Effect of Cable Television on Advertiser and Consumer Spending on Mass Media, 1978–1990

Abstract

Previousstudiesof the cable industry have been inconclusive in determining its impact on other media, especially that of broadcast television. While some industry observers predict a direfuture for broadcasters due to the erosion of market share by cable, others contend the current recession has been responsible for the industry's woes. McCombs' theory of relative constancy is used as a basis for examining trends for consumer and advertising spending on media during the [1978][1979][1980][1981][1982][1983][1984][1985][1986][1987][1988][1989][1990] time period. Both trends were found to be positive, indicating that, overall, cable has attracted additional spending on media.The impact of cable penetration on national advertising and broadcast networks has been documented by Krugman and Rust, amongothers.' These authors found that cable penetration predicted the networks' share of advertising revenues as well as network audience share. However, network revenues were found to have risen, even adjusting for inflation, despite the loss of audience share, suggesting a higher valuation for network audience or better demographics. The authors concluded that "things might not be as bleak for the networks as they might first appear" and the total "revenue pie" had increased so fast that both the cable industry and networks were "*en. "2 During the past decade, national cable advertising has increased along with the emergence of local cable and barter syndication. Local cable advertising grew from $8 million in 1980 to $635 million in 1990: Because local cable advertising can reach a target audience in a small geographic area and is relatively inexpensive, the potential for having an impact on other media is apparent. Another aspect of cable penetration has been the rise of syndicated advertising in the 1980s, due mostly to the increase in independent stations and the creation of the Fox network! Since 1980, revenues from barter syndication have grown from $50 million in 1980 to $1.61 billion in 1990.5Noting these current trends, a recent Federal Communications Commission (FCC) study forecasts a rather grim future for the broadcast industry.The agency predicted that as cable advertising becomes a better substitute for network advertising, prices of network advertising will fall along with advertising revenues during the 1990s.6 The FCC also predicted cable would erode the share of local and national spot advertising going to broadcast stations. A recently released report by the broadcast industry, which argues The author i s a doctoral candidate in the Mass Media program at Michigan State University. VOL m, NO. 3 l~~( r u n r t e r y Alrbmml!W 509-517 @l!WAEJhfC EFFECTOF b L € ~S J O N ON h V m S E R AND CONSUMER SPENDING ON h h S mDU, 1978-1990 509

Media Functionality and the Principle of Relative Constancy: An Explanation of the VCR Aberration

“…Some studies (Son & McCombs, 1993;Wood, 1986;Wood & O'Hare, 1991) reported that total consumer spending on mass media had increased in the shortterm. Furthermore, recent PRC studies that included new communication technologies (Dupagne, 1994;Glascock, 1993;Son & McCombs, 1993) reported that consumer spending on mass media had increased, instead of remaining constant.…”

Effect of Three Communication Technologies on Mass Media Spending in Belgium

“…Based on this study and preceding research (Dupagne, 1994;Glascock, 1993;Noh & Grant, 1997;Son & McCombs, 1993;Wood & O'Hare, 1991), it appears that cable television and the VCR have stimulated considerable consumer mass media spending. However, is it the case for all successful innovations?…”

“…In the same vein, Wood and O'Hare (1991) found that U.S. consumers devoted a larger share of their income to mass media between 1979 and 1988 by increasing spending on new media without reducing significantly their spending on print and traditional electronic media. Son and McCombs (1993) reported similar results, suggesting that the introduction of cable television and the VCR caused mass media expenditures to rise between 1975 and 1987 (see also Glascock, 1993;Noh & Grant, 1997). In the United Kingdom, Dupagne (1994) found support for the functional equivalence assumption for the period between 1963 and 1980.…”

Impact of Mobile Phones TV Commercials on Consumers’ Behavior

“…Today's advertising and advertising industry gain a lot of importance so there is need to find out the relationship between exposure of TV commercials and changing behavior of consumers. So the focus of this research is to find out that how and to which extent TV commercials of mobile phone network companies influence or change consumer behavior and how these TV commercials giving awareness, changing attitudes and compelling consumers to adopt specific network [16][17][18][19][20].…”