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Media: CABLE NETWORKS
ROGER AILES FIXED CNBC, BUT NOW TED TURNER LOOMS
Roger Ailes insists he doesn't like to criticize rivals. But when prodded to explain why he thinks Ted Turner's powerful Cable News Network can't mount a credible challenge to his CNBC business-news channel, he warms to the task nicely. First of all, he says, Turner's estimate of what he'll need to spend to give chase to CNBC is pure bunk. "They're going to have to spend millions--and I mean millions--to make it work," Ailes contends. "Somebody's not leveling with the board about the cost of generating a full-time business-news service." (Hello, Ted?)
CNN will have to hire more business journalists, spend heavily to market the service, and muscle through distribution agreements, Ailes says. He guesses it will cost more than Turner is willing to spend. "Right now, they have a worldwide brand name for tragedy headlines," he figures. "The good news is, you can count on enough tragedies to keep people tuned in. If there are enough O.J.S and wars out there, they're gonna make a lot of money." (CNN, of course, disputes all of this except the part about making a lot of money.)
"UNNERVING." Ailes has never been short on opinions. To listen to him for more than five minutes is to wonder why he didn't opt for a career in talk radio. He has the natural ability--honed while burnishing the images of three Republican Presidents--to say things with such simple, lyrical self-confidence that, even if you don't agree with him, you have to stop and think about why not. "I've never had a conversation with him where I didn't have the sneaking suspicion that he knew more than I did," says one person who
has worked for him. "It's a little
The big surprise is that Ailes's bulldog style has adapted itself so easily to running a business. In the two years since NBC Inc. hired him, CNBC has become solidly profitable, ratings have improved dramatically for its prime time lineup of talk shows and daytime business news has found a devoted, if still small, following. The success has inspired NBC to launch a new business channel for Asia, and plans are in store for a European CNBC.
"BUZZ." Less surprising is that the former spinmeister for Presidents Nixon, Reagan, and Bush has been able to imbue his latest charge with that elusive quality called "buzz." "It's got a clear niche and it's profitable," says Frank J. Biondi Jr., CEO of Viacom Inc. "I'm watching it right now."
The question these days is whether Ailes will stick around. His contract with NBC is up in September, and he has to decide whether to renew by June 30. NBC has offered to extend negotiations, but Ailes says he'd like to make a decision on time. He's taking a week's vacation to think it over, and intimates say he is pondering two other TV jobs. (Fox Broadcasting Co. chief Rupert Murdoch, long an Ailes fan, has been mentioned as a suitor, as has CBS Chairman Laurence A. Tisch). "I love it here, I'm not going to make any bones about that," Ailes says. "But I've got to feel comfortable going forward." Says a top NBC executive: "I'd be shocked if he left."
What would make Ailes comfortable? "I want a say in strategy and the resources to win the battle," he says. Most important, Ailes insists, is that he be an integral part of managing the global expansion of Brand CNBC. NBC Chairman Robert C. Wright is confident Ailes will stay. Referring to several New York press reports about the negotiations Wright says: "He gets out there in the press because Roger is a very press oriented guy."
NBC clearly sees CNBC as a standard-bearer. On June 20, the broadcaster launched a separate 24-hour, Hong Kong-based business-news network called CNBC Asia that will feature 12.5 hours of locally produced coverage of the Asian markets during the day, supplemented overnight with live coverage of the European and U.S. markets produced by CNBC in Ft. Lee, N.J., and London. "We're literally live wherever the business day is unfolding," says Thomas Rogers, the NBC executive whose responsibilities include CNBC and CNBC Asia.
Over time, CNBC in the U.S. will migrate to a similar 24-hour global business-news format. But for now, prime-time and late-night slots are taken up with a slew of talk shows (table). Last July 4, Ailes launched a 24-hour, all-talk network called America's Talking (which features, among other things, Ailes's own celebrity-interview show). Assuming America's Talking grows past its current 16 million subscribers, CNBC's talk shows will ultimately move to that channel.
Viewership at America's Talking is so low, it isn't rated. Whether it can develop into a contender remains to be seen. CNBC is a clearer story. When Ailes got there in 1993, the network was losing substantial amounts of money. Although it had bought out its only rival, Financial News Network, for a rich $155 million in 1991, it hadn't done much with it.
AD MAN. Ailes quickly focused staff and advertisers on the slogan "First in Business, First in Talk." He upgraded production values and made sure guests booked for the daytime interview segments were movers and shakers. He also convinced NBC that he should oversee ad sales as well as production. "I said: `This is the only way I can do this job,"' he says. Revenue improved.
Ailes, who is still executive producer of Rush Limbaugh's TV show, is an inveterate conservative. But his vision for CNBC's evening talk format has less to do with politics than fostering compelling hosts of any stripe. Geraldo Rivera and his daily digest of the O.J. trial gets the best ratings these days, but the show wins plaudits for being particularly un-Geraldo-like. Says Ailes: "The mission here is not to appeal to the lowest common denominator of mankind. I mean, there are 30 talk shows out there, and they're all trying to find the most dysfunctional person in America to be the guest. They're not going to be happy until somebody shoots somebody else on camera. We're adding light to the public debate, not just heat."
Ailes is working now to make daytime business news more compelling. While it is better than when he got there, its ratings haven't done as well as the prime time talk formats. Indeed, business ratings during much of the day have declined slightly over the past year, although this may be attributable to the O.J. factor. Currently under review: The Money Wheel, CNBC's core daytime programming, which continually updates various market figures and indexes. Although viewers seem content, Ailes and daytime boss Jack Reilly would like something less repetitive--perhaps more interview shows like noontime's Inside Opinion. Its interviews with Administration officials often move markets.
The good news is that many of CNBC's viewers are rabid, well-heeled fans, such as Billie Bolden of Mount Carmel, Ill., who is retired and manages her own account. And missing from the ratings is almost half of CNBC's audience. The network has become a staple on Wall Street trading floors and in executive offices such as Biondi's. Most of those viewers keep the volume down and only turn it up when something interests them. Nevertheless, they add to the perception that the network is watched by rich people, which means CNBC can charge a premium for ads.
FAT MARGINS. Indeed, CNBC's business is based on niche economics. At $145 million, its revenues are puny compared with NBC's billions. But because it's nonunion and production costs are low, its operating margins are fat. "These things take off once they hit break-even," says Rogers. "The cost of getting the first subscriber is the same as getting the 40 millionth subscriber."
Expanding in Asia and meeting a possible challenge from Turner, however, will drive up costs. It is generally assumed that Turner can put together a service fairly cheaply because of CNN's vast news resources. Getting distribution for a new channel on cable systems, though, will be a multiyear project--even though the nation's four largest cable systems own 14% voting control of Turner. "We haven't automatically agreed to roll out the service," says Rob Stengle, senior vice-president of programming for Continental Cablevision Inc., one of the four.
CNBC Asia is another matter. Wright concedes that it is a major investment that will involve "tens of millions" of dollars. Competitors such as ABN, a joint venture of Dow Jones & Co. and Tele-Communications Inc., will pose a threat, and nobody knows what it will cost to win loyalty among Asian viewers. Sources in Hong Kong say CNBC is already spending more than anybody else to lure talent. The service is being run by S.K. Fung, a veteran Taiwanese broadcaster, who should help lend credibility to the venture. But, says Wright: "This is obviously going to take years to develop."
Ailes says he has no interest in running CNBC Asia. But he wants his opinions heard--including in Europe, where CNBC is now on NBC Super Channel. "When I got here, I felt CNBC didn't have a vision," he says. "Now that we're going worldwide, I want to have some input in that." One thing is for sure--nobody ever had to pry Roger Ailes open to find out his opinion.By Michael Oneal in New York, with David Lindorff in Hong Kong and David Greising in Atlanta