IEEE JOURNAL ON SELECTED AREAS IN COMMUNICATIONS, VOL. SAC-3, NO. 1, JANUARY 1985
`
`215
`
`DBS Programming
`
`RICHARD M. GALKIN
`
`Abstract -There are four essential elements for a successful broadcast(cid:173)
`ing-satellite system: an international regulatory framework and domesµc
`approval, financial backing, the space and earth technology and hardware,
`and the programming to attract viewers-and subscribers. Without the
`latter, no system can be commercially viable, nor will the DBS industry
`thrive. This paper discusses the kind of programming planned for one of
`the subscription DBS systems, tbe sources of that programming, and the
`contemporary contractual and operational practices in the TV programming
`field.
`
`I.
`
`INTRODUCTION
`
`T HE program executive working with a new broadcast(cid:173)
`
`ing technology is regularly asked the question, "Will
`your delivery system produce new and different program(cid:173)
`ming?" At STC, the answer is "Yes"-in the long run.
`The experience of the last 20 years has shown that while
`new technologies do not really "invent" new kinds of
`programs, they do develop ways of presenting existing
`products that create new patterns of audience behavior.
`Home Box Office did not invent the feature film, Cable
`News Network did not discover news, and MTV did not
`originate the rock video. But all three pioneered innovative
`ways of packaging and delivering these products that
`changed the way Americans .viewed and used their televi(cid:173)
`sion sets. In bringing the first high-powered addressable
`DBS system to the American public, our DBS venture will
`also develop and refine new ways of packaging and deliver(cid:173)
`ing electronic services and, like its predecessors, hopes to
`have a significant effect on the habits and lifestyles of TV
`viewers.
`
`II. THE PROGRAM PACKAGE
`
`In our opinion, preparing a successful DBS program(cid:173)
`ming package requires assembling a mix of programs that
`will perform effectively in areas that do not have access to
`cable as well as in parts of the country that have, or will
`have, access to basic and pay cable service. For the first
`group, uncabled homes, the starting place is to off er a
`concentrated package of the best pay television available.
`For the second group, whose .members have access to or
`already subscribe to a variety of cable services, it will be
`necessary to provide programs and program attributes that
`will not be available to them through their local cable
`
`Manuscript received September 1, 1984; revised October 17, 1984.
`The author is with the Satellite Tele11ision Corporation, New York, NY
`10036.
`.
`
`systems. STC's approach to programming is to consider the
`wide range of audience segments, looking at potential
`customers not so much in terms of where they are but
`rather at the ways that they use communications systems
`and technology. The elements of such a package are being
`selected for their ability to address unfilled audience needs,
`whether they be from a lack of availability of standard pay
`television or from pastimes such as the use of personal
`computers, digital audio systems, videocassette recorders,
`or other special interests not fully supported by direct
`distribution. Such a package of entertainment services
`would include movies, sports, music, and general entertain(cid:173)
`ment that highlight the unique technical features of the
`DBS delivery system, such as addressability, digital stereo
`audio, and high quality video. Accompanying these pro(cid:173)
`grams should be information services such as teletext and
`computer software downloading, made possible by the
`wide-band delivery capacity and microprocessor-based
`home equipment.
`Based on this strategy, the schedule is likely to include
`premium movies, augmented by specials and series; na(cid:173)
`tional and regional sports; a variety of music program(cid:173)
`ming; lifestyles and children's programming; and a show(cid:173)
`case for pay-per-view (PPV) and pay-per-series program(cid:173)
`ming. Each TV channel will be accompanied by a stereo
`audio soundtrack and second-language capacity. A series
`of additional stereo audio channels can be .used for an
`array of "radio" services, presenting music and other audio
`programming that n;:iake full use of the digital transmission
`format. We also plan to deliver professional, business, and
`consumer computer software with a variety of teletext
`service.stransmitted in the video channels' vertical blanking
`intervals. Further market research and analysis will help to
`determine which of these elements should be part of the
`"basic" service and which will be available on an optional
`incremental basis.
`
`III. PROGRAMMING SOURCES AND ACQUISITION
`
`The key to the realization of this plan is arranging for a
`continuing supply of programs from a broad variety of
`program suppliers. Propelled by the period of rapid growth
`and change in the communications industries that began in
`the 1970's, the current program marketplace is one of
`tremendous activity. Suppliers of programs of all kinds
`have organized pay TV divisions, selling their products to
`pay and basic cable, home video, STY, and now, DBS.
`
`0733-8716/85/0100-0215$01.00 ©1985 IEEE ,
`
`APPLE EXHIBIT 1060
`APPLE v. PMC
`IPR2016-01520
`Page 1
`
`

`

`216
`
`IEEE JOURNAL ON SELECTED AREAS IN COMMUNICATIONS, VOL. SAC-3, NO. 1, JANUARY 1985
`
`The economics of program acquisition for DBS are not
`substantially different than for standard pay television.
`Although STC will acquire programs of many kinds from
`many different sources, feature films will be an important
`part of the schedule and are a good example of how DBS
`programming in general will be obtained.
`In the last decade, the share of the motion picture
`studios' income from nontheatrical exhibition of their films
`became so significant that they established a standard and
`predictable progression of exhibition "windows" for their
`products. Following an initial theatrical release of several
`weeks to several months, a movie can be expected to
`appear in about six months on videocassette and videodisk
`for the home market and on pay-per-view systems. In
`another six months, it will be shown on subscription pay
`cable and STV and subsequently on national network
`television. After a year or two of network airings, the film
`will be syndicated to television stations across the country
`and, increasingly, returned to pay cable as a "classic" or
`",movie great." In recent years, the networks have replaced
`much of their feature film schedules with lower-priced
`"made for TV" films, a trend which has also reached pay
`TV with HBO's introduction of "made for pays."
`In the past, the large majority of motion picture studio
`revenues came from theatrical showings, with some ad(cid:173)
`ditional income being generated by network and syndi(cid:173)
`cated television sales. When the studios began to sell large
`amounts of their product to cable programmers, their
`pricing was based on the model for theatrical exhibition, in
`which the studio took 35-40 percent of the gross ticket
`sales. Because of the difficulty of precisely determining pay
`cable "admission" per showing, pricing has evolved through
`negotiation to a variable license fee on a per film, per
`subscriber, per month basis, with fees for a moderately
`successful picture averaging about $0.30. For a film which
`performed poorly at the box office, this fee might be as low
`as $0.05; for a "hit" such as a Star Wars, this fee can
`exceed $1.
`This system is advantageous to both parties because
`prices are based on actual performance, both in the theatres
`and, cumulatively, on pay TV. It also allows the pay
`television programmer to create progra~.ning budgets
`based on a variable share of subscriber revenue model.
`This has been shown to be far more practical in a start-up
`operation than spending large amounts of fixed capital
`buying or producing programming, something which
`services such as CBS Cable and The Entertainment Chan(cid:173)
`nel found out the hard way. DBS programming will, of
`course, come from many different sources. In addition to
`the major Hollywood film studios, we will buy rights to
`programs from independent American and international
`film and television production companies, distributors and
`agents, ancillary sales divisions of networks, record compa(cid:173)
`nies, software producers, and other programming services
`in both basic and pay cable.
`Another source of programming besides acquisition of
`rights to existing programs is original production or
`
`coproduction. This has the advantages to the programmer
`of control over theme and format and the option of exclu(cid:173)
`sive presentation. However, the production costs of up to
`$800 000 /h for a network quality dramatic series, for
`example, make substantial amounts of original production
`a poor use of start-up capital. The increasing opportunities
`for sharing both production costs and exhibition rights
`with coproducers allow for a certain amount of original
`production in the first several years of S)'stem operation,
`and STC is engaged in such program development in a
`number of areas.
`
`IV. PROGRAMMING SYSTEMS
`
`The mechanics of selecting, buying, scheduling, and pre(cid:173)
`paring a variety of programs this diverse, and this large, is
`a complex undertaking. Once again, a look at the treatment
`of the film segment of typical pay programming is a good
`example of the operation as a whole.
`Instead of selecting the few from the many, the goal of
`film acquisition is, ironically, to find and buy as many
`movies as possible. The Hollywood studios and indepen(cid:173)
`dents produce only 250-300 features per year, with per(cid:173)
`haps another 100 coming from England, western Europe,
`and Australia. With 327 two-hour slots to fill on one
`channel each month, the tasks of an acquisitions staff are
`first, to fill those slots, and second, to do it as well as
`possible within the limits of budget and product· availabil(cid:173)
`ity.
`Like any other modern complicated business, program(cid:173)
`ming relies heavily on the use of computer systems. The
`starting point for film acquisition is the program availabil(cid:173)
`ity database. This is a computer file in which the output of
`the film companies, past, present, and future, is tracked for
`availability, cost, genre, stars, and length. Based on infor(cid:173)
`mation in this database, acquisition specialists review the
`statistics and screening copies of the films themselves and
`evaluate them against
`the programming department's
`budgets, schedule plans, editorial policies, and past acquisi(cid:173)
`tion patterns.
`The acquisitions staff negotiates the terms of the broad(cid:173)
`cast license with the film suppliers, usually within the
`existing limits of a general "umbrella" agreement. Con(cid:173)
`tracts are prepared and executed for each title or group of
`titles, specifying number of exhibitions, price per sub(cid:173)
`scriber, length of the license, technical requirements for the
`film's physical materials, and details of its delivery.
`As a contract is executed, the key points of the license
`are entered into an inventory file, which contains all perti(cid:173)
`nent information on a title, including contract abstracts,
`length, format, quality control status, and available show~
`ings. The information in this database is, in effect, the raw
`material for the program schedulers.
`Since e~ch time a title is acquired, or scheduled, it has a
`significant impact on budgets, program and technical oper(cid:173)
`ations, finance, business affairs, on-air promotion, and
`marketing, very careful coordination and sharing of infor-
`
`APPLE EXHIBIT 1060
`APPLE v. PMC
`IPR2016-01520
`Page 2
`
`

`

`GALKIN: DBS PROGRAMMING
`
`217
`
`mation takes place between these areas to ensure the
`successful broadcast of an acquired program. As a film is
`bought, program operations and technical operations begin
`the work of getting the physical material for the film, such
`as prints, negatives, and tapes, in house, formatted, and
`prepared. Information on the film's quality control status
`is continually updated in the inventory file to prevent final
`scheduling of a title which is not ready for the air. As a
`title is scheduled, its impact on the budget can be modeled
`in a variety of configurations and evaluated in light of
`alternative choices. When it is in fact scheduled, informa(cid:173)
`tion from the availability and inventory files is used by
`marketing and on-air promotion to develop plans for the
`film's advertisement within the service and to the public at
`large. As it is broadcast, the same information is used to
`automatically produce ac_counts payable lists in accordance
`with the terms of the contract. Also, the exhibition infor(cid:173)
`mation in the inventory is updated to reflect the film's use.
`The main features of the program schedule are assem(cid:173)
`bled from three to six months ahead of the air date, giving
`ample time for delivery and preparation of broadcast tapes,
`budget revisions, production of promotional spots, and
`general marketing. As the air date approaches, the oper(cid:173)
`ations area of programming prepares detailed broadcast
`logs, which contain the complete continuity of each chan(cid:173)
`nel for every broadcast day. Adding to the features them(cid:173)
`selves, the broadcast logs include scheduling information
`for promotional pieces, graphic elements, consumer sched(cid:173)
`uling information, and filler pieces such as cartoons, shorts,
`and rock videos. These logs are the "menus" for personnel
`at the playback and uplink centers to follow and are
`programming's final specifications for what will appear on
`the subscriber's TV screen.
`STC (like many DBS operators are expected to be) will
`be unusual compared to "terrestrial" pay television pro(cid:173)
`grammers because of the number of channels that will be
`supplied. While this number will obviously be less than the
`20 or 50 channels offered by many cable operators, STC's
`six channels are, for a program service, unique. The ability
`to program and schedule six parallel channels 24 h/day
`will give DBS an extraordinary flexibility to maximize the
`viewers' choices by vertical and horizontal day-part-ori(cid:173)
`ented counterprogramming. What this means is that the
`primary focus of the individual channels can change at
`various times during the day to respond to the changing
`constitution and interests of the viewing .audience. The
`viewer ·who does not care to watch live sports, for instance,
`can find feature films or music programs without switching
`off the service. Within the movie channels, the viewer who
`is not fascinated by the action/adventure feature on Chan(cid:173)
`nel 1 at 8:00 can find a romance or classic on Channel 2 at
`the same time. The majority of children's programs might
`be presented on a channel in the early morning; late
`afternoon, and weekends, when children comprise much of
`the available audience, while the programming on that
`same channel will change to lifestyles and general enter(cid:173)
`tainment during the middle of the day.
`
`V.
`
`PROGRAMMING INNOVATION
`
`The areas of DBS programming that may have the most
`potential for innovation are those made possible by univer(cid:173)
`sal addressability. The growth of PPV, or incrementally
`priced pay television viewing, has been severely restricted
`by the shortage of addressable cable converters in Ameri(cid:173)
`can homes. Of the 36 million subscribers to basic cable
`. service, less than 6 million, or 17 percent, have any sort of
`addressable hardware. The success of PPV programs in
`those systems
`that do have addressability has been
`hampered by generally fragmented noncomprehensive
`marketing efforts. All of STC's equipment will be individu(cid:173)
`ally addressable, enabling us to be the first broadcaster to
`program and market PPV products on a national scale.
`PPV programming to this point has focused on two
`elements: early availability of hit movies and occasional
`major sports events, usually prize fights. Film companies
`make most of their successful movies available for PPV
`concurrent with their release on video cassette, which usu(cid:173)
`ally precedes their release on subscription pay TV by six
`months. Many customers will pay $3-5 per film if it is of
`exceptional interest or quality and if they can see it appre(cid:173)
`ciably sooner than its appearance on HBO or similar
`services.
`In spite of its present limitations, the studios have high
`expectations for PPV's success, and for its eventual value
`to them, and are experimenting with placing the PPV
`window ahead of the videocassette release.
`The general availability of incremental buying of TV
`programming will also increase the chances of success for
`special interest programming. Simply because of the fact
`that it is special interest, programming in the cultural,
`professional, personal improvement, "how-to," and other
`areas has not been particularly successful for broad-based
`subscription or advertiser-supported broadcasting services.
`Early attempts at presenting "magazine rack" program(cid:173)
`ming schedules on some interactive and addressable cable
`systems failed because of the small subscriber population.
`For PPV programming, 5-10 percent penetration is con(cid:173)
`sidered good, but in a cable system of 300 000 that level of
`interest will not justify the high production, broadcasting,
`and marketing costs of PPV programming. With STC's
`projected subscribers numbering in the millions, these same
`percentages may very well support a wide variety of DBS
`program choices. Economically, the standard model for
`acquisition of all kinds of PPV programming is for the
`programmer to pay no initial license fee, but to share gross
`PPV revenues with the supplier. The supplier pays produc(cid:173)
`tion costs, while the programmer is responsible for broad(cid:173)
`casting and promotion expenses. Using this model, a pro(cid:173)
`grammer can_schedule an array of standard and unusual
`PPV programs without having to invest large sums in their
`production.
`· Combined with addressability, the "high-tech" features
`of STC's programming, made possible by a wide-band
`delivery medium and microprocessor-based receivers, will
`
`APPLE EXHIBIT 1060
`APPLE v. PMC
`IPR2016-01520
`Page 3
`
`

`

`218
`
`IEEE JOURNAL ON SELECTED AREAS IN COMMUNICATIONS, VOL. SAC-3, NO. 1, JANUARY 1985
`
`increase the new choices available to subscribers. Products
`such as personal computer software, video games, and
`"pay-per-listen" digital audio recordings can be offered to
`DBS subscribers at attractive "per-use" prices which will
`not include the usually hefty packaging, distribution, and
`retailing costs.
`Taken on whole, DBS programming can include the best
`of currently available pay-television entertainment pro(cid:173)
`gramming and innovative, perhaps experimental, offerings
`of PPV, special interest, and advanced technology prod(cid:173)
`ucts. STC's plans include both, and our expectations for
`success in a considerable range of programming areas are
`high. These DBS programming plans are based on the best
`available research, thoughtful consideration of current and
`past trends, practical economics, and creative exploitation
`of our system's technical features. The imperative is to
`provide the subscribers with "television worth paying for."
`
`Richard M. Galkin received the B.A. degree from
`Brown University, Providence, RI, and
`the
`M.B.A. degree from the Graduate School of
`Business, Columbia University, New York, NY.
`He is Senior Vice President, Programming, of
`the Satellite Television Corporation (STC), a·
`COMSAT subsidiary. He joined COMSA T as a
`senior consultant in 1978, and was instrumental
`in developing the concept of broadcasting pay
`television directly to the home by satellite. He
`has also served numerous pay television and ca(cid:173)
`ble companies as President of Richard M. Galkin Associates, a consulting
`firm. He has worked in the pay television and cable industries since 1966,
`when he was CA TV Operations Manager for Time· Life Broadcast. He has
`been responsible for a number of innovative business and programming
`ideas. In 1970, as President of Downe Broadcasting, he developed one of
`the first advertiser-supported cable programming services. As President of
`Manhattan Cable Television in 1973 he was responsible for the first
`commercial test using a cable system for data transmission. From 1977 to
`1978 he was Executive Vice President of Hollywood Home Theatre, a
`joint venture of Twentieth Century-Fox and United Artists.
`
`APPLE EXHIBIT 1060
`APPLE v. PMC
`IPR2016-01520
`Page 4
`
`