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Eisner touts 'national' duops

Disney chief's turnaround plan couples ABC, cable networks by daypart 10/06/2002 08:00:00 PM Eastern

Still at odds, ABC and affiliates agree on pact

Still at odds, ABC and affiliates agree on pact

Disney chief Michael Eisner's timing couldn't have been lousier. At the same time he was suggesting to investors and financial analysts in New York last Tuesday that ABC was not one of the company's "core brands" (those would be Disney itself and ESPN), ABC executives and its affiliate board were working hard to wrap up a new affiliate agreement.

Affiliates agreed to pay $34 million a year to help Disney pay for NFL rights for ESPN and ABC, roughly in line with the annual cash payment under the old agreement. (Under that one, the stations paid $45 million a year for three years, but the deal covered a fourth year retroactively.)

In the new two-year deal, the repurposing cap remains at 25% of ABC prime time programming. However, Disney warned affiliates it will want to sweeten that in the next deal. Also, Disney's use of ABC to advertise other Disney cable networks is limited but not prohibited.

The board and the network tried for a four-year pact but were too far apart to work it out.

"Still, we feel the affiliates will be better off with the new network-affiliate plan than without it," said Bruce Baker, chairman of the ABC Board of Governors.

Said Alex Wallau, president of the ABC Television Network, "We believe this agreement marks a very significant and productive next step in solidifying our ongoing network-affiliate relationship." Affiliates covering 67% of the country have until this Friday to ratify.

Baker, executive vice president of Cox Broadcasting, noted that, for the first time, the agreement addresses the so-called "assignment issue."

In the past, affiliates have charged that the network blocked the sales of affiliated stations by threatening to change the terms of the affiliate contract with the new owner or even to withhold an affiliate contract altogether. Now ABC says it won't pull that stunt.

Despite the tentative deal, affiliates still worried about having their network brand given second-class status by Disney. Affiliates wonder about Disney's commitment to ABC, said Baker: "It's not good. Affiliates have not responded well to this."

Disney spokeswoman Zenia Mucha tried to make amends. "[Fixing ABC] is our top priority," she said, adding that integrating the cable and broadcasting operations is part of the cure.—S.M.

Under pressure to revive the sagging fortunes of ABC, Disney Chairman/CEO Michael Eisner last week unveiled a plan that merges the management of the broadcast network with Disney-owned cable networks—daypart by daypart—and apparently spells the end of ABC as a discreet business.

"Each one of our dayparts at the ABC network will be run horizontally with the same businesses in cable," Eisner explained at a Goldman Sachs conference in New York.

"The people that run The Disney Channel, Toon Disney and Playhouse Disney [Anne Sweeney] will also run ABC broadcast Saturday morning," he said. "The people that run daytime at ABC [Brian Frons] will run SoapNet, and the people that run the ABC prime time schedule [Susan Lyne and Lloyd Braun] will run ABC Family."

The new strategy will create "national duopolies," Eisner said.

The plan is not sitting well with ABC affiliates, whose board just concluded a new two-year affiliation agreement with the network (see box, page 8). The affiliates were also grumbling about Eisner's comment that, going forward, Disney will focus on promoting two "core brands": Disney itself and ESPN. And ABC? Well, it's a brand, but not a core brand.

Eisner was unavailable to elaborate after his speech, but spokeswoman Zenia Mucha later modified his comments. For example, she said, Angela Shapiro, who now runs ABC Family, won't report to Lyne and Braun, although they will have a close working relationship.

Instead, all three will report to a more senior executive, possibly president of the ABC Television Group. Steve Bornstein resigned that post earlier this year. No replacement is imminent, Mucha said.

She stressed that final decisions on which managers will run which dayparts haven't been made yet. So, even though Eisner said ABC Daytime will run SoapNet, that doesn't necessarily mean Frons will be running both. What Eisner said "shouldn't be taken as a literal translation," Mucha explained. "It's premature to say who is going to be occupying which chair at this time."

Eisner's plan is not as radical as it may sound. In fact, Disney's "horizontal" merging of the broadcast and cable networks began three years ago with the combination of the ABC Sports and ESPN sales departments. By most accounts, that move has proved a success.

More recently, ABC children's programming head Jonathan Barzilay began reporting to Disney Cable Networks chief Ann Sweeney. And sources say Sweeney's own role may be redefined when the horizontal restructuring takes its final shape.

Disney is also looking to couple ABC News with an outside cable outlet. Last week, Eisner not only confirmed the talks with CNN but said Disney would "be thrilled if it happened," although he also put the chances of a deal at "50-50."

The common management of ABC and ABC Family prime time would likely lead to more repurposing—that is, the quick repeat of ABC sitcoms and dramas on ABC Family. Under its new agreement with ABC affiliates, Disney may repurpose only 25% of its programming. When that deal expires in two years, Disney expects to increase greatly the percentage.

At the conference, Eisner argued that repurposing would strengthen ABC, not weaken it, as many affiliates believe. Take the new show Push, Nevada
as an example, he said. "There is no way a quirky new kind of show like that can get sampled on Thursday night," up against all the formidable network competition. But give it "multiple plays on ABC Family, and you find ways to bring attention to it like HBO and other cable services bring attention to their product. Then you can bring it back on the network once you start to build a cult following."

But affiliates remained skeptical last week. Reacting to the plan, Post-Newsweek President Alan Frank said, "It worries me. Successful cable networks are those that understand they are niche programmers. Successful broadcast networks understand they are [mass media]. They are not one and the same."

Scripps' John Lansing shared the concern about the new cross-platform management. "Our company is certainly one with a lot of experience with both broadcasting and cable properties. They're managed through separate divisions. That doesn't mean we don't look to cooperate with each other and look to promote each other's product, but there's a fundamental difference between broadcasting and cable.

"A cable network," he explained, "can be successful with a small niche audience, if it can target that audience to a similar advertiser base. The success of a cable network should be tied to a small, specific group of viewers with a small, specific group of advertisers who target those viewers."

Addressing affiliate concerns, Mucha insisted that Disney remains firmly committed to ABC.

Still at odds, ABC and affiliates agree on pact

Still at odds, ABC and affiliates agree on pact

Disney chief Michael Eisner's timing couldn't have been lousier. At the same time he was suggesting to investors and financial analysts in New York last Tuesday that ABC was not one of the company's "core brands" (those would be Disney itself and ESPN), ABC executives and its affiliate board were working hard to wrap up a new affiliate agreement.

Affiliates agreed to pay $34 million a year to help Disney pay for NFL rights for ESPN and ABC, roughly in line with the annual cash payment under the old agreement. (Under that one, the stations paid $45 million a year for three years, but the deal covered a fourth year retroactively.)

In the new two-year deal, the repurposing cap remains at 25% of ABC prime time programming. However, Disney warned affiliates it will want to sweeten that in the next deal. Also, Disney's use of ABC to advertise other Disney cable networks is limited but not prohibited.

The board and the network tried for a four-year pact but were too far apart to work it out.

"Still, we feel the affiliates will be better off with the new network-affiliate plan than without it," said Bruce Baker, chairman of the ABC Board of Governors.

Said Alex Wallau, president of the ABC Television Network, "We believe this agreement marks a very significant and productive next step in solidifying our ongoing network-affiliate relationship." Affiliates covering 67% of the country have until this Friday to ratify.

Baker, executive vice president of Cox Broadcasting, noted that, for the first time, the agreement addresses the so-called "assignment issue."

In the past, affiliates have charged that the network blocked the sales of affiliated stations by threatening to change the terms of the affiliate contract with the new owner or even to withhold an affiliate contract altogether. Now ABC says it won't pull that stunt.

Despite the tentative deal, affiliates still worried about having their network brand given second-class status by Disney. Affiliates wonder about Disney's commitment to ABC, said Baker: "It's not good. Affiliates have not responded well to this."

Disney spokeswoman Zenia Mucha tried to make amends. "[Fixing ABC] is our top priority," she said, adding that integrating the cable and broadcasting operations is part of the cure.—S.M.

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