Amanda Lotz on How Cable Transformed Television

Thanks for joining me for this chat! To kick things off, could you explain a bit about who you are and what you do?

My name is Amanda Lotz.

I’m a professor at Queensland University of Technology, with the Digital Media Research Centre, where I lead the program Transforming Media Industries. My own research focuses mostly on television – how the business of television has evolved to incorporate new technologies and new ways to watch.

How did you get started on the book We Now Disrupt This Broadcast?

I think every project follows another.

In the early 2000’s I’d written the first version of The Television Will be Revolutionized, and it was an attempt to pull together many of the different changes taking place in the television industry. Many of those changes were related to various industrial practices just giving way. That was pre-streaming, but really experiencing the changes that multi-channel television had brought to the US.

After that book, I had a sense there was a story to tell about cable. The book itself hadn’t allowed me to tell it. I was eager to go back and really try to understand how – or why – US programming had changed.

Cable channels were, for the first time, commissioning original series in the early 2000s. And a lot of those series looked very different to what the US broadcast industry had produced for decades. We Now Disrupt This Broadcast was an effort to really tell that story on a couple of levels. Both the industrial story (how the business was changing) and also to give evidence drawn from programming, that illustrates how those changes were leading to different shows.

That’s really the first half of the book. The rest is the second technological and business change: the arrival of streaming. And from 2010 to 2016 – when I stopped writing – what was evident at that point in terms of the arrival of streaming services. At that point there was perceived to be a coming end to cable.

There are two watersheds suggested in the book: the arrival of cable, and the arrival of streaming. What is the state of television programming before the advent of cable TV? 

I’m going to add a slight nuance. The US actually had pretty high cable penetration quite early. By the late ’80s, half of the population had it, but the economic model wasn’t there for those channels to produce original programming.

There weren’t a tonne of channels at that point, but they were airing old television series or old theatrical movies. What changes the scenario is the late ’90s transition from analogue to digital cable. This is exactly the same moment as when satellite technology (which is also digital) becomes available.

Digital technologies have much greater capacity. Analogue cable was capped out at 20 or 30 channels. It was in this environment, in which there were now going to be hundreds of of channels available, that it became necessary for channels to stand out in some way.

And one of the best routes to distinction was to create original content.

Rather than just relying on advertising, cable channels are companies where people pay a monthly bills. The fact you have these two revenue streams coming in made it possible to make content in a different way to what broadcasters prioritized.

To answer your question, what broadcast had been doing before cable was trying to attract as many eyeballs as possible, because that was the business model. Describing it as middle of the road would be appropriate. There were moments of inspired genius, but for the most part US television was pretty uninspired.

The dynamics of the business put precedence on generating as many episodes as possible, because that was the way you could sell programming abroad and really make a lot of money. It led to a whole lot of cop shows, doctor shows, law shows, that weren’t all that different and were highly predictable.

As cable came in, and started pulling apart that audience, attracting different tastes to different places, it became more possible to effectively target smaller audiences. That’s when we begin to see television become more interesting.

Are these new channels scrappy upstarts with limited budgets, or do they represent the major players building a huge number of new brands? 

The second explanation is the right one; there’s an underlying story about media ownership. Because the other thing that’s happening in the mid-90s is a huge round of consolidation and conglomeration.

There were hundreds of channels, but basically they were owned by five companies. So were they scrappy upstarts? I’d say not so much. There were roughly 20 channels, launched in the ’70s and ’80s, that were able to put money into original programming that they hadn’t been able to put in before.

It’s at that point you begin to have the emergence of these other brands with innovative programming. HBO came in with The Sopranos in the late ’90s, and really led the American market to think about television in different ways.

Most of what these cable channels were producing fit somewhere in between. They couldn’t do what HBO was doing as a fully subscriber funded network, but they were able to be edgier, and be successful, while targeting a smaller audience than the broadcasters. Because they had that secondary revenue stream of some subscription money coming in, on top of the advertising.

Mad Men was released by AMC – a channel that was mostly playing old movies, and in fact for many years hadn’t run any advertising at all. The extent by which AMC was able to raise the rate it was paid by cable service providers accounted for millions of dollars of revenue.

These are calculated per subscriber and then per month, so even just a few cents multiplied out times 100 million homes (the extent of US cable at the time) times 12 months in the year… you can get to some pretty significant numbers.

What show best represents this shift? My personal favorite is The Wire. 

It’s really important to put HBO in its own box. The parallel comes later with Netflix, as something that’s entirely subscriber-funded. And yes it’s still coming to you via television, but in terms of the conditions of production it really is a different business.

The Wire isn’t particularly widely viewed, although it is a favorite of television scholars. In the book I take a look at Oz, which was the first series in which HBO started playing with this original strategy. A crucial thing HBO did, somewhat unintentionally, was also own the production of that series.

So you do have HBO in many ways leading the way in terms of really distinctive programming, and a lot of that did come back to the fact it’s entirely subscriber funded. There was no worry about advertisers being squeamish  or the fact that a lot of the HBO programming turned away many viewers. It was so different that it really couldn’t be replaced by anything else, and that was something that attracted certain subscribers to it.

What kinds of genre shifts were demanded and enabled by the proliferation of channels? 

I would describe it as innovation in storytelling. Different things were tried in different places. USA Network was frankly not doing series that were much different than you’d find on a broadcast network – but a little bit different.

A lot of their early shows were built around male anti-antiheroes (as they were called, although they were more like imperfect protagonists). FX then setup the playbook that AMC followed with the launch of Mad Men. About 2010 is when the first big successes start drawing audiences the same size as broadcast networks – The Walking Dead, Sons of Anarchy, and so on.

There’s an important contextual feature here. In the course of a decade, cable goes from being the butt of jokes to a cultural environment where almost every Emmy is going to a cable channel. It was an extraordinarily fast transition.

And then streaming comes along. How does that transition function? 

As with digital distribution in other industries, nothing happens like boom they turned on the lights and it was all different. In 2010, Netflix is making the transition away from DVDs by mail, at the same time as the tablet is coming out – three years into smart phone adoption – so people are finding new and different ways to view screens.

At the same time is the launch of HBO Go, which was just a value-add for people who already had HBO. But it was the first video service in the US that worked really well. There had been tonnes of experimentation throughout the decade, but mostly the commercial networks were not making full episodes available.

Even Hulu, which arrived in 2008, had a lot of advertisement breaks baked into it, and a limited number of episodes available. HBO Go looked like an experience that people would actually want. That was the beginning of consumer acculturation to that experience.

In 2013, streaming services start to make their own content. And Netflix did not mess around. They looked at what hadn’t worked for cable for a long time, which back in the ’90s was trying to make programs that were cheaper than broadcast.

Netflix was very noisy with the money they were spending, the high-end talent that wouldn’t ever have done television before. They really ran out of the gate with a very aggressive strategy. Even though it wasn’t really dissimilar to what HBO had done – or what services such as FX eventually established.

There are a lot of similarities with the music industry a little earlier. Why were mainstream broadcasters unable or unwilling to make this leap to video on demand? Are they tied up with the cable channels? Are they afraid, broke? What’s the problem? 

I’d say it was the same situation as the recording industry. It was Apple and then Spotify who then came through. It wasn’t Universal or EMI or any of the major labels.

So why was it Netflix? Because Netflix had no legacy business it was afraid of eroding. When you have a stake in an established industry, and a way that you make money, you don’t want that to change.

The broadcast networks and cable channels had seen what happened in the recording industry and were deathly afraid of piracy. That meant they were hesitant to move into streaming it all, and make it available in any format that could be pirated. The public messaging for a long time was, “We’re staying the course. This is where the future is, and there’s nothing wrong with our business.”

However, behind the scenes, some of the companies were preparing. The speed with which Disney+ has launched from announcement to market – that didn’t just happen. Other companies, such as Viacom, just didn’t figure out how to make the transition. They channels such as Nickelodean, MTV, Comedy Central. They dominate the younger audiences that adopt new technology and new ways of communicating. They fought that instead of embracing it.

There are many opinions about how strong Netflix is, and whether it warrants the current capitalization. But the indisputable thing we can say is that, were it not for Netflix, the US industry would have changed much more slowly. And the change that did eventually come was largely due to the legacy industry being forced to keep up.

It’s a tricky dance though. There are some people that just say, “oh, the people in the legacy industry were so stupid.”

That’s not a fair way to describe what was happening. But, without the experimentation and the willingness to try something really untested (in terms of business models and distribution), the television space would be very different.

Finally, there’s a lot of talk about ‘Streaming Wars‘ at the moment. What do you make of this?  

I think that’s actually a pretty lazy conceptualization. If we look at the companies, we have a fare more multi-faceted marketplace than the term suggests. And there’s a tendency to assume: if it’s video, it must be competing with each other.

What we see is some really different business models, and video being used in very different ways. The outcome is that different companies have different purposes and metrics. And therefore many can succeed.

For example, Netflix is really alone in the market because its only purpose is to find people who will pay to watch video. It is a pure play among a number of different companies in it for other reasons.

Amazon Prime Video looks similar in many ways, but it’s not. It exists to enhance the value of Amazon Prime membership, which is important because it’s tied to retail – where Amazon actually makes money. If you look at where Amazon is producing original series outside the US, it’s almost exclusively in those markets where the company is focused on expanding its retail footprint.

So on a Saturday night I might choosing between a show on Netflix or Amazon Prime Video, but it’s not the competition many imagine it to be. And I might have both of those services. I might have Amazon Prime because I like having things shipped to me.

Recently we’ve had Disney+ entering the competition. And that looks more like a pure play, but we also have to keep in mind how much Disney makes in really being a multi-faceted consumer brand.  Disney+ is about developing a deeper relationship with consumers, that will lead them to theme parks and to buy consumer goods.

What Disney is doing in terms of library depth is also significantly more narrow than what’s happening with Netflix. We might look at Disney+ and say, well, it’s launched in Europe, it’s in Australia, it’s multinational just like Netflix. But we don’t yet have a lot of evidence that Disney+ is planning to do anything more than continue to produce US content and push it abroad.

If we look at Netflix at this point, more than half of the original commissions Netflix has made are for shows produced outside the US.

And Apple? I mean it’s like 12 shows. They’re not even playing that game. In the US market there’s attention on Hulu, but there are very good reasons (related to making money from licensing) that Hulu is unlikely to be more than a US service. At this point that’s my suspicion for both Peacock and HBO Max as well. So it depends where you are.

Netflix is a supplement. And this rhetoric of war suggests there is going to be a winner. But I think our video ecosystems are just growing more complicated. Depending on what you want from your video ecosystem, people are getting more choice. In many cases that choice comes with fees, because our attention is not adding up enough to support this ecosystem through advertising.

The other thing is just the array of nation-specific services that also exist, and provide a different kind of opportunity. Netflix is producing a lot of content outside the US, but it’s not producing a lot of content in any particular place other than the US.

If you’re in Germany or Australia, you aren’t really going to get enough programming just from Netflix. So there is still that desire and demand for domestic services and stories that look familiar.

Amanda Lotz is an American media scholar, professor, and industry consultant, currently based in Australia.


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