My colleague at Decipher, Nigel Walley, has done a great job of summarising many of the key differences between the British and American TV markets. I have covered many of these issues over the years in our own research and blog. Like Nigel, it never ceases to amaze me how little is understood in each country about TV on the other side of the Pond. I would go further and extend this argument to the rest of Europe, although there are again many differences between European countries which make them even more alien to a US visitor.
I would add a few notes to Nigel’s review. He rightly mentions the importance of the cable providers (MSOs) in the US ecosystem. The origins of cable are a little different from how he explained them, but again illustrate the historical differences between the UK/Europe and the US. Cable technology originated in the 1940s as a means of getting free over-the-air signals to places which were out of reach of broadcast signals. Viewers paid service and installation fees to get this “free” programming and payment has therefore been a familiar part of the US broadcast landscape for more than 50 years, even though some of the programming is available free-to-air where broadcast signals are available. After many years of evolution (98% of US homes are now passed by a cable system) and the addition of premium channels, most US consumers don’t think twice about paying for TV, if only at the level of “basic” fees.
I’m not sure either about the arguments about picture quality. Even in the old days of analogue there was a fierce debate between NTSC and PAL proponents, but now that the systems are entirely digital it is more a question of how much bandwidth is allocated to each channel. As with all media distribution networks, what the viewer sees on the TV screen is subject to a huge number of variables. And it’s worth noting that the US mandated HD for terrestrial broadcasts, which, quality issues aside, is one reason, amongst several, why HD took off earlier in the US than in Europe.
The net result in the US is the significant power of operators in the cable as well as satellite and telco sectors. There are indeed still many small, local operators, but there are also a few mega-players who are set to consolidate even further in the coming months and who have huge influence over the future direction of television technologies and services. These companies manage the revenue streams which deliver the vast bulk of income to the US TV industry and there has always been a resulting tension as well as close relationships between content owners/broadcasters and their distributors. The OTT players have certainly been shaking things up in recent times, and there are even signs that pay TV is in decline, by some measures, as I wrote here. But we should never underestimate the power of Comcast, AT&T and others to maintain their leading positions.
Finally, I would emphasise once again the critical importance to the shape of the UK television industry of the licence fee business model in the UK, something which often still has to be explained when visiting the US. It is something we take so much for granted, and yet UK residents often fail to appreciate just how different the UK market is because of how we pay for the BBC. US executives have often liked to quote the BBC’s success in some digital venture as evidence of its potential in other markets, forgetting that without the licence fee the BBC would be unable to explore such new ventures free of any concern over such mundane matters as revenue streams or RoI. I remember particularly this report relating to the iPlayer, which turned out to be somewhat prescient given the absence of any similar broadcaster VOD services in the US since it was written six years ago.
Many of the differences Nigel mentions – the competition in free-to-air platforms, the relative lack of advertising – are only with us because we pay £3.7bn ($5.7bn) in annual fees. Some friends in the US, on hearing this, question how different that is from “pay TV”, and it’s a reasonable point. One thing is for sure – we should realise what a difference it would make to many aspects of the UK TV market if the licence fee model was to be radically altered at the next Charter renewal in 2016.