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Fox Broadcasting Company

Fox Broadcasting Company

founded: 1986



Contact Information:

headquarters: 10201 w. pico blvd.
los angeles, ca 90035 phone: (310)269-1000 email: [email protected] url: http://www.foxworld.com

OVERVIEW

In 1986, Keith Rupert Murdoch launched Fox Broadcasting Company, the first new television network in the United States since 1948. Within a decade, what started as an apparently risky broadcasting endeavor became a network capable of reaching almost 96 percent of U.S. homes through 20 stations and more than 176 affiliates. By 1996 Fox was the top-ranked television group in the United States, with 34.8 percent of market coverage, and the collection of U.S. broadcasting networks that used to be called "The Big Three" came to be known as "The Big Four": ABC, CBS, NBC, and Fox. During the "sweeps" of early 1998, for the first time ever, Fox Broadcasting rose from its fourth place position capturing 12.2 million prime time viewers and dislodging ABC from its third place spot with 11.7 million viewers.



COMPANY FINANCES

Financial information about a company like Fox Broadcasting—a subsidiary of a subsidiary (Fox, Inc.) of a giant corporation (News Corporation, Limited)—is very difficult to obtain. Consider that News Corp. is one of the largest media empires in the world, and along with owning Fox Broadcasting Company, it owns newspapers (the New York Post, four major British newspapers, dozens of Australian newspapers) TV Guide, a movie company (Twentieth Century Fox), a book publisher (HarperCollins), a 40 percent stake in a U.K. satellite pay-TV service (British Sky Broadcasting), a majority interest in STAR television, an Asian satellite TV network, an airline, the Los Angeles Dodgers, and a sheep farm. It's not surprising that details of Fox Broadcasting's financial costs and contributions are largely buried or entirely obscured in the enormous network of numbers and facts that make up News Corporation's financial statements.

Nonetheless, some details can be gleaned from Fox Entertainment Group's annual reports. The Corporation's three reportable television segments include television stations, a television broadcast network, and other television businesses. These segments get most of their revenues by selling advertising time. For the most part, that time is sold to national advertisers by the Fox Broadcasting Company and to national "spot" and local advertisers by the Company's group of 23 owned-and-operated television broadcast stations in their respective markets.

Revenue from television stations was $1.55 million in 2001, $1.63 million in 2000, and $1.5 million in 1999. For the television broadcast network, revenues were $1.8 million in 2001, $1.75 million in 2000, and $1.74 million in 1999. Revenues for other television businesses were $91 million in 2001, $97 million in 2000, and $118 million in 1999. Operating income for television stations in 2001 was $286 million, compared to $128 million in 2000 and $355 million in 1999. For the television broadcast network, 2001 operating income was $65 million, compared to $29 million in 2000 and $32 million in 1999. For other television businesses, operating income was $8 million in 2001, $11 million in 2000, and $3 million in 1999.



ANALYSTS' OPINIONS

When Fox Broadcasting began delivering programming in 1986, many were skeptical about its chances of success. Brandon Tartikoff, president of NBC Entertainment, called Fox the "coat-hanger network," referring to the fairly weak UHF TV stations Fox had collected. ABC programming master Fred Silverman referred to Fox as "The Mickey Mouse network," and added that "Fox will fail."

Famously, Fox didn't fail. For the first time, Fox bumped one of "The Big Three," ABC, for the spot of third-ranked network in the sweeps of early 1998. Sweeps are considered important for broadcasters because networks use ratings to determine advertising charges. But some, like Christopher Dixon, analyst at Paine Webber, think that network broadcasters are fighting the wrong battle. "Whether or not these broadcasters are number one or number three is a little like shuffling deck chairs on the Titanic," Dixon said. Then he added, "To me, the most interesting thing is the shift between broadcast networks as a whole and the cable industry."

Still, it's a long way from Herman's Head, the notoriously bad Fox original comedy series that debuted in 1991, to Malcom in the Middle, the original comedy series that made its debut in 2000 to overwhelming critical acclaim. But in the television industry, it's the voice of the viewer that counts most. In 2001, Fox Broadcasting Company, in the most competitive season of its relatively short history, finished a close second in network ratings (behind NBC) in the key demographic of adults 18 to 49. The previous year, it finished third. In addition, in 2001, Fox was ranked first among young adults, teens and male viewers.



HISTORY

Soon after buying the 20th Century Fox film studio in 1985 and six U.S. Metromedia television stations in 1986, Rupert Murdoch announced his decision to launch the Fox Broadcasting Company. In a landscape dominated by broadcast giants CBS, NBC, and ABC, Murdoch wanted Fox to become truly competitive, the country's fourth broadcast television network. Many, including the other three networks, were skeptical about Fox's chances of succeeding. Some, like then ABC Entertainment president Brandon Stoddard, felt the television market was already too saturated for another network. "There probably is a two-network economy as it stands, so I don't know if" a fourth network "can be economically feasible," Stoddard said at the time.

On October 9, 1986, Fox broadcasted its first program, the premiere of The Late Show With Joan Rivers, with guests Elton John, Cher, Pee Wee Herman, and David Lee Roth. By mid-1987, Joan Rivers had left the show, which was then hosted by several guest hosts before being hosted by Arsenio Hall. Then Fox abandoned the late night slot to begin concentrating on prime time programming.

In early April 1987, Fox offered its first full night of prime time shows that included an outrageous (and, to many, also hilarious) dysfunctional family, the Bundys, in a show Fox called Married . . . With Children. The show became a subject of controversy when a Michigan woman campaigned to have it removed from the air, but the free publicity helped bring the show national attention. By July of 1987, Fox added a second full night of prime-time shows.

More controversial than other networks, Fox attracted an audience with a collection of popular shows, including 21 Jump Street, The Tracey Ullman Show, America's Most Wanted, and, in 1990, The Simpsons. Also in 1990,the Academy of Television Arts and Sciences voted to give Fox a three-year contract to broadcast the Emmy Awards, breaking with the show's traditional rotation between the three networks. In an effort to expand its share of the youth market, Fox also launched the Fox Children's Network in 1990. The partnership with affiliate stations provided younger viewers with both animated and live-action programming. By 1997, the renamed Fox Kids Network enjoyed its fourth year as the top-rated children's program on broadcast television.

By June of 1993, Fox was offering an entire week's worth of prime-time programming. In May of the following year, the network took a serious step toward achieving a significant presence in major cities throughout the United States: it bought a minority stake in New World Communications Group, Inc. and then switched most of the company's stations from CBS to Fox. It was unquestionably the largest affiliation switch in the history of television broadcasting. As a result, in many of the areas in which Fox had been broadcasting on a UHF signal, the network could now transmit on a stronger VHF platform, providing a better channel position and the ability to reach a larger audience.

Two years later, in July of 1996, Rupert Murdoch acquired the remaining 80 percent of New World Communications Group, Inc. for $2.5 billion. With 22 owned-and-operated television stations, the Fox Television Station Group became the single largest group of television stations in the United States, reaching 10 of the 11 largest markets and at least 35 percent of the nation's television audience.

For the 1998-1999 TV season, Fox was number one among teenagers with two successful new series, Ally McBeal and King of the Hill, which complemented a strong Fox lineup that included perennial favorites The Simpsons and The X-Files.

By 2001 Fox Television Stations owned and operated 23 full power stations and Fox Broadcasting had 197 affiliated stations. During a typical week, Fox provided affiliates with 15 hours of prime time programming, one hour of late-night programming on Saturday and one hour of Sunday morning news programming.

The year 2001 proved especially strong. Fox finished a close second in the key demographic of adults 18-49 and the 40 Emmy nominations it earned were the most in its history. In addition, four of its new series turned out to be hits: Malcolm in the Middle, Titus, Boston Public, and Dark Angel.

FAST FACTS: About Fox Broadcasting Company


Ownership: Fox Broadcasting is a subsidiary of Fox Entertainment Group, Inc., which is itself a subsidiary of News Corporation Limited, a publicly owned multinational corporation traded on the New York Stock Exchange.

Ticker Symbol: NWS

Officers: K. Rupert Murdoch, Chmn. and CEO News Corporation, Ltd., 67; Chase Carey, COO and EVP Fox, Inc., 44; Peter Chernin, Pres. and COO Fox Entertainment Group, Inc.; David F. DeVoe, SVP and CFO Fox Entertainment Group, Inc., Inc.

Employees: 500

Principal Subsidiary Companies: Fox Broadcasting's subsidiaries include Fox Television Network, Fox Kids, and Fox Sports units.

Chief Competitors Fox Broadcasting Co. has as its main competitors the three other major television networks: National Broadcasting Company, Inc. (NBC), the top-ranked television network in the late 1990s, owned by industrial giant General Electric Company; CBS Corporation, formerly Westinghouse Electric, the second-ranked network toward the end of the twentieth century; and Capital Cities/ABC, Inc., subsidiary of entertainment and media behemoth Walt Disney Corporation.


STRATEGY

From its early days, Fox showed it would not be like the other networks. When it launched its first night of prime time television on April 5, 1987, Fox did not offer traditional family television. Instead, its first night of prime time programming marked the debut of Married . . .With Children and The Tracey Ullman Show. Instead of representing a conventional, wholesome household,Married. . .With Children introduced viewers to an uncouth, dysfunctional family called the Bundys. The show would go on to win several Emmy Awards and would become the longest-running situation comedy on American television. That same night, The Tracey Ullman Show debuted, introducing the brash young come-dienne and an animated segment called "The Simpsons." With its teen cop series 21 Jump Street, the network demonstrated it wasn't afraid to take on serious life issues such as drugs, prostitution, and child abuse, and it perhaps gained some respect for the public service spots that ended most of its 21 Jump Street shows. This aggressive approach to television programming paid off. By mid-1987, 113 affiliates joined the network and Fox attracted some major advertisers like Bristol-Myers, General Foods, and Johnson & Johnson.

In 1990, the network expanded its blunt, irreverent take on American home life with its debut of The Simpsons. Spun off from The Tracey Ullman Show, The Simpsons became the first Fox show to beat out its competition on the other networks. In the fall of 1990, Fox moved its animated sitcom to a Thursday night slot to take on NBC's top-rated comedy, The Cosby Show. While The Simpsons didn't beat out The Cosby Show in ratings, it did hurt NBC's ratings and helped establish Fox's image as a major force, especially with the youth market. Fox has become a main vehicle for advertisers wishing to reach the 18 to 34 age group. Many of its shows were youth-targeted or youth-oriented, like The Simpsons, Beverly Hills 90210, The X-Files, Mad-TV, and Melrose Place.

In the late 1990s and 2000, Fox found itself in the position of having to refurbish its strong primetime lineup after its two hugely successful primetime soaps, Beverly Hills 90210 and Melrose Place, came to the end of their successful runs. Fox opted to develop quality programs and innovative comedies, an approach that resulted in two of its biggest hits, Malcolm in the Middle and Titus, shows that were as respected by television critics as they were enjoyed by the viewing audience. A mid-season replacement, Malcolm in the Middle was the second highest rated premiere in Fox history and soon became one of its most popular series. Its success had the effect of bolstering the viewership for the rest of the Fox Sunday night lineup, which included King of the Hill and Futurarama. Titus had the same effect on another Monday night Fox comedy, That '70s Show.

CHRONOLOGY: Key Dates for Fox Broadcasting Company


1985:

Rupert Murdoch purchases the 20th Century Fox film studio and announces his plans for a television network

1986:

Fox broadcasts its first program, The Late Show With Joan Rivers

1987:

Fox offers its first full night of prime time shows

1990:

The Academy of Television Arts and Sciences gives Fox a three-year contract to broadcast the Emmy Awards and The Simpsons debuts

1993:

Fox is offering a full week of prime time programming

1994:

Murdoch purchases New World Communications Group, Inc. and switches most of the company's stations from CBS to Fox

1996:

Fox Television Station Group becomes the single largest group of television stations in the United States

1998:

In a company restructuring, the Fox Entertainment Group, Inc. is created

1999:

Fox finishes the 1998-1999 TV season a close second to NBC in the key male-ages-18-to-49 segment

2000:

News Corporation Chairman and CEO Rupert Murdoch offers free prime time airtime on the Fox network to the two major U.S. presidential candidates

2001:

Fox garners 40 Emmy nominations, the most in its history


INFLUENCES

Since the early 1980s when only about 25 percent of U.S. homes subscribed to cable services, the cable television industry experienced incredible growth. By the late 1980s, the percentage of U.S. homes with cable services more than doubled. By 1997, cable reached 70 percent or about 65 million U.S. homes. To compete with the expanding reach of cable television, some thought network broadcasters needed to increase sports coverage, particularly of high profile events like National Football League events and the Olympics. Indeed, when CBS covered the Nagano Winter Olympics in 1998, it dominated the Nielsen Media Research ratings. For Fox, an increase in major sports broadcasting came in 1993, when, to the shock of the industry, it succeeded in luring the National Football League from CBS. For almost $1.6 billion, the network bought four years of broadcast rights. The following year, Fox Sports signed a five-year contract with the National Hockey League, and in 1996 it began a five-year deal with Major League Baseball.

Fox also began making inroads into cable when, in October 1996, the Fox News Channel began cable broadcasting with its News Channel. Unfortunately for the company, its earlier distribution plans with Time Warner, Inc. fell through a month earlier when the media monolith backed out of plans for Fox distribution on its New York City cable services. Time Warner was then in the process of merging with Turner Broadcasting, whose Cable News Network (CNN) was a direct competitor to Fox News. CNN was to be carried on Time Warner's cable along with the new 24-hour news station, MSNBC. This meant a loss of more than 1 million homes for Fox and it quickly filed a federal anti-trust lawsuit against Time Warner, requesting the court block the merger of Time Warner and Turner Broadcasting and award Fox $1 billion in damages. In spite of the unexpected reduction in distribution, that year, Fox News Channel was ranked twelfth among the top cable channels.

CURRENT TRENDS


By 1999, Fox Broadcasting Company was out in front of all the major networks in terms of audience growth and advertising gains. That year, the advertisers, realizing that Fox attracted a large following among a very attractive demographic market, spent a record $1.3 billion toward the fall primetime season. For Fox, this created a 14 per cent increase in upfront ad revenues, the largest percentage increase of all four networks. It was also the fourth straight year that Fox demonstrated double-digit growth.

AY, CARAMBA!

He's an underachiever and "proud of it," as he (and thousands of T-shirts) will tell you. He gets himself into a lot of trouble and is a perpetual prankster. Once he filled the school groundkeeper's shack with creamed corn to get back at him for taking his skateboard. Another time he cut off the head of the statue of the town founder. You can often find this little good-for-nothing after school writing one of several admonishments on the blackboard: "I will not belch the national anthem; I will not call my teacher 'hot cakes;' the principal's toupee is not a Frisbee; spitwads are not free speech; I will not bury the new kid." Prank phone calls to the local watering hole are one of his bad habits: "Is Oliver there? Oliver Clothesoff?" If you make an issue of his less-than-perfect behavior, he'll tell you, "Don't have a cow, man!" or perhaps "Eat my shorts!" His father, a rather slow-witted chap, is often driven to choking the boy because of his misbehavior. This 1990s Dennis the Menace was once tried for killing his principal and once made the unfortunate miscalculation of selling his soul for five dollars.

Lisa, the little brat's sister and the brain of the family (but then, considering the family, that's not saying much), believes she has an explanation for her brother's delinquent deeds: "That little hell-raiser is the spawn of every shrieking commercial, every brain-rotting soda pop, every teacher who cares less about young minds than about cashing their big, fat paychecks." But, as Time magazine points out, "The kid knows right from wrong. He just likes wrong better."

Despite of all his misdeeds and bratty behavior (or maybe because of them), TV Guide named him one of the 50 greatest TV stars of all time, and Time named him one of the twentieth century's most influential artists and entertainers, putting him next to Picasso, T. S. Eliot, James Joyce, Frank Sinatra, and the Beatles.

By this time you've probably figured out that the above-mentioned scalawag is none other than Bart Simpson, the impish star of Fox's hit animated series of the 1990s, The Simpsons, a cartoon tale about a dysfunctional family living in a dysfunctional town in a dysfunctional universe. Bart became the cultural icon of 1990s. He was the role model of slackers everywhere ("I will not fake my way through life," he was once forced to write on the blackboard). He was also a big boost to Fox, helping propel it to full-fledged network status. The Simpsons became the longest-running prime time cartoon in history and also won several Emmys. Eventually it became no longer cool to shout "Cowabunga, man!" or "Ay, caramba!" and Bart's popularity gave way to the likes of Beavis and Butthead and the foul-mouthed tykes of South Park, but one suspects that the little yellow rascal from Springfield will outlast them all.


Advertisers were also impressed by the quality and success of Fox's new prime time fare. Fox was forced to rebuild its lineup after its era of prime time soaps came to and end. The company responded by producing its best programs yet. As a result, Fox experienced the fastest viewership growth rate among all of the top networks.

PRODUCTS

In addition to news, sports, and children's programming, Fox in its relatively short history has offered some of the most successful shows on television. For instance, Fox's 1997 lineup included tremendously popular shows like Ally McBeal and The X-Files. Other top-rated prime time Fox programs have included America's Most Wanted, COPS, Beverly Hills 90210, and Melrose Place.

Some of Fox's more controversial programs include specials like "When Stunts Go Bad" and "Breaking the Magician's Code: Magic's Biggest Secrets Revealed." When Fox planned to air its third show revealing magicians' secrets on May 5, 1998, a coalition of over 1,000 magicians from the Society of American Magicians, the International Brotherhood of Magicians, and elsewhere, filed legal action, urged a viewer boycott, and organized free magic shows at public venues around the country at the time of the broadcast. The coalition denounced the program's host, who was dubbed "the Masked Magician" because he wore a costume concealing his face while he exposed secrets behind magic tricks. According to the magicians, the Fox specials threatened the careers of some magicians. They claimed that since the specials started airing in November 1997, some magicians have lost jobs and some have had to give up elaborate illusions that cost them a tremendous amount of time and money to learn. Magician Andre Cole went to court in Los Angeles in late April 1998 to try to obtain a temporary restraining order to keep Fox from exposing the secret behind his patented "Table of Death" illusion. Cole's request was denied. Veteran magician Chuck Jones said, "This has not affected me personally, but I worry about the amateur magicians who spend $1,000 or so on one prop, and then it's exposed on these specials. Now they can't use it anymore."



SOURCES OF INFORMATION

Bibliography

braxton, greg. "magicians wish fox special would vanish." los angeles times, 1 may 1998.

business rankings annual. detroit, mi: gale research, 1998.

fox broadcasting home page, 1 june 1998. available at http://www.foxworld.com.

"fox sweeps abc aside." cnnfn, 6 march 1998.

fox tenth anniversary: a decade of revolutionizing television. new york: fox broadcasting co., 31 march 1997. available at http://www.foxworld.com/presroom.htm#tenth.

frank, allan dodds. "tv titans square off." cnnfn, 9 october 1996. available at http://www.cnnfn.com.

lazich, robert s., ed. market share reporter-1998, detroit, mi: gale research, 1997.

"miller brewing teams with fox in groundbreaking agreement." business wire, 28 august 1997.

"the news corporation limited." hoover's online, 1 june 1998. available at http://www.hoovers.com.

paeth, greg. "fox in the penthouse after 10 years, the ëcoat-hanger network' is sitting pretty." rocky mountain news, 5 april 997.

schwartz, shelly. "abc shelves ellen." cnnfn, 24 april 1998.

"s&p description: news corp., inc." standard & poor's, 7 april 1998.

wian, casey. "murdoch enters new world." cnnfn, 17 july 1996.

yahoo! finance. "fox entertainment group." cnnfn, 17 april 2002. available at: http://biz.yahoo.com/p/f/fox.html


For an annual report:

on the internet at: http://www.newscorp.com/feg/fegannual_reports.html.


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. fox broadcasting company's primary sics are:

4833 television broadcasting

4841 cable networks and other program distribution

also investigate companies by their north american industry classification system codes, also known as naics codes. fox broadcasting company's primary naics codes are:

513120 television broadcasting

513210 cable networks

513220 cable and other program distribution

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