At a time of considerable uncertainty about the future of network television, American Broadcasting Companies Inc. is making the boldest moves in the industry to carve out a niche in cable and pay television.
But those who have followed ABC's rise from a struggling third in the network wars as recently as eight years ago to a powerful player--and by some measures overall leader--in all phases of network television are not surprised that ABC is gambling with risky new ventures.
That's because ABC's small, family-like management circle views itself as it did 20 or 30 years ago; in those days it could not compete head-to-head with NBC or CBS, and offered a splintered schedule and lagged far behind its competition in number of affiliates.
As a result, ABC was forced to be different, in developing an entrepreneurial corporate culture and in being willing to take chances. Its risks have ranged from trying prime-time cartoons ("The Flintstones") and mundane comic shows ("Batman") to the more adventuresome and unprecedented 52-week sports anthology, "Wide World of Sports," its intensive and historic coverage of the Olympics, and its introduction of major miniseries like "Roots."
"It's fighting against all odds that made ABC what it is today," says Leonard Goldenson, the company's 77-year-old chairman, who assembled ABC in its current form 30 years ago next month.
"We were the last ones into the ball game and had no choice other than to establish one area at a time by being different and innovative," adds Frederick Pierce, who last week became only the third person to hold the title of president of ABC.
Goldenson, along with former president and newly named vice chairman Elton Rule, 65 and a 30-year ABC employe, and Pierce, 48 (who began with ABC as a researcher in 1956), have dominated ABC since its rise to network parity began in the early 1970s.
But it is Goldenson who, from his perch on the 39th floor at ABC's Sixth Avenue headquarters, is steering ABC aggressively into its new media activities. He shows no signs of losing touch with the marketplace or of giving up his place in the triumvirate.
Recent interviews with the top management team indicate that Goldenson sees the effort to move ABC into the new video marketplace as challenging as creating the network in the first place.
"We're not a manufacturer. We are going to be a software supplier in every line of distribution that comes along and shows that it has the viability to be successful," Goldenson asserts. "It's going to be a very exciting decade in which communications is going to be revolutionized in many forms, and we want to be a part of it."
The list of ABC's new ventures seems to compose a testing ground for the future of television. And that, remarks Herbert Granath, president of ABC Video Enterprises Inc., the umbrella subsidiary that includes all the new ventures, is precisely the point. "We decided we didn't know what would work over the long term so we decided to stick our toe in several different baths at one time," Granath says.
As if ABC's new efforts in advertiser-supported cultural, sports and women's cable programming weren't enough, the network was recently deeply involved in complex negotiations to purchase an interest in Showtime, the Viacom International Inc. cable service that is second only to Home Box Office in the lucrative pay televison world.
According to Goldenson, Twentieth Century-Fox, Coca-Cola Inc.'s Columbia Pictures and ABC were on the verge of buying into Showtime when Columbia backed out last month in part, apparently, to form a new Hollywood studio with CBS Inc. and HBO.
"We felt that with just one major movie company it would not be as viable," Goldenson said. "After Columbia got out we decided we wanted to stand off for a while and examine the situation." Nine days ago, Viacom, Warner Communications Inc., American Express Co., MCA Inc., and Paramount Pictures Corp. formed a new pay TV power to operate both Showtime and The Movie Channel, the Warner-Amex operation that is the third largest pay network.
But since the ABC subsidiary was established 3 1/2 years ago, it has entered a joint venture with The Hearst Corp. to produce the Alpha Repertory Television Service (ARTS)--a high-brow performing and visual arts service--and Daytime, a four-hour afternoon video "magazine" designed for women, which is set to double its air time this year.
ABC also is operating--in a joint venture with Westinghouse Broadcasting & Cable Inc.--Satellite News Channel, a 24-hour cable headline news service. In conjunction with Getty Oil's Entertainment and Sports Programming Network (ESPN), ABC is sharing some of its sports programming and, more importantly, may offer later this year a pay-per-view service, in which cable subscribers would be charged a fee for watching individual prizefights or other major events.
Further, in an agreement with Cox Cable Communications, the fourth largest cable operator, ABC is testing a variety of information, transactional and pay services, an operation about which little has been said to date.
In perhaps ABC's most dramatic and risky new venture, the company has announced plans to launch The Home View Network, a service that will utilize the signals of ABC affiliates to transmit scrambled pay television to subscribers' video recorders during the stations' off hours. (On the East Coast, for example, transmissions would occur between 2 a.m. and 6 a.m.) Testing of that venture begins this year, with ABC hoping to reach large numbers of the estimated 12 million to 15 million video recorders expected to be in the market in 1985, a tripling of the current recorder count.
Altogether, it is an ambitious package, one that is likely to drain ABC's resources for at least the next several years, with the only certainty being ABC's significant head start in the cable and pay-TV businesses.
John Reidy, media analyst for Drexel Burnham Lambert Inc., estimates that the entire operation under Granath probably lost about $26 million last year, a figure predicted to rise to $36 million this year and drop to about $25 million in 1984.
"You have to remember that nobody has any sure answers," says Reidy, who is firmly behind ABC's stock. "Advertiser-supported cable has not proved itself yet, and nobody is in the black yet in that business." But Reidy also notes that both Daytime and Arts seem to be carving unique spots on the cable platter. "ARTS ought to see the light of day and move into the black within a year or two," he says.
CBS' failure with the critically acclaimed CBS Cable, which it shut down last month, underscored the problems that plague advertiser-supported cable. With cable reaching, at most, 30 million homes, advertisers are leery, in a recessionary environment, of spreading their dollars too deeply over cable. "I had a lot of explaining to do when CBS Cable was canceled," Granath reports.
ABC's losses for ARTS, however, are "within acceptable limits," Granath maintains, while Pierce says revenues from the new ventures "have been in somewhat of a shortfall, but the distribution levels are exceeding our targets." ARTS has about 8.5 million subscribers, while Daytime has slightly fewer than 8 million. By the end of the year, the all-day, all-news venture expects to have 11 million subscribers.
Yet, it is ABC's firm position in television broadcasting--which permits its officials to call ABC the world's largest advertising medium--and its profitable radio operations, with six entertainment and news networks and 13 stations, that put it in the position to dabble in new video. ABC expects to report that 1982 was its second best year in history, behind only 1979, Pierce says. In 1981, ABC earned $146 million on sales of more than $2.44 billion.
But ABC's ratings this season have not lived up to expectations. The network has lost its prime-time lead to CBS, although it maintained a sign-on to sign-off lead over CBS and also a lead in the key marketing demographic group of 18- to 49-year-olds. The loss of Monday Night Football for most of the season accounted for half of its 1.5- to 2-point prime-time slippage this year, according to Reidy.
For the second half of the current season, ABC is pinning great hopes on two major miniseries, "The Winds of War" and "Thornbirds," although most analysts doubt whether even with record numbers for those shows ABC can catch CBS. "Several programs haven't worked out as well as we thought they would, but I think we can reach our goals," Goldenson says.
Meanwhile, CBS, having abandoned CBS Cable, is diversifying in other ways, planning other ventures, including a proposal to start a pay-television microwave service. CBS also is making a major move into the movie business with its new $400-million studio venture, while RCA Corp., third-ranked NBC's parent, is a partner in a pay television network, The Entertainment Channel.
But it is a long-term concern about the role of network television that, in part, is propelling the ABC moves. For ABC is, to use Wall Street's venacular, the most "pure broadcasting play" in the entertainment business, with 86 percent of its 1981 revenues from broadcasting and all of its profits essentially from the same source, which includes seven stations and its network operation.
In fact, even ABC executives acknowledge the basic thrust of estimates showing a steady erosion of the television audience to indepedents and cable outlets. The three-network share of homes watching television in prime-time (a different scale from the rating points) may drop from a current 81 percent to 64 percent by the end of the decade, according to some estimates. The standard network line, however, is that even with the development of other technologies, no other means will exist to reach that number of people.
Some competitors are skeptical, suggesting that ABC may be taking on more than it can handle. Goldenson, however, who as president of United Paramount Theaters bought ABC in 1953 after overcoming the initial objections of his own theater chain's board, relishes the challenge.
Not until the mid-1970s did ABC near parity with its two competitors. Only in 1975 did ABC introduce its own early morning program, "Good Morning America," which now leads in its time spot. And not until 1979, backed by successes in prime time and day time, did ABC really begin competitively entering the ratings game in news.
"We've been fighting against the odds all along and that same spirit still exists," Goldenson says.