Networks Seek Their Niches

By SALLIE HOFMEISTER

Oct. 23, 1997 12 AM PT

TIMES STAFF WRITER

Rather than calling NBC a network, some executives there have taken to referring to it as a “programming service.” That’s a term commonly used to describe cable channels such as ESPN or MTV, which target discrete audiences with a distinct genre of shows.

Indeed, NBC is casting itself as the place to go for intelligent adult urban comedies in the “Seinfeld” vein. That’s a large niche, but a narrower variation on the tradition of broadcasting to the masses.

In another tactic borrowed from cable, all broadcast networks now set their logos in the bottom right of the screen during prime-time shows to remind viewers which channel--or “brand”--of TV they’re tuned to.

Meanwhile, cable channels are trying to fashion themselves after the big broadcast networks, moving away from reruns in favor of original fare and A-list movies once reserved for the networks. TBS, a cable channel owned by Time Warner Inc., recently paid $8 million for the rights to air Michael Douglas’ current movie, “The Game,” adding to an arsenal building since February that also includes Jodie Foster’s “Contact” and the Oscar-winning “Fargo.”

The once-distinct line between network and cable TV is vanishing rapidly as a proliferation of choices has eroded network dominance. And the phenomenon is likely to propel deal-making and reshape television into the next century.

In effect, both cable and broadcast networks are being treated by their owners as consumer products, to be managed like a Coca-Cola or McDonald’s.

“One challenge for broadcasters is to figure out who you are and to be true to who you are,” said Warren Littlefield, president of NBC Entertainment. “With ESPN, you know it’s sports. With MSNBC, you know it’s news. But for broadcast networks, you don’t know what you’re going to get. At NBC, we like how sophisticated adult comedies separate us from other programming services. It’s what we’re good at.”

The convergence of broadcast and cable was underscored this week when media mogul Barry Diller announced a $4-billion deal to acquire the major television assets of Universal Studios, including the highly rated USA Network cable channel. Diller aims to create a national rival to the major networks using an unproven hybrid of cable and broadcasting distribution to reach across the country. While USA reaches all 70 million of the nation’s cable homes, the dozen TV stations he already controls reach roughly 30 million.

Some aspects of Diller’s plan are unique, but the melding of cable and broadcasting--on both the distribution and the programming fronts--has been hurtling forward as the major networks’ share of prime-time viewership has narrowed to less than 50% from more than 90% in the 1970s.

In the glory days of network television, CBS, NBC and ABC were virtually the only games in town, serving up programming designed to be all things to all people. Viewers rarely traveled above Channel 13 on their dial and found mainly snow and static if they did.

Cable wiring changed all that, and today, it matters far less where you are on the dial--or how you get into the home--as long as you serve up something that appeals to some slice of the public that interests advertisers.

Cable channels pioneered the concept of niche programming with HBO, MTV and CNN. While no one cable channel approached the ratings of the networks, combined they now account for half of America’s viewing audience.

Broadcasters have learned from cable. Diller shook the broadcasting world by building Fox into the fourth major network for Rupert Murdoch’s News Corp. in the 1980s. Though Fox started out largely on UHF stations with obscure channel positions, word of mouth about the sassy irreverence of the programming built a following among a young urban audience underserved by the majors.

Eventually Fox graduated to first-class broadcast stations in most markets and broadened its reach with National Football League and other sports programs.

One consequence of Fox’s approach was a seismic shift in how Madison Avenue measures television audiences. Fox convinced advertisers that quantity is less important than the quality of viewers delivered--that young viewers could be more easily persuaded to change their spending habits.

This shift has benefited cable. Madison Avenue is pumping millions of dollars into cable channels with minuscule ratings to reach particular audiences.

Two upstart networks, UPN and WB, are taking the Fox formula even further. Jamie Kellner, who helped Diller build Fox, is aiming WB, Time Warner’s fledgling network, at a niche Fox retreated from in broadening its appeal: the youngest network viewers--kids, teens and young adults.

The animated Michigan J. Frog delivers the message as WB’s mascot and spokes-creature.

Kellner, the architect of the 3-year-old WB, says his research shows that while NBC’s “Must See TV” was last season’s most recognizable television slogan, Michigan’s “Dubba Dubba” (a stuttering play on WB) ranked second (first with teens).

That’s not bad, considering the far superior distribution enjoyed by NBC. Most cities have only four or five broadcast stations, meaning that there’s room for ABC, NBC, CBS and Fox affiliates, leaving any leftovers for WB and UPN. To compensate, WB is relying on cable to cover the 30% or so of the country not reached by its affiliates.

Diller’s latest plan is a twist on the same theme. Instead of filling in the gaps with cable as WB is doing, he plans to build on the strength of the USA Network, which shows a hodgepodge of broadcast reruns, wrestling and a few original shows. He will present programming from the channel simultaneously on a weak group of broadcast stations that nonetheless reach 30% of the nation’s households (although most of those overlap with USA households).

Reinforcing the brand, Diller said he would carry the USA logo to his broadcast stations, which he will convert over 18 months from existing home shopping programming to general-interest fare. The first station to convert--next April--will be branded Miami USA, followed closely by San Francisco USA and so on.

Yet, as Kellner noted, “Most people don’t believe that cable coverage can do the same job” as broadcast stations.

But he said cable can deliver ratings equal to broadcast stations if the programming is right.

As an example, he points to an unusual situation in Binghamton, N.Y., where Fox bought and converted the NBC affiliate, forcing NBC to be carried solely on cable. Nevertheless, the top-rated NBC still manages to beat Fox and its other rivals in the ratings there.

In addition to having programs such as “Frasier” and “Friends” that viewers crave, Kellner and others credit NBC’s success to the way it promotes its shows and consistently hones its brand.

“People in this business don’t know what a brand is,” said Kellner. “They think they can just repeat the call letters all day and have it stand for something. But you have to have a definable product, a Starbucks, a Nike. NBC does it the best of the networks, better than Fox.”

Networks want viewers to associate them with a simple concept that evokes a positive feeling, but that can be difficult for a culture steeped in the tradition of reaching the greatest number of households.

NBC tries to reinforce its identity as a place for comedy with such teasers as “Night of a Thousand Laughs.” CBS, with an older audience, tried to lure young viewers with edgier shows, but lost so many viewers it has returned with the cozy theme “Welcome Home.” Media critics say many of ABC’s programs don’t match its slogan “TV is Good” or its witty new ad campaign.

In the future, perhaps within 10 years, digital technology will deliver 500 or more channels to the home. At that point, experts say there will be little distinction between network and cable channels.

The primary difference will be in the packaging of channels or families of channels with similar programming. “The big networks are now protected by the efficiency of their distribution, but everyone hits a level playing field in a digital world,” Kellner said.

Experts expect established names to have the edge, which explains the race among the studios and networks that dominate television today to imprint their brands in viewers’ minds before they get lost on the rows of shelves in the digital supermarket.

The search for properties that can be developed as national brands has resulted in unprecedented prices for cable channels. News Corp. paid $1.9 billion for The Family Channel and Universal Studios took control of USA Network and the Sci-Fi Channel in a deal that valued the services at $3.4 billion. When the Walt Disney Co. purchased ABC and ESPN last year, ESPN was given a higher value in the deal than the network.

Industry executives say NBC’s purchase this season of additional runs of its most popular comedies will allow the network to reinforce its image as the place for a certain brand of entertainment. While series suppliers typically sell networks rights to two runs of the 22 episodes they produce in a season, NBC bought the rights to three runs for “Seinfeld,” “Frasier” and “3rd Rock From the Sun.”

Fans of “ER” and most top shows tune in for fewer than half of the original episodes, meaning NBC can get more mileage by repeating those hits on other nights. In April, a rerun of “Seinfeld” on Monday night drew 11 million viewers, a healthy rating representing nearly two-thirds of its regular Thursday audience.

“Cable was built on repeats,” said Donald Ohlmeyer, president of NBC West Coast. “Cable has proven that repetition is not as onerous as people thought.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Now and Then

Copying the successful approach of some cable TV networks, the major television networks have begun narrowing the focus of their programming efforts. For example, NBC’s current “Must See TV” lineup on Thursday nights targets upscale urban viewers with a gritty medical drama and four half-hour sitcoms billed as sophisticated comedies. In contrast, NBC’s Thursday lineup in 1967 was much broader in focus: a family-oriented Western, an hourlong courtroom saga, a half-hour detective drama and an one-hour variety show.

Top 10 Networks (in millions of operating cash flow)

Estimated 1996

1. NBC: $485

2. ESPN: $432

3. ABC: $375

4. HBO/MAX: $350

5. QVC: $297

6. CBS: $235

7. WTNT: $230

8. NICK/Nick at Night: $201

9. CNN: $189

10. USA Network: $189