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Intro | Content Analysis | Audience | Economics | Ownership | News Investment | Public Attitudes | Conclusion | Charts & Tables
Ownership
In the last 10 years two networks of the big three, ABC and
CBS, have been part of large-scale mergers, and the third,
NBC, which went through a large-scale merger of its own earlier,
has spread its news division onto cable with all-news channels.
As 2004 began, another merger possibility appeared on the
horizon, the takeover of Disney, the owner of ABC, by a smaller
cable company, Comcast. Network ownership stands out from
the other media sectors in two important ways:
-
The big three networks that air nightly newscasts are
owned by true behemoths of American media. All three owners
- Viacom, Disney and General Electric - were among the
top five media companies in the country in overall revenue
in 2002.
-
Because these conglomerates are so big, their news divisions
are proportionally a much smaller part of the company
than they were under their previous owners.
These two points play an important role in where network
television news may be headed. Increasingly the question for
network news divisions is how they will carry on in a world
where they are a smaller and smaller element of the whole.
It is difficult, for instance, to find any mention of NBC
News in General Electric's annual report, one indicator of
where something stands on corporate strategic planning boards.
The Biggest Big Boys
Viacom, the owner of CBS, is the second-largest media company
in the country. Disney, the owner of ABC, is the fourth. NBC
(as a division of G.E.) is the fifth.
In some ways this should insulate the network news divisions.
Their owners are powerful and in theory should be diversified
enough that they would have more resources for news and more
economies of scale to produce news more efficiently. But size
can also mean that news becomes a smaller and potentially
less important part of a company's purpose, farther away from
its core values, just another contributor to the bottom line.
Television Revenue as Percent of Total
Corporate Revenue
Dollars in millions
| |
2002 Broadcast Revenue |
2002 Cable Revenue |
2002 TV Revenue (Broadcast + Cable) |
2002 Total Revenue |
2002 Broadcast Revenue as % of Total |
2002 Cable Revenue as % of Total |
2002 TV Revenue as % of Total |
| Viacom |
$7,490 |
$5,052 |
$12,542 |
$24,606 |
30% |
21% |
51% |
| Disney |
4,485 |
4,428 |
8,913 |
25,329 |
18% |
18% |
35% |
| NBC (GE) |
6,763 |
627 |
7,390 |
131,698 |
5% |
0.5% |
6% |
Viacom's broadcast television holdings, for instance, generated
$7.5 billion in revenue for 2002. As hefty as that sum might
sound, it was not even a third of the company's $24.6 billion
in revenues overall. Disney took in $4.5 billion in broadcast
revenue in 2002. That was not even a fifth of the company's
total of $25 billion. And NBC's $6.7 billion in broadcast
revenue was barely 5 percent of General Electric's $132 billion.
The Networks and Their Owners
It should be noted that the companies that own the ABC, CBS
and NBC have television holdings beyond their over-the-air
networks. They all own some cable networks, though the extent
of that ownership varies. Disney owns the sports giant ESPN
and its sibling networks as well as the Disney Channel and
ABC Family.
G.E. owns all or portions of A&E, Bravo, the History
Channel, as well as CNBC and MSNBC (a 24-hour news network)
on cable, and the Hispanic broadcast network Telemundo.
Viacom owns Showtime, Nickelodeon, MTV and BET on cable,
as well the UPN broadcast network. While the ownership of
those cable networks allows the parent companies to generate
revenue by network entertainment shows, it has had less effect
on the news division's programming, with the exception of
NBC and its cable news outlets. Below is a quick look at the
individual relationships between the owners and their news
divisions.
ABC and Disney
When Disney purchased Capital Cities Corporation (and ABC)
for $19 billion in 1995, it was thought to be a dream come
true for believers in synergy.
The network would give Disney, which created a lot of content,
a place to air its work. But for ABC's news division, the
merger has not led to success. From the start there were problems,
such as when ABC's "Good Morning America" was broadcast
live from Disney World, a move that was lambasted by press
critics. The Disney CEO, Michael Eisner, made statements that
raised doubts about his understanding of the ABC brand, as
when he famously said that it was impossible for ABC News
to cover Disney. Shortly after the merger, Disney made another
telling decision. It scrapped plans to launch a 24-hour cable
news network, a move that would have allowed ABC to follow
the cross-platform plan that has so helped NBC. Disney thought
the costs would be too great. Yet at the time, the widely-accepted
superiority of ABC's news division would have likely given
it an enormous leg up over any rival.
The numbers are even more revealing. At the time of the merger,
ABC was the leader of the network news divisions - on the
top in ratings and revenues, and its programs dominant in
most of their time slots, including nightly news.
Under Disney, nearly every program has stumbled, and the
poor performance of ABC's entertainment division has only
made the problems worse. The news division has since gone
through several rounds of staff reductions (either through
contracts not being renewed or layoffs), closed bureaus around
the world and the United States and has watched its position
sink to second in ratings on the evening news and third in
revenues. The network also developed a plan to replace its
"Nightline" franchise, considered by many the best
news program on commercial network television, and woo the
Dave Letterman program from CBS for its time spot. After two
humiliating weeks for Disney and ABC, Letterman turned them
down, in significant part because he, unlike Disney, did not
want to be known as the man who killed "Nightline."
All of these were bottom line decisions, caused by the parent
company wanting a larger return.
Some argue that the focus on the bottom line and cost cutting
did not begin with Disney, and the record shows that is the
case. There certainly was downsizing under the previous owner,
Capital Cities, coinciding with declining viewership. But
relative to other networks, ABC News prospered economically
and in the view of media critics. That has not been the case
since the acquisition by Disney.
In early 2003, Disney's tortured stewardship of the news
division seemed to come full circle. Disney considered the
possibility of merging with CNN to get access to cable's second
source of revenue - subscription - as well as the ability
to amortize product across multiple platforms. The deal never
happened.
With the arrival of the unwanted bid for Disney by Comcast,
ABC in many ways seemed at the center of the deal. While ABC
would become an even smaller part of a bigger company, television
(both broadcasting and cable), would become a bigger part
of the whole. ABC had fared better critically and financially
under Cap Cities than it had under Disney. Would Comcast's
background in television make a difference?
NBC and General Electric
General Electric purchased RCA, and by extension NBC, in
1986 for $6.4 billion and the initial result was not good.
When G.E. and its CEO, Jack Welch, bought NBC, the network
was viewed, say insiders, as a new division in a giant company
with the same responsibility as any other to show a return
to the bottom line.
In news, G.E. reportedly had plans to grow the network's
NewsChannel affiliate service to a point where ultimately
some form of evening news program could be done from Charlotte,
N.C., in a non-union environment.
At the same time, the news division was cut severely in what
NBC veterans privately refer to as "the Long March."
Staff and budget cuts hit the network news division and knocked
it into third place. In his book "Three Blind Mice,"
Ken Auletta described a corporation ignorant of broadcasting
and unfamiliar with the methods of building a network brand.
The focus on the cost of things rather than their value seemed
to reach its nadir when the network's new prime time magazine
"Dateline" faked a news story about exploding G.M.
pickup trucks.
The exploding pickup truck was a turning point, insiders
recall. Reportedly, it persuaded top G.E. executives of the
importance of a news division. One source close to NBC says
Welch personally got complaints from fellow CEOs. Whatever
occurred, changes began.
Andrew Lack was named president of news and the division
began to rebuild. Lack hired Neal Shapiro from ABC to remake
the magazine franchise and Jeff Gralnick from the same network
to work with Tom Brokaw in rebuilding NBC's "Nightly
News." He also committed $10 million for the street-front
studio for "Today."
While the bottom line remained important, insiders say G.E.
was now making available the money to rebuild, within corporate
reason. From 1993 to 1996, the "Nightly News," "Today"
and "Dateline" programs were reconceived. Under
the new news management team, each of the programs became
No. 1 in their time slots. They did so in part, the content
analyses reveal, by leading the march toward softer coverage,
yet they maintained their lead in recent years as nightly
news became more serious again.
Even before this period began, the man in charge of NBC,
Bob Wright, saw a niche for business news and persuaded G.E.
to purchase FNN, a struggling financial cable news network,
which became CNBC. It now returns to the bottom line reportedly
in excess of $400 million a year.
Part of the concept behind the rebuilding was to spread
the resources of the news division across multiple platforms,
including MSNBC and MSNBC.com. (MSNBC was created with the
infusion of money from Microsoft). The result is a diverse
array of products that can share costs and sell advertising
in combination, amortizing investments and making more use
of correspondents and news resources. Lack, who received a
lion's share of the credit for the rebuilding of NBC, was
promoted to run the whole network, but that did not go well
and he soon left the NBC altogether.
An open question now is whether his successors, led by the
new NBC News president, Neil Shapiro, who used to run "Dateline,"
will have similar success. While often unknown to the public,
the president of news, the history of network television suggests,
is often (perhaps always) the critical figure in the health
and integrity of a network's news division. At critical points
in their histories, it has been enormously important that
the news divisions were run by individuals with vision and
the credentials to stand up to their network bosses - Roone
Arledge at ABC, Reuven Frank at NBC and Richard Salant at
CBS to name only a few.
Two news presidents have lost their jobs in television history
for standing up to ownership. In the 1960s, Fred Friendly
at CBS lost his job for protesting network decision to air
reruns of "I Love Lucy" rather than coverage of
Senate hearings concerning American involvement in Vietnam.
In the 1980s, after G.E.'s purchase of NBC, the NBC news president,
Lawrence Grossman, lost his job after fighting G.E.'s attempts
to cut the news division.
Last year G.E. announced its plans to absorb the entertainment
giant Vivendi/Universal. The merger would put a movie studio
in G.E.'s hands and would give NBC "a relatively steady
stream of content" that was less reliant on independent
producers, according to one analyst.
Other than the fact that entertainment would make up a larger
part of G.E.'s media holdings, it may be hard to calculate
the effect of the merger. Even combined, NBC-Universal would
represent only a fraction of GE's total annual revenue of
$130 billion.
CBS and Viacom
The effects of the Viacom-CBS merger are still difficult
to know. Viacom's purchase of the network from Westinghouse
for $46 billion in 2000 is still relatively recent.
Perhaps more telling, Viacom has made fewer visible changes
at the top of CBS news than G.E. and Disney did when they
took over their networks.
In many ways, CBS is still recovering from the leadership
of Lawrence Tisch, who "rescued" the network from
a hostile takeover in 1986 and then slashed the news division,
cutting loose 230 news employees and cutting the news budget
by $30 million.
Westinghouse, which came in and bought the network in 1995
and then sold it four years later, was little more than a
temporary caretaker.
News Sliver of the Pie Shrinks
The end result of the wave of mergers is that the news divisions
have become a much smaller sliver of their owners' pies and
thus much more likely to get lost in the big picture. They
are more likely to become part of a homogenized whole, rather
than a brand apart with a notably different mission than the
rest of the parent companies. The nature of the owners is
different as well.
Newspapers were, and to a large extent still are, owned by
newspaper companies. Radio stations and magazines may not
be owned by news companies, but they are still largely owned
by media companies. Networks operate differently. Two of the
big three networks that air nightly newscasts - ABC and NBC
- are owned by companies that make most of their money in
the world outside of media. (As noted above, a scant 6 percent
of G.E.'s revenue comes from media ventures, according to
calculations by Advertising Age magazine, while only 35 percent
of Disney's revenues comes from its broadcast and cable holdings,
of which news is a tiny part. More comes from theme parks
and film studios.
These companies have less of a history with the journalistic
mission of serving the public interest than most media companies,
and certainly less than most news media companies.
In these environments the news divisions are having a harder
time getting the investments they need to cover the news than
they once did (see Newsroom
Investment).
Barring a sudden change in ownership or these parent companies
selling off their networks, it is hard to see how the situation
will change.
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