The Business of Television

The ability to broadcast moving images over-the-air was a miracle, but the question then became: “Who was going to pay for it?”

In the United Kingdom, the answer was the television set owners. Since 1904 the British government had been collecting a “license” fee from radio owners, and it was only natural to extend that to television, which they did starting in 1946. It cost £2 (£79 in 2018).

In the United States, however, the free market was left to resolve the question of how to fund television. Radio broadcasts had been funded by commercial sponsors practically ever since their inception, and the US FCC saw no reason not to allow that model to continue.

However, compared to radio stations, television stations were much more expensive to set up, programs (and advertisements) were much more expensive to create, and the broadcast range was lower, reaching fewer viewers. This was not terribly attractive to advertisers.

To make matters worse, television sets were themselves quite expensive, and thus what viewers there were typically came from more affluent demographics – great if you were selling automobiles or other high-end merchandise, but not if you were selling sugared cereal.

Initially, RCA solved this problem by “double-dipping” – they both sold the televisions, which needed broadcasting stations to be useful, and ran the broadcasting stations (the NBC network), which needed the television viewers to be useful. This worked well for NBC, but the FCC soon received complaints about its effective monopoly, and in 1939 it was forced to sell half of its stations.

In the post-WWII era, economic stimulation provided by the government and the mass production of cheaper televisions led to a dramatic increase in adoption, and broadened the potential advertising market to sponsors whose products appealed to lower-income viewers.

However, radio was still the medium most adored by these companies, and television stations continued to struggle to gain sponsors. Some even resorted to offering to produce commercials for free – or even have the talent spruik sponsors’ products for them. It was not uncommon for a character in a television drama or comedy stop in the middle of the action and talk directly to the audience about a brand of cigarettes!

Broadcasters also did whatever they could to increase their viewership. One tactic was to increase the size and power of their transmitting antenna as much as was feasibly possible – the KLVY-TV mast in Fargo, South Dakota was the tallest structure in the world when it was completed in 1963. At 629 metres (2063 feet) tall, it remains the world’s tallest radio mast today.

Another tactic was to give away televisions – each TV netted an average of four additional viewers, and over the lifetime of both viewers and television the station was sure to make the money back from advertisers!

Eventually, most stations hit a “critical mass” of viewers that finally made television appealing enough to advertisers to spend real money on it – this allowed the stations to survive (although many early stations first lost money for years or even more than a decade in some cases).

But soon sponsors wanted to know when the most viewers were watching – that’s where ratings came in.

By sending surveys to random households (often with cash or coupons to encourage participation), stations could determine which programs viewers were watching the most, and then charge a premium to advertise during their broadcasts. Eventually, third-party companies such as Neilsen began to conduct surveys that covered all of the stations in a given location, or market (after all, viewers could only watch one channel at a time!) This enabled television stations to tailor their programming to ensure the highest viewer numbers (and hence advertising rates) possible, leading to the modern commercial TV landscape.

Network Television

Television stations needed to attract both “prestige” sponsors who would spend big bucks to advertise during “prime time” hours when the most viewers were watching, while also ensuring less-watched times of the day at the very least paid for themselves.

To attract prime-time sponsors, stations became affiliates of stations in larger markets that had bigger budgets to spend on programming. These “networks” of stations then largely aired an identical suite of prime-time programming, and tended to become identified with the network to which they belonged.

The off-hours were commonly used for local programming, which is why news bulletins usually occupied the 6pm supper hour and after 11pm when many viewers had gone to sleep.