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Can Murdoch Outfox CNBC?


On Dec. 15, the Time Warner (TWX) cable channel CNNfn aired its final programs after years of languishing behind CNBC's business news fare. Not that CNBC (GE) doesn't have problems of its own. Its ratings have plummeted since the Internet boom went bust. And CNBC's ever-changing prime-time schedule never seems to click with viewers. Bringing financial news to TV is no sure bet.

So why does News Corp. (NWS) Chairman Rupert Murdoch think he can muscle into financial TV news? Murdoch has said Fox will launch an all-business news channel in the summer of 2005. But even though his Fox News startup has eclipsed stalwart CNN in the ratings battle recently, it seems an odd time to dive into the troubled financial TV news segment.

ACE IN THE HOLE

Where others see risk, though, Murdoch sees a pot of money. While CNBC's ratings are down, the channel's relatively low-cost programming allows it to generate lots of cash for parent GE. It also gets a more-than-10% premium over what other cable networks charge advertisers, thanks to its high-net-worth audience of business execs and Wall Streeters. No doubt, Murdoch believes he can take some of that windfall away from CNBC. What's more, he's holding a clear ace: Roger Ailes, one of the architects of CNBC, moved over to head Fox News in 1995. Ailes is legendary within the industry for his ability to figure out what keeps mainstream America glued to the tube and, thanks to his CNBC background, he possesses an insider's knowledge of the competition.

So what's the likely plan of attack? Fox execs aren't talking, but industry insiders bet Murdoch and Ailes will differentiate Fox from CNBC by gearing Fox's financial fare less to high-end Wall Streeters and more to average folks. They're also apt to jazz up programs and generate buzz. That could include using the business pages of Murdoch's own New York Post as a prototype. The tabloid often breaks news and is a gossipy, lively read. If that experience can be translated to TV, "it could well succeed, too," says Tom Rogers, vice-chairman of TiVo and the NBC exec who oversaw the launch of CNBC in 1989.

Another strategy would be to hit CNBC where it's weakest -- prime time. The channel has dropped business shows at night and is still struggling for the right formula, even slotting reruns of Conan O'Brien. Fox already has a stable of strong shows to start with if it decides to move existing programming from its general news channel to the business channel. Ailes has claimed the five highest-rated business programs on cable are already produced by Fox News under its top business anchor Neil Cavuto, also a CNBC alum. It's not yet known whether popular shows like Cavuto on Business, Cashin' In, Bulls and Bears, and Forbes on Fox will migrate to the new channel. But either way, Fox has proved its ability to draw an audience.

CNBC execs say they're not worried about Murdoch. They insist CNBC, which generates an estimated $100 million-plus a year in cash flow, owes its success to a core audience of elite viewers, including many CEOs who have the channel on all day in their offices. CNBC Chief Exec Pamela Thomas-Graham says advertisers have responded to those viewers by paying higher rates for spots on the channel.

An early test will be whether Fox can secure broad distribution. CNNfn's failure to do so helped speed its demise: It was in only 30 million homes, vs. CNBC's 86 million homes and offices. Without that reach, it's hard to build the audience for strong ad sales. But Murdoch has clout. He can use News Corp.'s 13.5 million DirecTV (DTV) subscribers as leverage with big cable outfits such as Comcast Corp. (CMCSA) and Time Warner, since they'd like satellite distribution for their own programs.

So is there room on TV for another business channel? "If you look at the example of CNNfn, you may have the answer to that question," says Thomas-Graham. But as one TV executive says: "Rupert doesn't get into the game to be No. 2 or No. 3." Let the ratings war begin.

By Tom Lowry in New York


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