Television Production in Post-Network Era: Changing Strategies of CBS, HBO, and Netflix. An Analysis on the Big Bang Theory, Game of Thrones, and Sense 8

(1)

1

Television Production in Post-Network Era:

Changing Strategies of CBS, HBO, and Netflix

An Analysis on the Big Bang Theory, Game of Thrones, and Sense 8

MA Thesis Television and Cross-Media Culture Miribanguli Abudureheman

Student Number: 11783095 Supervisor: Dr. Mark Stewart Second Reader: Dr. Jan Teurlings

(2)

2

Chapter 1: Introduction

The U.S. television industry has witnessed profound changes, and the contemporary television landscape is more competitive than ever. Observing the changing conditions in the industry, many overtly claim that traditional television – broadcast networks and cable channels – are dying (Cardinal; Yarow). Titles such as “TV’s Death by a Thousand

Streaming Apps” (Lachapelle), “Why Traditional TV Is in Trouble” (Maheshwari and

Koblin) perpetuate online, labeling label traditional television as “old-fashioned, irrelevant, and dying industry” (Enli and Syvertsen 143), while describes newly-emergent television portals as “world-dominating” (Katz) and “unstoppable” (Morgan). These claims rises many questions: Are traditional broadcast networks and cable networks total victim of this competition? Are they not taking any action to respond to these challenges? Are television portals really not facing any challenges?

The changes and the competition in the industry also have attracted many scholars’ attention. Some authors focus on the transformative changes in the production and consumption of television (Turner and Tay). Some recent works have focused specifically on the increasing competition and corresponding changes on industrial structure, practices, and businesses (Curtin et al.; Landau; Steemers). Wildman argues that traditional television and content suppliers should adjust their financing and distribution strategies in order to overcome challenges and maximize revenue (Wildman 91); On top of that, observing the changes in current U.S. television industry, Amanda Lotz argues that the transformation and current challenges has necessitate the reconsideration of production processes – “the practices involved in the creation and circulation of television – including how producers make television programs, how studios finance them, and how audiences access them” (Lotz, The Television 4), in other word, the financing, creation, and distribution of content.

This thesis aims to explore how U.S. traditional television – broadcast networks and cable channels – as well as relatively-new television portals are adjusting their television production practices in order to respond to challenges in current competitive television industry. To do so, Based on academic journals, industry and trade documents,

(5)

5 audio-visual materials and interviews (accessed from articles and online podcasts, etc.), this thesis conducts case studies on the broadcast network CBS, the premium cable network HBO, and television portals Netflix, and analyzes the production practices of one of their signature television series, namely The Big Bang Theory, Game of Thrones, and Sense 8.

The analysis in this thesis consists of three parts, each with an accompanying research question. The following chapter explores why U.S. television industry is said to be competitive than ever. By briefly overviewing the history of U.S. television industry, and comparing contemporary television industry with earlier periods, I argue that today’s U.S. television landscape is competitive because comparing to television’s earlier days, there are numerous platforms, abundant content, and alternative ways of watching television, which fragmented once national mass audience across different platforms, and changed their behavior and expectations.

Chapter three analyzes the general and specific challenges that CBS, HBO, and Netflix are facing in current television industry. Here, the main differences between them - the business models, technological features, and business strategies - are identified, and then the challenges that are threatening them are examined. I argue that they are all threatened by audience fragmentation, and the specific challenges vary due to the differences between them.

Chapter four analyzes the financing, creation, and distribution of The Big Bang

Theory, Game of Thrones, and Sense 8 to explore how CBS, HBO, and Netflix are

adjusting their production practices in response to the challenges identified in chapter two. I argue that all three networks are actively adjusting their production practices in order to overcome the challenges, and traditional television networks, in particular, are aggressively launching their studio portals to overcome challenges and expand their markets. Finally, this thesis ends with a concluding discussion on the main findings.

Chapter 2: Stories So Far: The Growing Competition

(6)

6 development of the U.S. television in order to illustrate how the industry has gradually become more competitive, and how different television distributors adapted to the changing environment; Then, it demonstrates the dynamic changes in the current television landscape, and their impact to different distributors.

Amanda Lotz, in her book The Television Will Be Revolutionized, categorizes the major developments of U.S. television into three periods, namely the network era, multi-channel transition, and post-network era (7-8), and demonstrates key changes within the three periods. Roberta Pearson took a similar approach, and summarizes the development of U.S. television as:

“In the United States, TVI, dating from the mid-1950s to the early 1980s, is the era of channel scarcity, the mass audience, and three-network hegemony. TVII, dating from roughly the early 1980s to the late 1990s, is the era of channel/network expansion, quality television, and network branding strategies. TVIII, dating from the 1990s to the present, is the era of proliferating digital distribution platforms, further audience fragmentation, and, as Rogers, Epstein, and Reeves suggest, a shift from second-order to first-order commodity relations.” (107).

I began with this quote because it illustrates the main characteristics of the U.S. television industry in different periods. While both authors admit that the linear periodization of television history into three distinct eras is likely to obscure the complex operations and considerable overlaps between them (Lotz, The Paradigmatic

Evolution 127; Pearson 107), these frameworks are useful in illuminating the main

industrial shifts of each era and providing comparisons between them. Therefore, in the text follows, these frameworks will be considered as broad guideposts to understand the development of U.S. television, and used to demonstrate the competition in each era, and corresponding changes in production practices.

2.1 The Network Era

The network era dates from the mid-1950s to the early 1980s, and is characterized by “channel scarcity, the mass audience, and three-network hegemony” (Pearson 107).

(7)

7 For audiences in the network era, the television meant the Big Three networks, namely ABC, CBS, and NBC. Although there were some local independent television stations for choice, their programming could not compete with the three big networks due to the financial limitation (Lotz, The Television 23-24). The television set was the only device to watch TV (22), and the remote control was not available until the early 1980s (24). Watching television in this era meant “a limited range of genres, certain types of programming scheduled at particular times of day, the television ‘season’, and reruns” (24), which offered the viewers with little control over program schedules, and limited options of content. The networks’ shows, on the other side, were distributed to the massive national audience, and the three networks generate revenue by selling the thirty-second advertisements to advertisers (22).

In network era, the television industry was dominated by the Big Three, and the competition was mainly limited within the trio. The networks had greater bargaining power over the production studios, (given the fact that the studios only had three potential buyers to sell content), and forced the studios to bear the financial risk while offering a minimal reward (Lotz, The Television 24). Audiences all around the U.S. were divided by the three networks, therefore, in order to get the most viewers possible, the main concern of the networks was preventing their audience from shifting to other two networks (Klein, 329). Considering that the whole family would watch television together, the networks tended to create shows that “doesn’t have to be ‘good’… [But] only has to be less objectionable” than the other two networks (ibid). The prime-time programs were also scheduled in a similar time in order to garner the largest audience (ibid).

2.2 Multi-Channel Transition

During the roughly thirty years of the network era, the industry practices remained fairly static until a series of new developments flooded in, and brought about substantial changes to the industry, signaling the start of the multi-channel transition. In this era, the development of new technologies provided more options and control for the viewers,

(8)

8 and disrupted the common television experience established in the network era (Lotz,

The Television 25-26): the invention of alternative distribution systems such as cable

and satellite, and the rise of new broadcast networks such as Fox (1986-present) significantly expanded audiences’ choice. In addition, the remote control devices (RCDs) enabled people to skip the commercial breaks, and easily shift from one channel to another (Curtin 11); the video-cassette recorders (VCRs) enabled viewers to record the television programs, to build their own personal libraries, and to watch them on their own scheduled time (Lotz, The Television 26). These changes altered the ways the viewers used the television, introduced more choice and content to the viewers, and consequently fragmented them to different channels.

One of the most substantial changes/disruptions of this era, as Lotz points out, was that U.S. cable channels started to produce original scripted series in the late 1990s (Lotz, The Paradigmatic Evolution 127; Lotz, Industrial and Creative Changes 10). At the beginning of multi-channel transition, there were nearly thirty cable channels. These channels, which are usually called as basic cable channels, drive revenue from two different sources – selling advertising in and between their programs, and generating affiliate fees from multichannel video programming distributors (MVPDs) – and were able to survive by rerunning broadcast network programs and old films (ibid 11). However, as the cable service providers introduced the digital cable system, cable channels in the market quickly expanded from approximately thirty to three hundred (Lotz, The Paradigmatic Evolution 127). This situation increased the competition in the industry, making it difficult for cable channels to seize bigger audience size by solely depending on rerunning acquired programs, and required them to build distinct identities to stand out from the crowded marketplace (Wayne 3). As a result, starting from the late 1990s, cable channels began to produce original scripted series that target a specific audience group (niche audience), and build their brand identities over these shows. This strategy was initially utilized by subscription-based premium cable channels – HBO debuted Oz 2003), and USA debuted La Femme Nikita (1997-2001) in 1997 – and followed up by basic cable channels in the early 2000s (Lotz,

(9)

9

Industrial and Creative Changes 11).A number of channels developed their identity by

creating original content which targets specific audience group. For example, ESPN established its brands as a place for sports programming, Lifetime targets female audience, while MTV produced original music television. By improving the value proposition, and building clear channel brands, these channels managed to generate considerable income from selling advertising which targeted their niche audience, and from cable service providers, and produce more original content in the years to come.

The proliferation of new networks and channels intensified the competition in the industry, and led to gradual changes in production practices. With the attempt to target specific audience group, cable channels started to pursue “differentiated programs that might be ‘most satisfying’” to their target audience, instead of developing shows likely to be least objectionable to the mass audience (Lotz, The Television 27). In addition, to differentiate themselves from broadcast networks, cable channels also tended to develop content clearly differed from broadcast networks’ content, according to Lotz, “many early cable originals consequently featured far less conventional characters, uncommon settings, and more serialized storytelling than typical of broadcast networks” (ibid, 104). Some bigger cable channels started to produce and schedule programs “with themes and content unlikely to be found on broadcast networks” (ibid 27). These practices increased viewers’ content choice and brought corresponding changes in viewers’ experience of watching television (ibid 27). Rather than being locked in three broadcast networks in the network era, audiences started to actively tune in different channels to find content that is most enjoyable to them.

The abundance of channels and the increase in content gradually fragmented the audience, and eroded the dominance of the Big Three Networks (Lotz, The Television 25). However, broadcast networks were still able to attract a significant amount of viewers comparing to cable channels, and it took decades for the audience fragmentation to impact broadcast networks’ revenue (ibid 57). Therefore, during most of multi-channel transition, the broadcast networks maintained their status, and the majority of their programming practices (ibid 57), and “fundamental logic of the

(10)

10 network system” (Curtin 11), such as program creation and distribution, remained the same.

2.3 Post-Network Era

Beginning from the early 2000s, the industry has witnessed numerous significant changes, which signaled the arrival of post-network era. A number of cable channels gained enough revenue to produce higher-quality original content, which further expanded viewers’ program choice and considerably disrupted the industrial practices (Lotz, The Paradigmatic 128); New technologies, such as digital video recorder (DVR), DVD, and video-on-demand (VOD), personal computers, and mobile phones, offered viewers more options and convenience to watch television content (Lotz, The Television 54); digital video distribution platforms such as YouTube and Netflix offered abundant content free from fixed schedule, and further fragmented the audience (Enli and Syvertsen 145); screen technologies also enabled the viewers to consume content across multiple screens, and dispersed “television’s family audience” into multiple places and platforms (Turner and Tay 2); given different options to watch television, viewers started to “focus much more on programs than on networks” (Lotz, The Television 68; Curtin et al. 88), which forced the industry to reconsider their conventional production practices in accord with the new conditions. Observing these significant changes in the industry, Michael Curtin argues that “[Television] was no longer a broadcast medium … television had become a matrix medium, an increasingly flexible and dynamic mode of communication” (13), and contemporary television landscape “is characterized by interactive exchanges, multiple sites of productivity, and diverse modes of interpretation and use” (ibid). So many changes had happened that it is difficult to uncover their specific impacts into limited pages, however, just as Michael Curtin argues, today’s television industry is undeniably dynamic and complex.

A number of scholars argue that one of the most transformational change occurred to current industry is the rise and proliferation of television portals, such as Netflix, Hulu, and Amazon Prime Video, which became a phenomenon in U.S. television

(11)

11 industry by 2010 (Lotz, The Paradigmatic Evolution 130; Lotz, Industrial and Creative

Change 18; Enli and Syvertsen 145). The fundamental difference between television

portals and the traditional television networks lies in their different distribution technologies. The distribution mechanism of broadcast networks and cable channels is founded on “broadcast architecture” (Sandvig 226), which is only able to transmit a single piece of content at a time to a large number of audience. Constrained by “24-hour broadcast schedule” (Cunningham and Silver 96), they only can organize a certain amount of television shows into a linear sequence. The audience, in turn, has to correspondingly arrange their time according to a channel’s schedule, having little control over when to watch their favorite shows. Television portals, in contrast, depends on a different distribution technology – distributing content over the internet. This particular distribution mechanism enables portals to “deliver personally-selected content from an industrially curated library”, which is also “independent from a schedule” (Lotz, Portals 2-4). Therefore, portals are able to bypass the time-specific schedule, and provide the viewers with a non-linear access to a vast content library, allowing them to have uncommon control over “where, when and how” to watch content. This different distribution technology enabled – also required – portals to utilize industrial and production practices vastly different from linear traditional television (Lotz, The Paradigmatic Evolution 135-36), which I will analyze with detail in next chapters. At the same time, this non-linear experience of watching television significantly distinguished portals from the linear broadcast networks and cable channels, and gradually changed the viewers’ behavior by providing them greater convenience (Lotz, The Television 74).

The proliferation of television portals and the abundance of content offered by them have led to a greater degree of audience fragmentation. (Enli and Syvertsen 145; Doyle, Media Economics 17; Lotz, Industrial and Creative Change 20). Viewers now are not only able to watch traditional linear television, they also have multiple platforms, websites and portals to choose from. In addition, bigger television portals are also investing heavily on content development to produce appealing, distinctive, and highly

(12)

12 desired content (Doyle, Digitization 635-638; Ryan and Littleton; Lotz, Portals 15). According to FX Networks Research, 182 original scripted series were produced in 2002; however, this figure increased to 487, among which 117 were produced by television portals (Otterson). Comparing to former two eras, viewers nowadays have a great variety of content to consume, and abundance of platforms to tune in. Consequently, audiences are more fragmented than ever before, which intensified the competition between different content distributors, and encouraged traditional television and portals alike to find out new ways to capture audience attention (Doyle,

Media Economics 17).

In addition, another feature of this competition is audience changing behavior and expectation towards non-linear viewing (Lotz, The Television 17). Television portals, as well as devices such as DVR and DVD, provided the viewers with more convenience and flexibility in deciding what, where and how to watch content (ibid 68; Curtin et al. 2). It is important to note that the popular discourse of “anytime, anywhere” access is exaggerated, for the reasons that television portals can only provide a limited amount of television, and they tend to be constrained by geographical boundaries (Stewart 702), however, television portals indeed provided viewers with more control over selecting their own viewing conditions and time. Non-linear viewing has been favored by some viewers, especially by the younger generation (Doyle, Channels 693), and gradually cultivated viewers expectations toward nonlinear convenience (Lotz, The Paradigmatic

Evolution 136-17; Curtin et al. 2). As a result, the conventional distribution strategies

such as linear scheduling became decreasingly effective as viewers tend to consume content on their self-scheduled manner (Lotz, Portals 15; Lotz, The Paradigmatic

Evolution 136-37). It is becoming increasingly difficult to force the viewers to watch

the show when it is airing live (ibid), which decreases the audience engagement with the channels and networks, and also influence their advertising revenue (Lotz, Portals 16).

Comparing contemporary U.S. television industry with former two periods, it can be argued that contemporary television marketplace is competitive than ever, and this

(13)

13 competition influenced every sector in the industry. Severe audience fragmentation influenced broadcast networks greatly, and the proliferation of content distributors also significantly eroded their dominance. At the end of the network era, the big three networks altogether were able to draw approximately 90 percent of all U.S. television households, however, this figure declined to 64 in multi-channel transition (Lotz, The

Television 25-26). This percentage only continued to decline as viewers have more

option to access various content in the post-network era. Although broadcast networks were able to raise their advertising price, and retained their revenue, it is reported that the advertising revenue has fallen substantially for two consecutive years (Oster). A similar precarious situation has also happened to cable networks as more and more people cutting the cords – i.e. cancelling their cable subscription and shift to the alternative offerings of television portals (Doyle, Channels 695). Many conventional practices and even business models of some traditional television networks proved to be less effective in this era, and forced them to reconsider their conventional practices. (Lotz, The Television 11; Curtin et al. 1). However, at the same time, disruptive and quickly-expanding television portals also need to compete for audience attention and time, which is becoming increasingly difficult to capture (Doyle, Digitization 634). That is to say, broadcast networks, cable channels, and television portals are all faced with various challenges in current competitive environment, and should accordingly adjust their strategies to maintain their business and status.

In order to have a clear understanding of what challenges different television distributors are facing with, in next chapter, I will analyze the business models, business strategies, and unique features of CBS, HBO, and Netflix, and highlight the general and specific challenges.

Chapter 3: Same Game, Different Rules

3.1 Columbia Broadcasting System (CBS)

The establishment of CBS dates back to 1927 when it was initially incorporated as

(14)

14 Broadcasting System in 1928), a national radio broadcasting company. With the emergence of television during the 1940s, and popularization of this new medium in American households, CBS had gradually transited its focus on television, and by providing numerous national hit programs, such as I Love Lucy (1951- 1957) and The

Beverly Hillbillies (1962-1971), etc., CBS established its status as one of the Big Three

networks. Although the dominant position of the Big Three slowly withered away during the transformations (Edgerton 2), CBS still has kept its reputation as a prestigious television provider with its different kind of programming, ranging from drama to live sports events, providing over 80 hours of free-to-air television shows to American households, and garnering millions of audience nationwide.

3.1.1The Advertising Business Model

In 2006, Howard J. Blumenthal and Oliver R. Goodenough define a major broadcast television network as:

“In the United States, a broadcast network is a branded collection of 100 to 200 local television (or radio) stations that promote and exhibit the same program schedule to build national audiences for programs and performers. The primary revenue stream for these programs is the sale of audience access in the form of commercial time”. (2, qtd. in Cunningham and Silver 64)

Starting from its radio origin, the U.S. broadcast networks have been working on this mechanism. That is to say, CBS delivers its programs to the viewers all around the U.S. with a fixed schedule, and sells the advertising time in and between these programs to the advertisers to generate revenue (Cunningham and Silverman 64). This adverting model makes it crucial for CBS, and for all other free-to-air television network to draw a large amount of audience to the network when airing a show. The larger audience that a show is able to attract, the more advertising money the network could generate from the advertisers (Napoli 164).

This business model, in turn, has fundamental impacts on how CBS create (or select) a show to air on its network, and how CBS invests in a specific show. Firstly, it

(15)

15 needs to consider audiences’ and advertiser’s needs when creating content. Due to the advertising model, CBS, as well as other broadcast networks, focus on creating appealing content that audiences like and enjoy, but they are even more concerned with creating content that are likely to be acceptable to the broadest range of audience so that they can maintain a large audience base (Havens and Lotz 32; Lotz, The Television 24). If a show is unacceptable to the viewers in any way, or it offends or shocks them, they might easily refuse to watch the show, and turn to other free-to-air network instead. This situation, in turn, directly influences the network’s viewership, and its advertising money. Furthermore, when viewers find the content of broadcast television inappropriate or offensive, they are able to make complaints to Federal Communications Commission (FCC), the federal regulatory organization that grants broadcast licenses and governs many media industries in the U.S., which can impose regulation and penalties on broadcast stations (Havens and Lotz 70-71; Nelson 26).

In addition, the advertising model also requires CBS to consider advertisers’ requirements and preferences when creating and selecting programs (Havens and Lotz 78 & 117). The advertisers are concerned about the content of the show that they are sponsoring, because it, to some extent, is correlated to their product and their brand reputation (ibid 117). Advertisers usually prefer shows that are light and unchallenging, and match the character of their product/brand (Kelso 48). Therefore, in order to retain larger audience, attract more advertisers, as well as avoid unnecessary conflicts with FCC, the broadcast networks tend to be conservative about their content creation and selection, and try to avoid controversial or challenging content.

Moreover, in order to strategically arrange the fixed amount of advertisements in and between its shows, and assure possibly-largest amount of audience to watch the advertisements, programs created for broadcast networks follows strict structural standards. For example, each episode of a half-hour show usually lasts around 22 minutes (or forty-two-minute if it is an one-hour show) (Lotz, The Television 236), and an episode is strictly designed to contain four or more commercial breaks (A.Smith), so that the network can organize a certain amount of advertisements into every

(16)

16 commercial interruption. This also influences the narrative structure of the show, because the scriptwriters are asked to incorporate a cliffhanger just before every commercial breaks in order to keep the audience stick to the channel and watch the advertisements (ibid 41; Lotz, The Television 194&326).

Therefore, the constraints and limitations on content, structure and narrative have great impact on broadcast content development, and provide the creators with limited innovation spaces when creating new shows. This does not mean broadcast networks never offer enjoyable or popular show, however, their content tends to be “tried, trite and predictable” (Lotz, The Television 234), conservative and conventional.

Despite from its influence on the content creation process, the advertising model also is a determining factor in how CBS invests in television programs. As Ian Griffiths in ITV comments, “Our [investment] model is very simple – we get X number of viewers. We know that around X million viewers, we will sell this much advertising. Therefore we can afford to pay a certain amount of money [for content]” (Griffths, Ian. Interview, April 2015, qtd. in Doyle, Digitization 638), the broadcast networks, in general, allocate their investment according to the size of the audience a show is able to draw.

As Maureen Ryan and Cynthia Littleton observes, big investment in content production becomes one feature of today’s U.S. television industry, as the subscription-supported television providers, such as HBO and Netflix, are investing heavily in their content (Doyle, Digitization 638). However, because of the advertising model, it is less feasible for CBS, and other broadcast networks, to pay such huge amount of money in a single show, because if the show fails to draw corresponding amount of audience when it is airing, the network will face the risk of losing money. This financial mandate makes CBS even more cautious about investing big money in new shows, because new shows need to gradually form its audience. Therefore, rather than making innovations in their content, broadcast networks tend to rely on their “past success” (Napoli 167), such as market-proven old shows, established genres and formulas to minimize risks, and ensure revenue.

(17)

17

3.1.2 The Challenges for CBS

First and foremost, severe audience fragmentation caused by proliferation of content providers and abundant program choice becomes a significant challenge to CBS, and also to other advertising-based networks. CBS’ business model requires it to attract as much audience as possible when it is airing the show live. However, the audience fragmentation and their changing behavior towards non-linear content consumption make it increasingly difficult for CBS to force audiences to watch its live shows. Gary Woolf, an executive in Zodiak International, acknowledges this situation,

“If you look at the TV landscape in general over the last 5-10 years it has just become more fragmented. The number of pay-TV and free-to-air channels you have and having additional SVOD services just complicates that further. And it is harder to launch a new [program] brand now than perhaps it was 5 or 10 years ago … It is not that programs aren’t as popular but actually getting viewers into one group is getting more and more like herding cats.” (Woolf, Gary. Interview, March 2015; qtd. in Doyle, Digitization 634).

As audience dispersed to different platforms to watch content, it will cause a decline in CBS’s audience rate, and directly influence its advertising revenue. This situation demands CBS to seek out alternative revenue stream to maintain profit, or to make distribution innovations to cater to audiences’ needs.

In addition, CBS, and other broadcast networks, face more difficulties in launching successful new shows. Firstly, as different television providers produce increasingly more content, and some even invest heavily on developing compelling “high-end content” to attract viewers (Doyle, Digitization), it becomes more challenging for television shows to stand out of the crowd. Additionally, as argued above, CBS tends to be conservative about its content creation, and produce “predictable” shows. These shows are unlikely to appeal audience’s attention in current “content bubble” (Landau 346). More importantly, CBS makes investment decisions according to how much audience a show is able to attract. New shows have to cultivate their audience base

(18)

18 gradually, however, as audience continue to fragment, it becomes more risky for CBS to invest more money in new shows. Therefore, broadcast networks face a “new show crisis” in contemporary television market. By comparison, their market-proven old shows are arguably more valuable for them, because they already have an established audience base.

3.2 Home Box Office (HBO)

To provide context and better illustrate HBO’s practices, a brief historical overview is given here. Initially conceived as The Green Channel in 1971 and soon renamed into

Home Box Office, HBO was, in the very beginning, established as “a subscription

television (STV) service that would primarily offer first-run movies and sporting events to its paying customers” (Edgerton 1). Indeed, by being the intermediary between the movie studios and at-home viewers, HBO had grown rapidly into a well-known domestic premium cable by the time that the videocassette recorder (VCR) was introduced to the American households, which enabled people to “bypass HBO by renting movies (and choosing from a much greater selection)” (Kelso 58).

Realizing that being solely a wholesaler of movies and sports events was a dead-end, HBO’s executive team started to reposition HBO’s focus on original content

production to provide “an outstanding one-of-a-kind programming service”(Edgerton and Jones 7).

Until 2017, HBO has been the biggest Primetime Emmy Awards winner for sixteen consecutive years, which, to some extent, confirms the high-quality of its shows. Now, HBO is no longer only a domestic premium cable channel; it has grown into a cable network whose content is available in more than 50 countries (HBO,

FAQs), a high-profile global brand which is “synonymous with quality in the

contemporary television landscape” (McCabe and Akass 84; Edgerton and Jones 322), and also a major revenue source for its parent company – Time Warner, Inc.

(19)

19 A fundamental difference between HBO and CBS is that CBS’ business model is advertisement-based, whereas HBO depends on a subscription model. Unlike CBS, whose main concern is how many people are actually watching its show at a specific time, HBO cares mainly about how many people (is willing to) subscribe to its service. In order to encourage television consumers to subscribe to its service, HBO needs to provide enough value to convince viewers to pay for and maintain the monthly subscription (Lotz, Linking 12). This requires HBO to deliver more attractive shows that differentiate it from free-to-air broadcast networks (Mullen 53; Lotz, Portals 31&40). As Chris Albrecht, the former chief of HBO, states,

“As the marketplace became more competitive, we had to go from being an occasional-use medium to something people use on a regular basis in order for people to justify paying for us … original programming became a tool for doing that” (Grego, A4, qtd. in McCabe and Akass 84).

HBO, as well as other subscription-based television, must provide television programs which are original to the cable channel and also which differ from those on advertiser-supported networks, so that it can sustain its business (Lotz, The Television 235). Its business model necessitates higher-quality and exclusivity of television content (Santo 20), so that the viewers “want to watch it so badly” (Bradberry 8), and could not find it anywhere else, so they will subscribe to HBO.

In addition, the subscription model exempted HBO from the regulation of FCC (Nelson 26; Leverette 124), and the restriction from the advertisers, which provided HBO with a greater degree of freedom to innovate on its content production (Lotz, The

Television 234-9; Jaramillo 168; A. Smith 46; Santo 19). As mentioned in the former

section, when creating a show for broadcast networks, the creators are usually conservative about the content, and follow a strict narrative structure. The subscription model eliminates these limitations, and offers more flexibility to creators. Without institutional constraints from FCC, and content-related requirements from advertisers, the creators working from HBO are able to take more challenging steps in storytelling, and innovate in narrative and visual style to pursue high quality and artistic integrity,

(20)

20 and even use profanity, nudity, and violence when it is necessary (C. Johnson 29; Kelso 49). In addition, the relatively flexible schedule in HBO – it no longer needs to put advertisements in and between its programs, so HBO has more flexible schedule to arrange its shows – provided more artistic innovation space to the creators by allowing them to arrange the episode length according to the story rather than commercial breaks, and use alternative narrative structure to enrich character complexity and storylines (Lotz, The Television 236; A. Smith 39&46).

These conditions provided a broader freedom to HBO to produce unconventional shows, which, in turn, used by HBO to promote itself as a place where “gifted storytellers are allowed pursue their own vision in their own way” and “the first and best place to find the world’s most innovative programming” (HBO, About HBO). However, it is a bit more exaggeration to call it “first” or “best”, for it is nearly impossible to determine which television provider is the best. But, what cannot be denied is that the subscription model indeed enables – and also requires – HBO to produce unconventional shows to differentiate itself from broadcast television, as well as other television providers.

3.2.3 HBO’s Original Programming and the Branding Strategy

Original programming is bread and butter of HBO’s business. On one hand, original content increases HBO’s value proposition. Since the cable channel deliver content that is unavailable elsewhere, it can provide better value for its viewers, and have more asset to require higher affiliate fees from MVPDs (Lotz, Industrial and Creative Changes 12). On the other hand, original programming helps HBO to build a recognizable brand identity, thus it can distinguish itself from other rivalries, and “construct a roadmap” that attracts viewers to itself (Havens 330). Scholars term this practice as “branding”, and states that branding became a crucial strategy for channels to reach target audience, differentiate itself, and stand out amidst the competition (C. Johnson 34; Wayne 3-4; Jaramillo 169; Edgerton 7).

(21)

21 even more necessary for television providers to “generate distinct identities” to survive in the competition (Selznick 181; Edgerton 7; Bottomley 483). As argued above, due to the subscription business model, HBO must differentiate itself from other television providers. Given the fact that the viewers have limited leisure time to watch television content, and have limited money to subscribe to a certain amount of television providers (Lotz, The Television 277), it is crucial for HBO (and other subscription-based television providers) to build a strong, “distinguishable”, and “recognizable” brand identity to stand out among its competitors, and attract new subscribers to remain viable.

Starting from HBO’s attempt to produce original content, HBO has been utilizing various ways to establish its brand. Catherine Johnson, in her book Branding Television, summarized HBO’s branding strategy by stating,

“[…] over the second half of the 1990s HBO developed a brand identity as the home of quality television in the USA that drew on a wide range of its programming, but was centered on the shift towards producing adult, edgy, authored and high-budget original drama series. While the brand identity was initially constructed through the promotional efforts of HBO itself, and then increasingly depended on these signature shows to stand in for the network, it also increasingly depended upon critical acclaim within the media more broadly to support its claim to be the home for creative talent”. (32)

This quote is particularly useful in understanding the way HBO reinforces its brand identity to the television consumers. First, by using “It’s not TV. It’s HBO” (1996-2007), HBO presented itself as a superior form of entertainment (Tryon 107), and distanced itself from “[regular] television and its historically low cultural reputation” (Newman and Levine 30).

Then, as HBO gradually shifted its focus more on the original programming in the late 1990s, HBO further identified its “not TV” status “through a reputation for innovative and artistically challenging original programming” (Bottomley 485; Edgerton and Jones, 318-19; Carter C2; Nelson). From then on, its original programming has become increasingly central to HBO’s brand. Starting with the

(22)

22 prison-drama Oz in 1997, HBO consistently produced hour-long original series such as

Sex and The City (1998-2004), The Sopranos (1999-2007), Six Feet Under (2001-2005), Curb Your Enthusiasm (2000-present), True Detective (2014-present), and most lately Game of Thrones (2011-present) and Westworld (2016-present) etc. These original

programs have embodied HBO’s slogan “It’s not TV. It’s HBO” themselves, and highlighted HBO’s brand by creating “prestige, cultural influence and public awareness” (Carter C1; McCabe and Akass 84; C. Johnson 31).

Also, HBO’s brand identity is further promoted by the press coverage that its original shows received. The high recognition these shows received from media professionals and academic critics, such as “[a show with] unusually intelligent storytelling, powerful visuals and exceptionally nuanced performances” (as for

Westworld) (Wiegand), “discussed around countless water-coolers across America” (as

for Sex and The City) (McCabe and Akass2), and “the greatest pop-culture masterpiece of its day” (as for The Sopranos) (Biskind), is used to reinforce HBO’s brand as the home to “television’s most creative minds” (HBO, About HBO) and high-quality content.

It can be seen from HBO’s branding practice that its original programming is very valuable to HBO’s business, as Chris Albrecht confirms, it is “pragmatic business decision” (McCabe and Akass 84). On one hand, HBO’s original programming is integral to establishing and maintaining a strong brand identity (Doyle, Digitization 635), so it can differentiate itself in the marketplace, and attract subscribers. On the other hand, as already mentioned above, the original programming is also the key to providing a reason to the subscribers to keep paying for the service (K. McDonald 209). Thus, content, especially compelling original content is at the primary importance of HBO’s business.

3.2.3 The Challenges for HBO

Firstly, HBO is also challenged by the proliferation of content providers and new programs. Although nowadays HBO is still the place that the audience switch to find

(23)

23 high-quality television content, there are many newly-emergent television portals which provide original programming. Given abundant choice, a subscriber or a potential customer might subscribe to other television distributors if he/she finds their content more attractive than HBO’s. This situation, as the network’s Chairman Richard Plepler suggests, reinforced the growing importance of establishing brand identity and reputation in the current market:

I think there is an interesting paradox about what is happening out there in this very rich content-driven culture now. … It means you cannot keep track of everything. And brands matter more than ever. Because a brand is essentially a promise. Our promise is the curation of quality. … As long as we continue to curate excellence, and we do it across a lot of categories, we’re gonna continue to grow.… We are going to put together in a rare quality can become addictive to even a broader part of the consumers. That’s what we are doing for a living. (Richard Plepler, HBO Chairman/CEO, Podcast)

Therefore, in current competitive environment, maintaining a brand identity becomes more crucial for television providers, and edgy original content, which is integral to establishing the brand identity and maintaining subscribers, becomes increasingly important.

Another challenge comes from audience changing behavior and expectation towards non-linear viewing. Television portals provides a more flexible and convenient way of watching television by allowing viewers to consume television content according to their own choices and schedules with various digital devices (Lotz, The

Paradigmatic Evolution 131). If HBO cannot be able to provide services that its rivals

are providing, HBO will be less attractive to both its potential customers and its subscribers, and suffer from cord-cutting. This signifies the importance of making distribution innovation. By offering a better way of watching its content, HBO can increase the value of its service and the brand, so that it can compete with other disruptive rivals, and retain subscription. HBO’s adjustment in distribution will be addressed in next chapter with detailed a case study.

(24)

24

3.3 Netflix

Founded on in 1997 by two software engineers Reed Hastings and Marc Randolph, at the very beginning, the company welcomed its customers as an online subscription-based DVD rental and delivery site. But soon, the emerge of digital content delivery technologies made consumers less reliant on renting DVD disks (Lotz, The Television 141), making the company’s executives come to believe that “DVD is not a hundred-year format” and they need to find a new market in digital arena (Helft; Hardy). Therefore, in 2007, Netflix debuted its online streaming service, delivering licensed television shows and movies directly to subscribers’ personal computers. By licensing popular content from major content providers such as Starz and The Walt Disney Co., etc. (Dempsey; Chmielewski and Fritz), and by enabling its subscribers to access its service through multiple digital devices, Netflix quickly garnered over 20 million subscribers (Hastings and Wells), and established itself as a multi-national “aggregator” of licensed television and movie content (Vonderau 721; Goldsmith).

However, the year of 2010 had witnessed the steep rise of television portals, such as HBO Go, Showtime Anytime, Hulu, and Amazon Prime, etc, which not only fragmented the potential subscribers, but also influenced Netflix’s content licensing deals- there were, and now still are, many buyers for limited content, and the studios started to raise the licensing prices (Pepitone). This competition suggested that solely depending on licensing others’ content was a fragile and unreliable business, and encouraged Netflix to provide customers with “original content that people love and that they can’t watch anyplace else” (Sarandos, Ted. Interview. qtd in Landau 16), so that they could (continue to) subscribe to Netflix. Therefore, Netflix tapped into original content development, and since 2011, it has produced a number of exclusive original programs, such as House of Cards (2013- present), Orange is the New Black (2013- present), and Stranger Things (2016- present), etc.

Now, Netflix has become a global television powerhouse which has 125 million subscribers (as at 2018-05-27) in over 190 countries (Netflix, World), and also a

(25)

25 recognized original content provider who has won considerable amount of awards including 43 Prime Time Emmy Awards, and 5 Golden Globe Awards.

3.3.1 Netflix’s Technological Features

Netflix’s internet distribution technology both enables and demands Netflix to utilize industrial practices and provide viewing experience different from traditional television. Firstly, as argued in chapter 2, the internet distribution technology exempted the traditional television schedule, and allows Netflix’s subscribers to watch content on their scheduled time with multiple electronic devices. Secondly, the different affordances of internet distribution technology enabled Netflix to build a rich content library rather than program schedules (Lotz, Industrial and Creative Change 18-19). Due to traditional television distributors’ “24-hour broadcast schedule” (Cunningham and Silver 96; Lotz, Portals 28), they can only arrange limited amount of programs into their schedule; Netflix, in contrast, is able to provide a library contains a greater amount of content, because it’s the internet distribution technology “eliminates time specificity and greatly reduces capacity constraints” (ibid 29). Its library contains a variety of licensed programs, and Netflix’s original content, ranging from popular shows to those only favored by a niche audience.

Another asset of Netflix enabled by internet distribution technology is that, Netflix is able to reach television consumers on a global scale in a way traditional television networks cannot. Television had long been circumscribed to a national territory (Chalaby 460). Due to the cultural, technological and regulatory factors, the globalization of television industry had been, and now still is, a complex practice (Havens and Lotz 232-33), thus traditional networks fail to address international viewers directly and immediately through their own channels, and are forced to separately manage the domestic and international distribution of content to reach global viewers. As in the case of HBO, although HBO is available in over 50 countries outside the U.S., its content distribution is still separated domestically and internationally, which involves complicated practices and vary in different countries. For example,

(26)

26 HBO distributes all of its original content in Hungary through its country-based affiliate HBO Hungary, however licenses a part of its original content to the third-party television providers Foxtel in Australia. Comparatively, with the technological capacity of its internet distribution, by which “content can be published, distributed and accessed around the clock, whether locally, regionally, nationally or transnationally” (Finneman 65), Netflix can be directly accessed by consumers all around the world (except from few countries which blocked Netflix’s service due to government restrictions) via internet connection (Netflix, World) – though the content available in different territories may vary (Lobato 244). Therefore, the capability to concurrently address domestic and international audience provides Netflix with the golden opportunity to expand globally in such a short time span, but furthermore requires Netflix to adjust its business strategies to cater to not only domestic viewers, but also global viewers.

3.3.2 The Subscription Business Model and Netflix’s Branding Strategy

Same as HBO, Netflix depends on subscription revenue to sustain its business. As already discussed above (in HBO’s case), this business model, on one hand, by eliminating the constraints of FCC and the advertisers, provides Netflix with more innovation space to create (or provide) unconventional content. On the other hand, it requires Netflix to provide viewers with enough value for the subscription fee, and to distinguish itself from other competitors to attract subscribers.

Different from HBO, who offers value and established brand identity mostly depending on its original content, Netflix is able to differentiate itself by its original programming, its content library and also by its non-linear access, which is identified by Chuck Tryon as “prestige, plentitude, and participation” (105). Timothy Havens argues that Netflix utilizes a dual branding strategy to highlight its identity: it emphasized its video-on-demand service as “disruptive, youthful, individualistic, techy, and capable of satisfying immediate viewers desire” (327) in order to differentiate itself from linear broadcast and cable networks; it also highlights its original programming to represent itself as a professional television network (322), and seek to generate loyal

(27)

27 audience for its programming in domestic and international markets (330).

3.3.3 The Challenges for Netflix

Firstly, the proliferation of content and content providers also challenges Netflix’s business. When Netflix started to distribute television content via internet, it was “definitely ahead-of-the-digital-curve” (Landau 8), and able to expand quickly in multiple countries. However, during recent few years, portals have emerged exponentially, and by the end of 2015, the amount reached nearly one hundred (Lotz,

Portals 75). Furthermore, portals with more resources began to aggressively invest in

original content in order to increase their subscription, competing directly with Netflix (Walsh). These portals also utilized Netflix’s innovative features such as simultaneous release, and to some extent demolished Netflix’s unique assets which once distinguish Netflix from others. The competition with numerous television portals requires Netflix to focus more on its content offerings.

Another challenge that Netflix encountered is the growing competition in content licensing. When Netflix was new to the industry, it was able to secure licensing deals with many major studios (Pipetone). However, as production studios start to launch its own streaming service, they aim to distribute their content on their own platform rather than licensing to Netflix. Last year Disney announced that it will launch its own streaming platform, and will end the licensing deals with Netflix (Robehmed). This situation, on one hand, reduces Netflix’s value proposition by removing popular content from its library; on the other hand, it means Netflix will face growing competition in the future when the studios provides their content. As a result, it highlights the importance of Netflix’s original content, which “is the most truly distinctive product Netflix has to offer” (Havens 330).

3.4 Findings and Discussion

This chapter set out to examine what challenges and threats CBS, HBO, and Netflix are facing in the current highly-competitive television industry. In order to answer this

(28)

28 question, the related aspects such as their development, business models, and branding strategies are investigated.

To begin with, in spite of the different content they provide in their networks, the main industrial differences between CBS, HBO, and Netflix mainly stem from two aspects: One is their different business models, which is the fundamental factor that influences how they position themselves in the industry, and how they utilize certain production practices and strategies. CBS’ advertising model requires CBS to be concerned mainly with how many viewers tune into the channel when it is airing one specific show. The larger the audience that watches its shows, the more revenue CBS generates. It is crucial for CBS to provide popular shows and utilize different strategies to ensure that a large amount of audience watches the show when it is airing; HBO and Netflix follows the same subscription business model, which requires HBO and Netflix to establish a brand that promises a better service than free-to-air broadcast networks, and their rivals, so that viewers will be willing to subscribe to them. The more people subscribe to HBO/Netflix, the more revenue HBO/Netflix generates. It is crucial for HBO and Netflix to provide excellent content, which can distinguish their brands from other television providers, and attract people to subscribe to their network. HBO has been distinguishing itself as the leading provider of quality TV, and established its brand identity with its original high-quality content; However, Netflix highlights its “anytime, anywhere” on-demand service to differentiate itself from traditional linear television providers, and provides original high-quality content to distinguish itself as professional content provider, and to cultivate loyal audience.

Another difference between CBS, HBO, and Netflix lies under their different distribution technologies, which is directly related to how they engage their audience. CBS and HBO follows linear transmission mechanism, which requires audience to watch the show on a weekly, time-fixed basis. This mechanism also restrains CBS and HBO to a “24-hour broadcast schedule” (Cunningham and Silver 96), so that they only can schedule a limited amount of shows into their schedule, which significantly constrains their capability of exploiting content. Netflix, however, follows internet

(29)

29 distribution mechanism, which enables its subscribers to access a rich content library “anywhere, everywhere” – a convenient experience of watching TV that linear television cannot provide. It also enables Netflix to reach global audience with single distribution platform, thus providing a significant opportunity to expand globally, and generate more revenue.

Current fierce competition indeed poses challenges to every television providers, however, due to the differences mentioned above, the problems that CBS, HBO and Netflix vary. First of all, the steep rise of television content providers and the proliferation of content has posed challenges to all of them. For CBS, as well as for other broadcast networks, the audience fragmentation caused by this competition is significantly threatening their advertising revenue. For HBO and Netflix, as well as other subscription-based television providers, they face problems because the television consumers nowadays have too many choices, but due to limitation of time and money, they are only able to subscribe to certain amount of television services. Besides, Netflix also face challenges as other television portals emerged, which weakened the uniqueness of its technological feature, and disturbed its content licensing deals. Therefore, it is increasingly crucial for HBO and Netflix to provide “compelling” original content in their network, to highlight their brand identity and attract subscribers. That is to say, as Caryn Mandabach, the CEO of Caryn Mandabach Productions, puts it, “The business models will catch up, but the king, as it has always been, is content” (Landau 1). Whatever a television content provider’s business model is, providing content which is excellent and able to attract a large number of audience’s attention is a key driver to sustain their business.

Secondly, audience behavior and expectations towards non-linear viewing makes it increasingly harder for CBS and HBO, as well as other linear television, to force audience to watch their content at a scheduled time (ibid 137). For advertising-based CBS and other broadcast networks, this tendency will influence their audience base, and harms their advertising revenue; for subscription-based HBO and other linear content providers, this tendency also diminishes subscribers’ engagement with the

(30)

30 network. The inconvenience caused by the linear viewing is very likely to upset the subscribers, and in the long run will cause a decrease in subscription. Therefore, it is relatively feasible for CBS and HBO, as well as other traditional linear television providers to innovate their distribution mechanism, so that they can address audience needs, and continue to expand their business.

It is also found that although it is increasingly difficult to launch a new program brand in current television industry (Doyle, Digitization 641), it is even harder for CBS and other advertising-based broadcast networks to launch successful new shows. The advertising business model requires broadcast networks to be conventional about their content creation, and program investment, which makes their new programs unlikely to stand out in contemporary “content bubble”. Moreover, as audience becomes more fragmented, it becomes more risky for CBS to invest big money in new shows. Therefore, by comparison, their market-proven old shows which already have a certain audience base are becoming more important to retain their advertising revenue. But, the “new show crisis” must be taken into account, because in the long term, not being able to launch successful new shows will have significant negative effect for their revenue.

It can be seen from the findings above that the challenges and threats the television providers are facing are caused by different factors. Therefore, they need to consider different aspects when financing, creating and distributing a content, so that they can successfully overcome the threats and maximize their revenue. In next chapter, I will examine the production practices of CBS’, HBO’s and Netflix’s one specific show to investigate how they are dealing with the current challenges, and what innovative strategies they are using to sustain their business.

Chapter 4: The Changing Production Practices

4.1 The Big Bang Theory

The Big Bang Theory, which debuted in September 24th, 2007, is arguably one of CBS’ most popular and profitable shows. The sitcom that portrays the daily lives of four geeky and socially-awkward scientists has been continuously establishing its popularity,

(31)

31 and also proving its commercial value. With average 20 million viewers for six consecutive, TBBT has been ranking broadcast TV’s most watched scripted series for two consecutive years, and has been the broadcast TV’s top rated comedy in key demographics since season six (Moraes, 2015-16 TV Rankings; Moraes, 2016-17 TV

Rankings). In March 2017, the broadcast network CBS has announced the two-season

renewal of TBBT (Goldberg, Officially Renewed), promising the show will last at least twelve seasons.

4.1.1 The Financing of TBBT: Deficit Financing

First of all, it is important to note how TBBT is financed, because the financing model eventually impacts how content will be exploited through distribution. The U.S. broadcast networks have long been relying on “deficit financing” (Lotz, Indutrial and

Creative Change 13). In this model, instead of purchasing a show outright, the networks

pay a certain amount of fee, which usually covers around 70 per cent of the production budget, to production studios, and the remaining costs are paid by the studios. In exchange, the network will have the right to become the first window to exclusively air the show for a period of time, usually a year. The studios, in return, will maintain the ownership of the show, being able to recoup the deficit by licensing it to secondary markets, such as other domestic broadcasters, DVD distributors, digital retailers like iTunes, and international distributors (Lotz, The Television 97; Lotz, Portals 68; Doyle,

Television Production 83). This way of financing reduces the risk of developing a

program for a network, but also enables the studios to generate profits in the long-term. (ibid)

In TBBT’s case, CBS is the primary window to exhibit the show, its production studio – Warner Bros. Television (WBTV for short) is the copyright owner of this show, and takes charge of TBBT’s distribution deals. Therefore, in terms of commercial value, CBS and WBTV see TBBT differently, and exploit the content through vastly different ways. CBS mainly concerns about how much audience the show can bring to the network, and what can CBS do to maximize the advertising revenue of this show during

(32)

32 the licensing period. WBTV, however, seeks to leverage different licensing offers to draw long-term value. Due to the reason that the thesis focuses on the production practices of CBS, the production studios’ practices related to TBBT will be touched upon, but will not be discussed further.

4.1.2 The Creation of TBBT: High Production Costs and a Spin-off

When looking into the narrative and production style of TBBT, it can be said that it is “old-fashioned multi-camera comedy” (Raymond). The narrative style of TBBT is based on “a story each episode” structure, and does not require complex stories or character relationship (although it cannot be denied that the script-writing does require significant efforts, since there are a lot of jokes and hilarious moments). In addition, it follows the traditional creation of multi-camera sitcom, which is shot in a studio with several fixed settings and few outdoor scenes (Butler 176-95). Moreover, its main interior settings have hardly changed throughout the eleven seasons. In other words, the cost required for storytelling and shooting is relatively cost-saving.

The production cost of an episode of multi-camera sitcom usually runs from $1.5 million to $3 million (Ryan and Littleton), however, TBBT has been made with a hefty production budget – over $10 million per episode (Goldberg, ‘Big Bang Theory’). The main factor that accelerates TBBT’s production cost is the increasing salaries of the cast members. Starting from $60,000 per episode in first season, the leading actor’s salaries have risen to more than $1 million per episode plus an approximate 1% share of the show’s back-end profit, making the production costs nearly equal to the expense of an independent feature film.

Considering that the broadcast networks are conventional with its investment, it is important to question CBS’ motivation to allocate such big budget on this show. One reason is apparently because of TBBT’s ability to generate considerable profit. TBBT is considered to be the broadcast television number one rated show, and the highest-rated sitcom since NBC’s Friends (Raymond). At its highest, TBBT has averaged 23.3 million total viewers (CBS Corporation, 2016-2017 Ratings), which nearly doubled the total

Television Production in Post-Network Era: Changing Strategies of CBS, HBO, and Netflix. An Analysis on the Big Bang Theory, Game of Thrones, and Sense 8