Management of Television’s Big 3 a Study in Contrasts

It was like the boa constrictor swallowing the elephant.

In March, 1985, a modest-sized player in the media business, Capital Cities Communications Inc., agreed to buy ABC Inc. for $3.5 billion. The deal ushered in a new era of bottom-line orientation for the profligate TV networks, which were hurting from softened advertising and facing an onslaught of competition from cable operators and the prospect of even more from telephone companies and computers.

Months later, RCA, the owner of NBC, announced a $6.5-billion merger with General Electric Co. Then, in 1986, CBS’ biggest shareholder, Laurence A. Tisch, wrested control of that company from its longtime chairman.

Flash ahead a decade. The industry roiling of 1985-86 looks like a warm-up when matched against the mega-deals that burst into the spotlight last week: Walt Disney Co.’s surprise $19-billion offer for Cap Cities/ABC and Westinghouse Electric Corp.’s $5.4-billion bid for CBS. All eyes are now on NBC, which may be pondering a partnership or acquisition of its own.

Along the way, each network has taken its lumps and had its moments in the sun.

What happened in the intervening years to turn ABC, a laggard for much of its existence, into the hottest property in broadcasting and to render CBS, the onetime “Tiffany network,” a pale also-ran? And how did GE’s cost-conscious approach position NBC for the tumultuous times ahead?

Here’s a look back at how the Big Three have been managed. Their styles are a study in contrasts, with widely divergent results.

CBS

Larry Tisch is no dummy. Born in Brooklyn, he enrolled at New York University at age 15 and went on with his younger brother Preston Robert Tisch to build Loews Corp.--an empire made up of hotels, insurance, cigarettes and watches--from some down-at-the-heels New Jersey hotels.

But his decision in the 1980s to strip CBS of its interests in records and publishing and to whack away at even the broadcasting base in the name of saving money looks today like a classic management blunder. He chose to liquidate assets at a time when vertical integration was accelerating among other entertainment companies.

“Tisch’s approach of paring down to the core business and then not doing the core business very well really stands out,” said Grant Tinker, a producer who knows Tisch well and in the early 1980s engineered a resurgence at NBC as its chairman.

The irony is that, in the mid-1980s, CBS Chairman Thomas Wyman had initially embraced Tisch as a white knight who would protect the company from the likes of Ted Turner, the brash, ambitious founder of Cable News Network. Turner in 1985 proposed buying CBS for $5.8 billion. CBS fought him and won, in large part thanks to the support of tycoon Tisch, whose Loews holding company had accumulated 25% of CBS shares.

The tables turned the next year, when Tisch teamed with CBS founder William Paley to oust Wyman and take over the company. Tisch installed himself as acting CEO and, without a hint of remorse, set about carving CBS down to a pure-play broadcaster. No matter that the company’s Columbia Records was ranked No. 1 in the world. Tisch sold it off, along with publishing and other operations. From a payroll of 38,000, CBS shrank to 6,500.

The idea of a broadcaster unencumbered by other operations initially held some appeal for Wall Street, but then Tisch began cutting into the bone of his revered network, the home of such news luminaries as Edward R. Murrow, William Shirer, Charles Collingwood, Eric Sevareid and Walter Cronkite.

Bureaus were closed, correspondents who had dodged bullets on assignment in war zones were summarily axed, and big names like Bill Moyers and Diane Sawyer bolted for jobs elsewhere. Morale basically never recovered.

The cutbacks got so messy in 1987 that news anchor Dan Rather and a CBS producer signed an Op-Ed piece in The New York Times that was a bitter indictment of Tisch’s management: “CBS Inc. is not on the skids. CBS Inc. is a profitable . . . corporation whose stock is setting new records. But 215 people lost their jobs so that the stockholders could have even more money in their pockets. More profits. That’s what business is all about.”

Tisch also chose not to invest in cable, which was becoming a medium of choice around the world. As a result, CBS missed out on a global boom from which rivals ABC and NBC have both profited. CBS also, to its detriment, skewed its programming toward older audiences, rather than the 18- to 49-year-old crowd coveted by advertisers.

Oddly, for an obsessive cost-cutter like Tisch, the sky often seemed to be the limit when it came to CBS bids for contracts to broadcast baseball, football, basketball and the Olympics. But last year he got cold feet and, in a bombshell, ceded the rights to televise National Football League games to Rupert Murdoch’s upstart Fox network. That set in motion a string of events that arguably led to Tisch’s decision to sell out to Westinghouse.

CBS’ loss of the football contract infuriated Ronald Perelman, whose New World Communications owned several CBS stations that had to forgo millions of dollars in advertising revenues. So Perelman turned around and switched the stations to Fox, further souring CBS’ already shaky relationship with its affiliates.

That stations would switch from CBS to Fox was shocking to many in the industry. For CBS, it “was a disaster of the greatest magnitude,” noted Fred Silverman, who in his long career held posts at all three networks.

CBS didn’t do everything wrong under Tisch. In an intoxicating coup, it spirited away David Letterman, who has since reigned as the king of late-night television. And how did he thank the network paying him $42 million over three years? By constantly tweaking CBS on air, calling it the network that asks, “Hey, where did everybody go?”

ABC

Like Tisch, Thomas S. Murphy and Daniel Burke of Capital Cities Communications--named for the company’s first two television stations--in Albany, N.Y., and Raleigh, N.C.--were notorious corporate penny-pinchers. When Capital Cities’ purchase of ABC was completed in early 1986, people had low expectations for the perennially weakest network.

“They were viewed as low rollers, a very dull, pedestrian crowd,” said Everette Dennis, executive director of the Freedom Forum Media Studies Center at Columbia University in New York. “[But] exactly the opposite happened. They were the masters of good management and knew how to invest money.”

Early on, heads did indeed roll at ABC. But Cap Cities soon set about making strategic investments in overseas ventures and cable channels, notably ESPN for sports, Arts & Entertainment and Lifetime. As CBS was whittling away at its news division, ABC pumped money into its news gathering, helping to push ABC to the top of the heap on the strength of the weekday news with anchor Peter Jennings and programs such as “Nightline.”

Murphy and Burke cut costs “in a sensible way,” said Arthur E. Rockwell, an entertainment industry analyst in Burbank. “They didn’t create an atmosphere of constant fear.”

The “Tom and Dan show” won respect from ABC employees.

“[These] are guys you would pray to be running the company that bought us,” said Jeff Greenfield, who has been the political and media analyst at ABC for 12 years. “That is because they are in the truest sense grown-ups. They are not working out adolescent complexes and don’t see a need to abuse or neglect the people who work here.”

The nation’s youngest network (formed in 1941 from a radio network owned by Radio Corp. of America), ABC was the home of the nation’s first female anchor, Barbara Walters, and the 1977 miniseries “Roots,” which became the all-time highest-rated program. More recently, ABC was the first network to sign a deal with a cable operator (Continental Cablevision) allowing its stations to be carried on cable without paying a fee.

For the 1994-95 season, ABC ranked first overall, with NBC second, CBS third and Fox fourth.

Ken Auletta, author of “Three Blind Mice: How the TV Networks Lost Their Way,” noted years ago that Murphy came to appreciate that in Hollywood a network had to spend money to make money. This was clear in his decision to stick with ABC’s investment in ESPN, a sports cable channel that had barely turned a profit when Cap Cities arrived on the scene. ESPN today is the nation’s largest cable network and a well-known international brand, easing Cap Cities’ entry into other countries.

The promotion of Robert Iger to head ABC was, in the view of many entertainment industry observers, reluctant and belated. In fact, Cap Cities’ legendary investor, Warren Buffett, reportedly was so uncertain of Iger’s ability to follow in Murphy’s footsteps that he pushed for the sale to Disney.

Even so, Michael Eisner, Disney’s able chief executive, “recognizes talent, and he’s not buying distressed goods,” said Silverman, the longtime network executive. “[With ABC], Cap Cities knew exactly what they wanted to do. At this point in time they’re the most successful.”

NBC

Soon after General Electric took over NBC in 1986, GE’s tough-minded chief executive, Jack Welch, gathered the network’s managers for a meeting.

Brandon Tartikoff, NBC’s Wunderkind programming chief, presented a slew of growth projections. Welch told Tartikoff to put up the chart on ad revenues and the chart on costs, and he said, “You know, Brandon, pretty soon those lines are going to cross, and you’d better hope that the Japanese don’t want to get into programming.”

GE’s takeover coincided with the departure of Tinker, a highly regarded executive who, with programming chief Tartikoff, was credited with the network’s rise to first place with such hits as “Cheers,” “Hill Street Blues,” “The Cosby Show” and “St. Elsewhere.”

To succeed Tinker, GE installed a former GE financial services president named Robert C. Wright. The appointment of this new guard sent a strong message to Wall Street that the primary concern would be shareholder profits, and trepidation was rampant among the network employees. And, indeed, as elsewhere, cuts were made.

Like Murphy and Burke of Cap Cities, however, Wright recognized that growth would come from global expansion into cable and overseas programming, and he was willing to make the investments to improve NBC’s position. In the early 1990s, he took frequent drubbings on Wall Street as NBC’s revenue and ratings deteriorated and earnings plummeted.

But Wright, a delegator, and his programming managers righted the ship and improved the network’s prime-time performance, with such programs as “Seinfeld,” “Friends,” “Frasier,” “Mad About You” and “E.R.,” a hospital-set blockbuster that has achieved the kind of viewership that network executives had thought was a thing of the past in this fractured and fractious market.

When GE took NBC over, “it was just a network and a few stations,” Wright said. “My job was broadening the base.”

The network had an illustrious history. Back in 1919, Acting Secretary of the Navy Franklin Delano Roosevelt urged General Electric to set up a new company to buy out the British-owned Marconi Wireless Telegraph Co. When it began, the fledgling company, Radio Corp. of America, had at its helm David Sarnoff, a young immigrant from a Jewish ghetto in Russia.

Although some GE insiders sought to get rid of him, the visionary if poorly educated Sarnoff stood his ground. In 1926, with 5 million radio sets in use in America, he launched the National Broadcasting Co. network. RCA started what is considered the first regular television service in 1939, and then, in 1946, it became the first company to market a black-and-white television set.

Under Wright, NBC has found a niche in financial programming on cable with CNBC. It has part ownership of several overseas ventures. Among other properties, it has the only news, sports and entertainment channel in Europe; it has just launched a 24-hour business service channel in Asia and a Spanish-language channel in Latin America. To come by year-end is a business channel in Europe.

All this is drawing the attention of suitors as movie studios and others strive to cash in on the networks’ resurgent cachet.

Speaking Friday afternoon from a car phone in New York, Wright sounded weary but relieved: “We made it through the week without being bought.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

The Big 10

Westinghouse Electric Corp.’s planned acquisition of CBS Inc. would vault the company to No. 1 on a list of the largest television groups in the country. Capital Cities/ABC Inc., which has agreed to be bought out by Walt Disney Co., would be second. Top 10 television groups, ranked by how much of the U.S. television market they can reach: *--*

Number Market Rank Group of stations penetration 1 CBS/Group W* 15 32.0% 2 Capital Cities/ABC** 9 28.7 3 Fox Broadcasting 12 22.4 4 NBC 6 21.7 5 Tribune 8 20.4 6 Silver King Communications 12 18.3 7 Chris Craft/United Television 8 17.8 8 New World Communications Group 12 13.9 9 Univision Television Group 9 10.4 10 Gannett 10 9.9

*--*

* Pending FCC approval of Westinghouse’s acquisition of CBS

** Includes an Indiana television station held by Disney; also pending FCC approval of Disney’s acquisition of Capital Cities/ABC

Sources: Broadcasting & Cable magazine, National Assn. of Broadcasters

Researched by JENNIFER OLDHAM / Los Angeles Times

The Ratings Game

Over the year, the three big networks--ABC, NBC and CBS--have all held and lost the No. 1 spot in the ratings, which estimate audience size. The Nielsen ratings since the 1952-53 television season:

Season to date:

ABC: 11.3

NBC: 10.9

CBS: 10.2

FOX: 7.0

Source: Nielsen Media Research