry as it developed around the country.

In his obituary, his family bragged that he was the first to prove that a cable could carry five channels, but he wasn’t just a technological innovator. His negotiation of exclusive franchise agreements with local city governments established the business plan that allowed the industry to flourish: to get TV, or more programming choices, residents had to buy from the one and only cable system with the right to serve them.

With a captive audience came the programming “bundle.” The Atlanta Braves became “America’s Team” thanks to the cable-distributed power of “superstation” WTBS, but subscribers who wanted popular programming had to accept (and pay for) programming aimed at smaller niche markets.

That part of the cable business plan has survived for four decades, as Joe Flint wrote in the Wall Street Journal earlier this month, “because the programmers and distributors both made huge profits from new channels, rising numbers of subscribers and steadily higher cable bills.”

And although customers have complained for years about having to buy programs they don’t want, “until recently, it would have been a logistical nightmare to sell channels individually,” Flint wrote.

Consumers, however, are no longer at the mercy of the programming contracts entered into by the one cable TV provider that made the best pitch to the city council. Nor, for that matter, are they dependent upon a cable — unless that’s how they choose to receive the broadband Internet service that allows them to bypass the cable bundles by delivering streaming services like Netflix and Hulu.

The WSJ noted that pay-TV subscriptions have peaked in the United States, and Len Pitcock, director of government affairs for cable provider Cox Communications, confirmed that traditional cable is not a growing product for his company.

But the same fiber-optic cables that Cox uses to send bundles of TV programming into individual homes is delivering growth products like high-speed Internet and home security monitoring and, for those who still want it, home telephone service.

Similarly, telecommunications companies like AT&T that originally used fiber-optics to deliver wireline telephone are using the same cables to deliver television and Internet. Companies that once delivered completely different and unrelated services — television and telephone — to defined geographic territories have become direct competitors. “This is how we stay relevant going forward,” Pitcock said last week, and why Cox has continued to reinvest. The company has even rolled out 1-gigabit Internet service on a limited basis in northwest Arkansas, although Pitcock acknowledged that few people or devices currently have any use for that kind of bandwidth. “It’s like running a 42-inch water main to someone’s house,” he said.

Customers may “cut the cable” by dropping their TV bundle, Pitcock said, but they may continue to be customers of the same cable provider if they want to watch “Orange Is the New Black” or “House of Cards,” hit series produced and distributed by Netflix, whose customers pay less than $10 a month for all-you-can-watch streaming of a robust catalog of series and movies.

Customers of pay TV, which includes satellite providers like Dish Network and DirecTV, pony up an average of $74 a month, according to the WSJ, although that figure may be outdated. And most of them also pay for high-speed Internet from some provider, even if it isn’t the cable company.

One thing that Netflix, Hulu, Amazon Prime, Dish Sling (a small-bundle, Web-delivered product offered by the satellite company) and other low-price streaming services don’t offer is the local programming from stations like the three that arrived in Little Rock in the mid-’50s and the relative upstart, KLRT-TV, Channel 16, which turned 32 last week.

Those, however, are still available free through the 21st-century high-definition version of “rabbit ears” or, in some cases, through live-streaming on their own websites. And local station managers don’t seem to care where or how they get viewers.

“Our commitment is to produce great content that’s relevant and meaningful to the communities we serve,” Michael Caplan, general manager at KTHV, said in an email to Arkansas Business. “New technologies put stories and information at the consumers’ fingertips and it’s allowing all of us to be part of the conversation in ways not seen before.”

Mark Rose, president and general manager of KATV, said viewers are viewers. “It doesn’t matter to me, as long as the viewer is able to receive our signal.”

Households that keep viewership diaries for the all-important Nielsen ratings count as viewers whether they’re watching on TVs connected to antennas, cables or satellite feeds or on computers, tablets or smartphones, Rose said.

But while all viewers are equal, advertisers are not. Contractually and legally, there are limits on how, when and where commercials can be distributed by the local stations. Thus, the “Always On” live-stream of local programming on KATV.com is often interrupted by a screen that says “Be right back!” or promotional ads for the station rather than paid advertising.

Those breaks in online programming represent potential future revenue, Rose said.

While the cable TV industry considers the streaming services to be head-on competitors, Rose said local stations like his aren’t as threatened as even the networks with which they are affiliated.

“These streaming channels are definitely gaining ground among the younger viewers and with the 23-54s,” he said, using industry jargon that refers to age demographics. “But the vast majority of what we do is provide local news to the audience in Arkansas, and that’s the least likely thing for people to record and watch later. And it’s where the vast majority of our revenue comes from.”

Viewership of traditional network programming — your standard sit-com or prime-time drama — has plateaued, Rose said, and that “is where the industry is most challenged.”

But traditional TV still delivers a vast and growing audience for live events like awards shows and sporting events. The recent NBA finals, Rose said, drew the biggest audience in the history of the NBA.

(Correction, July 6, 2015: The original version of this story failed to credit KFSA-TV as the first commercial television station in Arkansas.)

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