Turning Toward The Future

Phil Kent has a lot on his plate, and therefore a lot on his mind

By Melissa Grego -- Broadcasting & Cable, 10/4/2010 12:01:00 AM

Phil Kent has a lot on his plate, and therefore a lot on his mind. As chairman and CEO of Turner Broadcasting System, Kent oversees a massive group of businesses, both domestically and around the world. And from shaking up CNN to driving his highly valued entertainment networks through a constantly evolving marketplace, that is no easy task. But as his company turns 40, it is racking up success stories—and new talent—with properties like Conan O’Brien, Piers Morgan and NCAA basketball coming to Turner networks.

With all of this going on, Kent sat for a rare interview with B&C Executive Editor Melissa Grego. Conducted over two separate phone calls—one before and one after the shakeup at CNN—an edited transcript combined from those wide-ranging conversations follows.

You are probably aware that there is speculation in the industry that it was your decision to let Jon Klein go from CNN.
No, it’s not true.

So, what exactly prompted the reorganization, and whose idea was it?
It was [CNN Worldwide President] Jim Walton’s idea. Jim and I have been talking for a long time about how to raise the level of the journalism, about how to get a more global, multi-platform journalistic voice. He told me he didn’t think the structure we had was the right one anymore, and he wanted to make these changes. And I agreed immediately and supported it. This was his decision.

So, it wasn’t a referendum on the new primetime slate. Do you still believe in it?
Completely. It had nothing to do with the slate. In fact it would have been probably logical to some to wait, but we actually thought the best thing to do was to do this sooner and not have the launch of the new shows disrupted by a management change. It has nothing to do with the new shows…and if they work, Jon Klein gets a good share of the credit.

Is there anything you would like to say about Klein and his service to CNN?
I think Jon Klein did a lot of good here; he had one of the longest tenures in CNN’s history as head of the network. He brought a lot of editorial leadership at a time when we badly needed it six years ago. I don’t have anything but good things to say about Jon.

How much of a concern are the ratings at CNN’s U.S. flagship?
Well, they’re a concern because they’re lower than they’ve been in a long time, but we’ve had low ratings before. And I’m confident that they will come back. It’s one part of the business, but it’s the part that people pay a lot of attention to and it does have some reputational effect. And over a long-term, sustained basis, it could have a carryover effect to some of the other platforms, though we haven’t seen any of that to date. But it’s obviously a concern when you’re getting much smaller audiences for a consistent period of time than you’re used to getting.

Have you set any time line at CNN for getting the ratings back on the upswing?
We all feel a sense of urgency, but not panic. It’s a very solid business. It’s going to have its best year; its profi ts are multiple hundreds of millions of dollars. It has a very strong dual revenue stream, healthy subscription fees from cable and satellite operators and phone companies as well as premium CPMs, so there’s no sense that the house is on fire. But there’s a strong sense of urgency and sheer disappointment that we’re not getting the levels of audience that we think we should be getting.

With Piers Morgan replacing Larry King, do you see it as a challenge that Piers is not known as an interviewer to U.S. audiences?
It could be a short-term challenge, but this is the beginning of a series I hope will be on for many, many years.

Katie Couric’s deal at CBS is up in May. Do you see a place for her on CNN?
I would not want to speculate on that. Katie is a brilliant journalist; she has to decide what her future is at CBS, and I would afford her the same courtesy others would to our talent. They should decide what they want to do with their current employer before speculating what they’d want to do with others.

There’s been tons of talk about CNN and CBS News hooking up.
Yes, for a long time.

Where does that stand; are you talking with them?
We talk a little. We are very friendly with that company as you know; we made one of largest sports rights deals in television history, with CBS with the NCAA with the same execs we talk to news about, who would be Les [Moonves] and Sean [McManus]. Both great guys and good friends, but there’s nothing going on right now about that. To be fair, we talked in the past, we’ll probably talk in the future, and we do things together, particularly in terms of sharing talent.

What was your reaction to Steve Burke replacing Jeff Zucker?
I was not surprised. I expected it; not that I had any inside information, but I expected it and I think Steve Burke is one of the best executives in media today.

Were you surprised about the timing?
No, we’ve been through mergers ourselves. Mergers create a certain level of anxiety in all the ranks and also the upper management. I think it’s always good when the company that’s “buying”—and I put “buying” in quotes because it was a complicated transaction— can make announcements sooner rather than later. My guess is that it’s a good thing that they at least announced that part of it, and they have a very talented pool of executives. Steve Burke has a very high-class opportunity. He has very good people there, and he is truly one of the best and most broadly experienced executives in all of media.

How well do you know David Westin?
I’ve known him for years. I don’t know him very well; he seems like a very nice, competent guy. All conversations over the years have been very friendly. I have lot of respect for what he did there.

Have you been in touch with him since his announcement?
No.

What about Steve McPherson?
I don’t know him at all. There’s lots of people who used to have big jobs whom I’m friendly with. I’m friendly with Andy Lack, I’m friendly with Andy Heyward. But it doesn’t mean I’m hiring them. By the way, I know those two more than David Westin.

Do you see any of the big changes at Disney/ ABC affecting your business at all?
Not at all. All companies have executive changes from time to time.

Of course, there has been talk about the possibility that Disney could put ABC up for sale. What’s your take on it?
I’d be surprised if they do it. I think the network television business has a brighter future now than it may have had a few years ago because of retransmission consent payments, and I’d be surprised if they did that. And, quite frankly, people don’t expect someone in my position to say this, but I want the broadcast networks to do well because they produce a lot of programming that we want to buy a few years later for our entertainment networks. I would actually be disappointed if they sold ABC; I think that’s a good asset for the Walt Disney company.

Would you like Time Warner to acquire all or a portion of ABC if it were put up for sale?
I think that we are in the right businesses with the cable networks, both ad-supported under Turner and the world’s leading pay network under HBO. I don’t see the burning need here, but that’s more a question to ask my boss, Jeff Bewkes.

Do you see Turner or Time Warner or yourself making any sort of big acquisition or joint venture a la NBCU as part of your growth plans? Or anything smaller? Maybe something on the Time Warner level that would impact your group?
I think that’s a great question. We’ve spent the better part of the last decade trying to get Time Warner the right size, with the right mix of businesses, and now since we’ve made the decision to divest the cable business and AOL, we have a great mix in terms of a very contentfocused company. In terms of future M&A, we will always look at a good domestic cable channel, we will always take a hard look at a good international channel or group of channels.

Andrew Tyndall was quoted in B&C as saying that there will be no broadcast TV in 10 years. Do you think that will be true?
I don’t think that’s true. I think that there is a strong audience and advertiser need for local television. I cannot imagine a country without local television stations and local news. Yes, local cable systems can do that, too. I guess I can be surprised, but I don’t see that happening.

Carriage fees paid for TNT and TBS in particular certainly come up in a lot of the broadcasters’ retrans pitches: If TNT is going to get a buck a sub and draw a fraction of the audience of Fox, the operators should be paying Fox at least that much. Do the cable operators then ask you the same question?
First of all, that’s mixing apples and oranges. We also give a signifi cant amount of advertising time back every hour to the cable operator to sell locally, which is not the arrangement with broadcasters. I don’t think it’s out of whack. Still, the bulk of the networks’ revenue is going to be advertising. This is just a deserved second revenue stream for them. I do not think it’s an undue burden on the cable operators.

So, you’re not concerned it is a burden that will be passed on to you?
Oh, I’m sure, there’s no doubt, it will be used in negotiations with us, but our networks stand on their own. We deliver very valuable programming to our distribution customers, and we keep improving the quality of the programming. We’ll be starting the NCAA basketball tournament next year, and I feel completely comfortable with the value proposition our networks bring against the rates we ask for.

I have to ask a Conan question, of course. Why invest in this daypart?
Listen, late night’s been very good to this company. Adult Swim started as a hobby there and is now making ad revenue in the U.S. competitive with Cartoon Network. If you look at the demos Conan is competing with, and look at the demos on some of the programs that will be the lead-in to Conan, I think this is going to be tremendous.

What is your biggest concern for your business, or the TV business in general?  Looking at the next 40 days, weeks, months, what’s the biggest priority or concern you have?
We’re at a very interesting inflection point in the business where all the technologies we’ve been talking about for about a decade are really starting to take effect now in terms of giving viewers lots of alternative ways to fi nd programming. I am concerned that in the future—it’s not going to happen tomorrow, it’s not going to happen next year—if we don’t make certain decisions correctly in the next couple of years, we could potentially help the disaggregation of network brands, and that would be a very bad thing.

And I’m very concerned about the amount of off-network programming for which we paid significant prices to studios also being on Hulu and Netflix and VOD and SVOD platforms. Those are the things I’m more concerned about long-term.

How important is it that the industry get on the same page?
My hope, and I’m trying not to be too Pollyana-ish about this, is that market forces and smart people thinking rationally about what role some of these platforms can play will get us to the right place. And that’s why I know some people think we have been messianic or religious about TV Everywhere, but it’s not out of ego.

We think it’s a really important development to preserve the ecosystem. We’re trying to address two issues: how to get to the consumer the content, what they want, where they want it, how they want it, but still hold up the underpinnings of the business where content is being paid for. And the best way to do that, I think—whether you want to use the words “TV Everywhere” or the technical term, “authentication”— is authenticate that the consumer is paying for these channels in some form to someone, and then give them what they want, anytime they want it, anywhere they want it.

Do you think that figuring out this authentication idea will add money to the ecosystem?
Yes, and here’s why. I think once we can give the consumer the content they want, where they want it, when they want it, there will be more consumption of the content. Then, the next challenge is to get the ratings service to measure it in as many ways as possible. I think it will take longer for mobile, but certainly Nielsen has an announced timetable for being able to measure broadband and VOD. Now, [this will] bring to the advertising marketplace even more impressions, with Internet viewing being priced with television costs per thousand. And I think this could lead to a whole new golden age of television, where we’ll have video on the Internet to be priced competitively in the ad marketplace with video on television and maybe even more so.

What would you like to say in conclusion about where Turner is and is going at the 40-year mark?
If you look at the 40-year arc of Turner, the first 20 years was the launching of these iconic brands, CNN, TBS—which used to be the superstation—and TNT. And then what my management team has done in the last decade, and some people before me, is really take this amazing legacy that Ted [Turner] left us and reinvent it from within and constantly refresh by bringing exciting new properties to it. We’ve also done some things like HLN and TruTV and TBS, which stopped being the superstation and [became] the “Very Funny” network. So, you will continue to see this kind of large and small innovation from us. There’s no doubt in my mind that I think our best years are still ahead of us.

What are you most proud of personally about where Turner is going?
I’m proud of the management team. I think I’ve assembled a team here that is the best of the business. Whether it’s in programming, journalism, ad sales, distribution, I think I’ve got the best team in the biz.

And that’s the thing I’m most proud of. There was a handful of these amazing people like Ted Turner and John Hendricks who forged this industry, and I think we’ve taken it to a whole other level. And I’m very focused now on preparing a new generation of leaders to someday take over for all of us. But not too soon.

What is the plan to turn CNN around? Have you given your team any sort of timeframe for turning things back around?
We remind people all the time, but we're launching a new show at 8 o'clock, not without some controversy. It's a very intelligent discussion/debate show. It's not quite pure discussion, not quite pure debate with Elliot Spitzer and Kathleen Parker and many guests, and I think we're going to prove you can have a really interesting discussion without people screaming at each other. And I think that's completely within the purview for CNN to do that. We were basically the network that created this format with Crossfire. We're trying to do that again. And if we produce this according to our vision, it's going to be a very intelligent issue discussion show with very bright people who have strong points of view. And I think that's completely within the brand purview of CNN.

What are the primary things you're looking for this Managing Editor to bring to the table?
One of the things we would like to see -- in addition to the hundreds and thousands of people who work at CNN that are very focused on the day-to-day and the newsgathering and producing a show at 2 o'clock and producing a show at 6 -- is somebody who has been given the luxury of perspective and oversight to focus on the handful of stories every week that are really important; explain, using all the different resources of CNN, why they're important, what these stories are really about, put as much perspective behind them and why they should matter to people.

Why is Piers Morgan the person to replace Larry King?
A lot of people know Piers Morgan as a judge and a personality but for those who watch him in the UK, who watch his show there, he is a fantastic conversationalist and interviewer with a range of different guests. I wouldn't say I watched as much as Jon Klein probably did or Jim Walton, but I've watched enough sampling of it to agree and to know that he is one hell of an interviewer. And I thought following Larry King, to bring a really fresh face to CNN, to fill that role of being a great interviewer, a great conversationalist, who can work either in a news environment or a celebrity guest or an entertainer, I thought that was just a really good strategy.

CNN has an absolutely great brand reputation as standing for unbiased news and being a technological innovator. But the network has been criticized for getting beat or having a lag time in confirming news. Is that something you are looking to have your team improve on?
As a headline, I'm much more concerned about being right than being first. I will always choose right over first. That being said, I'd like to see us break as much news as possible, but I'd also like to be right, and in the age of Internet when a blog or Facebook posting can sometimes break news, in a news organization that tries to have a strong set of standards -- including a strong set of sources -- it becomes more challenging to be first all the time. It's not an excuse; it's a reality.

It sounds like, correct me if I'm wrong, you really are focused on the cable network business, with little interest in broadcast or station assets.
Absolutely. But broadcast is an important component in the ecosystem because we need them to be successful. Nothing would make me happier than to see a whole new successful slate of new comedies and dramas that we can acquire one, two, three, four years from now. I'd love to see -- with all the money the networks are getting from retrans -- them invest more heavily in drama and comedy so we have more programming to acquire, and I would imagine our main competitors would say the exact same thing.

Broadcast vs. cable simply put is an interesting topic. The message from Turner is loud and clear that you think there should be more parity in pricing between broadcast and cable.
Absolutely.

How do you see that gap being closed?
Closed is a relative term. I don't know if it will ever be closed but I still think an awful lot of narrowing can happen, which gives us enormous potential for growth.

Closed is going to be challenging, given that's depending how you count The CW, four or five of them and 40-plus, 50-plus viable cable channels that sell ad time. Closed I think is tough. What we talk about is narrowing the gap. We've closed the gap in cost per thousands for sports, we've closed the gap in CPMs for news, there really is no gap in kids anymore because the broadcast networks are basically out of the kids business. In entertainment a milestone for us was in the upfront, selling the Conan O'Brien show in late night. I think the opportunity is to narrow, if not ever close, the gap in primetime entertainment.

How do you think cable & satellite operators will pay for the retrans fees for broadcasters?
They are still making a lot of money. Look at their financial statements. They're still doing very, very well. I don't know exact payments, but the rates I'm hearing about are not unreasonable given the value of network primetime programming and they should get paid. One of the great misconceptions out there is they've never paid before. They have been getting paid for 20 years; they've just been getting paid in a different way. They've been getting paid in the form of channel launches, of cable channels. Now those days are over.

What is your priority for each of the main divisions of Turner -CNN we covered - what about TNT?
For TNT we've had, for the most part, a very good track record for original programming. We've had a few that have not succeeded, but for the most part we've had some solid successes, like with The Closer, Rizzoli and Isles, and solid successes like Men of a Certain Age and HawthoRNe, Leverage. And we're also very excited about what we're acquiring, we're very excited about getting The Mentalist in the near future.

Speaking of Big Bang and syndication, you've certainly made some innovative deals in the syndication field, especially with models you used with Tyler Perry and Debmar-Mercury. These deals are very important to the success of the network, too, are they not?
That's a great example. I think people now take for granted the success with Tyler Perry. We took a risk of producing years of episodes all at once. We took a small test, the results were promising and we rolled the dice. We did it a second time, with Meet the Browns and we did it more recently, not with Tyler, but Are We There Yet? And these shows are successful not only in terms of ratings but also in terms of the diverse audience composition, which helps us to increase our reach, which is important to advertisers.

What's the next model? It does shine a light on the fact that there are a lot of different ways of doing business. How important is it that your team is coming up with new models?
We're always thinking of new ways. I like to think one of the things that defined the early years of Turner, and particularly Ted Turner, was audacity and doing things that other people wouldn't have done or thought couldn't be done. And Ted has been gone a long, long time but we like to think we still have a lot of that audacity in our genes here. Doing something like rolling the dice on 100 episodes of House of Payne, or Steve Koonin flying to California to meet Conan O'Brien who had never heard of him and probably never watched TBS, was similarly audacious. These are just examples of ambition and audacity, and we try to be very buttoned up about our business.

On Cartoon Network:
Cartoon is a wonderful business, I can't tell you its financial statement, but it's a high margin business, having its best year ever. Kids programming is getting tougher because of macro issues around advertising, particularly around food and beverage, but the toy business is getting stronger and we have a special position, especially with boys. And we're building on that. I think we have some very promising new series particularly one called Adventure Time. Adult Swim was a hobby where we experimented with some useless hours on a kids network and said, ‘Hey what can we do with this?' and we wound up creating a network of nearly equal value to Cartoon.

On TruTV:
Another example, bought the half of CourtTV we didn't own. The people who created and built CourtTV over the years did a fine job, but we felt it maximized its potential. We kept court coverage in the daytime but we turned it into a whole different network in the afternoon and evening. And did a wonderful brand change. This was a real inflection point year for TruTV, where we went into the distribution marketplace and -- I don't want to get into the numbers -- but we set a much higher carriage rate for TruTV than we had gotten earlier and we will be doing this as more distribution deals come up.

In terms of the upfront, we decided there were a lot of deals we took in the past that we won't take again. And we set a much higher minimum cost per thousand for TruTV, which we also got it. The goal is to make TruTV as significant a network in the near future as TNT and TBS. Again, it's not going to happen overnight, it's not going to happen in one or two years, but that is the long term goal.

E-mail comments to mgrego@nbmedia.com and follow her on Twitter: @MelissaGrego