Dominant Chord in Country Music’s Mecca

As Nashville rises as a tourist destination, a convention crossroads and an entertainment and film center, national media conglomerates have discovered a well-entrenched competitor in the land of the honky-tonks.

Known primarily for its two cable networks--The Nashville Network (TNN) and Country Music Television (CMT)--Gaylord Entertainment Co. is as ubiquitous in Nashville as Disney is in Orlando.

When people go to Nashville for a vacation or convention, they more often than not stay at Gaylord’s Opryland Hotel, which will soon be the largest hotel in the U.S.--outside of Las Vegas. They might make a day trip to the Opryland theme park, play 18 holes at the Springhouse Golf Club or go see the Grand Ole Opry--all owned by Gaylord. Or they might catch a Gaylord water taxi or Gaylord showboat to downtown Nashville, where two of the most-visited attractions are the historic Ryman Auditorium and the newest country and western dance mecca, the Wildhorse Saloon. Again, both Gaylord assets.

Gaylord’s dominance of Nashville--plus the fact that TNN is in most cable homes in the U.S.--has made the company a potential takeover target.

“TNN is in 65 million homes in the U.S., making the company a very scarce commodity,” says Richard Read, an analyst with Arnhold & S. Bleichroeder, a New York investment firm. “People are killing to get that kind of asset.”

Focusing on the lifestyle of country music fans, TNN shows everything from country music variety shows to auto races to line dancing. It ranks sixth among cable networks in number of subscribers, behind ESPN, CNN, TBS, A&E; and Discovery.

CMT shows country music videos around the clock and is in about 2 million U.S. homes.

Gaylord corporate executives are declining to comment about takeover speculation, a small shift from December when Richard Evans, a former Disney and Madison Square Garden executive and now Gaylord’s chief operations officer, said flatly: “This company is not for sale.”

There are several companies regarded as likely suitors: Walt Disney Co., which owns ABC and ESPN and knows a thing or two about theme parks and hotels; Seagram Co., which already has a major country music-related asset in MCA Records and owns half of USA Network; ITT Corp., which recently acquired Madison Square Garden and Caesars World Inc.; and Westinghouse Corp., which just bought CBS and through its subsidiary Group W already owns a third of CMT and has a long-term contract to market TNN.

The relationship between Group W and Gaylord gives Westinghouse the inside track, analysts believe. “No one wants to be in bed with a potential competitor,” says David Shell, a portfolio manager with Liberty Investments, which owns about 4.1 million shares of Gaylord stock. “No one who has their own sales force would want to use someone else’s. And everyone knows that Group W takes a big chunk of revenue off the top of TNN.”

Specific terms of the agreement between Group W and Gaylord are not public. But some analysts have speculated that Gaylord might try to get out of its arrangement with Group W in order to make the company more desirable.

The company is controlled by a 75-year-old Oklahoma City newspaper publisher who maintains a low profile. Ed Gaylord, who also owns the Oklahoma 89ers minor league baseball team and has a minority interest in Western Pacific Airlines, generally avoids media inquiries about his public company. The Daily Oklahoman publisher did not return phone calls for this article.

Gaylord first bought into country music in 1983, when Houston’s American General Life Insurance Co. was looking to unload the entertainment and tourist-related remnants of its takeover of Nashville’s NLT Corp.

At that time, TNN had just been launched and was struggling. Gaylord acquired CMT in 1991.

Today, both networks are doing so well that clones are popping up. In December, Jones International launched a network called Great American Country. The network shows country music videos and plans to branch off into other types of programming. Jones, which owns cable systems that reach 1.4 million viewers, is dropping CMT in favor of its new network.

And in Nashville, Richard Speer, the son of Home Shopping Network founder Roy Speer, has spent more than $50 million building a broadcast and cable facility about four miles from Opryland.

Speer has been vague about his long-term strategy, but has hinted that he intends to eventually launch several cable networks that will combine the programming of narrowly targeted video channels with the marketing strategy of direct shopping networks.

Gaylord’s Evans does not seem concerned about cable competitors. “It’s happened before and it will happen again,” he says. “Cable networks aren’t something that you can just start up and all of a sudden you are making money. It takes years of deficit financing to successfully launch one of these businesses.”

Evans also feels that his two networks have had a lot to do with the rise of country music. “In 1983, country music was pretty much a regional art form,” Evans says, pointing out that since then, country’s portion of the music market has quadrupled to about 17%. Today, more than a fifth of all U.S. radio stations format country exclusively.

Analysts also see Gaylord as a major reason country will avoid going bust, as it did after the “urban cowboy” phase of the early 1980s. “CMT and TNN have taken country music’s marketing out of the Stone Age and broadened its audience,” Read says.

Gaylord went public four years ago. Then, in 1993, the company announced it was adding 979 rooms to its hotel--at $175 million, the largest construction project in Nashville history. It also built the Wildhorse Saloon and renovated the Ryman Auditorium--two projects now credited with sparking a revitalization of downtown Nashville.

The company has also started several new ventures, most of them based on country music fans’ other interests. It plans to build several more Wildhorse Saloons, and to promote them through TNN. It has a minority ownership in Bass Pro Shops, the Missouri-based hunting and fishing equipment company that sells through catalogs and superstores.

And Gaylord has several budding relationships with NASCAR. TNN broadcasts more auto races than any other network. Gaylord and NASCAR are launching a chain of retail stores called NASCAR Thunder that will sell officially licensed racing memorabilia at malls.

About the only thing not targeted at its core customer is Gaylord’s attempt to help Nashville acquire an NHL or NBA team. Evans says that has more to do with promoting Nashville’s growth than appealing to country music fans.

“The more that happens in Nashville in terms of concerts or events, the better,” Evans says, pointing out that most of Gaylord’s assets are here in Nashville.

One Gaylord follower borrows a term from the retail world to describe the company’s dominance.

“They’re a category-killer, like Home Depot or Office Depot,” Shell says. “Only instead of hardware or office products, the market they have cornered is country music.”

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PROFILE:

* Gaylord Entertainment Co.

* Headquarters: Nashville

* Employees: 5,000 full-time; 5,000 seasonal

* Top officers: CEO: Earl W. “Bud” Wendall

* Ownership: 35% of the stock owned by the family of Ed K. Gaylord of Oklahoma City. The Gaylord family retains voting control over the company.

* Assets:

* Opryland USA, a country music theme park in suburban Nashville

* The Opryland Hotel, a 1,900-room hotel and convention center next to the theme park (now being expanded to 2,900 rooms)

* The Nashville Network (TNN) and Country Music Television (CMT) cable networks

* Several tourist attractions in Nashville, including the Ryman Auditorium, the Grand Ole Opry House, the Grand Ole Opry show, the General Jackson showboat and Wildhorse Saloon

* A music publishing company in Nashville

* CBS television affiliates in Seattle and Houston

* Stock symbol: GET