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 2002.1
- 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.2
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|
Source: AdAge, “100 Leading Media Companies”
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.3
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.4 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.5 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.6 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.7 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.8 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.9 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.
1. Advertising Age, 100 Leading Media Companies chart. Time/Warner and Comcast round out the top five. Online: www.adage.com.
2. Advertising Age, 100 Leading Media Companies chart.
3. These figures include all revenues from television operations: network income, owned-and-operated stations revenue, revenue from syndicated programming and all other operations.
4. “The Walt Disney Company Annual Report, 1999.” Online at http://www.reportgallery.com/work/disney99/dis99ar08.html.
5. “Mergers and Acquisitions,” Encyclopedia of Television, online at http://www.museum.tv/archives/etv/M/htmlM/mergersanda/mergersanda.htm.
6. James Peltz, “G.E would gain risk with assets; The firm would face Hollywood volatility in bid to boost growth,” Los Angeles Times, September 3, 2003, p. C1.
7. “Viacom, CBS merger gets OK,” USA Today, May 4, 2000, p. 2B.
8. “Laurence A. Tisch, investor known for saving CBS Inc. from takeover, dies at 80,” obituary, The New York Times, November 16, 2003, Section 1, p. 43.
9. Advertising Age, 100 Leading Media Companies chart.