Cbs Television Network Business Information, Profile, and History
New York, New York 10019
History of Cbs Television Network
The world's second oldest broadcasting network, CBS Television Network (formerly CBS Corporation) was acquired by Viacom Inc. in 2000. The network provides television programs (including such hits as Survivor, 60 Minutes, and Everybody Loves Raymond) to more than 200 affiliate stations in the United States, including 20 stations owned by Viacom. During the late 1990s, CBS Television Network reversed a downward slide and rose to become the nation's top network.
In the late 1920s Arthur Judson, the impresario of the Philadelphia and New York Philharmonic orchestras, approached the Radio Corporation of the National Broadcasting Company (NBC), then the only radio broadcaster in the United States, with an idea to promote classical music by airing orchestra performances; NBC declined. Undaunted, Judson founded his own broadcasting company, which he named United Independent Broadcasters, Inc. (UIB), in 1927.
Lacking the strong capital base NBC was afforded by its parent, RCA, UIB struggled to stay afloat for several months. In the summer of 1927, however, Judson found a rich partner in Columbia Phonograph, a leader in the phonograph record business. Columbia Phonograph bought UIB's operating rights for $163,000; the new company was named the Columbia Phonograph Broadcasting System.
Columbia Phonograph sold UIB's operating rights back to the broadcasting company in 1928, however, apparently because the phonograph company was frustrated by a lack of advertiser loyalty. The broadcasting company's name was then shortened to the Columbia Broadcasting System (CBS), and its finances were greatly enhanced that year when William Paley--the son of a Russian cigar company owner who eventually helped CBS earn its reputation as a classy network--invested $400,000 in the company's stock.
At the time of Paley's CBS stock purchase, the company consisted of only 16 affiliated radio stations and possessed no stations of its own. Paley, who was quickly elected president of the company, tripled earnings in his first year. This success was accomplished by offering to prospective affiliates the network's entire unsponsored schedule at no cost, in contrast to NBC, which charged affiliates for all programs. In return for free programs, affiliates gave CBS airtime for sponsored broadcasts, allowing the network to assure contracted sponsors that airtime would be available. Within a decade, CBS added nearly 100 stations to its network. Since the number of affiliates a network possesses determines the number of people it can reach, which in turn determines what a sponsor is charged, CBS was soon on firm financial ground. By 1930 CBS had 300 employees and total sales of $7.2 million.
Although CBS fared well, NBC continued to dominate the entertainment-oriented broadcasting industry. Paley, viewing news and public affairs as a quick way for CBS to gain respectability, decided to explore the potential for establishing its own network news. In 1930 he hired Ed Klauber to institute a news and public affairs section, and in 1933 the Columbia News Service, the first radio network news operation, was formed. By 1935 CBS had become the largest radio network in the United States.
In 1938 Edward R. Murrow began his career at CBS as head of the network's European division. The first international radio news broadcast was initiated later that year with Murrow in Vienna, Austria, William L. Shirer in London, and others reporting from Paris, Berlin, and Rome. With these newsbreaks, CBS began the practice of preempting regular programming. Interruptions were planned for prime listening time--8:55 to 9:00 p.m.--and were intended to give the network a "statesmanlike" image.
CBS entered the recording business in 1938 with the purchase of the American Record Corporation. Later called the Columbia Recording Corporation, it soon became an industry powerhouse.
By the beginning of World War II, CBS employed more than 2,000 people, had annual sales of nearly $36 million, and boasted more than 100 affiliate stations throughout the United States. In 1940 the world's first experimental color television broadcast was made from a CBS transmitter atop the Chrysler Building in New York City and was received in the CBS Building at 485 Madison Avenue. The following year marked the beginning of CBS's weekly broadcasts of black-and-white television programs. Also in 1941, the government ordered NBC to divest itself of one of its two networks, which eventually gave rise to the American Broadcasting Company (ABC).
Post-World War II Activity
Although CBS continued to expand after World War II, NBC was still the industry leader. Under Paley's direction, CBS lured stars away from NBC by devising a plan in which the celebrities could be taxed as companies rather than as individuals, greatly reducing the amount of income they were required to turn over to the government. Jack Benny was the first major star to leave NBC for CBS; soon Edgar Bergen and Charlie McCarthy, Amos 'n' Andy, Red Skelton, and George Burns and Gracie Allen followed. Within a year CBS took the lead from NBC in programming, advertising revenues, and profits--a lead it maintained as the two networks further expanded into television.
In 1946 CBS submitted its color television broadcasting system to the Federal Communications Commission (FCC) for approval. CBS was confident that its color system would be approved, even though existing black-and-white sets could not receive CBS's color broadcasts. The FCC did not approve the system, calling it "premature." In the meantime, RCA had developed a color system that was compatible with existing television sets. The CBS method produced a better picture, however, and in 1950, when both CBS and RCA submitted their systems to the FCC for approval, only the CBS system was approved. But RCA appealed the decision, preventing CBS from marketing its system and gaining time to improve the quality of its own technique. In 1953 the FCC reversed and ruled in favor of RCA.
During the 1950s censorship became an issue in the broadcasting industry. The networks had always been sensitive to censorship pressure: the FCC was given authority to revoke a station's license if it did not serve the "public interest responsibly." In addition, advertisers were given permission to refuse to sponsor a program that they deemed offensive, and network affiliates could pressure the network into discontinuing a controversial program.
Censorship surfaced at all the networks during the early 1950s as U.S. Senator Joseph McCarthy's anticommunist campaign pressured networks and sponsors to blacklist certain actors and writers who were suspected of having left-wing associations. Although CBS was considered the most liberal of the networks, it required 2,500 employees to sign a "loyalty oath," which stated that they "neither belonged to nor sympathized with" any communist organization. In 1954 two CBS News commentators began to expose McCarthy's unethical behavior on the television show See It Now. The program helped to discredit communist paranoia, but proved so controversial that CBS eventually canceled it.
By this time there were 32 million television sets in the United States, and television had become the biggest advertising medium in the world. The period was marred, however, by a 1956 TV quiz show scandal in which CBS's $64,000 Question was shown to be rigged.
In the late 1950s, Paley hired James Aubrey as president of CBS. Aubrey, who purportedly thought that television programming had become too "highbrow," introduced such shows as The Beverly Hillbillies, Mr. Ed, and The Munsters. These series were extremely popular; in his first two years with CBS, Aubrey doubled the network's profits.
During the early 1960s, CBS embarked on a diverse acquisitions campaign. Before 1964 CBS had made only two acquisitions in its history, but from that year on the company made acquisitions almost every year. In 1964 the network purchased an 80 percent interest in the New York Yankees baseball team, which it sold ten years later. Acquisitions in the fields of musical instruments, book publishing, and children's toys were made throughout the 1960s.
By the end of the decade, CBS had 22,000 employees and net profits of more than $64 million. The network's most notable programming innovation of the decade came in 1968 with the debut of 60 Minutes, a television news magazine. The 1970s were a period of successful prime-time programming. In 1971 All in the Family debuted on CBS, and in 1972 both M*A*S*H and The Waltons were televised for the first time.
The 1970s, however, were also years of managerial turmoil. In 1971 Charles T. Ireland became the president of CBS but was replaced a year later by Arthur Taylor, who held the position for four years. Taylor was relieved of his duties when the network placed second in the Nielsen ratings for the first time in 21 years. John D. Backe, who had been president of the CBS publishing division since 1973, was chosen as Taylor's replacement.
Meanwhile, in 1976 CBS relieved reporter Daniel Schorr of all duties after he leaked a secret House Intelligence Committee report on the Central Intelligence Agency (CIA) to the Village Voice. He resigned from CBS several months later. And in April 1979, in a case involving CBS and two employees--correspondent Mike Wallace and producer Barry Lando--the U.S. Supreme Court ruled that journalists accused of libel may be forced to answer questions about their "state of mind" or about conversations with colleagues during the editorial process. The decision was a victory for former Lieutenant Colonel Anthony E. Herbert, who contended that he was libeled in a "60 Minutes" broadcast that aired in 1973.
In 1979 CBS finally began to divest itself of some of its diverse holdings, selling at least one business every year for the next few years. The following year CBS regained dominance in the prime-time TV ratings, a position held by ABC since 1976. One week after CBS took the lead, however, President Backe was forced to resign. He was replaced by Thomas H. Wyman, who had been a vice-president at Pillsbury.
CBS went to court again in 1982 after it aired the documentary The Uncounted Enemy: A Vietnam Deception. The case was the beginning of a long-running battle between CBS and retired U.S. Army General William Westmoreland, who filed a $120 million libel suit against the network. The dispute ended several years later when Westmoreland withdrew his charges on a promise from CBS that the network would publicly attempt to restore his character.
By the early 1980s CBS operations had been divided into six main categories: the broadcast group, which was concerned with programming and production of shows for the network, theaters, home video, and cable TV; the records group; the publishing group; the toys division; the technology center, which was responsible for research and development of new technologies; and various corporate joint ventures, including CBS/FOX Company, a collaboration with Twentieth Century-Fox to manufacture and distribute videocassettes and videodiscs. In 1986 CBS sold its book-publishing business to Harcourt Brace Jovanovich, Inc., for $500 million, and that same year the company sold all of its toy businesses.
In 1983 CBS, Columbia Pictures, and Home Box Office (HBO) joined forces to form Tri-Star Pictures, a motion picture production and distribution company. By 1984 Tri-Star had released 17 full-length films, nine of which it also produced, and in 1985 CBS sold its interest in the company. Another experiment was Trintex, a commercial electronic service that allowed people access to news, weather, and sports information; financial and educational data; and home shopping and banking from a personal computer terminal. Initiated in 1984, Trintex--a project from which CBS withdrew in 1986--was the combined effort of CBS, IBM, and Sears, Roebuck & Co.
In 1985 Ted Turner, owner of Turner Broadcasting System (TBS), announced his intentions to take over CBS. In order to prevent this, CBS swallowed a $954.8 million poison pill by purchasing 21 percent of its own outstanding stock.
In September 1986 Larry Tisch replaced Tom Wyman as chief executive officer of CBS. Tisch had previously served as the chairman of Loew's Corporation, which owned nearly 25 percent of CBS stock at the time. Following a power struggle between Tisch and Wyman, who continued to serve as president of CBS, William S. Paley returned as chairman of the board and Wyman was forced to resign.
Although Tisch was originally to serve only as interim chief executive officer, within four months it was clear that the job was his. He immediately began cutting costs at the network. Trimming $30 million from the news division budget, Tisch tried to reduce programming costs, cut hundreds of jobs, and sold a number of CBS publishing concerns. He also sold CBS Records to the Sony Corporation in 1987 for $2 billion, even though the subsidiary, which boasted such top stars as Michael Jackson and Bruce Springsteen, had been a perennial moneymaker for the company.
Tisch was soundly criticized for selling the number one record company in the industry at a time when the music business appeared to be healthy, and for trying to cut television programming costs when cable TV and other pay services were seducing viewers with a broader and higher quality selection. CBS's prime-time hits were getting old; in 1987 the network came in last in the Nielsen ratings. To make matters worse, CBS viewers tended to be older than the audience advertisers were trying to reach.
In 1988 Tisch, under fire from the CBS board and affiliate stations for lacking any long-term strategy, appointed 38-year-old Kim LeMasters to head the network's entertainment division. LeMasters' task was to find new programming that would appeal to younger audiences.
CBS entered the 1990s absent Paley, who died in 1990. The company soon experienced a pleasant jump in the ratings but was still coping with slumping revenues. In 1990 CBS, like other companies dependent on advertising, saw its income drop precipitously as the country remained stuck in a recession, and prospects for an economic recovery seemed bleak as a war in the Persian Gulf threatened to erupt. Also contributing to the poor fiscal performance that year were the huge hits CBS took on major sports contracts, particularly on professional baseball: the company was forced to swallow $171.2 million in losses.
CBS enjoyed a moral, if not financial, surge in 1991, as the broadcaster's ratings--last among the networks for the previous four years--jumped to number one, the most dramatic recovery in television history. CBS boasted five of the top ten programs, including the number one 60 Minutes, which became the only show ever to rank first in three separate decades. Although executives from other networks claimed that special events, such as coverage of the World Series and the 1992 Winter Olympics, accounted for the coveted ratings trophy, CBS pointed out that it had beat the competition in regularly scheduled programming and had consistently led NBC and ABC in the weekly ratings races. Industry observers credited this victory to a better stock of shows on CBS as well as an aggressive self-promotional and marketing campaign that outpaced those of the rival networks. Even controversy played to CBS's favor. When U.S. Vice-President Dan Quayle accused the show Murphy Brown, the third highest rated show on TV, of irresponsibly celebrating unwed mothers and the breakup of the traditional American family, CBS executives believed the political storm would only lead to greater viewer and advertiser interest.
Financial woes, however, overshadowed these successes. Despite reducing its dividend, cutting $100 million in operating costs, and scaling back personnel by approximately 6 percent--the budgetary ax fell on the company's flagship news division particularly hard--CBS saw revenue fall 8 percent and suffered a loss. Although the networks collectively did their worst business in 20 years, as total ad spending in the country declined for the first time in 30 years, 1991-92 was considered a banner period for television. American viewers were riveted by the Persian Gulf War, the confirmation hearings of Supreme Court Justice Clarence Thomas, and the dissolution of the Soviet Union.
However, CBS was not able to coast on these spectacles. As in 1990, the company racked up huge losses in its sports divisions, proving to some observers what had always been suspected: the network had grossly overpaid for its baseball and football contracts, which were to expire after their respective 1993 seasons. Despite projections of losses for its coverage of the 1992 Winter Olympics, CBS proudly revealed that it had broken even on the Games.
1995 Acquisition by Westinghouse
CBS lost the rights to NFC football games in 1993. This loss, combined with mounting financial losses and the lack of a move into cable, led to a vote of no confidence from one of CBS's top two institutional investors. In response, the beleaguered Tisch sold CBS to Westinghouse Electric Corporation in 1995 for $5.4 billion, marking the beginning of a dramatic era of change for the broadcasting company's new parent company.
Westinghouse, whose massive holdings included defense electronics, power generation, and nuclear engineering businesses, had experienced profound problems during the early 1990s. A lack of strategy, mismanagement, and a costly foray into the financial services business prompted the industrial giant's board of directors to recruit Michael H. Jordan, an executive from Pepsi, to lead the corporation to recovery. Initially, Jordan promised to restore Westinghouse to its former greatness as a technology-driven, industrial heavyweight, but he soon began to look toward other alternatives for the corporation's future. CBS, as it became apparent after Westinghouse acquired the broadcaster in 1995, represented Jordan's vision of Westinghouse's future, perhaps more so than anyone realized.
After abandoning a plan to split Westinghouse's diverse industrial holdings and CBS into two companies, Jordan decided to strip Westinghouse of all its industrial businesses and focus instead on broadcasting. Beginning in 1996, Westinghouse began transforming itself, in essence, into CBS, a process that required the industrial behemoth to peel away all its former strength and move headlong into television and radio broadcasting. In 1996, Westinghouse sold its Knoll Group furniture manufacturing operations, its defense electronics units, and its residential burglar alarm business. The following year, the company sold its Thermo-King business to Ingersoll-Rand for $2.56 billion and its power generation business to Siemens AG for roughly $1.5 billion.
By the end of 1997, Jordan had orchestrated $25 billion in deals to execute his strategy of turning Westinghouse into a broadcaster, a total that not only included the divestitures of the company's industrial holdings but also several important acquisitions. In 1997, Westinghouse paid $4.9 billion for Infinity Broadcasting Corporation, the second largest radio station network in the United States. Also in 1997, Jordan engineered CBS's belated push into cable by acquiring TNN (The Nashville Network) and the U.S. and Canadian operations of CMT (Country Music Television) from Gaylord Entertainment Co. for $1.55 billion. Additionally, CBS launched Eye on People, a news and entertainment network expected to bolster the broadcaster's presence in cable.
On December 1, 1997, with much of Jordan's major transformation work completed, Westinghouse changed its name to CBS Corporation and moved its headquarters from Pittsburgh to New York City. Following the sale of its power generation business to Siemens, the only vestiges of the former Westinghouse were the company's nuclear power business and a unit that handled nuclear material for the U.S. government. Both of these businesses were divested in 1998, acquired by Morrison Knudsen and British Nuclear Fuels. What remained was the newly diversified CBS, whose strength during the late 1990s had grown amid the swirl of corporate activity surrounding it. Although the network continued to attract an older audience, CBS's television ratings were encouragingly high during the late 1990s, eclipsing all rival networks. As the broadcaster prepared for the 21st century, ready to begin an eight-year, $4 billion contract with the NFL (having outbid NBC for the rights), the company's new management hoped to engineer a return to the past, back to the years when CBS dominated the industry.
2000 and Beyond
While CBS did return to supremacy, it was achieved under a different corporate structure. In 2000 CBS was acquired by Sumner Redstone's media giant Viacom Inc. for $45 billion. Under Viacom, CBS's cable networks and radio holdings were transferred to other Viacom divisions. CBS gained a new CEO, Leslie Moonves, as former CEO Mel Karmazin went on to take that position at Viacom. Within two years, Viacom had acquired and added to the CBS division the United Paramount Network (UPN), known for such programs as Buffy the Vampire Slayer and America's Next Top Model.
The ensuing success of CBS was, in part, due to the fact that "reality TV" rocked the television industry. These unscripted shows, featuring ordinary people in sometimes-extraordinary, unrehearsed situations, were a huge hit among viewers, and promised to become a cultural phenomenon with staying power. CBS's reality show Survivor was one of the most successful in the genre. Survivor, which placed a group of people from all walks of life in a secluded location and charged them with outwitting and outlasting each other in competition, pushed CBS in to first place in the 2002-2003 ratings race. Also instrumental in accelerating CBS's race to the top of the ratings was the show CSI: Crime Scene Investigation. The forensics show was a hit, edging the NBC medical drama ER away from the top of the Nielsen ratings.
During the 2003-04 television season, CBS introduced some shows that performed well, including Joan of Arcadia, and Cold Case. The network's most successful show, however, remained CSI, primetime's most-watched show (averaging 26.3 million viewers per week). In 2003, the company drew sharp criticism from some as it prepared to air a mini-series on former U.S. President Reagan and First Lady Nancy. When the show's scripts were leaked to the press, conservative and Republican interest groups protested The Reagans, which was not a necessarily sympathetic portrayal of its subjects. CBS eventually opted to shuttle the program over to Viacom's cable network Showtime for airing.
Principal Operating Units: Infinity Promotions Group; King World Productions Inc.; Paramount Television Group; Sportsline.com Inc.; United Paramount Network.
- Key Dates:
- 1927: Columbia Broadcasting is founded.
- 1928: William Paley invests in the radio broadcaster and becomes president of the company.
- 1938: Edward R. Murrow goes to work for CBS.
- 1964: Company begins an acquisition spree.
- 1979: Company begins divesting diverse holdings.
- 1995: Westinghouse acquires CBS.
- 2000: Viacom acquires CBS.
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