International Family Entertainment Inc.

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International Family Entertainment Inc.

2877 Guardian Lane
Virginia Beach, Virginia 23452
U.S.A.
(804) 459-6000
Fax: (804) 459-6427

Public Company
Incorporated: 1977
Employees: 280
Sales: $208 million
Stock Exchanges: New York
SICs: 4833 Television Broadcasting Stations

Founded in the late 1970s by televangelist and one-time presidential hopeful Pat Robertson, International Family Entertainment, Inc. (IFF) owns and operates a number of “family-oriented” entertainment companies. Its flagship operation, the Family Channel, is the fifth largest cable television network in the U.S., with over 60 million subscribers and a television household penetration rate of 63 percent. IFE also owns and operates two related networks, the Family Channel (UK) and the Cable Health Club, as well as MTM Entertainment Inc., the television production company founded by actress Mary Tyler Moore. Further, IFE operates a smaller live entertainment division, comprised of the Great American Entertainment Company, a producer of live country music variety shows in South Carolina, and Dorothy Hamill International, parent of Dorothy Hamill’s Ice Capades, a popular live figure skating show that tours North America.

IFE is an outgrowth of the Christian Broadcasting Network (CBN), Robertson’s not-for-profit television ministry. In 1960, the Yale Law School graduate and son of a former U.S. Senator purchased a failing television station in Portsmouth, Virginia, for $37,000. With only one camera and virtually no operating capital, Robertson began preaching to local residents via television. Success was slow until 1963, when Robertson created the 700 Club, an evangelical program once described as “a hybrid of telethon, talk show and Sunday school class” by Time magazine. The idea behind Robertson’s 700 Club was to find 700 viewers willing to support the program by donating $10 a month to cover basic operating expenses. Ultimately, more than 700 people donated to the operation, and by the mid-1970s the network was able to purchase two more television stations, one in Atlanta, Georgia, and the other in Dallas, Texas.

The popularity of the Christian Broadcasting Network did not soar until 1977 when CBN changed its name to CBN Satellite Services and became the first satellite-launched network on cable television, as well as the first network devoted entirely to religious programming. Financed primarily by viewer donations, CBN Satellite Services was considered by industry analysts to be a hazardous venture. The cable industry was still in its infant stages and there were no precedents on which Robertson could judge the success of a station devoted solely to Christian programming. At the same time, says TV Communications, “the company’s move to join Home Box Office and WTGC-Atlanta ... served as a political ‘plus’ for the cable industry. Religious programming provided a comforting addition to pay cable’s “R”-rated movies, [which were] just new enough to have the public curious but still skeptical.” Few in the industry expected the network’s success to come as quickly as it did. Within its first year, CBN had signed on 3 million subscribers, and could boast more potential viewers than all satellite services combined. By 1979, CBN’s subscription rate had grown to 5 million. The network’s religious format was so popular it spawned its own competition: People That Love (PTL) Television and Trinity Broadcasting, both of which broadcast via the same satellite system as CBN.

CBN’s initial cable television format consisted of one eight-hour programming block run three times daily. The network’s cornerstone remained Robertson’s 700 Club, but programming also expanded to include a number of Christian-oriented children’s programs, educational shows, concerts, and news updates. Although CBN began soliciting advertisers in 1977 (when it landed a $5 million advertising contract with Richardson-Vicks), the organization remained entirely non-profit, receiving about $5 million in viewer donations per year.

By 1981, CBN had 10.7 million subscribers and annual revenues of approximately $60 million. That year, the network underwent a second transformation, changing its name to CBN Cable Network and broadening its format to offer mainstream fare such as game shows, soap operas, and docu-dramas. Led by Robertson’s son Tim—who got his start in the company at age 16 and worked his way up the ranks after graduating with a B.A. from Columbia University—CBN sought to become “the place where everybody would turn for family programming.” The younger Robertson chose to imitate the format of the three major networks—soap operas in the afternoon, news at five, movies in the evening—based on the assumption that most viewers were already accustomed to that format.

The fundamental way in which CBN sought to distinguish itself was through content. “There’s a yearning inside of people for the ultimate meaning in life,” the elder Robertson told Time magazine in 1982. “We hope to come up with programs that provide answers to that yearning. The problem is not just sex and violence on the major networks, it’s the banality.” To that end, CBN aired Another Life, a soap opera starring, as Robertson said: “a mean, despicable, female J.R.,” based on the famous character from the television series Dallas; “a crazed person” who courts her; and “a nice Christian couple, around whom all this swirls.” In addition, CBN began airing The Waltons, a television series about a wholesome country family during the Great Depression, and a 26-week special on people who have had “miraculous encounters with God.”

In 1982, CBN built a $38 million headquarters in Virginia Beach, complete with a state-of-the art studio, a university, and an executive office center built in the shape of a cross. CBN signed contracts with Tele-Communications, Inc. (TCI), and ATC, two of the nation’s largest cable service providers, and by 1984 the network was beginning to turn a profit. As co-host of the 700 Club, Pat Robertson was becoming a nationally known figure, using his daily “sermonettes” to comment on everything from the busing issue to U.S. trade with Taiwan, and blasting Hollywood entertainment industry for what he perceived as its active contribution to the moral decline of society. In 1988, Robertson unsuccessfully ran for President of the United States on the Republican ticket, using his platform to continue his attack on Hollywood and to trumpet the “traditional family values” that he shared with the network.

Throughout the early 1980s, the general public identified CBN primarily with Robertson and its religious programs; however, about 78 percent of its programming was devoted to entertainment. As the network grew under the direction of the younger Robertson, it sharpened its image as a family-oriented network by offering the so-called “golden oldies” of American television: family situation comedies such as Father Knows Best and Hazel’, Westerns such as Gunsmoke and Bonanza’, and detective series like Remington Steele. By 1988, CBN had taken on the name “The Family Channel” in a move to position itself as more than a religious network. That year, it also began developing original programming. One of its first ventures, Border-town, an innovative rendering of the traditional Western series, became the number one original series on cable within a year of its introduction.

The network inaugurated yet another transformation in 1989 as CBN management became concerned that The Family Channel was growing too profitable to meet IRS requirements for a nonprofit corporation. In order to protect CBN’s non-profit status, the Robertsons joined forces with TCI Development Corp., a subsidiary of Tele-Communications Inc., to form International Family Entertainment Inc. (IFE), a holding company that would serve as parent organization for The Family Channel. In 1990, International Family Entertainment bought The Family Channel from CBN for $250 million in convertible securities. The Robertsons paid $150,000 for 4.5 million shares and a controlling interest in the company. Soon after the purchase, the two awarded themselves an additional 1.5 million shares. Tim Robertson became president. His father took on other executive duties, while continuing to host the 700 Club, which remained in CBN’s hands as a non-profit entity and was guaranteed a prime-time spot in the network. Initially, because The Family Channel was spun-off through convertible securities, CBN held 64.3 percent of IFE stock. It held no voting rights, however, and was thus able to retain its non-profit status.

By this time, The Family Channel was indisputably the top family-oriented network on the cable television system. Its subscriber rate of 48.5 million households far surpassed the 5 million or so subscribers to the Disney Channel, IFE’s nearest competitor. Its original programs, Rin Tin Tin —Canine Cop and T and T, were moderately successful. A fourth original series, Zorro, debuted in 1990 and quickly took second place behind Bordertown as the most popular original series on basic cable. Robertson’s conservative philosophy stood firmly behind every show that aired on The Family Channel. “You won’t see Murder on Elm Street on the Family Channel,” IFE’s programming executive announced in 1990 in the Christian Science Monitor. The younger Robertson echoed that sentiment: “At ‘fam’ we say let’s have programs that celebrate love and life. Let’s talk about values between husbands and wives and children, where they can have loving, caring relationships in which children aren’t smart alecks and the parents aren’t buffoons.” He added, “We feel there is very clearly an identifiable niche that exists there both for viewers and cable operators alike.” If the elder Robertson can be credited with giving a voice to the thoughts of the conservative, religious right, his son deserves credit for marketing it with incredible business savvy.

The Family Channel was not without its detractors, however. Many media analysts argued that programs such as Father Knows Best and Hazel presented an overly idealized version of American families. Others stated that the profusion of violent war movies and Westerns did not conform to the network’s declared intent of providing wholesome family-oriented programming. In defense, one Family Channel executive told the Christian Science Monitor, “We make exceptions for Westerns and movies because the violence is part of what actually went on and is far from most people’s daily lives. They don’t put fear in you of walking down a dark street at night or make you afraid to go camping.”

Less than a year after The Family Channel became a for-profit entity, it began a $4 million marketing campaign entitled “Accentuate the Positive.” The campaign ran for five weeks on ABC and CBS, as well as on a number of cable stations including TBS SuperStation, CNN, and ESPN. As a result of the new campaign, marketing costs jumped 27 percent in 1992. Programming and production costs grew by a similar percentage, as IFE continued to develop original programming, including three successful new series, Big Brother Jake, The New Zorro and Maniac Mansion. That year, IFE also began testing international markets when it entered into an agreement with Hyundai Corp. of South Korea, in which the automobile manufacturer advertised on The Family Channel and persuaded the South Korean government to authorize a “cable test run” of The Family Channel in its country.

In 1992, IFE made an initial public offering on the New York Stock Exchange which raised $46.2 million. According to the Washington Post, the Robertsons continued to hold 6 million voting shares, or 61 percent of the company, by then worth an estimated $96 million. Of the 3 million shares, the younger Robertson held 2.1 million and the elder held 900,000. In addition, Pat Robertson controlled the remaining 3 million shares through a charitable trust of which he was a beneficiary and the trustee. Although the trust produced no income in its early years, it could legally pay a beneficiary $2.4 million per year. Upon Robertson’s death, the remaining trust would revert to CBN.

After the initial public offering, the Robertsons encountered some public criticism for earning large profits off the sale of an organization that, essentially, was founded through religious donations. “It may be as legal as can be,” James Dunn of the Baptist Joint Committee on Public Affairs told Newsweek in 1994. “But to me it’s immoral to build your business empire based on tax deductible gifts to a ministry.” CBN remains Robertson’s ministry and its officials believe differently, stating that Robertson’s “business skills have enabled CBN to thrive in an environment that has crippled other ministries.”

As CBN has thrived, so has IFE. In 1993, it acquired London-based TVS Entertainment PLC, parent company of MTM Entertainment for $94 million. The acquisition gave IFE an extensive library of family-friendly television programs, including Hill Street Blues, The Bob Newhart Show and The Mary Tyler Moore Show. It also provided IFE with a platform from which it could launch an entry into the British cable television market. Within a year of the TVS purchase, a United Kingdom version of The Family Channel was established. Initial success was slow, as subscribers complained that the channel did not air enough British programs, but within a year the network was making a concerted effort to deliver programs that reflected its traditional family values and also appealed to British tastes.

In 1992, IFE also began a trial run of programs for two potential new channels: Cable Health Club and the Game Channel. The following year, IFE launched Cable Health Club, a 24-hour health and fitness club. The Family Channel continued to air new programs in the U.S. which were well received by viewers, especially the six-part animated children’s series The World of Peter Rabbit and Friends. In 1993, IFE ventured into live entertainment with the purchase of three theaters in Myrtle Beach, South Carolina, that showcase country music acts. Within the year, IFE added more clout to its live entertainment division with the purchase of Dorothy Hamill International, producer of Dorothy Hamill’s Ice Capades, one of the stronger touring shows in the volatile live entertainment industry. Revenues in the company’s first year after going public totaled $208 million.

In less than ten years, IFE transformed itself from a non-profit television ministry into an international entertainment company. Although the company remained committed to the principles on which The Family Channel was founded, it was now free to grow in fields that were previously off limits. Going into the mid-1990s, expansion seemed inevitable, given that the company held $140 million in cash reserves and had minimal debt. Further, the younger Robertson announced plans to establish The Family Channel throughout Europe on a country-by-country basis, and he believed that someday The Family Channel’s international audience would outnumber its U.S. audience. However, there were a number of obstacles to overcome in the process of establishing networks across Europe—among them different regulations concerning cable systems, as well as the more delicate matter of cultural preferences, which ultimately dictate the success of any entertainment venture. During this period, the company sought to expand in the U.S. as well. In 1994, it made an unsuccessful $40-million bid for the Nostalgia Network Inc., and most likely will consider other acquisitions. Given its already strong position in the cable television market and the Robertsons’ uncanny ability to turn a profit, IFE’s future success seems certain.