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POWER LUNCH by Ronald Grover December 10, 1999

Does Oxygen Have Enough Money to Burn?
Geraldine Laybourne is going to have to spend a lot to get women to understand "convergence"

It was 9:15 a.m. at the Hilton Hotel in Beverly Hills, and Geraldine Laybourne, the woman who gave America Nickelodeon, looked lost. One hand clutching a Styrofoam cup with coffee, the other a laptop, the 52-year-old Laybourne scanned the half-filled Hilton ballroom for people to help set up her presentation before an Internet conference. "I know they're here somewhere," she said. "They promised."

If it's searches you want, Laybourne is on quite a quest these days. With such glitzy partners as TV talk-show host Oprah Winfrey and Cosby Show producers Tom Werner and Marcy Carsey, Laybourne is trying to launch Oxygen, the first full-fledged "convergence" network -- a network that will move its viewers back and forth from one channel on the Internet to another on cable TV. If that sounds a little fuzzy, don't worry. Nobody else -- inlcuding Laybourne -- clearly understands how it will work yet, either. "I know, you hear the word 'convergence' and you groan," she tells the conference. "Well, we all know that it's coming, even if we don't know where or when."

Still, Laybourne and a hardy band of optimists think it's not only coming but that when they refine the concept, it will make them money. Walt Disney Co. has invested, as has billionaire Paul Allen, and AT&T (through its TCI cable-TV unit). Not that anyone figures this is going to be easy. "It's daunting," says Laybourne herself. And how! For starters, Oxygen's first effort, an Internet site it launched in May, was panned by critics and redone in October. Even then, there were still raspberries (see BW Online, 11/24/99, "Go to Oxygen.com If You Can Never Get Enough Oprah").

CARRIER DEALS. Meanwhile, Oxygen's cable channel, scheduled to debut on Feb. 2, has agreements so far to be carried on cable systems serving only about 10 million of the country's 70 million cable homes. It's short on advertisers, and it has plenty of established competitors that are already gearing up to provide tailor-made programming for women only -- Oxygen's stock-in-trade.

Do women really need -- or more important, do they want their own cable channel or Web site? Maybe. The Lifetime cable network lures 2 million every now and then, as it did recently with one of its patented women-in-danger movies, Total Stranger. And iVillage, the 25th-ranked site according to Media Metrix, attracted 5.4 million unique viewers in October. But to achieve that, iVillage, a four-year-old company, spent a steep $30.4 million in its most recent nine-month reporting period to generate revenues of $25.2 million. And this doesn't even count the $12 million in free ads that equity partner NBC kicked in.

Oxygen's basic problem is that it's independent. Sure, AT&T will likely put the cable channel in which it has invested on more of its cable systems, as will Paul Allen with his Charter cable systems. And America Online has given some of the Oxygen sites priority placement. Oxygen also has Oprah, who will no doubt promote the heck out her new investment to the 7 million or so folks who watch her talk show every day. Lifetime cable's great strength these days is its connection to ABC and A&E, two other media properties owned by Lifetime parent Disney. And even Oprah's reach pales next to the 10 million folks that NBC averages each day when it promotes iVillage throughout its schedule.

ECLECTIC PROGRAMMING. But all that assumes that there's a market out there for a second outlet for women's programming. Not being female, I'm not going there. But whether there is or isn't, Laybourne intends to spend an awful lot of money to give them programming. Insiders say the programming budget for Oxygen is north of $400 million, hefty stuff by Lifetime standards and off the chart for little ole iVillage. The programming is certainly interesting: an animated Breakup Girl to help women in sorting out relationships, Murphy Brown star Candice Bergen and Oprah hosting shows and chats, hand-held cameras showing up to film teens around the country in Trekkers, and Pajama Party, a talk show for teens with a PJ-clad hostess.

As for convergence, Laybourne offers up Drawn From Life, in which ideas from women are collected from online chats and then turned into hip, animated shows that are set to music. In one, a 20-something secretary in a New York PR agency talks about her truck-driving boyfriend and the postcards he sends her from around the country. In all, Oxygen, with more than 300 staffers toiling away in New York, San Francisco, and Los Angeles, intends to program a raft of Internet channels and provide more than 55 hours of original broadcast programming each week.

They better have a lot of money to blow through. To launch the cable channel alone, Oxygen will spent more than $10 million, including $2 million for an ad during the Super Bowl. That ad will run somewhere near those of some 15 other Internet sites that are cramming their own TV commercials between the field goals and touchdown runs. But will Oxygen get noticed? Not likely.

PLANTING SEEDS. For Disney and AT&T, Oxygen is just one of a number of investments they're making these days as they try to figure out where, how, and when the Internet will converge with the TV set. Paul Allen alone has more than 140 such investments, as he plants seeds along the Web in anticipation of what he calls the "wired world."

But for Laybourne, Oxygen is a bold move to restart a once-illustrious career. Her resume includes helping to launch Nickelodeon in 1979 and its successful creation six years later of Nick at Night for adults. But after jumping to Disney in 1997, Laybourne's career stalled when she was frustrated in her attempts to get Disney to launch its own all-news cable channel.

Oxygen has so far put Laybourne back in the limelight, including a cover story in Forbes and a lengthy piece in Newsweek. Still, all in all, getting publicity is easy. Getting eyeballs will be much more difficult. Even with Oprah warming up the audience.

Grover covers the media industry from his post as Los Angeles bureau chief

EDITED BY DOUGLAS HARBRECHT _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

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