The Pennsylvania State University The Graduate School College of Communications COMPETITION AND PROGRAM TYPE DIVERSITY IN THE OVER-THE-AIR TELEVISION INDUSTRY, 1943-2005 A Thesis in Mass Communications by Young Shin Cho © 2007 Young Shin Cho Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy August 2007 The thesis of Young-Shin Cho was reviewed and approved* by the following: Richard Taylor Palmer Chair of Telecommunications Studies and Law Thesis Advisor Chair of Committee Matt Jackson Associate Professor of Communications Krishna Jayakar Associate Professor of Communications Lynette Kvasny Assistant Professor of Information Sciences and Technology John S. Nichols Professor of Communications Associate Dean for Graduates Studies and Research *Signatures are on file in the Graduate School ABSTRACT Competition and diversity are touchstones in media policy, but the relationship between them is not clear despite a great number of studies because even studies dealing with their relationship, did not measure the intensity of competition. This paper investigates the relationship between market competition and program type diversity in the over-the-air television industry. Specifically, market competition is divided into intra-network competition and intra-media competition, i.e. terrestrial television vs. cable TV. Also this paper uses a comprehensive model of program types, with 281 program type categories, which have never been used in previous studies. The results show that program type diversity keeps decreasing over time and intra-network competition has a negative effect on program type diversity. Also, intra- network competition is a more important factor on program type diversity than inter- media competition. Keywords: market competition, program type diversity, broadcasting policies, Herfindahal-Hirsh Index, FCC, ownership rule TABLE OF CONTENTS List of Figures..............................................................................................................vi List of Tables ...............................................................................................................vii Acknowledgements......................................................................................................viii Chapter 1. Introduction ................................................................................................ 1 Chapter 2. Literature Review....................................................................................... 9 2.1. Competition and Diversity as the Public Interest .......................................... 9 2.2. Structural Regulation vs. Content Regulation ..............................................14 2.2.1. An economic approach: the advocates of structural regulation ............16 2.2.2. Critical approach: the advocates of content regulation .........................20 2.2.3. Analysis .................................................................................................27 2.3. Program Choice Model: the Relationship between Competition and Diversity ........................................................................................................28 2.3.1. Steiner Applications ..............................................................................30 Chapter 3. Developing Instruments .............................................................................35 3.1. Measurement of Competition .......................................................................35 3.1.1. PCM method .........................................................................................36 3.1.2. Lorenz Curve ........................................................................................39 3.1.3. Uncertainty Ratio ..................................................................................41 3.1.4. Concentration Ratio ..............................................................................44 3.1.5. Herfindahl-Hirschman Index (HHI) ......................................................44 3.1.6. Measurement selection...........................................................................46 3.2. Measurement of Diversity ............................................................................48 Chapter 4. Research Question and Method..................................................................61 4.1. Research Question ........................................................................................61 4.2. Dependent Variable ......................................................................................63 4.3. Independent Variables ..................................................................................68 4.3.1. Intra-Network Competition Variable ....................................................68 4.3.2. Inter-Media Competition Variable ........................................................70 Chapter 5. Findings......................................................................................................73 5.1. Diversity Trends ...........................................................................................73 5.2. Market Competition Trends ..........................................................................79 5.2.1. Intra-Network Competition Trends .......................................................75 5.2.2. Inter-Media Competition Trends ..........................................................76 5.2.3. Market Competition Index ....................................................................77 5.3. Effect of Intra-network competition and inter-media competition on program type diversity ..................................................................................83 Chapter 6. Discussion and Conclusion ........................................................................87 6.1. Competition, Diversity and Program Costs ..................................................88 6.2. Program selection and concentration ............................................................90 6.3. Media conglomerates and diversity ..............................................................95 6.4. Network TV national ownership cap ............................................................97 6.5. Content Requirement ....................................................................................99 6.5. Limitations of the study ................................................................................101 Bibliography ................................................................................................................103 Appendix......................................................................................................................115 Appendix A. Program concentration ratio: CR8 1946~2003 ..............................115 Appendix B. Total network programs during 1946-2003 ...................................118 Appendix C. Comprehensive list of program types during 1946-2003 ...............139 LIST OF FIGURES Figure 3-1. Comparison of merger guideline and program type diversity ..................54 Figure 3-2. Diversity of prime time programming comparison (HHI)........................57 Figure 3-3. CR4, CR8, CR12 CR24, and Diminick and Pearce (1976)’s CR3 ...........59 Figure 4-1. Intra-Network Competition ratio...............................................................70 Figure 4-2. Inter-media competition variable ..............................................................71 Figure 5-1. Program Type Diversity Index..................................................................74 Figure 5-2. Program Content Concentration Ratio......................................................76 Figure 5-3. Intra-Competition index............................................................................80 Figure 5-4. Inter-Media Competition: : Cable TV Ad Volume...................................81 Figure 5-5. Market Competition Index ........................................................................82 Figure 6-1. Program Cost per Home............................................................................88 Figure 6-2. GDP, Ad Vol, TV ad Vol, Network Ad Vol. and program costs per home .....................................................................................................................89 Figure 6-3. Advertising Revenues by media Type ......................................................91 Figure 6-4: Top 1, Top 2, Top 3, Top 4 and competition............................................94 LIST OF TABLES Table 3-1. A Summary of Program Categories ...........................................................55 Table 5-1. Top Program Type List ..............................................................................78 Table 5-2. Summary of simultaneous regression analysis for intra- and inter- media competitions predicting program type diversity (n=54) ............................84 Table 5-3. Summary of simultaneous regression analysis for intra- and inter- media competitions and their moderate effects on program type diversity (n=54) ...................................................................................................................85 Table 6-1. Media consolidation as of 2006..................................................................95 ACKNOWLEDGEMENTS I would like to deliver the best appreciation to Prof. Richard Taylor, my intellectual mentor, to Prof. Matt Jackson, Prof. Krishna Jayakar and Prof. Lynette Kvasny. Certainly, this study cannot be done without