3.1 The formation of major networks and their business models

The formation of major networks shaped the landscape of early television. NBC, CBS, and ABC emerged as powerhouses, driven by visionary executives like William S. Paley and Leonard Goldenson. These networks pioneered programming strategies and business models that would define the industry for decades.

Networks adopted innovative revenue strategies, moving from sponsor-based models to time-selling and the "magazine concept." They expanded through owned-and-operated stations and vertical integration, while Nielsen ratings became crucial for determining advertising rates and program viability. This competitive environment spurred diverse programming and new advertising tactics.

Key Players in Network Formation

Pioneering Executives and Companies

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• Radio Corporation of America (RCA) spearheaded television technology development and formed NBC, the first major television network
• William S. Paley transformed CBS from a small radio network to a major television broadcaster through strategic acquisitions (KCBS in Los Angeles) and innovative programming decisions (I Love Lucy)
• Leonard Goldenson led ABC's transition from struggling radio network to competitive television network by focusing on entertainment programming (American Bandstand) and innovative business strategies (merger with United Paramount Theatres)
• Allen B. DuMont founded DuMont Television Network, the first commercial television network to begin operation
  • Ultimately failed due to financial constraints and regulatory challenges (FCC's limit on owned-and-operated stations)
• General David Sarnoff, RCA president, pushed for commercial television development and established NBC as a dominant industry force
  • Instrumental in launching NBC's color television broadcasts in 1954

Innovative Programming Executives

• Pat Weaver, NBC president in the 1950s, introduced revolutionary programming concepts
  • Created the "Today" show, pioneering the morning news format
  • Developed the "Tonight Show," establishing the late-night talk show genre
  • Introduced the concept of "spectaculars," which later evolved into TV specials and event programming

Business Models of Early Networks

Advertising and Revenue Strategies

• Sponsor-based model prevalent in early television
  • Individual advertisers funded entire programs (Texaco Star Theater)
• Time-selling model adopted by networks
  • Sold specific time slots to advertisers, allowing for more diverse programming and revenue streams
• "Magazine concept" in advertising developed
  • Allowed multiple sponsors within a single program (60 Minutes)
  • Increased flexibility for networks and advertisers
• Nielsen ratings became crucial in determining advertising rates and program viability
  • Measured audience size and demographics
  • Influenced programming decisions and cancellations

Network Expansion and Integration

• Networks invested in owned-and-operated stations (O&Os) in major markets
  • Ensured distribution and generated additional revenue (WNBC in New York, KNBC in Los Angeles)
• Deficit financing became a common business strategy
  • Networks partially funded production costs in exchange for broadcast rights and future syndication profits
  • Allowed for higher-budget productions (Star Trek)
• Vertical integration strategy implemented
  • Networks owned production companies and distribution channels
  • Allowed for greater control over content and increased profitability (CBS Television Studios)

Network Competition and its Impact

Programming Strategies

• Diverse programming genres developed to attract different audience segments
  • Sitcoms (I Love Lucy), dramas (Gunsmoke), variety shows (The Ed Sullivan Show)
• "Least objectionable programming" strategy emerged
  • Networks sought to maximize viewership across broad demographics
  • Led to the creation of family-friendly content in prime time
• Counterprogramming tactics employed
  • Networks scheduled shows to directly compete with or complement rival offerings
  • Example: CBS airing "All in the Family" against NBC's "The Flip Wilson Show"
• Prime time schedule concept solidified
  • Networks competed for viewers during peak viewing hours (8-11 PM Eastern Time)
• "Event television" and special programming developed
  • Created must-see viewing experiences (Super Bowl, Academy Awards)

Production and Advertising Evolution

• Increased production budgets and higher quality programming to attract viewers and advertisers
  • Led to the "Golden Age of Television" with critically acclaimed series (The Twilight Zone)
• Advertising strategies evolved
  • Product placement became more sophisticated (James Bond films featuring specific car brands)
  • Integrated marketing campaigns developed to leverage television's reach
• Rise of "sweeps" periods
  • Networks aired their best programming during specific months to boost ratings and set advertising rates

Affiliate Stations in Network Television

Affiliate-Network Relationship

• Affiliate stations contract with networks to air programming in designated market areas (DMAs)
• Network-affiliate relationship based on compensation system
  • Affiliates receive payment or benefits for carrying network content
  • Compensation models evolved from direct payments to more complex arrangements involving ad inventory
• Clearance practice gives affiliates autonomy
  • Allows affiliates to decide which network programs to air in their local markets
  • Can lead to scheduling variations across different regions

Local Contribution and National Coverage

• Affiliates contribute to network revenue by selling local advertising spots during network programming
• Provide crucial local news and programming
  • Complements national network content (local news broadcasts before and after network evening news)
  • Strengthens community ties through coverage of local events and issues
• Network-affiliate system enables national coverage
  • Networks achieve widespread distribution without owning stations in every market
  • Allows for a mix of national and local content tailored to each community
• Affiliate relations departments at networks manage these relationships
  • Negotiate contracts and ensure smooth operations between networks and local stations
  • Address conflicts and coordinate promotional efforts