Abc Family Worldwide, Inc. Business Information, Profile, and History

Company Perspectives:

ABC Family--powered by the ABC brand and the resources of The Walt Disney Company--is the destination for quality, contemporary family entertainment. ABC Family offers a variety of programming appealing to all ages in the household--with an emphasis on adults ages 18-49. Distributed in over 80 million homes via cable and satellite, ABC Family is the only national family channel, providing viewers with the best in original and acquired movies, series, and specials.

History of Abc Family Worldwide, Inc.

ABC Family Worldwide, Inc. is one of a slew of cable networks owned by The Walt Disney Company. Operating as a companion channel for broadcaster ABC, ABC Family boasts more than 80 million subscribers in the United States. Programs airing on the network in 2002 included 8 Simple Rules for Dating My Teenage Daughter, Less Than Perfect, and That Was Then.

Origins

When the corporate banner "ABC Family Worldwide" was first unfurled, executives at ABC, and their overseers at The Walt Disney Co., found themselves staking a flag on an asset bearing the fingerprints of two previous owners. ABC Family Worldwide, in its new guise, represented the third incarnation of a cable network started by televangelist Marion G. Robertson, more commonly known as Pat Robertson. Although the cable network was frequently tinkered with, rebuilt, reconfigured, and revamped, the three major chapters in its history were engendered by the contrasting philosophies espoused by its owners.

Robertson gave up his job working for W.R. Grace in the late 1950s after becoming "born again." A talk given by a missionary at a New York hotel dramatically changed Robertson's perspective on life, prompting him to rush home, throw away a bottle of Ballantine scotch, take down a print of a Modigliani nude hanging in his living room, and enroll in a seminary school. After receiving a degree in sacred theology in 1959, Robertson bought a UHF station in Virginia, preferring television as his pulpit because the medium "was a terrifically powerful means of telling people about the Lord," according to his March 17, 1997 interview with Variety. Before long, Robertson had accumulated a string of UHF stations running from Virginia to Boston, the beginning of what became the Christian Broadcasting Network. In 1977, five years before Robertson sold his UHF stations, he began satellite broadcast of the Christian Broadcasting Network, airing the first show from the Mount of Olives in Israel.

Robertson's network essentially served as the vehicle for the televangelist's signature program, The 700 Club, a Christian newsmagazine show and prayer hour. Aside from The 700 Club and other Christian programs he produced, Robertson acquired other programming, provided it did not conflict with his strict moral code of conduct. When Robertson announced his candidacy for president in 1987, his son, Tim, began running the network, serving as president and chief executive officer. Among the first changes made by the younger Robertson was a name change, redubbing the channel The Family Channel. "We became aware we had to have a clear brand identification," Tim Robertson said in a March 17, 1997 interview with Variety. "People didn't know what (Christian Broadcasting Network) was and they didn't care. The minute you see 'Family' in all the listings, you know what we are. It really gave us a lift."

The Family Channel's performance within the Christian Broadcasting Network caused a problem not long after the name change. The channel was generating sufficient amounts of profits to create a tax issue for the nonprofit Christian Broadcasting Network. Consequently, a new company, International Family Entertainment, was created in 1989. The following year, International Family acquired The Family Channel from the Christian Broadcasting Network for $250 million.

After Pat Robertson's failed presidential campaign, Tim Robertson continued serving as president and chief executive officer. During the early 1990s, he focused on increasing The Family Channel's original programming, scoring considerable success in his efforts after acquiring MTM studios from a bankrupt British company in 1993. The acquisition, completed at a bargain price, gave International Family its own production arm to make Family Channel movies and programs for syndication. After installing a new production and programming team in early 1995, the network began to display substantial strength, presenting a lineup of syndicated programs such as The Waltons and Rescue: 911 in primetime, Home & Family and original game shows during the day, and original movies on Sunday nights. The Family Channel's ratings began to rise, prompting a host of media companies to take notice, including News Corp., run by mogul Rupert Murdoch.

1997 Acquisition by Fox

During the mid-1990s, Murdoch was endeavoring to combat cable stalwart Nickelodeon by creating a channel geared for children. As part of his effort, Murdoch partnered with a production company named Saban Entertainment, run by Haim Saban, whose claim to fame was the hugely popular television program Mighty Morphin Power Rangers. In 1995, the combination of Saban's company and Fox Kids Network created Fox Family Worldwide, Inc. (FFW). Murdoch, through News Corp., expressed interest in the network run by the Robertsons in 1996. In 1997, Murdoch and Saban struck a deal, paying between $1.7 billion and $1.9 billion for International Family, thereby gaining ownership of The Family Channel.

The change in ownership led to the second incarnation of The Family Channel. FFW executives, following Murdoch's mandate, sought to attract children and their parents to the newly reconstituted Fox Family Channel, but what they inherited was the legacy of a televangelist. Roughly 60 percent of the viewers were more than 50 years old. The programming geared for children and teens was minimal, prompting new Fox management, led by Rich Cronin, to implement a thorough reconstruction of the network. Management discarded programs such as Diagnosis Murder and Hawaii Five-O, and in their place built a lineup of acquired television series, movies, and specials tailored for children and teens during the day and family audiences during primetime. The attempt to lure a new stratum of viewers failed. In a May 28, 2001 interview with Variety, an FFW executive explained. "We flipped the switch on the programming changes in August 1998," Maureen Smith remarked, "and the 50-plus audience went away in droves, causing our household ratings to take a serious hit." Later in the interview, Smith continued: "... viewers perceived the new schedule as designed for kids. And during the day the kids did watch the channel. Unfortunately, their parents didn't show up at night."

In the wake of the August 1998 relaunch of the network, FFW labored to find its balance. Ratings fell, exacerbating the sting of a financial blow wrought by the acquisition of Robertson's International Family Entertainment. During the first six months of 1998, FFW reported a loss of $53 million after posting a profit of $40 million a year earlier, before the purchase of International Family Entertainment. The network floundered for much of 1999, as the realization sank in that the company had missed its target in the August 1998 re-launch. Cash flow, which had stood at $142.5 million in 1998, fell to $115.2 million in 1999. Primetime ratings for the beleaguered Fox Family Channel dropped 30 percent in 1999. Midway through the year, Saban had to secure a $125 million loan from Fox to pay off FFW's creditors and thwart a technical default on the network's $710 million bank loan.

The enterprise that had flowered during decades of existence under Robertson's leadership quickly soured in the grasp of Murdoch and Saban. Rumors of unrest between the two partners began to surface in 1999, with Murdoch reportedly rankled by Fox Family Channel's performance. Industry insiders speculated that Murdoch was considering exercising an option in his contract that allowed him to acquire Saban's 49.5 percent stake in FFW. Officials from both Murdoch's and Saban's camps denied the rumors, but there was no denying FFW's troubles.

Wholesale changes arrived in 2000, some initiated by executive order and others stemming from internal distress that smacked of a crew abandoning a sinking ship. During the first six months of the year, five high-ranking executives left FFW, including its president, Rich Cronin, who had been hired to spearhead the development of new programming in 1998. Cronin was fired in May 2000, followed by the resignation of Tom Lucas, FFW's senior vice-president of marketing. Several weeks later, Rick Sirvaitis, FFW's president of sales, also resigned, fueling another round of speculation by industry observers. A former Fox executive, wishing to remain anonymous, was quoted in the June 26, 2000 issue of Electronic Media, saying, "You've lost Cronin, you've lost Lucas, you've lost Sirvaitis. It's not a happy place right now." With the absence of the executives, FFW scrambled to cover its deficiencies in marketing, sales, and programming supervision. Saban assumed control over the day-to-day activities associated with FFW's sales and distribution.

Amid the turmoil, the business press published reports that Murdoch and Saban were looking to sell FFW, asking for an estimated $4 billion. As opposed to 1999, industry pundits in mid-2000 claimed it was Saban who was considering invoking the buyout clause in his contract with Murdoch's News Corp. A source, speaking on the condition of anonymity, was quoted in the June 26, 2000 issue of Electronic Media as saying, "Saban is absolutely over it--he wants out. He's just trying to make sure he gets a premium for it." In the same issue of Electronic Media, Saban fired back at the allegations that he was forsaking his turnaround efforts for brokering the largest sum for his stake in FFW. "It's categorically not for sale now--and not for sale ever," he averred. "We are absolutely committed to making this channel work."

In late 2000, Saban activated the clause in his contract with Murdoch that forced the News Corp. chairman to buy out his partner. The business marriage was over, but Murdoch preferred to sell FFW rather than acquire Saban's stake. Murdoch, through News Corp., began searching for an interested party, reportedly engaging in discussions with a list of potential suitors that included AOL Time Warner, Walt Disney, Viacom, Sony, NBC, MGM, and Comcast. Roughly six months after Saban announced his desire to cut his ties to FFW, negotiations stalled, reportedly because Saban refused to back down from $6 billion as the price tag for FFW. Meanwhile, conditions at the network, whose management had fallen to a Fox veteran, Maureen Smith, in June 2000, had not improved. Average household ratings in primetime dropped nearly in half, falling from a 1.3 average in 1998 to a 0.7 average in mid-2001.

2001 Acquisition by Disney

Eventually, a willing buyer for the troubled network was found. Michael D. Eisner, chairman and chief executive officer of Walt Disney Co., decided to acquire FFW, officially announcing the deal in July 2001. Despite the lackluster performance of the network, Eisner was excited about the acquisition, envisioning the strength FFW could add to Disney's property, broadcaster ABC. In a July 24, 2001 interview with the Rocky Mountain News, Eisner said, "This is really a unique purchase--a beachfront property which gives us unlimited growth. Combined with our current television assets, we can find ways to cross-utilize and cross-package the networks and their content." The deal closed in October 2001 for $5.2 billion, $100 million less than the price announced during the summer. For the price, the Disney empire eliminated a direct competitor to the Disney Channel in children's and family entertainment, gaining 81 million U.S. subscribers, 24 million subscribers in Europe, and ten million subscribers in Latin America. The acquisition also gave Disney a controlling stake in publicly traded Fox Kids Europe.

Following its purchase by Disney, FFW was put in control of the ABC Television Group and its name changed to ABC Family Worldwide. Plans for the new addition surfaced in late 2001, when ABC announced that it would revive ABC Family's vitality by using it as a secondary outlet for a range of programs, including primetime dramas such as Alias, family comedies such as The Wonder Years, and possibly repackaged news from ABC. Armed with a sister channel, ABC also was able to join in a growing trend that saw many in the broadcasting industry "repurpose" programs, that is, rebroadcast a program on cable shortly after it had appeared on network television. "Repurposing" was pioneered by USA Networks, Inc. in 1999, when the cable network aired NBC's Law & Order: Special Victims Unit nine days after the program had first appeared on the NBC network.

New ownership of the former FFW also meant new management. Maureen Smith agreed to guide the network through its transitional period as it moved from Fox to ABC, a period that ended in the spring of 2002. Smith was replaced by Angela Shapiro, who had joined ABC in 1995 as senior vice-president of marketing and promotion at ABC Daytime. In 1998, she was appointed president of ABC Daytime, later earning the additional title of president of Buena Vista Productions, a business that also served Disney's programming interests in cable and broadcast syndication. Under Shapiro's rule, which began in April 2002, ABC Family was expected to project a much broader definition of family, as Shapiro targeted the 18- to 34-year-old demographic coveted by advertisers. "The great part of being part of the Walt Disney Co. are synergies," Shapiro remarked in an April 1, 2002 interview with Variety. "If you look at the record of what we've done at ABC Daytime and Buena Vista Productions, we've partnered well with news, primetime, theme parks. We will look to do the same in the early stages at ABC Family."

Looking ahead, the future was uncertain for ABC Family. By September 2002, the network was undergoing its third major reconfiguration in four years, yet to shake free from the anemic performance tainting its operation under the management of Cronin and Smith. Under Shapiro, the network was recasting itself, developing a new lineup and a new brand identity. Starting in January 2003, Shapiro planned to air a Monday night schedule of original reality shows anchored by My Life As a Sitcom. More immediate plans called for the network to tout itself as "ABC Plus" on Saturday nights beginning in October 2002. Among the programs to be included on Saturday night were 8 Simple Rules for Dating My Teenage Daughter, Less Than Perfect, and That Was Then. Considering the network was in the process of negotiating carriage deals with cable operators such as Time Warner Cable, Cox Communications, and Cablevision Systems late in 2002, the success of the new lineup promised to decide much.

Principal Competitors: Fox Entertainment Group, Inc.; National Broadcasting Company, Inc.; Viacom Inc.

Chronology

• Key Dates:
• 1960s:Pat Robertson begins acquiring television properties, marking the beginning of the Christian Broadcasting Network (CBN).
• 1988: CBN Cable changes its name to The Family Channel.
• 1989: International Family Entertainment is formed to acquire The Family Channel.
• 1993: International Family Entertainment acquires MTM studios.
• 1997: Rupert Murdoch's News Corp. acquires International Family Entertainment, creating Fox Family Worldwide.
• 2001: The Walt Disney Company acquires Fox Family Worldwide, creating ABC Family Worldwide.