BUILDING A NETWORK : Robert Johnson is positioning his cable company to be at the forefront of black media.

A few years after founding Washington-based Black Entertainment Television in 1980, owner Robert Johnson boasted that the nation’s only black-owned cable network--then barely breaking even with B-movies and music videos--would be showing more costly dramatic series and soap operas “as early as 1986.”

But even though the low-cost programming had made BET profitable by 1986, the promise of original shows aimed at black audiences eluded BET’s financial capabilities until this year when the network opened a $10-million studio and unveiled plans to air eight new shows, beginning Sept. 26.

With most of the nation now wired for cable television reception, Black Entertainment Television stands poised to become one of the most influential black-oriented media at a time when companies are targeting ethnic markets to increase sales. Many marketers have recently begun to focus a larger share of their advertising efforts on the nation’s more than 28 million black consumers, who control an estimated $240 billion in yearly income.

“I see no reason why BET cannot become the dominant place where blacks get their entertainment and also pull a significant crossover audience” of non-black viewers, Johnson said. For years, he added, “the industry undervalued the black consumer marketplace.” Cable is now expanding in urban markets “where blacks are concentrated.”

Available in Orange County

Considered a long-shot business venture when it began, BET has become a full-fledged 24-hour network. Its current lineup of videos, college sports coverage, movies, news and talk shows--though sometimes criticized as uninspired--is carried by about 1,300 of the nation’s 9,300 cable systems.

Many new systems with large channel capacity carry BET, including some in mostly white areas such as Orange County. However, the network is not offered full time by many older systems including, surprisingly, the 31-channel system that serves predominantly black Harlem, N.Y.

“It doesn’t have very high viewership,” explained Robert G. Benya, vice president of marketing of Paragon Cable in Manhattan. “We haven’t received anywhere near the number of calls for BET that we received for (cable networks) Lifetime or the Disney Channel.”

Still, BET reaches nearly 24 million households nationwide and has a prime time rating of 0.7. That means that between 8 p.m. and 11 p.m., its shows, on average, are watched by more than 150,000 households, making BET’s audience larger than that for video music channel Video Hits One (VH-1) or the Weather Channel, but far smaller than that for MTV and the entertainment and arts Discovery channel.

Johnson expects BET’s ratings to improve dramatically in the next few years as cable systems expand in urban areas such as South Central Los Angeles, New York’s outer boroughs and Washington.

Revenue Rising

Already, BET is commanding higher fees for its programs. Cable networks derive their income from the monthly fee that cable operators charge subscribers as well as from advertising. On Jan. 1, cable operators began paying BET 5 cents per household, twice the previous rate. And the rate will increase by a penny in each of the next five years, bringing BET about $75 million in revenue during the period.

“We feature BET as part of our marketing strategy in our direct-mail campaign,” said Perry Parks, district manager of Continental Cablevision of South Central Los Angeles, which is being wired for cable. “We did a viewer study and found that BET was one of the most highly watched and highly valued of the (52-channel) cable services we offer.”

For Johnson, who started BET with a $15,000 personal bank loan and a $500,000 investment from cable giant Tele-Communications Inc., the formula for success has been a simple one: “What John Malone (president of Tele-Communications) told me when he first invested was ‘keep your revenues up and your costs down,’ ” Johnson said. “The fact that we’ve been able to run BET in a cost-conscious fashion is just going to do wonders for us now that we have some dollars.”

BET’s frugality, however, hasn’t yet paid off for its three major investors--Tele-Communications, Great American Broadcasting Co. and Time Warner Inc.’s pay cable unit, Home Box Office, which together have $10 million in the enterprise.

“We have not recovered all of the money from our investment,” said Bob Thompson, a vice president of Tele-Communications. But he added that because Tele-Communications is a major cable operator, it receives “an indirect benefit from increases in (BET’s cable) penetration due to its programming designed specifically for urban audiences.”

It remains an open question, however, whether BET’s new program strategy will work.

The new $10-million studio and the creation of more original programming will mean higher operating costs. Most of the programs will be produced by BET’s staff, including two new talk shows, “Our Voices” and “Teen Summit.” Johnson insists that such “reality-based programming” will be the key to BET’s future success. But some say the new shows mimic existing syndicated black-oriented talk shows such as “Tony Brown’s Journal” and “Ebony Showcase.”

What’s more, adds Merrill Brown, editor of Channels, a New York-based magazine covering the broadcasting industry, advertisers’ appetite for original black-oriented programming is unproven. However, the network has attracted a surprisingly varied group of advertisers thus far, including Procter & Gamble, General Motors and Time magazine.

Still, Brown said, BET probably will need to modify its format because “videos are no way to build audience loyalty today when you can watch them on MTV and network TV.”

Some independent black producers who might offer BET an alternative to its current programming say they have had no success getting BET to back their productions.

Total Control

Frank Dawson, a black producer in Los Angeles who helped develop several network television shows while an executive at Universal Television in the mid-1980s, said he has been rebuffed twice by BET after approaching them with project proposals.

“Black producers by and large don’t have anything good to say about BET,” Dawson said. “Bob has all kinds of excuses about why black producers don’t get on BET. But what he wants is total control of everything that goes on the air from his own home base in Washington, D.C. There’s nothing wrong with that. I just think he’s limiting himself in terms of how successful he ultimately might be.”

Topper Carew, a black Hollywood film maker who produced the movie “D.C. Cab” as well as several television shows, including a recent comedy special for BET, is more circumspect. But he also feels that BET could improve its relationship with the black entertainment community.

“I did a comedy special for them that was well received by the audience, but I have not heard from BET since the show was aired” this spring, Carew said. “There is a market for black (TV) products, and it’s a fairly large market. I don’t know why” there’s a hesitancy to air the work of independent black producers, he added. “You have to ask them (BET) that.”

Johnson readily admits a distaste for Hollywood and the West in general. Aware that he’s speaking to a Los Angeles audience, he nonetheless declares that “black culture really resides . . . in New York, Atlanta, D.C., Philly--the Eastern seaboard.” Johnson also admits to having a greater interest in the business side of television than in programming.

“I don’t see myself as a programming genius or get excited about sitting around with Hollywood types talking about programming,” Johnson explained. “The middle name of (BET) is still entertainment and the programming is going to be entertaining. But it’s not going to be car chases . . . nor is it going to be laugh track comedies, which is what you see in black programming” on network TV.

Some agree with Johnson’s emphasis on costs and revenue over art.

“Black producers want Bob to go and do all the work; they only want to be involved in the creative process,” said Ken Smikle, editor of Target Market News, a Chicago-based publication that covers the black consumer market. “That won’t work in today’s competitive environment. They have to learn to barter their programs and get sponsorship like everybody else.”

Though BET will not disclose figures, industry analyst Larry Gerbrandt of Paul Kagan Associates estimates that in 1989 the network will realize $4 million in operating cash flow on $23 million in revenue. (Operating cash flow is revenue less expenses, before interest, depreciation and taxes.)

Launching New Magazine

Such estimates pale beside those of bigger cable networks such as ESPN, which is expected to rake in $100 million this year. But, Gerbrandt said, for niche programming “they do OK.”

Doing OK is not enough for Johnson, however.

Next month, he plans to begin publishing an upscale, black-oriented magazine, “Emerge,” in a joint venture with Time Warner Inc. and Syndicated Communications Inc., a venture capital firm in Washington. He said he also wants to set up a production company one day.

“What I see is positioning the company as a media company,” Johnson explained. “I basically want BET to become the dominant black media company in the world.”