A portfolio theory approach to network program selection

This article proposes a new approach to explaining network program selectio n behavior. It draws on literature in the area of finance to build a model of networks' program choice. The basis for the model is the traditional the ory of portfolio selection. It will be argued that networks' management of program schedules is analogous to the management of a portfolio of investme nts. Networks maximize profits or returns while minimizing risk, and invest in programs to achieve this goal. Programs are, in effect, a network's assets. A network's selection of progr ams is motivated by its desire to maximize returns for a given level of ris k. Therefore, its selection of programs and construction of a program sched ule can be conceived of as an exercise in selecting financial securities in a portfolio. The network investor strives to develop a portfolio of securi ties that fulfills its investment objective. Earlier studies have looked at factors governing the cancellation and renew al of programs. A portfolio theory approach goes beyond these studies and p rovides a more comprehensive understanding of the factors that determine th e selection of programs and the resulting optimal program mix.