Total Households (in millions) Broadcast Penetration. Cable Penetration. HDTV Penetration. Year

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1 Forget baseball! TV should be declared America s national pastime. Broadcast TV maintained a whopping 98.2% household penetration for over fi ve years. (According to the Nielsen Company, 2009 s dip to 97.5% is due to the switch to digital broadcast, for which some TV owners were unprepared.) Why does broadcast dominate? It s free and readily available in most places, and it has a history of producing top-notch programs with wide appeal. As a subscription service, cable has it tougher. The market penetration for cable TV has suffered, especially during the recession, when many people learned they could live without costly subscriptions. After the fi nancial collapse in 2007, cable subscriptions dropped 5.5%, and were at 48.5% in Satellite and HDTV lag behind both broadcast and cable, but HD programming is becoming more popular. At the end of 2009, HDTV reached 33% of American households, quite a leap from the 13.5% in 2007; satellite reached 28.9% of U.S. homes. Year U.S. Household Rates : Broadcast and Cable TV Total Households (in millions) Broadcast Cable HDTV ,630, % 66.6% n/a ,260, % 59.2% n/a ,800, % 58.0% 13.5% ,000, % 52.5% 23.3% ,500, % 48.5% 33.0% Source: National Cable and Telecommunications Media, 2008; Nielsen Wire, 2010

2 2 The End of Cable s Heyday In its golden days, cable TV made a killing through syndication and movies, but technology has changed all that. Now if people miss an episode of their favorite show, they can watch it on their DVRs or even access it through the internet. In recent years, many cable networks have followed the example set by HBO and Showtime and developed their own original series to compete with broadcast. Cable networks take advantage of broadcast networks summer idleness by fi lling the gap with new episodes of original series. Cable series also run during other seasons against fi rst-run broadcast programming, but the competition is tough. Broadcast network shows still get the biggest buzz consider the media frenzy during the upfronts and that visibility translates to higher viewership and ad spend. Many shows have been successful, but cable s weaker penetration is limiting. Take for instance new cable hit Rizzoli & Isles. The show s 2010 series premiere (July 12 on TNT) set a record as the number-one commercial-supported cable series launch in history, drawing 7.6 million viewers. It s a hit by cable standards, but compared to broadcast s 2010 summertime darling, America s Got Talent, that audience looks positively scrawny. The season two premiere of America s Got Talent (June 1 on NBC) got the attention of more than 10.4 million viewers and broadcast audiences during the summer are at their lowest. Many popular programs that run during the traditional season have between 15 and 20 million viewers. FOX s American Idol saw an average viewership of viewers during the season. The high number of cable channels is another weakness. While variety entices customers, it also encourages market fragmentation and drives stiff competition between networks Top 20 Primetime Broadcast Shows Live and Same Day Average Viewership Rank Program Network Viewers 1 American Idol (Tuesday) Rating FOX 22,974, American Idol (Wednesday) FOX 21,951, CBS NFL Today CBS 19,509, NCIS CBS 19,327, Dancing with the Stars ABC 19,125, NBC Sunday Night Football NBC 18,738, Undercover Boss CBS 17,807, Fox NFL Sunday FOX 16,827, NCIS: Los Angeles CBS 16,082, The Mentalist CBS 15,368, Two and a Half Men CBS 12,945, CSI CBS 14,918, Dancing with the Stars Results ABC 14,811, The Big Bang Theory CBS 14,143, Sunday Night NFL Pre-Kick NBC 13,852, Criminal Minds CBS 13,695, Grey s Anatomy (Thursday, 9pm) ABC 13,259, The Good Wife CBS 13,123, Minutes CBS 13,075, Desperate Housewives Source: TV by the Numbers, June 16, 2010 ABC 12,823,

3 3 Top 10 Primetime Cable Shows (July 12 July 18, 2010) Rank Program Network Viewers Rating 1 Deadliest Catch DISC 8,546, The Closer TNT 7,660, Rizzoli & Isles TNT 7,553, After the Catch DISC 6,849, Home Run Derby ESPN 6,418, Sonny with a Chance DSNY 6,115, Burn Notice USA 5,646, Hannah Montana Forever DSNY 5,399, Royal Pains USA 5,196, Pawn Stars HIST 5,170, Source: TV by the Numbers, July 20, If those numbers aren t enough, broadcast s stack of nominations for this year s primetime Emmy Awards will erase any doubt as to who s tops in TV. Broadcast traditionally dominates the annual awards show, and, so far, 2010 s been no exception. The four broadcast networks earned a total of 215 Emmy nominations, while 25 cable networks are up for a combined 248 awards and half of those were earned by HBO or Showtime. This year s leader is ABC, with 63 nominations, followed by CBS (57), NBC (48), and FOX (47). Top 10 Primetime Cable Networks in Q Rank Network Average Primetime Viewers (in millions) 1 USA TNT FOX News ESPN 1,747 5 Nick at Nite History TBS A&E Cartoon Network Discovery Channel Source: Huffi ngton Post, June 30, 2010 Not only do the kudos increase broadcast s profi le, but it could also set up non-cable networks for more success come fall. Last year s primetime Emmy Awards saw a 15% boost in viewership ratings. If viewers are enticed to watch shows that were popular last season, they re likely to stick around, giving new programs a chance to hit the ground running Emmy Awards: Top 10 Nominated Shows Show Network Number of Nominations Glee FOX 19 Mad Men AMC Rock NBC 15 Modern Family ABC 14 Lost ABC 12 Saturday Night Live NBC 12 Dancing with the Stars ABC 9 The Good Wife CBS 9 Dexter SHO 8 Nurse Jackie SHO 8 Source: Academy of Television Arts and Sciences

4 4 Technology: Choosing the Viewing Experience Today s TV viewers have lots of programming options to choose from: cable, satellite, HDTV, premium channels not to mention DVR, Hulu, Netfl ix, and other new technologies. To beat each other out, cable, HDTV, and satellite providers have made exclusivity deals to stand out. For example, only DirecTV offers NFL Sunday Ticket, a subscription service that broadcasts every NFL game. Time Warner Cable in the New York/New York City metro region has an exclusive deal with local news station NY1. Broadcast TV doesn t need to compete in the subscription arena, so its viewers won t be lured away if they switch service providers or drop cable entirely. Another cable option on the horizon is à la carte cable offerings. Customers would be able to subscribe to individual channels rather than buying packages. This could compartmentalize viewership, make cable even more fragmented, and limit opportunities for cable viewers to explore new stations. DVRs and timeshifted TV has had less of an impact on viewing than originally feared, and this is good news for advertisers. For starters, consumers won t be eager to shell out cash for DVR services when the economy is at its worst. Growth will be slow, but even as timeshifting increases, advertisers need not worry. Right now, 34% of U.S. TV households have DVR access; but this doesn t mean that they record everything for later. The shows that benefi t most from DVR are those with ongoing plot lines that continue week to week rather than shows that run self-contained episodes. Timeshifting boosts TV audiences. Thanks to DVR, primetime viewing now extends into the late night fringe period (11pm-1am), and many of these people are household decision makers or working professionals who are more likely to have discretionary income. Timeshifting also allows people to watch TV content even if they have a scheduling confl ict or want to watch two shows that run at the same time. Before DVR, they would have had to choose. It s no secret that one reason people like DVR is the option to skip commercials, but the truth is that some part of the TV audience tunes out during aired commercial breaks. The timeshifted audience is less different that one might expect. About 35% of regular TV viewers admit to changing channels or leaving the room at least some of the time during commercial breaks. The number of ad-skipping during DVR views is higher just over 65% according to AdWeek. But AdWeek also found that viewers are likely to watch ads that are relevant to their lives. For example, ads for toys and children s health products were watched 37% more often in households with children. To combat potential commercial skipping, advertisers are adapting. Some are even creating new ads just for DVR viewing. New types of ads include guest appearances by actors in the program, shorter ads, and mini commercials that follow a plot culminating in the last ad segment. In 2006, KFC released an ad that, when paused, provided a code that could be redeemed for a free chicken sandwich. And there s no need to worry about ads not staying current, since nearly all viewers watch recorded shows within three days of the original airdate Top 10 Timeshifted Primetime Shows (by % of audience gained) Rank Show Network % Audience Gained 1 Battlestar Galactica SYFY 59.4% 2 Mad Men AMC 57.7% 3 Damages FX 56.3% 4 Rescue Me FX 53.2% 5T True Blood HBO 46.9% 5T Stargate Universe SYFY 46.9% 7T Sanctuary SYFY 45.9% 7T Heroes NBC 45.9% 9 Terminator: The Sarah Connor Chronicles FOX 45.5% 10T 10 Things I Hate About You FAM 44.9% 10T Dollhouse FOX 44.9% 10T Melrose Place CW 44.9%

5 5 Where Is Ad Spend Going? Savvy advertisers know the value of broadcast airtime. Broadcast advertisements are more expensive than cable ads sometimes costing nearly twice as much but many media analysts agree that broadcast advertising is still a bargain. According to Credit Suisse media advertising analysts (quoted in Broadcasting & Cable), It [broadcast] is really critical to advertisers. The viewing dynamics are fundamentally different to cable... A 100% cable plan, while yielding far more commercial airing and total impressions, concentrates too much exposure among the nation s heaviest TV viewers, who by virtue of lower education and employment status are less attractive to many of the medium s largest spenders. Local networks are also winners, especially for businesses looking to target a specifi c region. According to Broadcasting & Cable (B&C) magazine, local networks have sustained an average 15% revenue growth through the fi rst two quarters of The Hollywood Reporter forecasts that by year-end, local TV will have increased 9.6% this year. Hit hard by a drop in auto advertising in 2009, non-cable networks are seeing some recovery in 2010 as auto ads rebound and other ad categories fi ll the gap in an effort to reach hesitant consumers. B&C also predicts that political advertising will be a boon to local stations s in the fall. National TV both broadcast and cable should see growth as well. Adjusting for the winter Olympics and upcoming political ads, which will buoy this year s numbers, analysts still predict 4.9% revenue growth in By April 2010, Nielsen reported that 2009 broadcast ad spending was down 10% and cable ad spending was up 16%. Advertisers haven t forgotten the effectiveness of TV ads, despite a dire The Hollywood Reporter reports that spending for the 2010 season is rebounding, and ad prices are creeping back to their pre-recession levels. When it comes to TV advertising, you get what you pay for and broadcast commercials are the way to go. They reach the largest audience e and air during the most popular programs. And as the economy improves, consumers will get excited to get spending! SOURCES: Academy of Television Arts & Sciences, www. w. emmys.tv, 7/19/10; Adweek, 7/30/08; Broadcasting & Cable (B&C), 7/12/10, 7/9/10, 6/28/10, 6/21/10, 5/18/09; DirectTV, 7/19/10; Entertainment Weekly, Hollywood Insider, 6/2/10; Hollywood Reporter, r, 7/14/10; Huffi ngton Post, 6/30/10; MSNBC, Food Inc., 2/23/06; National al Cable & Telecommunications Association, 2008 Industry Overview, 5/16/08; The Nielsen Company, Nielsen Wire, 4/28/10, 12/11/09, 11/2/09, 8/28/09; NY1, 7/19/10; TV by the Numbers, com, 7/13/10, 7/7/10, 6/18/10, 6/16/10, 5/28/10; Variety magazine, 6/1/10. UPDATED: 07/2010 THE MEDIACENTER The TV Authority 7000 Kennedy Blvd. East, M-9 Guttenberg, NJ Tel: