One business goal that consistently has eluded CBS chief William S. Paley is to diversify the company sufficiently so that it would derive at east half of its income from non-broadcast operations.
But despite numerous company acquisitions over the years that now account for more than half of CBS' total annual sales, the CBS network and the company's wholly owned and operated television and radio stations remain the corporation's true money machine, outpacing all the other operations combined in adding increased profits to the bottom line each year.
Even a pronounced slide in the prime time television ratings during the current season has left CBS largely unscathed because the demand for television advertising is more torrid than at any time in the history of the medium, and all the networks are benefitting.
In 1976, 53 per cent of CBS' $2.2 billion in revenues came from its non-broadcast operations, which include everything from CBS Records -- the world's largest record company -- to publishing giants such as Holt, Rinehart & Winston and Fawcett Books, magazines such as Woman's Day, Field & Stream, World Tennis, and Road & Track, musical instrument companies such as Steinway, Fender and Gulbransen, a chain of stereo stores, and a string of toy companies.
Still, the broadcast group accounted for $215.2 million, or two-thirds, of the corporation's $330.7 million in pre-tax profits last year, with Wall Street analysts estimating that about $150 million came from the network and the remainder from the wholly owned stations.
The $215.2 million represented a 25 per cent increase over the previous year and a generous return of nearly 21 per cent on advertising sales totalling $1.04 billion.
For 1977, the analysts estimate that revenues for the CBS/Broadcast Group will leap another 13 to 15 per cent, with profits rising somewhat faster.
CBS still claims to be the overall ratings leader when all parts of the broadcast day are taken into account. "More people spend more time looking at the total broadcast schedule of the CBS television network than they do at the other two commercial television networks," says Broadcast Group president John A. Schneider.
But because of ABC's commanding lead in the high-priced prime time period which has now been translated into advertising rates of $125,000 for a minute and even more, that network for the first time is expected to edge out CBS for the overall lead in broadcast advertising billings in 1977, as well as winning the evening ratings battle.
After 29 weeks -- one week away from the end of the regular season, ABC leads commandingly in the Nielsen averages with a 21.6 average, CBS is a distant second with 18.6 and NBC trials at 18.2. CBS managed to win the most recent week, breaking the ABC consecutive weekly win streak at 13. And since last November, when CBS sat in a stunned third position, it has managed to claw back to No.2, but this is due in large part to an even poorer performance by NBC.
Because broadcasting remains the heart of the company, and because CBS cannot depend indefinitely on a strong advertising environment to compensate for weak ratings, the network has embarked on a crucial development effort to bolster its fall schedule and soon will announce what could be seven hours of new programs, or an overhaul of fully one-third of its prime time offerings.
Even so, CBS broadcast executives concede that ABC's momentum will not be allowed easily, and they say that the earliest CBS could mount a challenge for the top spot in the ratings will be the first quarter of 1978.
William Paley's side-step as chief executive officer and president John K. Backe's expected assumption of that post in May therefore comes at an important juncture for CBS.
Backe, 44, was head of the CBS/Publishing Group when, to his surprise, he was asked by Paley last fall to step up to the presidency of the corporation with the idea that he would succeed Paley as the chief executive.
Backe said he hesitated initially about accepting the job, which amazed Paley. "The reason was we had had so many different styles of management come through CBS that I had to be very clear in my own mind what Bill and the board wanted as president. Because if they wanted a flamboyant person, making speeches, that wasn't my style," Backe explained.
But Backe said he became convinced that "I will be able to run the company in my own, and not somebody else's, style."
His own style is deeply grounded in the latest business management techniques. Backe received his initial training at General Electric, which has one of the most sophisticated managerial systems of any corporation in America. And Backe already has launched plans for a CBS management school similar to those found at GE and other large corporations in order to better develop managerial talent internally at CBS.
But given this orientation and his background primarily in publishing, some industry observers wonder how well organization man Backe will function as the head of a high-strung creative company such as CBS, and also how long he can survive in the shark-infested waters of network television. Wall Street, however, already has responded favorably to Backe.
In an interview, Backe said he finds "a great deal of similarity between publishing and broadcasting on the creative side, so I'm not uncomfortable about that at all.
"I'm trying to build an environment here at CBS where it's going to be stimulating for creative people," he explained, adding that, at the same time, he would exmphasize strict controls to achieve the corporation's business and profit goals division by division.
Backe said he was "particularly interested" in bringing together the creative talents that exist within CBS in the separate areas of broadcasting, publishing and recorded music so that the network might be able to break out of the "formula approaches" that exist in programming "to go a different direction or come in with a new form."
He already has become deeply involved in the programming decisions for the fall, and said the extent of his eventual involvement probably would be as great as Paley's but "our styles will be different." Backe said he would come in with "a more structured approach" rather than the day-to-day involvement Paley favored.
The CBS strategy for the fall will be to "whittle away" at the ABC lead rather than expect to swamp the rival network. CBS will continue to rely on the traditional series format for the core of its ratings success, but "with considerable flexibility in the use of the miniseries, the short burst and the made-for-TV film," he indicated. "If we spot any weakness at all, we'll have the flexibility to turn on a dime and make some changes."
As for the future direction of the corporation as a whole, Backe said he was "a believer in internal development" rather than growth and diversification primarily through acquisitions. The two parts of the company slated for the greatest expansion are the publishing group which he helped mold and the Columbia Group, which includes a grab bag of business ventures.
The publishing group, which just recently acquired Fawcett, along with its 30 specialty magazines, has a number of major projects in the works, including consideration of going into the newspaper business, according to John Purcell, the group's president who was brought in just last February from the Gannett Co. where he engineered more than $1 billion in acquisitions over the years.
Backe also said the potential within CBS Records for significant growth was underrated by those outside the company.