Comedy Central Inc.

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Comedy Central Inc.

FOUNDED: 1991

Contact Information:

HEADQUARTERS: 1775 Broadway
New York, NY 10019-1903
PHONE: (212)767-8600
FAX: (212)767-4257 EMAIL: [email protected]
URL: http://www.comedycentral.com

OVERVIEW

Comedy Central was developed as a marriage of Time Warner's HBO and Viacom's MTV Networks. Both HBO and MTV had developed comedy channels, and neither of them was reaching a critical mass of subscribers. The union of the HA! and Comedy Channel efforts was named Comedy Central Inc. when it was launched in April 1991. By 1998 Comedy Central was reaching about two-thirds of the U.S. households that were equipped with cable television. Comedy Central was ranked second by millions of subscribers in 1996 after The Learning Channel, which had 54 million subscribers to Comedy Central's 44 million. In 1997 Comedy Central's subscribers numbered 49 million.

COMPANY FINANCES

Comedy Central spent its first five years as a money-losing venture. The channel's 1994 losses were not quite as steep as those in 1992 and 1993, but they were still a relatively significant $16.5 million. In 1995 Comedy Central lost around $11.0 million, and a year later it lost less than half that much. In 1997 Comedy Central earned its first profit. Profits were under $10.0 million, with advertising sales generating most of the station's revenues. Cable operators were not required to pay a large fee to carry Comedy Central, whereas they had to make significant investments to carry such channels as ESPN.

In 1991 the $8.0 million brought in through advertising represented 45 percent of the company's total revenues. In 1994 the $34.0 million in advertising revenues accounted for more than half of the company's total revenues. Advertising revenues came close to $60.0 million in 1996, with anticipated yearly increases of nearly $20.0 million. Viacom reported to shareholders that Comedy Central's improved performance could be seen in the price of advertising on the hit show South Park. Advertisers including AT&T, Snapple, and Calvin Klein paid up to $80,000 for a 30-second spot during the show.

ANALYSTS' OPINIONS

Television and cable have been extremely competitive industries in the late twentieth century. Many cable companies fold soon after they open shop. Industry analysts were largely skeptical that Comedy Central would find success where others had failed. Three years after the venture began, Comedy Central had a subscriber base of around 31 million and 10 million more than that had signed on within a few years. The skyrocketing success of South Park also brought kudos to Comedy Central. In 1998, 5.2 million viewers were counted watching the show during a two-week period. Almost one quarter of the show's audience was under 18, and close to 60 percent were in the 18 to 34 age range. Advertisers were eager to reach this market, knowing that during the airing of a popular episode, the advertisers could reach a potential 7-percent share of the market.

HISTORY

In 1991 executives at Viacom's MTV Networks and Time Warner's HBO decided to join forces rather than suffer as they both saw losing numbers in their attempts to add comedy cable channels. Thomas Freston of MTV and Michael Fuchs of HBO merged their networks into Comedy Central in 1991 and hired Robert Kreek as CEO. Kreek, a veteran at Fox, revamped programming, trimmed staff, and even gave away some national advertising. Comedy Central's forbears were Comedy Channel, which HBO had developed beginning in 1989, and HA! from Viacom's MTV Networks. Both of these channels ran into trouble getting subscribers. After initial outlays of close to $50 million, both stations were primarily featuring reruns of classic comedy, and both were losing money.

In the fall of 1990 Freston and Fuchs put together a joint venture, launching Comedy Central in April 1991. Putting some effort into original programming led to the early success of the topical show Politically Incorrect. The show was Comedy Central's flagship until it defected to ABC in the fall of 1996.

The two primary goals of Comedy Central were to get cable companies to offer the channel to their subscribers and to get advertising revenue. By the end of 1991 the cable giant Tele-Communications, Inc. (TCI) signed on and Comedy Central's subscribers numbered 22 million. This was the beginning, however, of a continuous effort by Comedy Central executives to keep their channel available through cable offers. TCI and other cable companies regularly add and remove channels from their service and viewers often resort to letter-writing and telephone campaigns to reinstate their favorite channels.

Things started turning around in 1995 when Doug Herzog was recruited away from MTV to become president and CEO of Comedy Central. Herzog spent 11 years at MTV where he was a programmer focused on changing MTV's video-only format. He replaced Kreek and developed new shows including The Daily Show, which focused on current events in the way Politically Incorrect had.

Herzog had a huge hit on his hands with the debut in the fall of 1997 of South Park, a raunchy animated comedy starring four third graders from a Colorado town of the same name. The eight- and nine-year-olds who talk like truck drivers soon developed a loyal audience, even in areas where Comedy Central was not available. Through the Internet and successful merchandising, the characters and vocabulary of South Park were everywhere.

FAST FACTS: About Comedy Central Inc.

Ownership: Comedy Central is a 50–50 joint venture of Time Warner Entertainment Company, a publicly owned company traded on The New York Stock Exchange, and Viacom International, a publicly owned company traded on the American Stock Exchange.

Ticker symbol: VIA (Viacom); TWX (Time Warner)

Officers: Doug Herzog, Pres. & CEO, 39; Eileen Katz, Sr. VP, programming

Chief Competitors: Comedy Central's competitors are other cable channels. In some ways, the networks are Comedy Central's competitors, as well. The top tier of cable channels is said to include: CNN; TBS; and The Learning Channel.

STRATEGY

In its brief history Comedy Central had a distinct goal of making niche in cable television. The officers and executives wanted to reach more viewers in homes. They used animated comedy shows to compete with game shows, and kept their programming lineup varied. In 1992 the cable industry was re-regulated by the federal government so until 1994, when the government relaxed its rules, the potential subscriber base for the channel was limited. Bob Kreek, Comedy Central's first president and CEO, worked within the limits of the regulations and also found innovative programming to add to the existing library of reruns the channel was showing. The Federal Trade Commission was also investigating Time Warner as it acquired Turner Broadcasting Systems and there was talk in 1996 that Viacom might purchase Time Warner's stake in Comedy Central. The commission's review came and went, however, and there was no change in the joint venture ownership of Comedy Central.

During the Republican National Convention in 1996 in San Diego, Comedy Central proved itself an able medium for yet another kind of programming. The network news coverage of the convention was limited and relatively uninteresting. Comedy Central dispatched correspondents Al Franken and Arianna Huffington, who provided humorous coverage of the convention. The hit show Politically Incorrect was also broadcast live from the convention site in San Diego. Not long thereafter, the show moved to ABC, and there was concern that Comedy Central was losing its flagship show. Bill Maher and the show became the weeknight post-Nightline show, but Comedy Central found success with other shows. The Daily Show became the network's place for topical humor. At the web site http://www.thedailyshow.com, the day's biggest stories are also promoted.

In 1997 Comedy Central's advertising agency, Holland Advertising, created an April Fool's spoof that was distributed as an Advertising Age circular. It included imaginary news events such as an article that changed the name of Time Warner to Turner Time, and an article on a new fragrance named for the advertising executive Jerry Della Femina. The circular also featured an advertisement showing Newt Gingrich eating crow, a broad parody of the milk mustache campaign.

Comedy Central strives to create original programming that is both irreverent and cutting edge. The channel's shows have been rewarded by the industry. Jonathan Katz won a 1995 Emmy for Outstanding Voiceover performance for his work on Dr. Katz. The series Win Ben Stein's Money won two Emmy awards for daytime television shows in May 1998. South Park won a CableACE Award for the Best Animated Series in 1998, and the show was on the cover of such varied publications as Newsweek and Rolling Stone. The show's creators, Trey Parker and Matt Stone, were awarded a NOVA Award from the Producers Guild of America for the most promising producers on television in 1998.

INFLUENCES

Larry Divney, the executive vice president of advertising sales, was Ted Turner's friend from Divney's days in advertising sales at CNN. Turner, the vice-chairman of Time Warner, knew that Divney was the man behind advertising sales and that advertising sales were the way Comedy Central would earn money. As for programming, Comedy Central was willing to take risks and discovered that aggravating some of their viewers was worthwhile if it got them the attention they hoped for.

CHRONOLOGY: Key Dates for Comedy Central Inc.

1991:: Founded
1994:: U.S. government relaxes cable industry programming rules
1995:: Doug Herzog becomes president & CEO; launches Radio Active
1996:: Politically Incorrect moves to ABC; starts the Daily Show
1997:: Earns its first profit; introduces South Park
1998:: South Park wins CableACE Award for Best Animated Series

CURRENT TRENDS

The popularity of Comedy Central's South Park has led to a multitude of merchandising opportunities. The licensed product line was worth $30 million in the late 1990s and South Park t-shirts, hats, and bumper stickers could be found across the country. The Internet provided Comedy Central with a way to reach viewers whose local cable providers did not carry the channel's programming. Many Comedy Central enthusiasts became fans of certain shows through Internet sites. For example, there are 250 unofficial web sites only for the show South Park. Comedy Central also made it a priority to have closed captioning available for much of its programming day. Reruns of such standard classics as Saturday Night Live and The Odd Couple are closed-captioned, and all of South Park's existing episodes are also closed-captioned.

PRODUCTS

In 1998 the best-known product of Comedy Central was its show South Park. While its cutout animation was not considered particularly clever or stylish, the characters are drawn in such a way that they are universally recognized by viewers young and old. South Park's creators are Trey Parker and Matt Stone, 20-something film-school classmates from University of Colorado at Boulder, who made a short video as a Christmas present commissioned by a Hollywood executive. The Spirit of Christmas was just the kind of twisted story that led to South Park. Comedy Central took a risk and hired them and made a huge success of these third grade characters from a Colorado mountain town. Stan, Kyle, Cartman, and Kenny (who gets killed on each episode), look cute with their big eyes and round faces, until the dialogue starts, and the plots begin to revolve around bathroom humor. But despite objections and outcry from parents and schools, the show posted some Nielsen ratings of 1.7 for the Wednesday night time slot at 10:00 PM, which previously averaged 0.5.

Some of the other popular programs on Comedy Central include Absolutely Fabulous, a British import with a cult-like following; Viva Variety, which gives a European spin to the variety show format; and Make Me Laugh, a television game show with contemporary comedians taped in front of a live audience.

The Daily Show started in 1996 and moved into the 11 PM time slot after the departure of Politically Incorrect. Dr. Katz: Professional Therapist was the first animated series about a therapist. In 1995 Comedy Central launched Radio Active, a live remote program that radio stations around the country used. Comedy Central gained a reputation through this show as source for comedy as well as a cable channel. The office lobby at Comedy Central headquarters became a lounge area used by dozens of stations in the first two years of the show.

GLOBAL PRESENCE

Comedy Central's International Business Development Division is responsible for oversees expansion. The division distributes original programming such as The A List, London Underground, and Two Drink Minimum. In mid-1998 Comedy Central announced new markets for some of its most popular shows. South Park will be seen in Argentina, Germany, New Zealand, and the Middle East. Dr. Katz will be available in Argentina, Australia, Belgium, New Zealand, The Netherlands, and Portugal. Viewers in New Zealand and Australia will be able to see Viva Variety.

EMPLOYMENT

Television and cable television are notorious industries for the people trying to build careers from within. Some of Comedy Central's employees began at HBO, some began at MTV, and many were hired along the way. The self-contained sales force from HBO's Comedy Channel had 20 members who started a new management team at the new entity. Larry Divney is the head of advertising sales and became one of the longest-remaining executives at Comedy Central. Those who work for him say there is a sense of freedom and self-direction at the company that encourages members of the sales force to achieve results at their own pace and that confidence and motivation extends to other areas of the company. Even the Comedy Central web site invites potential summer interns to submit resumes for a variety of positions at the company.