A & E Television Networks Business Information, Profile, and History

Company Perspectives:

A & E Television Networks, a joint venture of The Hearst Corporation, ABC, Inc., and NBC, is an award-wining, international media company offering consumers a diverse communications environment including television programming, magazine publishing, web sites, music and home videos, as well as supporting nationwide initiatives.

History of A & E Television Networks

A & E Television Networks began modestly in 1984 with one cable channel, The Arts & Entertainment Network, which presented a variety of cultural programming, much of it British. By adding original programming and developing a strong franchise through its popular 'Biography' series, the network succeeded in attracting more viewers as well as launching new cable channels, including The History Channel, The Biography Channel, and History Channel International. By 1999 the A & E Network reached more than 78 million cable subscribers, while The History Channel was seen by more than 70 million households in more than 50 countries.

Focusing on Cultural Programming: 1984-87

The Arts & Entertainment Network (A & E) was formed in 1984 by four partners: American Broadcasting Co. Inc. (ABC), the Hearst Corporation, National Broadcasting Co. Inc. (NBC), and the Rockefeller Group. Its predecessors were two failed cable ventures, the ARTS cable service, which was a joint venture of Hearst and ABC, and The Entertainment Channel, which was co-owned by The Rockefeller Group and RCA, then the parent of NBC. The Entertainment Channel had been launched as a premium channel that required subscribers to pay an extra monthly fee. Herb Granath, head of ABC Video Enterprises, recruited Nickolas Davatzes from Warner Amex Cable Communications to serve as chief executive.

A & E was established as a cultural cable channel, but unlike its non-cable competitor Public Broadcasting Service (PBS), it was expected to turn a profit. In order to persuade cable systems to carry the new channel, A & E offered to set up video libraries of its tapes in local libraries. Known as the National Cable Library Project, this tactic won favor for A & E in hundreds of communities that were wired for cable.

When it began broadcasting on February 1, 1984, the Arts & Entertainment Network went to 1,500 cable systems with nine million subscribers. The network had one sponsor, and its principal asset was an agreement with the British Broadcasting Corporation (BBC) that gave it first rights to a range of British programming. In its first year, two-thirds of A & E's programming came from the BBC.

By mid-1986, A & E was carried on more than 2,200 cable systems in the United States and Canada and reached nearly 20 million cable subscribers. About 40 percent of programming came from the BBC, including a ten-part miniseries on the Borgias and a six-part miniseries on Sigmund Freud. The network's programming, acquired at bargain prices, was predominantly cultural and included jazz performances, operas, dramas based on literary classics, symphonic concerts, classic movies, celebrity interviews, and a variety of documentaries. It also broadcast reruns of series acquired from the broadcast networks to fill its 20-hour broadcast day.

As A & E approached its third anniversary, TV Guide offered this appraisal: 'Clearly, A & E is delivering some of the very best of the world's television. It has more actors, dancers, singers, and musicians on a daily basis than any network, and a range of arts programming never before done by an advertiser-supported TV network.'

A Broader Range of Programming: 1987-92

In 1987 A & E made an important decision to acquire the rights to the 'Biography' series, which initially aired once a week in the fall of 1987 and later became a key franchise for A & E in the 1990s. For its first three years, all of the episodes were acquired and nearly all were about historical figures.

The network turned its first profit in 1987, and in 1988 revenues surpassed $50 million, with an operating profit estimated at a modest $4 million. The network was reaching 37 million cable subscribers. From 1987 to 1997, it would enjoy an average growth of more than 30 percent per year in profits and revenues.

While A & E was still the home of fine arts programming, it had also added historical documentaries and several off-network sitcoms to its lineup. Such shows were cited as part of a trend away from 'narrowcasting' and were in fact an attempt to broaden the network's appeal. Its core audience at this time was upscale and over the age of 25. New programs, such as 'Living Dangerously,' which profiled people who liked to take risks, the weekly stand-up comedy series 'An Evening at the Improv,' and a 19-week variety show called 'Good Time Café' were designed to attract viewers between the ages of 18 and 25, and possibly even younger. A & E's broadcast of straight news footage of the Kennedy assassination in 1988 resulted in the network's highest ratings to date.

In 1990 A & E began commissioning original episodes of 'Biography,' after it acquired the 'Biography' library and trademark from the owner of the original series, which was broadcast in the early 1960s with Mike Wallace as host. New episodes covered contemporary political leaders and celebrities in addition to historical figures.

In 1991 A & E had four major programming categories: performing arts, drama, documentary, and comedy. Its daytime programming was filled with classic one-hour dramas such as 'The Fugitive,' 'The Avengers,' and 'The Rockford Files.' During the year it began publishing the magazine A & E Monthly, which served as a program guide.

A Boost for Original Programming: 1993-94

A & E achieved its best rating to date in February 1993 with a varied mix of comedy, drama, documentary, and performing arts. It registered a 0.9 average audience rating, representing 532,000 households during prime time, according to A.C. Nielsen Co. A & E's president and CEO, Nickolas Davatzes, noted that the programming budget was the network's single largest expenditure. During the past year the network had boosted domestic production, producing three comedy series--"An Evening at the Improv," "Caroline's Comedy Hour," and "Comedy on the Road"&mdash well as such new series as "Charlton Heston Presents the Bible" and "The American West." A & E also continued to maintain strong ties with international co-production partners, such as the BBC, with whom it did more co-productions than with any other partner.

Expansion plans outside the United States were limited to North America. A & E was reaching four million of the 6.5 million cable households in Canada and was in the developmental stages of expanding into Mexican households.

In June 1993 The Rockefeller Group sold its 12.5 percent interest to its three partners, Hearst, ABC, and NBC. The Rockefeller Group was the only partner without other television interests, and the company decided to sell its interest in A & E because it did not fit with its core business of real estate. The transaction left ABC and Hearst each owning 37.5 percent of A & E, with NBC owning the remaining 25 percent. The three remaining partners agreed to continue their agreement for an additional 50 years.

In December 1993 it was announced that News Production would produce 22 original episodes of "The Twentieth Century" for A & E starting in September 1994, with CBS news correspondent Mike Wallace as the host. The show was an update of a series that originally aired between 1957 and 1966 on CBS with Walter Cronkite as the host.

Ad revenues for 1993 increased by 30 percent to approximately $105 million. Profits rose 47 percent, although specific figures were not released, and total revenues were estimated at $147 million, a 27 percent increase over 1992. Davatzes termed 1993 "an absolutely defining year" for A & E.

A & E celebrated its tenth anniversary in 1994. It officially changed its name from Arts and Entertainment to A & E and redefined its range of programming, announcing that it would focus on three themes: original biographies, mysteries, and specials. Mysteries would include several whodunit-type series, and "specials" included miniseries and original movies. "Biography," which was expanded from one night a week to five, continued to draw some of the network's highest ratings.

Biography and History, Growing in Importance: 1995-97

Plans for a separate history channel were announced in early 1993, and a new production unit was established in June of that year. Start-up costs were not revealed, but were expected to be less than the $100 million it cost USA Networks to launch the Sci-Fi Channel. In preparing for the launch, A & E acquired a documentary library from Lou Reda Productions and also bought long-term rights for a substantial archive of documentaries from Hearst Entertainment, a subsidiary of one of its parent companies.

The History Channel finally premiered on January 1, 1995. The company expected between 500,000 and one million subscribers at launch. Initial programming included four prime-time series: "Year by Year," featuring documentary newsreels; "History Alive," with original and exclusive historical documentaries; "Movies in Time," including miniseries and movies such as "Shogun" and Gandhi; and both new and classic episodes of the documentary series "Our Century." Approximately 30 percent of the channel's programming would be original. The History Channel was also perceived as being able to drive the company's expansion overseas. Many of A & E's international co-productions left it without international rights for those programs.

A & E added 18 percent more original programming in 1994 and 1995, creating several original specials based on its most popular series, "Biography" and "Investigative Reports with Bill Kurtis." For the 1994-95 season, A & E commissioned more than 100 hours of "Biography" regular programming. Other key prime-time series included "A & E Stage," "American Justice," "Civil War Journal," and "20th Century." Altogether, A & E ordered more than 640 hours of first-run material for its 1994-95 season, up from 520 hours for 1993-94 and 447 hours for 1992-93. The network planned to stick to its principal genres: biographies, mysteries, and documentaries, plus a variety of specials. Its fourth quarter 1994 ratings were the highest in its history, up some 38 percent over the previous year. A & E's average prime-time audience was pegged at 636,000 households by A.C. Nielsen.

The History Channel U.K. was introduced on November 1, 1995, with three-hour blocks scheduled at 4--7 p.m. weekdays. It was A & E's first international venture, in partnership with British Sky Broadcasting, a U.K. pay-TV direct-to-home operator. A & E planned to make the channel a full-time network once its digital transponder was launched in 1996 or 1997. Filling the three-hour block were "History Alive," "Our Century," and "Biography," which was tailored for British audiences and featured a British host.

For 1995 A & E's prime-time ratings were flat, and there was a significant drop in daytime ratings, with the network losing daytime viewers to CNN and Court Television broadcasts of the O. J. Simpson trial.

By 1996 A & E's programming was 85 percent original, with only four out of 21 weekly prime-time hours not being original programming. January 1996 was the network's highest-rated month ever, due in large part to the success of the six-hour British miniseries "Pride and Prejudice," based on the 19th-century novel of the same name by Jane Austen. The series garnered a prestigious Peabody Award for the network. As a result, A & E planned to sign up more literary specials for the coming year.

For the 1995-96 season, a sixth night of "Biography" was added, called "Biography This Week" and featuring a profile of someone who had made news during the past seven days. In some cases existing episodes were updated, but in other cases A & E rushed to produce a new episode, as it did for Yitzak Rabin, George Burns, and Gene Kelly.

Following a six-month trial period, Barnes & Noble agreed to install A & E's "Biography" line of $19.95 videos in its superstores, which would number about 400 in 1996. Trade sources estimated A & E Home Video's revenues at $14 million, most of which came from direct response sales. About four to six new videocassettes were released each quarter, and the network had a catalog of some 100 video titles.

The History Channel proved to be very successful. It began its second full year with eight million subscribers, a figure that doubled to 16 million by April 1996. It was the number one station that cable operators planned to add, mainly because of its superior programming quality, according to a survey by Myers Communications. In May 1996 the New York Times called The History Channel "one of the most remarkable success stories in cable television." THC's strongest audience was male viewers between the ages of 35 and 64, and they tended to be more educated and affluent than the average television viewer.

The History Channel also led A & E's international expansion. In April 1996 Brazil's TVA, a pay-television service reaching 800,000 homes, signed a deal with The History Channel to launch a Brazilian version, to be called Canal Historia. In the United Kingdom, The History Channel U.K. surpassed the one million mark in subscribers in 1996, after Bell Cablemedia and Cable Tel began carrying it. THC was now being carried by five of the seven largest U.K. cable systems, giving it a 75 percent market penetration less than one year after being launched. In 1997 The History Channel expanded into the Nordic and Baltic regions of Europe, through an agreement with Modern Times Group, and also debuted in Canada. AETN International was the global division responsible for marketing THC outside the United States.

THC also expanded into radio and video in 1996. "From the Archives of the History Channel" debuted in September on ABC Radio Networks. The short features consisted of 60-second segments highlighting events and milestones that occurred on that date. Starting September 1, 1996, Borders Books and Music began offering THC videos in a dedicated space entitled, "Bring History Home."

By the end of 1996 THC had more than 35 million subscribers, adding 19.2 million subscribers during 1996 and projecting a total of more than 40 million subscribers by the end of 1997. It was carried in 70 of the top 100 markets and seen in almost every major American city.

A & E also continued to develop and expand its flagship series, "Biography," and to introduce related products. The "Biography" web site (www.biography.com) was launched in July 1996, a version of the series for children premiered in fall 1996, and a line of "Biography" audio tapes was slated for 1997. Original "Biography" made-for-television movies were also in the works. A & E was commissioning more than 130 hours of original "Biography" episodes per season, and its library included episodes dating back to 1961.

In 1997 A & E partnered with publisher Random House to publish short biographies of about 200 pages each. The first four "Biography" books, published in the fall of 1997, covered Muhammad Ali, Jacqueline Kennedy Onassis, Ronald Reagan, and Pope John Paul II. The trade paperbacks were published by Crown, a subsidiary of Random House.

Now in its tenth year, "Biography" was one of cable television's most respected programs, as well as being A & E's strongest brand. When it was first launched, it was a form of programming that no other network was doing, and the franchise continued breaking new ground. In April 1997 A & E launched Biography magazine, with an initial circulation of 100,000 and content that was created independently of the TV program. Biography replaced the eight-year-old A & E Monthly, a general entertainment magazine that doubled as a program guide. Biography benefited from the distribution clout of The Hearst Corporation, one of A & E's parent companies. By mid-1998, circulation had reached 367,000.

The year 1997 was A & E's most profitable and highest-rated in its 13-year history. It had an average 1.4 rating in prime time for the 1996-97 season, up from 1.3 for 1995-96. The network projected operating cash for 1997 would be $129 million, against total revenues of $322 million. The network reached more than 70 million cable subscribers.

Building on Strengths: 1998-99

A & E expanded its programming in biography, mystery, and documentaries for the 1998-99 and 1999-2000 seasons. There were about 130 original "Biography" premieres each season, and "Biography Movies" offered extended looks at P.T. Barnum, Lillian Hellman, and Dashiell Hammett, among others. Original mysteries were produced for A & E's "Mysteries to Die For" series, and different documentary series were shown each weeknight at 9 p.m. following "Biography: American Justice" and "Investigative Reports," both hosted by Bill Kurtis; "L.A. Detectives" and "Inside Stories," two new series; and "The Unexplained," which also featured Kurtis as the host.

THC announced that it would team with Mayflower Tours to promote tours to U.S. landmarks as part of a growing interest in historic travel. A special web site, www.historytravel.com, was launched, and trips were scheduled to Alcatraz and to Northeast seaports on a vintage rumrunner. A quarterly history travel magazine was also planned. These efforts were tied in to THC's Saturday morning series "History Channel Traveler."

By January 1998 it was clear that THC could become as successful as A & E. THC's success was attributed to several factors: a strong parent in A & E, which has helped promote the network; high-quality programming; few direct competitors; and an audience eager for history programming. As THC grew, it relied less on archive shows from A & E's library, many of them on military themes, and began to produce original programming. At the beginning of 1998 it had about 40 percent original programming, and it expected to have about 75 percent original programming for the 1998-99 season.

In October 1998 THC teamed with Madison Square Garden Network to develop several short-form programs to be called "This Moment in New York Sports History." MSGN planned to air the 30-second shorts during its coverage of New York sports events and its nightly SportsDesk news show.

In November 1998 A & E launched its first digital channels, The Biography Channel and History Channel International. The channels would be carried on Tele-Communications Inc.'s digital Headend in the Sky system. The commitment to digital format required A & E to spend up to $10 million annually to reformat programming from A & E and The History Channel for digital distribution and to rent transponder space.

In February 1999 The History Channel premiered its new slogan, "The official network of every millennium." In August THC posted its highest-rated prime time to date with an average 0.8 universe rating, equal to 500,000 households. Shows broadcast during the month included the premier of THC's original miniseries "The History of Sex." In September THC reported that it passed the 60 million mark in subscribers, making it one of the fastest-growing cable services.

A & E also continued to build its "Biography" franchise in 1999. Circulation of "Biography" magazine for the first half of 1999 reached 528,000, an increase of 44 percent over the previous year. Magazine advertising revenues for the first seven months of 1999 were up 250 percent, to about $5 million.

In the spring of 1999 promotion of four two-hour TV movies in the Horatio Hornblower series included cross-promotions by the American Library Association, Barnes & Noble, publisher Little Brown, and software maker Strategy First.

Original Programming, a Continuing Strength

A & E realized that its strength resided in the quality of its original programming. Since the A & E Network was formed in 1984, it had won numerous Emmy Awards and 88 Cable ACE Awards. After only five years, The History Channel was reaching nearly as many cable subscribers as A & E and was the second fastest growing television network in U.S. history. The company's two other channels, The Biography Channel and History Channel International, were positioned to grow once the cable industry and the viewing public switched to a greater acceptance of digital television.

Principal Divisions:The History Channel; The Biography Channel; History Channel International; AETN Enterprises; AETN International.

Principal Competitors:The Discovery Channel; Public Broadcasting Service.

Chronology

• Key Dates:

• 1984: Arts and Entertainment Network is formed and begins broadcasting on February 1.
• 1987: 'Biography' is introduced in the fall as a once-a-week prime-time series.
• 1990: The network begins commissioning original episodes of 'Biography.'
• 1993: The Rockefeller Group sells its interest in A & E to the three remaining partners: Hearst Corporation, ABC, and NBC.
• 1994: 'Biography' is expanded to five nights a week. A & E celebrates its tenth anniversary by changing its name from Arts and Entertainment to A & E.
• 1995: The History Channel premieres on January 1. The History Channel U.K. is introduced on November 1.
• 1997: Biography magazine is launched.
• 1998: A & E launches its first digital channels, The Biography Channel and History Channel International, in November.