Cable TV - HBO Read the Cable TV-HBO case and answer the questions included at the end. CABLE TV CASE The concept of cable television was never patented, which is remarkable given the extraordinary revenues it generates today. This peculiarity is a consequence of how the technology was invented and how it subsequently evolved. Cable television was invented by John Walson in 1948. Walson was the owner of an electronics store located in Mahanoy, Pennsylvania, a small town near Philadelphia situated in a bucolic valley surrounded by mountains. The signals were blocked by the mountains which caused the picture quality to be very poor. Walson realized that he would not be able to sell televisions to his neighbors until he solved the problem. The solution was to place an antenna on a mountain and carry the signals to the valley using cables and amplifiers. Once in the valley the signal was distributed to the neighbors by cable directly from the amplifier located in Walson's store. Walson did not create any new device. His invention consisted of combining existing components in a very ingenious way. Instead of using a short coaxial cable to carry the signal from the antenna amplifier to the TV set, Walson used a coaxial cable several miles long and strings of amplifiers to carry the signal to his neighbors' TV sets. The idea was so simple that it never crossed Walson's mind that it was possible to patent it. Two years later, Robert Tarlton thought it would be possible to use Walson's idea on a larger scale. The television signal in Philadelphia was of poor quality because of the so-called ghosting. Waves bounce off buildings and arrive from different points with slight phase lags, resulting in slightly overlapping images. Tarlton got in touch with several Philadelphia television retailers and began offering a subscription service to receive the signal directly by cable instead of by antenna. Tarlton's idea was immediately successful because, in exchange for a small fee, the picture quality was much better and it was possible to watch more channels. Thus, in 1950, the cable television business was born. Cable expanded across the United States city by city creating a huge base of very loyal customers even after the technical problems with the antennas were solved. The great advantage of cable television is that you could enjoy many more channels than were possible with the antennas. For example, East Coast subscribers could watch West Coast channels and vice versa, something unthinkable for antenna users. In Europe, meanwhile, cable development was held back by heavy regulation and the existence of state television monopolies. By the 1970s, the supply of free-to-air television via antenna had grown sufficiently to jeopardize the cable business. The technology of antennas, amplifiers and noise suppressors had evolved to the point where there was no difference in quality between antennas and cables. In addition, the television networks were no longer small local companies, but national giants. The differences in programming between networks on one coast and the other were negligible. All this seemed to put the cable business on the ropes. This all changed again in 1972, with the founding of HBO, the first cable-only television network. HBO needed cable operators to obtain customers and to collect the subscription fee, which was included in the bill as a small supplement to the monthly cable fee. Cable operators, on the other hand, found in HBO the ally they needed to change their value proposition. The commercial argument of image quality was abandoned and the focus shifted to exclusive content. In just ten years, there were dozens of cable-only channels and the number of subscribers increased twentyfold, even in spite of the emergence of a new competitor, satellite television. The questions related to the case are: 1. Why is John Walson's 1948 cable television technological innovation disruptive? 2. How did the cable television business emerge and in what year? 3. In what year was HBO created and for what purpose? 4. By how much did the number of subscribers multiply in just 10 years? 5. Who was the person with the business vision and why? 6. What type of innovation is cable television, according to the Oslo manual? 7. What does innovation include in the process? Find an example in the case. 8. How is organizational innovation defined? Find examples of this type of innovation in the case.