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Enhanced TV as Brand Extension: The Economics and Pragmatics of Enhanced TV to Cable TV Network Viewership A Magness Institute Research Report By Louisa Ha Associate Professor Department of Telecommunications Bowling Green State University Bowling Green, OH 43403 Tel: (419) 372-9103 Fax: (419) 372-9449 E-mail: louisah@bgnet.bgsu.edu Home Page: http://www.bgsu.edu/departments/tcom/faculty/ha/home.htm and Sylvia Chan-Olmsted Associate Professor Department of Telecommunication College of Journalism and Communications 3065 Weimer Hall University of Florida

2 TABLE OF CONTENTS EXECUTIVE SUMMARY6 I. INTRODUCTION10 - ENHANCED TELEVISION CONCEPTUALIZATION - USE OF ENHANCED TELEVISION BY BROADCAST AND CABLE TV NETWORKS IN THE INDUSTRY - SIGNIFICANCE OF THE STUDY TO THE CABLE INDUSTRY II. LITERATURE REVIEW.11 - PRIOR RESEARCH ON TV WEB SITES AND ENHANCED TV - TV AUDIENCE BEHAVIOR AND FANDOM CULTIVATION - BRAND EXTENSION THEORIES AND APPLICATIONS IN ENHANCED TV III. RESEARCH QUESTIONS.18 IV. METHODOLOGY. 19 - SAMPLING - SURVEY QUESTIONNAIRE DESIGN - PROCEDURES - RESPONSE RATE - STATISTICAL ANALYSIS V. RESULTS - SAMPLE PROFILE.23 1. TV USAGE AND VIEWING HABITS 2. CABLE AND SATELLITE SUBSCRIPTION 3. ON DEMAND MEDIA CONSUMPTION 4. HIGH TECH MEDIA OWNERSHIP 5. INTERNET USAGE FINDINGS 1. 2. 3. USE OF CABLE TV WEB SITES..41 USE OF ENHANCED TV FEATURES.46 EFFECTS OF ENHANCED TV USAGE ON VIEWER LOYALTY, SUBSCRIBER LOYALTY AND ATTRACTING NEW SUBSCRIBERS FOR CABLE NETWORKS...48 COMPARISON BETWEEN BASIC AND PREMIUM CABLE NETWORKS ENHANCED TV USAGE AND EFFECTIVENESS ..49

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3 5. MOST EFFECTIVE ENHANCED TV FEATURES ON CABLE NETWORK WEB SITES IN FACILITATING VIEWER LOYALTY AND ATTRACTING NEW SUBSCRIBERS.50 EFFECTIVENESS OF ENHANCED TV AS BRAND EXTENSION IN ATTRACTING NEW VIEWERS AND MOTIVATING THEM TO BUY ADVERTISED PRODUCTS (T-COMMERCE) ON THE WEB SITES 51 VIEWERS EVALUATION OF THEIR ENHANCED TV EXPERIENCE ON THE WEB .. 53 COMPARISON BETWEEN PAID AND NON-PAID INTERNET SUBSCRIBERS TV AND ENHANCED TV BEHAVIOR .52

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VI. DISCUSSION57 VII. CONCLUSION.59 VIII. REFERENCES62 IX. APPENDICES - COVER LETTER - SURVEY QUESTIONNAIRE (PRINT VERSION) - SURVEY QUESTIONNAIRE (WEB VERSION) - HUMAN SUBJECTS RESEARCH APPROVAL FROM BGSU AND UNIVERSITY OF FLORIDA

4 LIST OF TABLES 1.0 QUESTIONNAIRE OBJECTIVES AND STRUCTURE 1.BASIC DEMOGRAPHICS OF RESPONDENTS 1.1 AGE 1.2 GENDER 1.3 EDUCATION 1.4 MARITAL STATUS 1.5 HOUSEHOLD SIZE 1.6 STATE OF RESIDENCE 1.7 HOUSEHOLD INCOME 1.8 OCCUPATION 2. TV USAGE 2.1 HOURS SPENT ON WATCHING BROADCAST NETWORKS PER WEEK 2.2 HOURS SPENT ON WATCHING CABLE NETWORKS PER WEEK 2.3 MOST FREQUENTLY WATCHED BROADCAST NETWORK 2.4 MOST FREQUENTLY WATCHED CABLE NETWORK 2.5 FAVORITE TV PROGRAM CATEGORY 2.6 TV VIEWING HABIT . CABLE AND SATELLITE SUBSCRIPTION 3.1 TYPE OF TV SERVICE USED 3.2 CHANGE OF SERVICE IN PAST THREE MONTHS 4. ON DEMAND MEDIA CONSUMPTION 5. HIGH TECH MEDIA OWNERSHIP 6. INTERNET AND COMPUTER USAGE 6.1 COMPUTER PLATFORM 6.2 LENGTH OF TIME USING INTERNET 6.3 TYPE OF INTERNET CONNECTION 6.4 MAJOR WEB BROWSER 6.5 TIME SPENT ON INTERNET AT HOME PER MONTH 6.6 AMOUNT SPENT ON INTERNET SERVICE 6.7 HOME INTERNET SERVICE PROVIDER 6.8 FEATURES USED ONLINE 6.9 TYPE OF WEB SITES USED MOST OFTEN AT HOME 6.10 ONLINE SHOPPING 6.11 AMOUNT OF MONEY SPENT ON ONLINE PURCHASE 6.12 INTERNET USER TYPE 7.USE OF CABLE TV WEB SITES 7.1 MOST RECENT VISIT TO CABLE WEB SITES 7.2 CABLE WEB SITES VISITED IN PAST 3 MONTHS 7.3 MOST FREQUENTLY VISITED CABLE WEB SITE

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5 7.4 WAYS TO FIND OUT THE CABLE WEB SITE 7.5 AMOUNT OF TIME AND NUMBER OF TIMES SPENT ON THE MOST RECENT VISITED CABLE WEB SITE 7.6 CARRIAGE BY CABLE OPERATORS OF THE MOST FREQUENTLY VISITED CABLE NETWORK WEB SITE 8. USE OF ENHANCED TV FEATURES 8.1 USE OF ENHANCED TV FEATURES 8.2 WILLINGNESS TO DOWNLOAD SOFTWARE TO VIEW EXTRA FEATURES 9. EFFECTS OF ENHANCED TV USAGE 9.1 EFFECTS OF ENHANCED TV USAGE ON VIEWER LOYALTY, SUBSCRIBER LOYALTY AND ATTRACTING NEW SUBSCRIBERS FOR CABLE NETWORKS 9.2 VISIT PREMIUM WEB NETWORK WEB SITES IN THE PAST THREE MONTHS 9.3 BENEFITS TO PREMIUM NETWORK WHEN ITS SITE IS MOST FREQUENLTY VISITED 10. EFFECTIVENESS OF ENAHNCED TV FEATURES ON CABLE NETWORK VIEWERSHIP 10.1 MOST EFFECTIVE ENHANCED TV FEATURES ON CABLE NETWORK WEB SITES IN FACILITATING VIEWER LOYALTY 10.2 MOST EFFECTIVE ENHANCED TV FEATURES ON CABLE NETWORK WEB SITES IN ATTRACTING NEW SUBSCRIBERS 11. EFFECTIVENESS OF ENHANCED TV AS BRAND EXTENSION 12. VIEWERS EVALUATION OF THEIR ENHANCED TV EXPERIENCE ON THE WEB 13. COMPARISON BETWEEN INTERNET SUBSCRIBER TYPES (FREE VS. PAID SUBSCRIBERS) IN ENHANCED TV USES AND GRATIFICATIONS . 13.1 COMPARISON OF TV SERVICE USED BY PAID AND NON-PAID SUBSCRIBERS 13.2 COMPARISON OF CHANGE IN TV SERVICE USED BY PAID AND NON-PAID SUBSCRIBERS 13.3 COMPARISON OF THE ENHANCED TV EXPERIENCE EVALUATION BY PAID AND NON-PAID SUBSCRIBERS

Executive Summary This national study of Internet users usage of enhanced TV features of cable networks and its effects on the cable industry was funded by the Magness Institute. Enhanced TV is the use of the features of the Internet for enhancing the viewing experience of TV viewers. Three thousand mail surveys were sent to a national random sample of Internet users with an effective response rate of 51%. Among the 1484 usable sample respondents, almost 80% are paid Internet service subscribers. In comparing paid and non-paid Internet subscribers, this study found that paid Internet subscribers are more valuable targets for TV services than non-paid Internet subscribers. They watch significantly more TV (both broadcast and cable) than non-paid Internet subscribers. Paid Internet subscribers are also significantly more likely to subscribe to premium cable or satellite TV service, or upgrade their TV subscription service. Nonetheless, the two types of Internet service subscribers have not much difference both in network preference or other TV viewing habits. Among the Internet users in this study, for broadcast TV viewing, NBC is the most popular network, closely followed by ABC. For cable TV, CNN, Lifetime and A & E are the top 3 most frequently watched cable networks. However, in cable network visits, CNN, Discovery and ESPN are the top 3 most frequently visited sites among those who visited a cable network site in the past 3 months. The favorite program categories of Internet users are dramas, sports, sitcoms and informational programs in descending order. More than half of the Internet users in this study are appointment TV viewers who read TV guides before watching a program. A considerable percentage of Internet users are casual TV viewers who do not spend much additional effort in watching their TV. There is an apparent trend on the increasing role of the Internet in the watching of television programs. About 12 percent of the respondents either use the Internet to search for more information about TV programs or look for alternatives. When comparing premium cable subscribers and basic cable subscribers, we found that premium cable subscribers invest more on both their Internet service and most types of on demand media services. Premium cable subscribers spend significantly more money in their Internet subscription than basic cable subscribers. They have significantly higher consumption of on demand media services such as PPV and VOD. Their lower usage of video/DVD rental may be explained by the substitution of premium movie cable subscription service, PPV and VOD. Yet, on demand media at this stage does not have a large audience appeal. Even with the most basic on demand media service Video/DVD rental, only 63.2% of all respondents have used it in the past 12 months. The adoption significantly leveled off for PPV (20%) and very low for VOD (4.8%). The on demand market is still a niche market that needs to be nurtured and educated to the general public. Premium cable subscribers are also a big market for advanced TV technology gadgets. Even after controlling for the income factor, they are still much more likely to adopt TV-related new media technology than basic cable subscribers except TiVo/PVRs. It is understandable why

7 TiVo has less appeal to premium subscribers. TiVo is primarily used by viewers to skip TV commercials and premium subscribers do not need to screen out commercials as all premium channels do not carry advertising commercials. Premium cable subscribers have a significantly higher ownership of DVD players, HDTV sets, big screen TV sets and WebTV/AOLTV type of Internet TV services than basic cable subscribers. Premium cable subscribers also exhibit a pattern of early innovation adopters. They are more experienced in using the Internet than basic cable subscribers with almost one-third of them have five years or more experience in using the Internet. They owned more high-tech media gadgets than basic cable subscribers . However, still many of them are not yet attracted to broadband access as only 17% have broadband access. Their broadband adoption is similar to basic cable subscribers. Despite their longer experience in the Internet, they spend less time on the Internet than basic cable subscribers. Microsoft plays a quite important role in these subscribers. There are slightly more MSN online service subscribers and Internet Explorer browser usage among premium cable subscribers. Despite the less time they spend on the Internet than basic cable subscribers, premium cable subscribers are significantly more likely than basic cable subscribers to shop online. They spend almost two times more in money on online purchases than basic cable subscribers. They were more likely to report to use banking services, play games, trade stock and shop online frequently, and they shop on the Internet for its convenience. They are also more willing to download software to view extra features on a web site than basic cable subscribers. They have much more frequent visit to their most recently visited cable network site than basic cable subscribers. The usage of cable network web sites is not as high as reported in Nielsen ratings or Cable Advertising Bureau. Only about 60% of Internet users reported that they had visited a cable network web site. Less than one third visited a cable network site within the past two weeks. Nevertheless the web sites are able to generate a considerable number of repeated visits. When asked how many times they visited their most frequently visited web site, the average is 15 times. They also spent considerable time on those sites as the average visit time is 10.4 minutes. Promotion on TV is overwhelmingly reported as the way for Internet users to find out the presence of the cable network web site. Overall, enhanced TV feature usage is low. Almost one half of respondents did not use any of the enhanced TV features of any TV sites in the past three months. In addition, no one particular enhanced TV feature stand out as the most popular feature used by most respondents. News and weather update, the most commonly mentioned enhanced TV features, is only used by less than a quarter of the respondents. Background for news, polls, program previews were other three more commonly mentioned web sites. In terms of enhanced TV feature usage, there are only a few significant differences found between premium cable subscribers and basic cable subscribers. Premium cable subscribers are much more likely than basic cable subscribers to join chatrooms or message boards, read episode synopsis, use TV guides or schedules, and participate in online polls.

8 Despite the generally low reported use of enhanced TV features, the effects of increase in enhanced TV usage is significantly positive in predicting viewer loyalty, subscriber loyalty, and attracting new subscribers for cable networks. First, this study found that the more enhanced TV features being used will lead to more often watching TV shows featured on the site and the network is more likely to become the respondents favorite cable network. They are also more involved in and attached to the TV show when they used a lot of enhanced TV features. The best news to cable networks is that they would more likely to request the cable operator to carry the network or keep the network if they used more enhanced TV features. In attracting new subscribers, Internet users who use more enhanced TV features are more likely to become interested in the network. To cable system operators, increase in enhanced TV usage also has positive effects. First, users who have more use of enhanced TV features will more likely to agree that cable is good value for the money, and want to have high speed Internet access. The good news of enhanced TV also brings bright prospects on the use of interactive TV which can provide similar service as those on TV web sites. Respondents who used more enhanced TV features are much more likely to be willing to pay for the same features on television. The use of enhanced TV features also means good prospects on TV commerce. First, respondents who use more enhanced TV features reported a higher urge to buy something featured on the site. Second, they would also more probably buy the memorabilia items of the TV network, TV show or TV stars if more of them were available for purchase on the web site. Overall, enhanced TV features are much more effective in maintaining viewer loyalty than attracting new subscribers. Among the enhanced TV features listed in the study, there are five features that are most effective in facilitating viewer loyalty: 1) news/weather update, 2) background for news, 3)information about stars/gossips, 4) episode synopsis and 5) sweepstakes. But in attracting new subscribers, there is not one enhanced TV feature which is particularly effective and explained very little in the variation of becoming interested in a network or request a cable system operator to carry it. In general, the aggregate effect of the benefits of enhanced TV feature usage is positive by most standards. At least it arouses visitors interest in the network, increases likelihood of buying products features in the show on the site, creates an urge to buy things on the site, and watches shows featured on the site that the respondent seldom or never watched prior to visiting the site. As a brand extension for the network brand, enhanced TV features are quite successful in achieving their mission of attracting new viewers to the programs and the networks and also to entice them to buy products on the site. Increase in enhanced TV feature use, however, does not lead viewers to feel that the web site content complements the TV program. The web site is neither seen as an Internet brand of the network nor a substitute for viewing the network. Premium cable subscribers have a more positive evaluation on their enhanced TV experience than basic cable subscribers. They have significantly higher rating of the quality of the site than the basic cable subscribers. They are significantly more likely to report that they have fun and enjoyed the time spent on the site. They are also more likely to feel that there are many choices for them on the site and there are sufficient internal links.

Based on the rating of the experience of cable network sites, there are rooms for improvement by the cable networks. First, not many cable subscribers agree that the enhanced TV features of the web site enhanced their TV viewing experience, which is contrary to the purpose of enhanced TV. Second, many cable subscribers are not very interested in participating in the site such as submitting comments or participate in the program. They are more interested in information services provided by the networks to facilitate their program choice and understanding of program content. As almost half of the Internet users are unwilling to download software to view extra features, networks should be careful and be selective in requiring users to download software in visiting their web sites.

10 Introduction Interactive TV and enhanced TV features on the Web have received enormous attention from the TV industry as the future direction of TV technology development (Kontzer, 2001). More than 78 percent of web users have visited a TV web site within the past year (Schlosberg, 2000b). Enhanced TV includes all the features of the Internet that can improve (enhance) the viewing experience of TV viewers. Cable television programmers believe that enhanced TV can build viewer loyalty, increase retention and attract new subscribers (Fahey, 2000; Griffin, 1996). As a manifestation of the convergence between television and the Internet, enhanced TV is expected to create a new world of hybrid media content encompassing e-commerce, information, games, music, movies, and advertising (Arlen, 2000; Baldwin, McVoy & Steinfeld, 1996). Cable TV, in particular, seems to benefit the most from creating a presence on the Web (Foley, 2000). A study reported that cable TV network subscribers have higher percentage of use of their cable networks web sites than broadcast networks (Fahey, 2000). For example, Food Network (owned by the Gannett Group) and ESPN (owned by Disney) have more than 30% of their subscribers visiting their web sites in the past three months. There are four major types of enhanced TV features that enable the interaction between the viewer and the TV station/network on the Web (Hurst, 2000): 1) Fan-based features, 2) game-based features, 3) information-based features, and 4) programming-based features. Fanbased features aim at creating fans for the shows and helping fans to get closer to the show or stars of the show such as background about the stars of the show. Using chat room or other sharing features, the network can facilitate the creation of a fan community. Game-based features are features that users can play-along or simulate the contestants experience on game shows such as ABCs highly successful Who wants to be a millionaire web site (Gruenwedel, 2000).

11 Information-based features are background information that supplements news, sports and weather forecasts, allowing for customized information and deeper stories. Programming-based features are the devices through which users can pick and choose what to view such as TV schedule, simulcast or video-on-demand which is basically the webcasting of TV programs. The expected strong growth of interactive television using cable set-top boxes in this decade (The Carmel Group, 2000; Swann, 2000) has led to heavy investment both on web sites and other interactive TV technology development. Interactivity is believed to be the future of television and cable technology. Yet the benefit of interactivity is still more a marketers wish than a consumer reality (Ha & James, 1998; Lake, 2001). The content of interactive TV is very much based on the enhanced TV features already used in web sites. In addition to the programming benefits, cable companies and programming networks alike put high hopes on the additional revenue that interactive shopping (TV-commerce) can bring to them. They expect that viewers will become buyers by purchasing immediately the products being featured in a TV show (Fitzgerald, 2000; McKay, 2000). Significance of the Study to the Cable Industry Subscriber loyalty is especially important for cable companies because the majority of their revenues come from subscription fees. With the advent of more than 200 national cable networks, the competition for cable subscribers and system operators support is fierce. The Web, becomes an important brand extension for cable networks to strengthen viewer loyalty and attract new subscribers. Cable networks which are using or considering providing enhanced TV features will benefit greatly from the findings of this study. First, the findings of the study can provide cable advertisers with the effectiveness of enhanced TV on branding and TV commerce value. The

12 heavy cost in developing and maintaining enhanced TV features especially those involving simulcasting and interactive real-time games on a web site mandates a closer look at the returns they offer on investment. Cable TV networks may assume their web sites can attract nonsubscribers and that subscribers will use their web sites to enhance their viewing experience. However, how many TV viewers know these features and utilize these features on these web sites is not known at all. An overly optimistic projection of audience usage will lead to an excessive investment in the web site before it can yield any profitable return to the network. Any disappointing results may lead to termination of the features if the cost is deemed high and the future is uncertain. Already many layoffs in their Internet operations have been announced by cable networks such as CNN and CNET. Second, according to the brand extension theory (Aaker & Keller, 1990), when a cable TV web site is seen by viewers as a close sister product of cable TV network (an Internet version of the Cable TV brand), not a competing substitute (Ferguson & Perse, 2000), consumers will embrace the Internet presence. It will strengthen the brand equity of the network. A move to the Internet will become an indispensable need for a cable network to survive in the increasingly competitive marketplace where viewers can easily get lost in the jungle of numerous program service providers (Becker & Schoenbach, 1989; Schlosberg, 2000b). Third, this study will not only benefit existing cable network companies, but also facilitates cable system operators in evaluating attractiveness and potential of different cable networks by their Internet brand. To new cable networks that are planning to use the Web to launch and promote their networks, results of this study can give them important audience insights and select the most effective enhanced TV features for their networks. In addition, the

13 usage of enhanced TV will increase the demand for broadband access in which cable companies are vying for a larger share in the business. The society at large will also get a better understanding on how Web users are being affected by the enhanced TV features. One possible effect is that enhanced TV creates more TV addicts who are parasocial and unable to communicate with real people (Mcllwraith, 1998). Another effect is that it may cultivate TV viewers to be impulsive consumers spending extra money for products shown or advertised on these web sites (Abercrombie & Longhurst, 1998; Ang, 1996; Shanahan & Morgan, 1999; Webster & Phalen, 1997; Zubayr, 1999). Before the cable TV industry is being blamed for stimulating unnecessary purchase and consumption by critics, the industry should also have an idea of how this may create undesirable economic and social consequences to the users. This study is a modification of a pilot study conducted to a college student sample on their enhanced TV experience in broadcast TV web sites. The results of that study indicated that despite free Internet access on campus and in residential halls, many college students seldom visit TV networks web sites, but they have high awareness of the enhanced TV features after exposure to the networks web site (Ha and Chan-Olmsted, 2001). Literature Review Prior Research on TV Web Sites and Enhanced TV Enhanced TV, as a product of the Internet, is a new phenomenon with little systematic research studies on it. Ha and Chan-Olmsted (2001) have been pioneers on this area and used a rigorous Solomons four group experiment to assess the impact of enhanced TV on TV brand loyalty and interest in TV commerce. Their initial experiment with students found low interest in TV commerce before and after the web site exposure and such low interest do not differ

14 among subjects with different enhanced TV features awareness levels. Ha (in press) compares U.S. cable and broadcast network web sites and proposes three different enhanced TV strategy models that broadcast and cable networks can use as a new revenue source and a new way to attract and keep audiences. Her models stress the importance of segmenting the target audience of web sites and selection of enhanced TV features for each target audience segment. Much of the attraction of enhanced TV features lies in its ability to interact with the viewers, fulfilling their communication needs before, during and after watching a TV program. Dennis Quinn, the Executive Vice-President of TBS, for example, viewed enhanced TV as a tool to increase time spent viewing, attract viewers attention and keep them engaged in programs (Foley, 2000; Robins, 2001). One function that network executives treasure about the Internet is the large quantity of immediate feedback that viewers provide to programmers and its potential to improve ratings for the program. For example, CNNs News Site collected comments from the site visitors and used some of them in the stories. The perspectives of the viewers offered diversity of viewpoints in the show. The ratings of the show almost doubled in a year after the online editorial meeting format was launched. Another example of the increased communication with the viewers is the Food Network, which receives about 8,000 posts per week on its bulletin boards and about 1,500 e-mail messages each day (Whitney, 2001). Interactivity is the crucial advantage that the Internet offers as a medium over other traditional media (Ries & Ries, 2000). The five-dimensional nature of interactivity proposed by Ha and James (1998) provides a useful framework for analyzing the interactivity of a web site and measuring a users online experience. The five dimensions they proposed were (a) playfulness, (b) choice, (c) connectedness, (d) information collection, and (e) reciprocal communication. To investigate the factor of interactivity in the context of web visits, this study

15 will examine the users perspective of interactivity, incorporating these five dimensions of interactivity. TV Audience Behavior and Fandom Cultivation When analyzing TV audiences, we can broadly divide them into two groups: 1) The casual viewers who only see TV as background noise and pay no or minimal effort in choosing a TV program to watch, and 2) the TV fans who are more engaged in the TV programs than general casual TV viewers. These skilled audiences are also likely to be heavy viewers of the programs so that they can fully indulge themselves in those programs (Fiske, 1992). Essentially, TV web sites are attempting to transform general viewers to fans. Networks see the Web as the ideal medium to meet the demands of fans that cannot get enough of the programs they have on TV. These fans are also viewed as better consumers for the networks because they deliver more value to advertisers (Kerschbaumer, 2000b). Indeed, the features on TV web sites make the viewers more informed about what is going on in each program, how they can participate (for example writing feedback in chat rooms, participating in a poll, getting tickets to a show, etc.). Sometimes, they write to the producers to express their opinions about the shows in attempts to influence the outcome or content of a TV show. Sometimes they collect information and artifacts so that they become experts of the shows. Their adoration of the TV characters help to define their own identity and even help to establish their own aspiration (Abercrombie & Longhurst, 1998). The previously relatively detached TV viewers who were the majority in the past can now be converted to enthusiastic viewers with the various interactive features on the web sites. One of the main reasons for networks to build presence on the Web is to develop brand loyalty of their viewers (Ferguson, 2000) as a part of the network brand franchise (Ince, 2001),

16 or to use the web site to market their on-air programs (Kershbaumer, 2000b; Chan-Olmsted, 2000). Nevertheless, to succeed in this brand building effort, it is essential that those interactive features on the web sites are actually being used by the visitors and that the visitors can realize the associated benefits of these features. In other words, the visitor must have a pleasant experience in using the web site and leave with an impression that will give him or her top-ofmind awareness to return again (Kania, 2001). Brand Extension Theories and Their Applications in Enhanced TV The study of branding and brand equity in the media industry is a relatively new phenomenon, even though it has been a very important marketing issue for packaged goods for more than two decades (Chan-Olmsted & Kim, 2001). Branding is the marketing strategy of giving value to the name of a product to distinguish itself from competitors and achieve a competitive differential advantage (Farquhar, 1991; Keller, 1993). For the TV industry, brand equity translates to audience loyalty for a television brand such as a particular broadcast network and the audience polarization trend as suggested by Webster and Phalen (1997) -- Viewers become fans of a TV show or the TV network (i.e., skilled audiences who spend more time than average viewers in learning about a show and its actors) and continue to choose programs supplied by that network (Abercromie & Longhurst, 1998). Ideally, the fans of TV networks or their shows will become advocates of the shows or the network, purchasing products either advertised or used by their favourite stars in the shows, hence realizing the commercial benefits of fandom in entertainment media (Fiske, 1992). Brand extension is the leveraging of a brands equity to its sister new products bearing the same brand name (Lane, 2000). Its theoretical premise is based on the affect transfer of the consumers of an established brand to the new products launched under the same brand. By using

17 the same brand name, the new products can easily receive the support and trust from the consumers. Many marketing researchers use product attribute transfer (or categorization by forming a brand family category with similar attributes under the umbrella of the same brand name) in explaining the mechanism of brand leveraging (e.g., Joiner & Loken, 1998; Kim, Lavack & Smith, 2001). Other researchers such as Broniarcyzk and Alba (1994) study brand extensions as an affect transfer process. Affect is a concept comprising familiarity and likeability towards a brand. It is the special feeling toward an object, which characterizes the relationship between an object and its consumer (Grossberg, 1992). Aaker and Keller (1990) found that the more complementary the new product is to the originating brand, the more likely for him or her to accept the brand extension. In this study, we subscribe to the notion that, because both brand familiarity and brand likeability are proven predictors of acceptance of brand extension (Lane & Jacobson 1995), the transfer of affect illustrates most succinctly the process in which brand extension can be successful. Benefits and risks of brand extensions have been widely discussed in marketing literature. Some of the major benefits presented were the carryover of brand benefits across products and markets, cost saving in a new product launch, and the consolidation of a brands position in the industry through extension of the product line with stronger customer and distributor loyalty (Mahajan, Rao & Srivastava, 1993). There are also risks involved in brand extension. The main concern is the damage to the established brand if the new products are not perceived as congruent in quality or image to the brand name (Milberg & Lawson, 1991). The extended brand may cannibalize the established brand if it is seen as a substitute or a competitor to the core brand (Roedder-John, Loken & Joiner 1998). Note that brand extension is a privilege

18 only for established and well-liked brands that have acquired high brand equity (Lane & Jacobson, 1995). Studies have shown that broadcast executives have yet to see their presence on the Web as a kind of brand extension. Chan-Olmsted and Kim (2001) found that only about one-third of TV station general managers thought of the Internet as a tool for branding. Most local TV stations web sites were used to provide news and community services/information (ChanOlmsted & Park, 2000; Kiernam & Levy, 1999). We believe that it is essential for a national TV network to treat its web site(s) from a brand extension perspective because it uses the same brand name (e.g., NBC.com and ABC.com), it offers in-depth information about selected network programs that are not typically available to the off-line TV audience, it often includes materials that are related but different from a broadcast networks TV products (e.g., customized news segments, program bloopers, etc.), and, by featuring online links about a networks products (programming), it encourages the audience to be more involved with a networks programs through another medium. Such cross-medium (product) usage is a characteristic of brand extension where users consume the same companys products in different formats. Similar risks of brand extension also apply to a broadcast networks web site. As for all new products, the web site may not be acceptable to the audience if its content is considered inferior or irrelevant to the viewers. The costs of product failures apply to the networks as well. If a networks web site is not used or badly-received by its viewers, and the network continues to supply such a failing product, it will not only waste the resources of the network but also possibly turn away prospective viewers who become disinterested of a network and/or its programs based on their experiences at the network site.

19 Research Questions 1. Do enhanced TV features indeed increase viewer loyalty, keep subscribers, and attract new subscribers for cable networks? Do premium cable networks benefit more from enhanced TV features in keeping subscribers than basic cable networks? Do premium cable subscribers differ from basic cable subscribers in their enhanced TV usage? Are the presumable benefits of enhanced TV large enough to justify the cost of building and maintaining enhanced TV features on the cable networks web sites? Which enhanced TV features are the most effective in achieving increase in viewer loyalty and attracting new subscribers? Does enhanced TV function successfully as brand extension for cable TV networks both in terms of attracting new viewers to the programs especially for cable channels that are not available locally to the cable subscribers and motivating them to buy advertised products (TV commerce) in the web site? How do viewers evaluate their enhanced TV experience on the Web? Do subscribers use enhance TV features and feel the flow (Nel, Berthon & Davis, 1999) or a totally immersed experience on these web sites?. Are there differences between Internet subscriber types (free vs. paid subscribers) in enhanced TV uses and gratifications? Are paid Internet subscribers more likely than free Internet subscribers be attracted to premium cable or pay-per-view cable TV? Methodology Sampling The sampling frame was adult home users of the Internet who use their leisure time on the Internet to fulfill their information and entertainment needs. Internet users either obtain

20 Internet access through a paid service such as America Online (AOL) and Earthlink, or through a free Internet access provider supported by advertising such as NetZero or an institutional source. To compare the attributes of paid and non-paid (free) Internet service subscribers, the initial plan was to have equal proportion of paid and non-paid internet service subscribers by using the subscriber lists of AOL and Netzero to select 1500 subscribers respectively. But both companies refused to provide their subscriber list to the study. The Metromails Behaviorbank respondent mailing was used instead as the sampling frame of the study. Behaviorbank is a national consumer survey sent to 55 million households per year. Its mailing list is based on the national residential listing that Metromail collected and compiled for national use. It contains the most up-to-date mailing addresses and data is updated within three months. Because the survey has been conducted annually for seven years and Metromail is now owned by Experian, the leading company in the U.S to provide database for credit information, the quality of the mailing list is deemed appropriate for the purpose of this study. We selected a national random sample of 3000 self-reported Internet users from its 3 million database. To avoid demographic bias, the same gender proportion as per the census was selected in generating the final sample. Procedures Each selected sample Internet user was mailed a 2-color survey booklet of eight pages following the total design method (Dillman, 1978) with a cover letter explaining the purpose of the study and an attractive visual design to guide respondents (See Appendix 1 for the cover letter). The questionnaire was divided into four main sections (See Appendix 2 for the mail questionnaire). The first section was about their TV service, Internet service, and on demand media usage. The second section was about their online experience and their general cable TV viewing behavior, TV commerce experience, and their assessment of effects of the Internet on

21 their life. The third section was about cable TV web site usage and specific experience of enhanced TV features of TV web sites. The last section was for collecting basic demographic information of the respondent (Please refer to Table 1.0 for the variables and the corresponding question number in the study). Table 1.0 Questionnaire Objectives and Structure Variables/Research questions 1. Cable web site usage and Enhanced TV features usage 2. Effects of enhanced TV on viewership: 1. loyalty 2. keep subscribers 3. attract new subscribers 4. premium cables benefits 3. Enhanced TV as brand extension: 1. attract viewers to watch programs/networks 2. buy merchandise (T-commerce) 4. Evaluation of enhanced TV experience 5. Effects of internet usage 6. Subscriber type (free vs. paid) 7. Cable/satellite, Premium cable and pay per view usage 8. Viral/buzz marketing effectiveness 9. Attitudes toward and experience in download/program installation 10. Internet/Web usage + experience + online shopping (internet user cluster) 11. Demographics 12. Broadcast and cable usage comparison 13. Shopping style 14. TV viewing style (fandom) scale 15. Media Technology ownership Questions in questionnaire 3.1-3.9

3.10 3.10 3.10 3.10 3.10 2.14-15, 3.10 3.10 2.18 1.1, 1.6 1.7, 1.8, 1.9, 1.11,1.12, 1.13, 1.14, 1.15, 1.16 1.17-1.20 2.7-2.8 1.1, 1.2, 1.3, 1.4, 1.5, 2.1, 2.2, 2.3-2.6, 2.17 4.2-4.9 2.92.12, 2.13 4.1 2.16 1.10

Representativeness of the sample is very crucial to draw any generalization in this study. To encourage participation, a fresh one-dollar bill was sent along with the questionnaire as a token to all survey recipients. This practice is very common in market research to boost

22 response rate and shows the respect to the survey recipients to thank them for their time and effort to participate in the study. Survey recipients could choose to participate the survey on the Web if they prefer to enter the information on a web site rather than mailing it out in an envelope (See Appendix 3 for the web version of the questionnaire). In our study, only 5.7% of the respondents (n=87) chose to answer the survey on the web. Because of the low percentage, no further comparison was made between difference of the web respondents and the paper version. Response Rate Initially, 3000 questionnaires were sent out. Sixteen substitutes were sent after receiving returned package with bad addresses. Another 22 undeliverable addresses were received after one month of the mailing and no substitute mailing were made. Therefore non-response rate due to undeliverable addresses was very low only 1.2%. Four recipients of the questionnaire explicitly refused to participate by mailing back either the blank questionnaire (1) or the $1 token (3) in the postage paid return envelope. The effective response rate = 50.9% (1518/(3006-22)). Statistical Analysis Several statistical techniques were to be employed to analyze the data. Apart from using descriptive statistics to describe the characteristics of the samples use of enhanced TV features and cable viewing patterns, other multivariate analysis techniques will be used. Regression analysis was used to test if more exposure to the web site and knowledge of enhanced TV features will make viewers are more loyal, more addicted to the show, and more likely to keep the subscription and try new subscription as programmers would like them to be. It was also used to identify the enhanced TV features that were most effective in predicting viewer loyalty and attracting new subscribers.

23

Results Sample Profile Although 1518 questionnaires were returned to the researchers, only 1484 were usable because 34 respondents were under the age of 18 which made them ineligible for the study. The demographic characteristics of the respondents were shown in Tables 1.1 to Table 1.7. Respondents are older than the general population as per the estimates of the 2000 Census. About 39% of the respondents are older than 55 years old. There are more female respondents than male respondents in this study. More than one half of the respondents had college

education or above. Only one-fifth of the respondents are single and never married. The average household size is 2.45 persons, which is similar to the 2000 U.S. Census. (Table 1.5). Florida, California, and Pennsylvania are the three states with largest number of respondents (Table 1.6). The median household income of the respondents is between $45,000-59,999 (Table 1.7). Although almost one-fifth of the respondents are professionals, respondents are highly diversified in their occupation, ranging from business sales, administrators, technicians, factory workers and a wide variety of other occupations (Table 1.8)

24 Table 1.1 AGE PROFILE OF RESPONDENTS THIS STUDY (n=1484) 4.4% 14.4% 18.3% 23.1% 19.9% 19.5% -----------100.0 CENSUS* 9.4% 19.9% 22.5% 18.8% 12.1% 17.3% -------100%

19-24 25-34 35-44 45-54 55-64 65 or more Total

The U.S. 2000 Census age category is 20-24. Age 19 is in 15-19 age group. Table 1.2 GENDER DISTRIBUTION OF RESPONDENTS Male Female *Age 18+ Table 1.3 EDUCATION PROFILE OF RESPONDENTS 8th grade of less attended high school graduated high schoo attended/attending college bachelor's master's doctorate other Missing Total Valid cases 1482 Missing cases THIS STUDY 2.0% 10.3% 22.9% 35.1% 21.7% 4.3% .4% 3.1% . 0.1% 100% 2 THIS STUDY 35.4% 64.6% CENSUS* 48% 52%

25 Table 1.4 MARITAL STATUS OF RESPONDENTS single married living with partner widowed/divorced N=1484 20.7% 47.9% 6.3% 23.8% TABLE 1.5 HOUSEHOLD SIZE 1 person 2 persons 3 persons 4 persons 5 persons 6 persons 7 persons 8 persons Average: 2.45 21.7% 41.2% 17.6% 11.9% .5% 1.6% 0.7% 0.2% Census: 2.59

26 Table 1.6
AL AR AZ CA CO CT DE FL GA IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV

STATE OF RESIDENCE OF RESPONDENTS THIS STUDY


1.6% .9% 1.9% 7.5% 1.9% 1.5% .4% 7.2% 2.1% 1.8% .7% 3.9% 2.4% 1.6% 1.2% 1.2% 2.1% 2.1% .9% 3.9% 2.5% 2.3% .7% .4% 2.7% .4% 1.0% .5% 2.7% .2% .7% 6.3% 5.9% 1.1% 1.0% 7.4% .1% 1.1% .5% 1.9% 4.5% .7% 2.4% .1% 2.5% 2.5% 1.0%

27
WY Valid cases 1345 Missing cases .1% 139

Table 1.7 ANNUAL HOUSEHOLD INCOME PROFILE OF RESPONDENTS under $15,000 $15,000-29,999 $30,000-44,999 $45,000-59,999 $60,000-99,999 over $100,000 Valid cases 1369 Missing cases N=1484 7.6% 18.0% 22.9% 19.9% 21.8% 8.7% 115

Table 1.8 OCCUPATION PROFILE OF RESPONDENTS Manager/business/sales professional homemaker cashiers/customer service clerical/administrator factory worker engineers/technician student other Valid cases 1467 THIS STUDY 14.3% 23.1% 8.7% 3.7% 11.5% 3.1% 6.8% 2.1% 26.4% 17

Missing cases

28 TV Usage Among the 1484 usable sample respondents, almost 80% are paid Internet service subscribers. In comparing paid and non-paid Internet subscribers, this study found that paid Internet subscribers are more valuable targets for TV services than non-paid Internet subscribers. They watch significantly more TV (both broadcast and cable) than non-paid Internet subscribers (Tables 2.1 and 2.2). On average, non-paid Internet service subscribers spend 25 hours per week watching TV, of which 14.4 hours are spent on broadcast networks and 10.6 hours are on cable networks. Paid Internet service subscribers, in contrast, spend 28.8 hours per week watching TV, of which 17.7 hours are spent on broadcast networks and 11.1 hours are spent on cable networks. Nonetheless, the two types of Internet service subscribers have not much difference

in network preference (Table 2.3). The most frequently watched broadcast network by all respondents is NBC, followed by ABC. CBS is a distant third. The most frequently watched cable network is CNN, with Arts & Entertainment and Lifetime almost tied for the second position. Drama is the most favorite program genre of all respondents. Yet non-paid Internet service subscribers have more interest in information/news magazines programs, talk shows, sitcoms and other program genres than paid Internet service subscribers. Paid Internet service subscribers are more likely than non-paid Internet service subscribers to choose sports, newscasts, soap operas and reality shows as their favorite program category.

29

Table 2.1 HOURS SPENT ON WATCHING BROADCAST NETWORKS PER WEEK Non-Paid vs. Paid Internet Service Subscribers Non-Paid Subscribers (n=289) Average No. of Hours Missing Cases=109 * Significantly different from non-paid subscribers at p < 0.05. Table 2.2 HOURS SPENT ON WATCHING CABLE NETWORKS PER WEEK Non-Paid Subscribers (SD) Paid Subscribers (SD) Total (n=288) (n=1078) (n=1366) Average No. of Hours Missing Cases=118 * Significantly different from non-paid subscribers at p < 0.05. Table 2.3 MOST FREQUENTLY WATCHED BROADCAST NETWORK Network (rank) ABC (2) CBS (3) NBC (1) FOX PAX UPN PBS WB Non-Paid Subscribers (n=288) 24.1% 17.7% 26.6% 16.0% 2.8% 1.8% 4.3% 2.1% (SD) Paid Subscribers (SD) Total (n=1078) (n=1366) 26.0% 18.9% 30.4% 12.4% 1.5% 1.6% 4.4% 2.2% 25.6% 18.6% 29.6% 13.2% 1.8% 1.6% 4.4% 2.2% 10.6(13.6) 11.1 (17.2)* 11.05(16.5) 14.4(12.6) (SD) Paid Subscribers (SD) Total (n=1086) (n=1375) 17.7 (20.1)* 17.03

30 Table 2.4 MOST FREQUENTLY WATCHED CABLE NETWORK Q2.11 Non-Paid Subscribers (SD) Paid Subscribers (SD) Total n=285 n=1076 n=1361 Network (rank) A&E (2) Cinemax CNN (1) Discovery (6) ESPN (4) HBO (5) Lifetime (3) MTV Nickelodeon Showtime Starz TBS TNN TNT USA other 2.1% .7% 1.1% 2.8% 3.9% 15.1% .7% 2.1% .7% 0.5% 2.3% 2.1% 3.2% 4.9% 14.1% 11.9% .4% 7.7% 6.0% 13.3% 8.4% 11.9% .5% 2.0% 1.0% 0.8% 2.0% 1.9% 3.1% 4.7% 14.3% 11.4% .7% 13.8% 6.8% 8.9% 7.2% 11.2% .5% 2.0% 1.0% 11.5% .7% 12.6% 6.6% 9.8% 7.4% 11.4%

31 Table 2.5 FAVORITE TV PROGRAM CATEGORY Q2.13 Program Category (rank) sports (2) info programs/news magazines(4) talk shows newscasts dramas (1) music/concerts soap operas sitcoms (3) game shows/reality shows other 10.8% Non-Paid Subscribers (n=285) 12.9% 17.4% 3.8% 7.0% 21.6% 1.7% 2.4% 17.1% 2.1% 5.4% (SD) Paid Subscribers (SD) Total (n=1076) (n=1361) 14.7% 12.3% 2.3% 11.1% 28.8% 1.8% 3.4% 12.8% 4.4% 6.6% 14.4% 13.3% 2.6% 10.2% 27.3% 1.8% 3.2% 13.7% 3.9%

More than half of the Internet users in this study are appointment TV viewers. They read TV guides before watching a program (Table 2.6). Notably, more than one-third of the respondents see television as simply background noise for them with little interest in spending additional effort in choosing programs. There is an apparent trend on the increasing role of the Internet in the watching of television programs. About 12 percent of the respondents either use the Internet to search for more information about TV programs or look for alternatives. A fandom score was computed based on the additional six items a viewer may use to prepare for watching the television such as reading TV guide, reading synopsis or program preview, write letters, reading entertainment news, member of a fan club, going to Internet for further information about the program. We found that very few respondents in this study qualified as

32 fans as many of them did not go beyond a single item such as reading TV guides in preparation for their TV consumption. Table 2.6 TV VIEWING HABITS (Multiple Response) Q. 2.16Non-Paid Subscribers Paid Subscribers (n=288) a. Read TV guide 49.7% b. Read synopsis and preview 14.6 c. Write letters 4.5% d. Read entertainment news 10.4% e. Member of a fan club 0% f . Go to Internet to search for more info 8.7% g. Surf to look for alternatives 6.9% h. TV just background noise 38.5% Mean Fandom Score: (sum of item a to f)0.93 Total (n=1076) 53.8% 15.2% 2.7% 8.2% 0.7% 7.0% 4.5% 33.3% 0.86 (n=1364) 52.9% 15.1% 3.1% 8.6% 0.7% 7.3% 5.1% 34.1%

Cable and Satellite Subscription Cable and satellite penetration is high among respondents. Only 11.1% are not cable or satellite service subscribers. While almost a third are just basic cable service subscribers, the rest are premium service subscribers. Cable subscribers outnumber satellite subscribers by about three times (Table 3.1). Table 3.1 TYPE OF TV SERVICE USED Q. 1.7 & Q. 1.9 No cable or satellite subscription Cable Basic Only Satellite TV Basic Only Cable expanded basic Cable premium Satellite premium Other multichannel services Total (n=1379) 11.1% 22.5% 11.4% 30.6% 21.3% 16.6% 0.7%

33

Table 3.2 CHANGE OF SERVICE IN PAST THREE MONTHS Total (n=1369) 92.6% 5.4% 1.9%

No change of service Upgrade services Downgrade services On-Demand Media Consumption

Among the three types of on-demand media services included in this study: 1) Video/DVD rental, 2) Pay Per View, and 3) Video-on-demand, video/DVD rental is still the most popular type used by the respondents (Table 4). About 63.2% of all respondents have rented a video or a DVD in the past 12 months with an average of 12 times a year. The consumption significantly leveled off for PPV (20%) and very low for VOD (4.8%). Premium

cable subscribers have significantly higher consumption of other on-demand media services such as PPV and VOD and have a lower usage of video/DVD rental compared with basic cable subscribers. Their lower usage of video/DVD rental can be explained by the substitution of premium movie cable subscription service, PPV and VOD. TABLE 4. ON DEMAND MEDIA CONSUMPTION IN PAST 12 MONTHS Basic Cable Subscribers (n=737) 66.4% 10.4% 2.4% Premium Cable Total Subscribers Subscribers (n=528) (n=1265) 58.7% 63.2% 31.6% 19.3% 8.1% 4.8% 11.3 2.01 0.15 12.3 1.18 0.39

VIDEO/DVD RENTAL* PAY PER VIEW* VIDEO ON DEMAND*

Average Usage - Number of Times VIDEO/DVD RENTAL 13.0 PAY PER VIEW* 0.58 VIDEO ON DEMAND* 0.56 High Tech Media Ownership

34 Premium cable subscribers are also a big market for advanced TV technology gadgets. Even after controlling for the income factor, they are still much more likely to adopt TV-related new media technology than basic cable subscribers except TiVo or other personal video recorder devices (PVRs). It is understandable why PVRs have less appeal to premium subscribers. PVRs are primarily used by viewers to skip TV commercials and premium subscribers do not need to screen out commercials because all premium channels do not carry commercials. Premium cable subscribers have a significantly higher ownership of DVD players, HDTV sets, big screen TV sets and WebTV/AOLTV type of Internet TV services than basic cable subscribers. Almost one-third of premium cable subscribers own a DVD player, 11.9% own a big screen TV and 8.9% have Internet TV service such as WebTV or AOLTV. Among the seven high tech media items included in the study, E-book has the lowest penetration (only 1.9% among all respondents). Digital camera is just second to DVD as a popular item for respondents to own (19.8%). TABLE 5.HIGH TECH MEDIA OWNERSHIP Q.1.10a-g Basic Cable Subscribers (n=737) TiVo or other replay TV 11.3% WebTV/AOLTV* 4.7% DVD Player* 21.7% High Definition TV* 3.3% Big Screen TV* 8.0% E-Book 1.5% Digital Camera 18.5% *Significantly different at p < 0.05. Internet and Computer Usage

Premium Cable Total Subscribers Subscribers (n=528) (n=1265) 9.3% 10.5% 8.9% 13.5% 30.7% 25.5% 6.4% 4.6% 11.9% 9.6% 2.5% 1.9% 22.5% 19.8%

35 The PC is the most common computer platform used by the cable/satellite subscribers. Almost three-quarters of the subscribers are using PCs for their home computers with an addition of 3 percent that use a combination of both PC and Macs (Table 6.1). Premium cable subscribers exhibit a pattern of early innovation adopters. Not only are they more likely to own TV-related technologies, they are more experienced in using the Internet than basic cable subscribers with almost one-third of them have five years or more experience in using the Internet (Table 6.2). Nevertheless, premium cable subscribers do not have much higher broadband use than basic cable subscribers. Both basic and cable subscribers primarily use dial-up modems at home (78.8% in total). Overall use of cable modem is low as only 12.6% of cable subscribers use it for Internet connection. Table 6.1 HOME COMPUTER PLATFORM (Q.1.4) Basic Cable Subscribers (n=737) 72.2% 3.4% 2.7% 13.0% Premium Cable Total Subscribers Subscribers (n=528) (n=1265) 76.2% 73.9% 4.8% 4.0% 4.0% 3.3% 12.0% 12.5%

PC MAC Both PC & MAC Other

36 Table 6.2 LENGTH OF TIME USING INTERNET Basic Cable Premium Cable Total Subscribers Subscribers Subscribers (n=737) (n=528) (n=1265) Less than 6 months 3.1% 3.8% 3.4% Six months to one year 9.2% 7.8% 8.6% More than 1 year to 2 years 17.4% 12.5% 15.3% More than 2 years to 3 years 18.5% 18.6% 18.5% More than 3 years to 5 years 24.5% 25.0% 24.7% More than 5 years to 8 years 17.3% 22.3% 19.4% More than 8 years 6.3% 8.5% 7.2% Chi Square = 18.4, df=8, p = 0.18 Table 6.3 TYPE OF INTERNET CONNECTION Basic Cable Premium Cable Total Subscribers Subscribers Subscribers (n=737) (n=528) (n=1265) Dial Up Modem 78.8% 79.9% 78.8% Cable Modem 12.6% 12.7% 12.6% DSL Modem 2.7% 4.4% 3.4% Satellite 0.8% 0.2% 0.6% Dont Know 3.1% 3.6% 3.3% Other 1.1% 0 0.6% As expected, Internet Explorer as a browser that are preinstalled on PCs, is the most popular major web browser for cable subscribers with almost two-third of respondents reported using it (Table 6.4). Only one-fifth of cable subscribers used the Netscape Navigator. Notably, Internet is playing a more and more important part in the life of cable subscribers. The average time cable subscribers spend on the Internet is 47.9 hours a month or almost 12 hours a week (Table 6.5), approximating the time they spent on watching cable television networks. The median Internet access service fee they are paying is $20 a month (Table 6.6). Among Internet service providers, AOL is the most popular with slightly more than one-third of cable subscribers reported using it. The second most popular is MSN with about 10 percent of cable subscribers using it. Local Internet service providers are also quite common with one-fifth of cable subscribers using it (Table 6.7).

37 Premium cable subscribers in general are much more likely to use a variety of features on line. In particular, they are more likely to pay bills or handle personal finance online, get information and play games online than basic cable subscribers (Table 6.8). The types of web sites that cable subscribers use most often are quite similar between premium and basic subscribers. News and information sites are most commonly used Search engines are a close second. General entertainment sites are not as commonly used as reported in the media. Only seven percent of cable subscribers mentioned them as their most frequently used sites (Table 6.9). Online shopping is quite common among cable subscribers with about more than one half of the cable subscribers reported shopping online in the past 12 months (Table 6.10). Basic and premium cable subscribers differ significantly in online shopping behavior. Premium cable subscribers are significantly more likely to make purchase online than basic cable subscribers. Among those that shopped online, premium cable subscribers spend almost two times more the amount than basic cable subscribers in online purchase, with an average of $417 in the past 12 months (Table 6.11). Despite the considerable purchase interest online among cable subscribers, there are about one-third that do not want to shop online at all (Table 6.12). About one-fifth said they rarely spend money buying things online (the ebivalent newbies of Harris Interactive) and another 10% will only browse information online but shop offline (the clicks-and-mortar cluster of Harris Interactive). According to the Pew Internet User Types, about one-quarter of cable subscribers belongs the Netizen cluster who use the Internet for connecting with friends, rather than for information or shopping (Weiss, 2001). There are also significant differences between basic and premium cable subscribers in online user clusters. Basic cable subscribers are much

38 more likely than premium cable subscribers to use the Internet for information and social purposes. Premium cable subscribers are more likely than basic cable subscribers to use it for shopping, entertainment, and other business transactions. TABLE 6.4 MAJOR WEB BROWSER Q.2.4 Basic Cable Subscribers (n=737) Netscape Natvigator 22.2% Internet Explorer 65.0% Other 12.8% Premium Cable Total Subscribers Subscribers (n=528) (n=1265) 18.1% 20.5% 70.7% 67.4% 11.2% 12.1%

6.5 AVERAGE TIME SPENT ON INTERNET AT HOME PER MONTH Basic Cable Premium Cable Total Subscribers Subscribers Subscribers (n=737) (n=528) (n=1265) 48.9 hours 46.6 hours 47.9 hours

TABLE 6.6 AMOUNT SPENT ON INTERNET SERVICE Basic Cable Subscribers (n=737) Average* Median Standard Deviation $16.7 $20 $13.8 Premium Cable Total Subscribers Subscribers (n=528) (n=1265) $18.8 $20 $13.0 $17.6 $20.0 $15.4

39 TABLE 6.7 HOME INTERNET SERVICE PROVIDER (Q.1.1) Basic Cable Premium Cable Total Subscribers Subscribers Subscribers (n=737) (n=528) (n=1265) AOL 37.7% 32.6% 35.6% Earthlink 6.8% 8.0% 7.3% MSN 8.7% 12.5% 10.3% NetZero 4.1% 2.8% 3.6% Company/Campus 3.0% 3.2% 3.1% Local ISPs 18.5% 23.0% 20.3% Other 19.5% 23.0% 21.0% No longer subscribed to 6.0% 4.5% 5.4% Internet service 6.8 FEATURES USED ONLINE Q.2.3 Basic Cable Subscribers (n=737) Paying bills or 22.9% handling personal finances Searching jobs or career34.8% Related information Gathering news or weather 69.0% Sending or receiving e-mails 92.3% Accessing information databases48.6% Education applications 29.2% Getting information 81.8% Playing games 36.1% Joining chat rooms 51.8% Premium Cable Total Subscribers Subscribers (n=528) (n=1265) 33.5% 35.9% 70.2% 92.7% 50.6% 32.3% 85.5% 42.4% 53.6% 27.3% 35.2% 69.5% 92.5% 49.4% 30.5% 83.3% 38.7% 52.5%

40

6.9 TYPE OF WEB SITES USED MOST OFTEN AT HOME Q.2.5 Basic Cable Premium Cable Total Subscribers Subscribers Subscribers (n=737) (n=528) (n=1265) News and finance sites 26.1% Job/Work-related sites 6.9% Travel 8.0% ISP/Online Service Portal5.8% General Entertainment 6.6% Search engine 16.3% Shopping/retail 6.2% Consumer information 4.5% Sports 2.1% Other 11.9% 6.10 ONLINE SHOPPING Q.2.1 and Q.2.2 Basic Cable Subscribers (n=671) Ever purchased things online Missing Cases=340 Chi square=6.54, df=1, p=0.01 Table 6.11 Money Spent on Online Purchase Basic Cable Subscribers (n=703) Amount of money spent on online purchase $220 Premium Cable Total Subscribers Subscribers (n=488) (n=1191) $417* $300.7 53.7% 20.8% 7.1% 9.2% 5.0% 6.7% 20.2% 5.6% 7.5% 3.1% 8.8% 23.9% 7.0% 8.5% 5.4% 6.6% 17.9% 5.9% 6.0% 2.5% 10.6%

Premium Cable Total Subscribers Subscribers (n=473) (n=1144) 61.1%* 56.7%

Significantly different at p < 0.01

41 TABLE 6.12 INTERNET USER TYPE Premium Cable Total Subscribers Subscribers (n=490) (n=1168) 12.4% 20.6% 12.2% 9.2% 8.8% 10% 22.7% 10.6% 10.7% 6.1%

Basic Cable Subscribers (n=678) Browse products online but only buy offline Rarely spend money buying things online Bank, play games, trade stocks and shop online frequently Use the Internet like a consumer report magazine Shop on the Internet for its convenience Regularly visit web sites of favorite store and spend considerable amount of money shopping online Connect with friends as routine Use Internet for work-related Research None of the above 8.3% 24.2% 9.4% 11.8% 4.1%

0.3% 29.2% 12.7% 5.0%

2.0% 23.7% 11.0% 4.5%

1.0% 26.9% 12.0% 4.7%

Chi square=33.8, df=8, p < 0.01 Use of Cable TV Web Sites Almost one half of cable subscribers did not visit any cable networks web site (Table 7.1). Nevertheless, quite a number of respondents recently visited a cable networks web site. Slightly more than 20 percent of the respondents visited cable networks web sites in the past seven days. The usage pattern of cable TV web sites generally mirrors the popularity of the cable network. CNN is the most frequently watched cable network. Its web site is also recently visited and most frequently visited by the respondents (Table 7.2). Nevertheless, the other most

frequently watched cable network have changed their ranking in their web sites. For example, A & E, which was the second most watched-cable network, ranked fourth in recent web site visit.

42 Discovery, which ranked fifth in the most frequently watched cable network, its web site becomes the second most recently visited site. Very few cable network web sites are reported as a most frequently visited cable network web site (Table 7.3). Almost 60 percent of cable subscribers do not have a most frequently visited cable network web site. Cross-promotion on television is the most important source of cable subscribers in knowing the cable networks web site (Table 7.4). Almost two-third of the cable subscriber respondents found out the web site for the first time from promotion of the web site on television. Search engines and word of mouth recommendation are the distant second and third source. Web site reviews or print ads play almost no role in helping users to find out the cable networks web site. Cable subscribers spend a considerable amount of time on their cable networks web site visit (Table 7.5). In general, they spend an average of 10 minutes on a each site visit. Premium cable subscribers are more likely, though not statistically significant, than basic cable subscribers, to visit the same site many times. On average, they visited their most frequently visited site 19 times. TABLE 7.1 MOST RECENT VISIT TO CABLE NETWORK WEB SITES Basic Cable Subscribers (n=672) 48.4% 14.9% 6.8% 6.2% 5.8% 5.1% 12.1% Premium Cable Total Subscribers Subscribers (n-498) (n=1170) 44.0% 46.5% 15.9% 15.3% 8.4% 7.5% 7.1% 6.5% 6.1% 5.9% 7.5% 11.1% 6.1% 11.7%

Never visited any such site Less than 3 days ago 3 days to 7 days ago No more than 2 weeks ago 2 weeks to no more than 4 weeks ago 4 weeks to no more than 3 months ago 3 months ago or more

TABLE 7.2 CABLE WEB SITES VISITED IN PAST 3 MONTHS

43 Basic Cable Subscribers (n=672) 7.4% 1.3% 19.8% 11.6% 9.2% 3.1% 5.8% 3.3% 5.2% 0.3% 0.7% 4.5% 3.9% 5.2% 6.0% 11.2% 48.4% Premium Cable Total Subscribers Subscribers (n=498) (n=1170) 11.2% 9.1% 0.4% 0.9% 18.1% 19.1% 12.4% 12.0% 9.5% 9.3% 8.9% 5.6% 6.2% 6.0% 4.3% 3.7% 5.3% 5.2% 1.6% 0.9% 1.6% 1.1% 4.2% 4.4% 3.6% 3.8% 4.0% 4.7% 5.6% 5.8% 14.0% 12.4% 44.0% 46.5%

A & E (4) Cinemax CNN (1) Discovery (2) ESPN (3) HBO (6) Lifetime (5) MTV Nickelodeon Showtime Starz TBS TNN TNT USA Other Did not visit any cable networks web site

Note: Multiple response. Percentage based on respondents.

44 TABLE 7.3 MOST FREQUENTLY VISITED CABLE WEB SITE Network (rank) Basic Cable Subscribers Premium Cable Total Subscribers Subscribers 55.4% 1.9% 0 11.9% 3.7% 4.1% 2.4% 1.7% 1.3% 2.4% 0.4% 0.4% 0.2% 0.9% 0.0% 0.2% 0.2% 12.5% 59.1% 1.7% 0.4% 11.7% 3.7% 3.8% 1.1% 1.3% 0.9% 1.9% 0.2% 0.2% 0.4% 1.1% 0.4% 0.6% 0.1% 11.4%

No most frequently visited 61.7% cable web site A&E 1.5% Cinemax 0.6% CNN (1) 11.6% Discovery (2) 3.8% ESPN (3) 3.7% HBO 0.2% Lifetime 0.9% MTV 0.6% Nickelodeon 1.5% Showtime 0.0% Starz 0.0% TBS 0.5% TNN 1.2% TNT 0.6% USA 0.9% MSNBC 0.0% Other 10.7% (e.g., Disney, HGTV, FoxNews, Food)

TABLE 7.4 WAYS TO FIND OUT THE CABLE WEB SITE Basic Cable Subscribers (n=275) Word-of-mouth recommendation 12% Promotion on TV Search Engines/Directories Web site reviews Print Ads Other 66.% 14.2% 1.5% 2.5% 3.6% Premium Cable Total Subscribers Subscribers (n=223) 8.5% 70% 11.2% 1.3% 5.8% 3.1% (n=498) 10.4% 67.9% 12.9% 1.4% 4.0% 3.4%

45 TABLE 7.5 AMOUNT OF TIME SPENT ON THE MOST RECENT VISITED CABLE WEB SITE Basic Cable Subscribers (n=662) Av. time spent most recent visit 10 mins. Number of times* 13 times *t=-1.35, p = 0.14. TABLE 7.6 CARRIAGE BY CABLE OPERATOR OF THE MOST FREQUENTLY VISITED SITE % 19.9% 80.1% Premium Cable Total Subscribers Subscribers (n=480) (n=1142) 11 mins. 10.4 mins 19 times 15 times

Network not carried by the cable system operator Network carried by the cable system operator

46 Use of Enhanced TV Features Overall, enhanced TV feature usage is low. Almost one half of respondents did not use any of the enhanced TV features of any TV sites in the past three months. In addition, no one particular enhanced TV feature stand out as the most popular feature used by most respondents. News and weather update, the most commonly mentioned enhanced TV features, is only used by less than a quarter of the respondents (Table 8.1). Background for news, polls, and program previews are the other three more commonly mentioned features. In terms of enhanced TV feature usage, there are only a few significant differences found between premium cable subscribers and basic cable subscribers. Premium cable subscribers are much more likely than basic cable subscribers to join chatrooms or message boards, read episode synopsis, use TV guides or schedules, and participate in online polls. As some of the enhanced TV features and other interactive features on the Web requires download of additional software or plug-in for the visitors, we probed for the interest of Internet users in downloading software to view certain features. Almost half of the respondents are not willing to go through the hassle of downloading software for viewing additional features (Table 8.2). Premium cable subscribers are more likely than basic cable subscribers to download software to view additional features on the site.

47

Table 8.1 USE OF ENHANCED TV FEATURES (Q.3.9) Basic Cable Subscribers (n=667) Background for news 17.1% Information about stars 8.8% Chatroom or message boards* 2.7% E-mail link 4.8% Program preview 12.7% Episode synopsis* 4.1% Play-along/games 8.6% TV guide/schedules* 10.0% Simulcast 2.1% News/weather update 21.4% List of upcoming guests 6.9% Polls* 13.5% Third-party links 3.3% Original web programming 2.6% Quiz/trivia 6.7% Statistics 5.5% Program transcript 3.5% Purchase/Shopping Cart 5.1% Video clip archive 7.4% Sweepstakes 5.8% Other 0.9% Note: Multiple response items TABLE 8.2 WILLINGNESS TO DOWNLOAD SOFTWARE TO VIEW EXTRA FEATURES Q2.8 Basic Cable Subscribers (n=678) No 48.8% Yes, if not more than 5 minutes 38.6% Yes, no matter how long it takes12.6% Chi Square = 9.91, df=2, p < 0.01 Premium Cable Total Subscribers Subscribers (n=490) (n=1168) 41.8% 39.9% 18.2% 45.9% 39.2% 14.9% Premium Cable Total Subscribers Subscribers (n=496) (n=1163) 16.3% 16.8% 12.3% 10.3% 5.5% 3.9% 7.3% 5.9% 16.7% 14.4% 8.7% 6.0% 8.9% 8.7% 13.9% 11.7% 3.3% 2.6% 25.2% 23.0% 6.3% 6.7% 18.5% 15.6% 4.1% 3.6% 2.6% 2.6% 8.8% 7.6% 6.5% 5.9% 4.7% 4.0% 5.3% 5.2% 7.3% 7.3% 7.1% 6.4% 2.2% 1.5%

48 Effects of Enhanced TV Usage on Viewer loyalty, Subscriber Loyalty and Attracting New Subscribers Despite the generally low reported use of enhanced TV features, increase in enhanced TV usage is significantly positive in predicting viewer loyalty, subscriber loyalty, and attracting new subscribers for cable networks (Table 9). A regression analysis shows that increase in enhanced TV usage is a positive predictor of viewer loyalty, subscriber loyalty and attracting new subscribers. First, this study found that the more enhanced TV features being used will lead to more often watching TV shows featured on the site (beta=.71, p < 0.01) and more likely to become the respondents favorite cable network (beta=.62, p < 0.01). They are also more involved in (beta=.53, p<0.01)and attached to the TV show when they used a lot of enhanced TV features (beta=.41 , p < 0.01). The best news to cable networks is that they would more likely to request the cable operator to carry the network or keep the network if they used more enhanced TV features (beta=.68, p < 0.01). In attracting new subscribers, Internet users who use more

enhanced TV features are more likely to become interested in the network (beta=.63, p < 0.01).

49

TABLE 9.1 EFFECTS OF ENHANCED TV USAGE ON VIEWER LOYALTY, SUBSCRIBER LOYALTY AND ATTRACTING NEW SUBSCRIBERS FOR CABLE NETWORKS Beta Urge to buy something featured on the site .63 Want to have high speed Internet access .65 Watch shows featured in the site more often .71 More involved in the shows .53 More attached to the shows .41 Request to carry the network/keep the network .68 Became interested in the network .63 Cable good value for money .69 More products, probably buy them .47 My favorite cable network .62 Willing to pay same features on TV .69 T 28.5 30.0 35.3 21.9 15.7 32.3 28.6 33.0 18.8 27.9 33.4 p < 0.01 < 0.01 < 0.01 < 0.01 < 0.01 < 0.01 < 0.01 < 0.01 < 0.01 < 0.01 < 0.01

To cable system operators, increase in enhanced TV usage also has positive effects. First, Internet users who have more use of enhanced TV features will more likely to agree that cable is good value for the money (beta=.69, p< 0.01) and want to have high speed Internet access (beta=.65, p < 0.01). The good news of enhanced TV also brings bright prospects on the use of interactive TV which can provide similar service as those on TV web sites. Respondents who use more enhanced TV features are much more likely to be willing to pay for the same features on television (beta=.69, p < 0.01). Comparison between Basic and Premium Cable Networks in Enhanced TV Usage and Effectiveness Premium networks web sites are not commonly visited by cable subscribers (Table 9.2). Although premium cable subscribers are significantly much more likely to visit a premium network web site in the past three months, very few reported the premium network web site as

50 their most frequently visited site. Only 25 respondents said their most frequently visited cable network web site is a premium channel such as HBO, Cinemax, Starz or Showtime. As in other networks, premium network web sites usage positively predicts viewer loyalty and attract subscribers. Premium cable network web site visitors are same as basic cable network web sites visitors to have better viewer loyalty and being attracted to the network after visiting the site (Table 9.3). TABLE 9.2 Visit any Premium Network Web Site in the past 3 months Basic Cable Subscribers n=672 Premium Networks web site Non-Premium networks web sites Chi Square=17.3, df=1, p < 0.01 4.8% 95.2% Premium Cable Total Subscribers Subscribers n=498 n=1170 11.2% 88.8% 7.5% 92.5%

TABLE 9.3 Enhanced TVs Benefits to Premium Network Site When Its Site Is the Most Frequently Visited Web Site Beta Increase viewer loyalty Attract new subscribers .17 .11 t 6.27 2.57 p <0.01 < 0.01

Most Effective Enhanced TV Features on Cable Network Web Sites in Facilitating Loyalty and Attracting New Subscribers Comparatively speaking, enhanced TV features are much more effective in maintaining viewer loyalty than attracting new subscribers. Among the enhanced TV features listed in the study, there are five features that are most effective in facilitating viewer loyalty: 1)

51 news/weather update, 2) background for news, 3)information about stars/gossips, 4) episode synopsis and 5) sweepstakes (Table 10.1). These five features can explain 48% of the variation in viewer loyalty (Adjusted R2=0.48). But in attracting new subscribers, None of enhanced TV features is particularly effective and explained very little in the variation of becoming interested in a network or request a cable system operator to carry it (adjusted R2=0.03). TABLE 10.1 MOST EFFECTIVE ENHANCED TV FEATURES ON CABLE NETWORK WEB SITES IN FACILITATING VIEWER LOYALTY (Q.3.10) Viewer Loyalty (watch shows more often, more involved, more attached) Beta Top 5 features News/weather update Background for news Information about stars/gossips Episode Synopsis Sweepstakes .26 .19 .14 .14 .13 Adjusted R2=0.48 TABLE 10.2 MOST EFFECTIVE ENHANCED TV FEATURES ON CABLE NETWORK WEB SITES IN ATTRACTING NEW SUBSCRIBERS (Q.3.10) Beta T p Top 5 features Chatroom TV Guide Program Preview Sweepstakes E-mail link 0.10 0.09 0.08 0.07 0.06 2.06 1.70 1.70 1.57 1.47 0.04 0.06 0.09 0.12 0.15 T 9.51 7.30 5.70 5.10 5.35 p <0.01 <0.01 <0.01 <0.01 <0.01

Adjusted R2=0.03 Effectiveness of Enhanced TV as Brand Extension In general, the aggregate effect of the benefits of enhanced TV feature usage is positive to both cable networks and cable system operators by most standards. At least it arouses visitors

52 interest in the network, increases the likelihood of buying products features in the show in the site, creates an urge for consumers to buy things on the site, and watches shows features on the site that the viewer seldom or never watched prior to visiting the site. However, as a brand extension for the network brand, enhanced TV feature usage has achieved its mission of motivating consumers to buy products anda reach consumers whose cable system operators are not carrying the network. Nonetheless, increase in enhanced TV feature use does not lead viewers to feel that the web site content complements the TV program. The web site is not seen as an Internet brand of the network (Table 11). The use of enhanced TV features also means good prospects on TV commerce. First, respondents who use more enhanced TV features reported a higher urge to buy something featured on the site(beta=.17 , p < 0.01).. Second, they would also more probably buy the memorabilia items of the TV network, TV show or TV stars if more of them were available for purchase on the web site (beta=.13, p < 0.01). TABLE 11. EFFECTIVENESS OF ENHANCED TV AS BRAND EXTENSION IN ATTRACTING NEW VIEWERS AND MOTIVATING THEM TO BUY ADVERTISED PRODUCTS ADVERTISED PRODUCTS (T-COMMERCE) ON THE WEB SITES Beta T p Became Interested in a certain cable network 0.19 6.88 <0.01 Probably buy products featured in the shows on the site 0.124 2.92 <0.01 Felt an urge to buy something on the site 0.17 3.91 <0.01 Want to have broadband access 0.17 4.08 <0.01 The web site is the Internet brand of the network 0.07 1.62 0.10 (n.s.) The web site complements the networks program 0.05 1.24 0.22 (n.s.) The web site can substitute for viewing the TV program -0.04 -.93 0.35 (n.s.) Viewers Evaluation of the Enhanced TV Experience In general, viewers find the cable networks web site they visit interesting. Premium cable subscribers have a more positive evaluation of their enhanced TV experience than basic cable than basic cable subscribers (Table 12). They have significantly higher rating of the

53 quality of the site than the basic cable subscribers (83 vs 78 on a scale of 100). They are significantly more likely to report that they have fun and enjoy the time spent on the site. They are also more likely to feel that there are many choices for them on the site and there are sufficient internal links. These experience attributes are also among the most positive among all the attributes being evaluated. However, viewers are unlikely to become active participants on the web site by submitting comments or participating in events on the Web. Their web site visit is also open to new experience. Most of them disagree with the statement that they only visit the site to explore their favorite show or TV star. This leaves room for development and promotion of other shows not currently watched by the visitor.

54 TABLE 12. VIEWERS EVALUATION OF THEIR ENHANCED TV EXPERIENCE ON THE WEB (Q.3.8. Q3.10) Mean Score Basic Cable Premium Cable Total Subscribers Subscribers Subscribers (n=280) (n=228) (n=508) Have fun and enjoyed the time spent on site* There are many choices for me on the site* Sufficient internal links* Sufficient external links Devices to collect information Will submit comments or participate Felt in control Was aware of the distractions Was totally absorbed* Made me curious and want to learn more Site was interesting Only explored favorite show/stars Quality rating of the web site* 3.5 3.7 3.52 3.25 3.10 1.96 3.25 3.10 3.26 3.36 3.76 2.40 77.9 3.92 4.10 3.85 3.41 3.00 2.24 3.36 3.14 3.57 3.53 3.89 2.57 82.8 3.69 3.89 3.67 3.32 3.06 2.09 3.30 3.12 3.40 3.44 3.82 2.48 79.9

Ratings on a 5- point scale from strongly agree (5) to strongly disagree (1). *Significantly different at p <0 .05 Only those who reported visiting cable networks web site are included in this evaluation. Comparison between Paid and Non-Paid Subscribers TV and Enhanced TV Behaviors Paid Internet subscribers are significantly more likely to subscribe to premium cable or satellite TV service (Table 13.1), or upgrade their TV subscription service(Table 13.2). More than 90 percent of the respondents did not change their cable/satellite TV service. About six percent of the Paid Internet service subscribers upgrade their services, and only two percent has downgraded their service in the past three months. There is no significant differences between paid and non-paid Internet subscribers in their enhanced TV experience both in terms of interactivity rating or flow. They are alike in terms of positive ratings on choices on the site and reported having fun and enjoyed the time spent on the

55 site. Although non-paid subscribers gave the web site low ratings in overall quality than paid subscribers, the difference is not statistically significant at 95% confidence level.

TABLE 13.1 COMPARISON BETWEEN PAID AND NON-PAID SUBSCRIBERS IN TV SERVICE USE Q. 1.7 & Q. 1.9 Non-Paid Subscribers (n=289) No cable or satellite subscription 12.1% Cable Basic Only 21.8% Satellite TV Basic Only 14.6% Cable expanded basic 33.2% Cable premium 17.6% Satellite premium 14.6% Other multichannel services 0.7% Paid Subscribers (n=1090) 10.8% 22.7% 10.6% 29.9% 22.2% 17.1% 0.7% Total (n=1379) 11.1% 22.5% 11.4% 30.6% 21.3% 16.6% 0.7%

TABLE 13.2 COMPARISON BETWEEN PAID AND NON-PAID SUBSCRIBERS IN CHANGE OF SERVICE IN PAST THREE MONTHS Non-Paid Subscribers (n=288) 95.6% 3.4% 1.0% Paid Subscribers Total (n=1081) (n=1369) 91.8% 92.6% 6.0% 5.4% 2.2% 1.9%

No change of service Upgrade services Downgrade services

Chi-Square= 4.6, df=2, p=0.10

56

TABLE 13.3 COMPARISON BETWEEN PAID AND NON-PAID SUBSCRIBERS IN EVALUATION OF ENHANCED TV EXPERIENCE Non-Paid Paid T Subscribers Subscribers (n=255) (n=924) Average number of enhanced TV features used 2.19 1.98 -0.18 Non-Paid Paid T Subscribers Subscribers (n=100) (n=408) 3.50 3.75 -1.37 4.09 4.06 0.21 3.90 3.89 0.14 3.64 3.41 1.2 3.36 2.99 1.66 3.03 2.11 1.64 3.21 3.43 -1.09 2.85 3.21 -1.62 3.64 3.59 0.23 3.64 3.56 0.35 3.91 3.90 0.07 2.94 2.57 1.50 77.2 80.7 -1.47 p .85 (n.s.) p .17 (n.s.) .84(n.s.) .89(n.s.) .23(n.s.) .10(n.s.) .10(n.s.) .28(n.s.) .11(n.s.) .82(n.s.) .72(n.s.) .95(n.s.) .14(n.s.) .14 (n.s.)

Those who visited a cable networks web site: Have fun and enjoyed the time spent on site There are many choices for me on the site Sufficient internal links Sufficient external links Devices to collect information Will submit comments or participate Felt in control Was aware of the distractions Was totally absorbed Make me curious and want to learn more Site was interesting Only explored favorite show/stars Quality rating of the web site

Ratings on a 5- point scale from strongly agree (5) to strongly disagree (1). .

57 DISCUSSION The findings of the study indicate that enhanced TV features indeed increase viewer loyalty, keep subscribers, and to a lesser extent, attract new subscribers for cable networks. Premium cable networks, however, do not benefit more from enhanced TV features in keeping subscribers than basic cable networks. Despite the benefits of enhanced TV usage on increasing viewer loyalty, keeping subscribers and attracting new subscribers, the low number of Internet users using these features makes the current enhanced TV effort not very cost-effective. The huge resources put into creating and maintaining a good interactive cable network web site do not yield enough users to fully utilize the features. The lack of promotion of web sites may explain the discrepancy between the number of viewers of a cable network and the number of its web sites visitors. Some cable networks, such as CNN and Discovery, are more aggressive in promoting their web sites than other cable networks. Almost every program of these networks have promotional spots or scrollers on the TV screen encouraging viewers to visit the site. Because of the importance of the promotion on television s the primary source of information to attract viewers to try the web site as shown in this study a, TV networks should maximize viewers awareness and interest in the web site by making it a routine to display the web site address and point out interesting enhanced TV features that they can use related to the programs that they watch.

58 It is interesting to note that news and weather update, a general service, is the strongest enhanced TV feature in predicting viewer loyalty. Chatrooms and other high audience involvement features, are not so useful in predicting viewer loyalty. In terms of estimating the

extent of the impact of the enhanced TV in changing viewers from passive audience to active participants of TV programs, we can examine the popularity of the various enhanced TV features and their respective effects on viewer loyalty. The results of this study indicate that the success and appeal of enhanced TV lie in their customized features and supplemental information, rather than active involvement in the development or participation in the program. Such audience inertia still applies in online media where audiences primary communication need is to satisfy their own information and entertainment needs, rather than to communicate with the media content providers as discussed in Ha & James (1998).

59 Although many Internet users did not see the web site of the network as an Internet brand nor complement the networks programs, enhanced TV has partially succeeded its brand extension mission of increasing viewers and broadening its reach to users who did not have the network available on their cable systems as about 20% of the most frequently visited site are networks not carried by the respondents cable system operators. Some Internet users also become interested in a certain cable network as a result of the cross-promotion of the network on the Internet. In addition, the increase in use of enhanced TV did show an increase in the demand on broadband access and lead to the positive perception that cable is good value for the money. Most importantly, as web sites are not seen as substitutes of the networks programs, they will not cannibalize the viewership of the network, but only add more viewers to and consolidate the viewers for the network. The additional revenue of TV commerce that network web sites may deliver is also promising based on the results of the study. The more viewers use the features, the more they feel the urge to buy something on the site. The data also show that when more products related to the show are available, many Internet users will probably buy the products.

60 Such positive results on TV commerce interest shown in this study are contrary to the earlier experiment conducted by the authors (Ha & Chan-Olmsted, 2001). In that study, subjects did not show an increased interest in TV commerce after exposure to the broadcast networks web site and their awareness level of the enhanced TV features has no effect on their viewer loyalty. There are several differences between this study and the earlier experiment. The experiment was a one-time exposure of the web site and we only measured the awareness level, and not actual usage, of enhanced TV features. The student sample in the experiment also is different from the general public of this study. Perhaps, the most important difference is that the experiment tried to establish an immediate cause and effect relationship from the exposure to web sites and their enhanced TV features, but the results of the current study is largely correlational and at best been able to predict viewer loyalty, new subscriber attraction by the enhanced TV usage. Another alternative explanation is that enhanced TV usage in this study is a self-selection phenomenon. Those who are predisposed to be loyal to TV networks/programs may be the ones who are using enhanced TV features. Those that do not use these features are the unloyal and casual TV viewers. The challenge that this study presents to cable networks is that they have to entice the unloyal and casual viewers to get interested in their web sites, which in turn, could arouse their interest in the programs and nurture their loyalty to the network. The users evaluation of their enhanced TV experience shows that the experience is generally positive, but not overwhelmingly positive. While the interactivity rating is good and they generally report some charcteristics of the flow experience in terms of feeling in control and total absorption during the site visit, they are not fully concentrated as many reported awareness of distraction when visiting the site. There is no difference between paid Internet subscribers and non-Internet subscribers in their evaluation of the experience. Although not all

61 non-paid Internet subscribers used ad-supported Internet service providers, it is a good indication that ad-supported Internet service have little or no negative effects on the evaluation of web site experience. Paid Internet subscribers in comparison to non-paid Internet subscribers, seem to be a much more promising and better target for cable networks and cable system operators. Their willingness to pay for Internet access is a good indication of their willingness to pay for media services. The results of this study not only confirm this fact, but also indicate that these paid Internet subscribers are more likely, though not statistically significant, to upgrade their service and subscribe to premium networks, making them profitable targets for cable networks and cable/satellite service providers. Conclusion This study of enhanced TV usage points to an imminent need for cable networks to increase their efforts in promoting their networks web sites. Currently, the enhanced TV features are underutilized and many have not visited cable network sites. The potential and positive effects of enhanced TV shown in this study justify the investment in the cable network web sites. It is especially important for new cable networks to utilize this medium to showcase their networks and promote their networks when they are not currently available to the market. They have to advertise on major web sites such as popular search engines and provide useful services to web visitors and TV viewers in general to attract visitors. After their visit of the site, they may become interested in the network and create a consumer demand for the network. By building more direct contact with the consumers using their web sites, cable networks can provide stronger evidence of consumer demand for the cable networks and provides better support to cable system operators.

62 For cable marketers, this study underscores the importance of premium cable subscribers both in terms of innovation adoption and also their greater appreciation of enhanced TV features. Premium cable subscribers are still largely narrowband users. They are the prime target for cable broadband service. The enhanced TV features are excellent tools to nurture the demand for broadband service of premium cable subscribers as shown in the study. Their indication of willingness to pay for the enhanced TV services on their TV is another untapped goldmine for digital cable and interactive TV services. Cable system operators, cable TV networks, and other high-tech media devices manufacturers should work closely such as offering bundled services or package deals to attract premium cable subscribers. By so doing, premium cable subscribers can form a critical mass of interactive TV users that set the trend for interactive TV and on demand media services.

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APPENDICES

69

Bowling Green State University

Dr. Louisa Ha College of Arts & Sciences Department of Telecommunications 322 West Hall Bowling Green, Ohio 43403 (419) 372-9103 phone (419) 372-9449 fax

http://infopoll.net/live/surveys/tv.htm
September 28, 2001 Dear Internet User:

You receive this survey questionnaire because you are one of the individuals randomly chosen from databases of millions of Internet service users to participate in this national study on Internet Usage and TV Usage. This academic study will investigate Internet users interest and usage of web site features and television service. Your opinion will represent Internet users in the country. It is very important that your opinion is included because the results of this study can affect the future development of television and the Internet. Internet and TV industry executives and public policy makers will read the report of this study and make their plans accordingly. Your participation is voluntary and your completion of the questionnaire constitutes your consent to participate in this study.
This survey will take no more than 10 minutes on average to complete. We know your time is very precious and to thank you for your participation, we have attached a fresh one dollar bill in front of the questionnaire as a token of our appreciation. You can choose to fill out the enclosed paper questionnaire and use the enclosed postage-paid reply envelope to send it back to us OR answer the survey on our web site at http://infopoll.net/live/surveys/tv.htm. Dont answer both the paper questionnaire and the web survey. Please send in your answers before October 31, 2001. To ensure your privacy, this is an anonymous survey. All the information collected will be reported as a group and no individual will be identified. If you have any questions or concerns regarding the study, you are welcome to contact Dr. Louisa Ha at (419) 372-9103 (e-mail: louisah@bgnet.bgsu.edu) or Dr. Sylvia Chan-Olmsted at (352) 392-0954 (e-mail: chanolmsted@jou.ufl.edu). You can also contact the Chair of the Human Subjects Review Board of Bowling Green State University at (419) 372-7716. Thank you very much for your participation. Sincerely,

Louisa Ha, Ph.D. Associate Professor Department of Telecommunications Bowling Green State University

Sylvia Chan-Olmsted, Ph.D. Associate Professor Department of Telecommunications University of Florida