E!valuation TimeIt got fat off Anna Nicole Smith and Howard Stern, but breakout success has been elusive. Network chief Mindy Herman's future is on the line. After 14 years, why isn't E! the ESPN of entertainment? 4/11/2004 08:00:00 PM Eastern
Staying Hot by Staying in the Shop
On any given week, the staff at E! Entertainment Television gets a half-dozen pitches by celebrities and wannabe stars for their own reality show. CEO Mindy Herman wants everything
considered. Who knows, she says, which one will be the next Anna Nicole Smith, the buxom blonde Playmate whose reality show shattered E!'s ratings records a couple of summers ago and put the channel on the map.
"It's about personality," says Herman, who came aboard in 2000. "Anna was a personality that popped. We'll look for the right one again."
But that was two years ago.
E! could use some star power—now. At a time when celebrity culture has never been hotter, the network dedicated to it all—E! Entertainment Television—faces a troubling task: standing out in a crowd.
Syndicators have long staked claims on E!'s turf with daily doses of celebrity dish on shows like Entertainment Tonight
and Access Hollywood. Cable channels like Bravo and VH1 are elbowing in, too, with programs focused on the famous and the notorious threatening E!'s 14-year-old franchise. With more than 80 million subscribers, E! is fully distributed and mature, so the need for a hit show is paramount.
While some critics argue that the network lacks big breakout shows, media buyers say it simply needs to hawk its wares better.
"Promotion, promotion, promotion," advises veteran buyer Howard Nass. He says E! delivers what viewers want: "quick tidbits, a little bit of scandal, a little bit of People
magazine, a little bit of the National Enquirer." The trouble is, "I don't think enough people know it's on."
Hungry fans are devouring pop culture across cable, including E!. In the first quarter (which E! considers Super Bowl season because of the awards shows), E!'s viewership increased 6% to 445,000 viewers. The channel posted increases across the key 18-34 and 18-49 demos, too, aided by the highly rated Howard Stern
radio show. Impressive on the surface, but VH1 and Bravo boasted larger gains in the same time period. VH1 climbed 13% to 513,000 viewers, and Bravo perked up 75% to 510,000 viewers.
"Other people will create shows that are successful in our space," Herman says, sipping green tea over lunch at Sasabune, a no-frills West Hollywood sushi shrine beloved of execs at Fox and parent News Corp., where she spent eight years in various roles. "Our goal is to have more hits."
The tepid growth, at a time when interest in celebrities is rising, may be troubling to E!'s owners, Comcast and Disney, but it's unclear if that spells a change at the top. Comcast executives declined to say whether Herman, whose contract is up for renewal at year-end, will continue in her current role—hardly a vote of confidence. For now, the 41-year-old exec is intent on implementing a new lineup of shows that she hopes will recapture the spotlight.
To get there, E! is launching a slate of reality programs, showcasing buzz-worthy stars and shows more attentive to fan interests. Herman is hopeful about two that will run in June: Dr. 90210, about life inside a Beverly Hills plastic-surgery practice, and Scream Play, in which contestants re-create famous stunt scenes, such as jumping from a speeding bus from the movie Speed. The new shows should complement solid performers like The 101 Best
franchise (101 Best Makeovers, 101 Reasons the '90s Ruled) and True Hollywood Stories. (Anna Nicole
is in repeats. E! prefers to make specials with her these days.)
Since last summer, E! has pushed to bring hotter stars to the cameras. Hip, hungry viewers want au courant
celebs, not yesterday's stars. "Britney Spears instead of Joan Crawford. 'NSync versus New Kids on the Block," says Programming President Mark Sonnenberg, who shepherds the programming with development chief Lisa Berger, a former MTV programmer. Seeing MTV's hit Til Death Do Us Part
with newlyweds Carmen Electra and Dave Navarro "is hard on me," Berger admits. Ditto MTV's Newlyweds. But just any celeb won't do for E!. "What is the moment that makes them compelling?" she demands. "People call and say, 'I have so-and-so.' I say what is the story?"
While the hunt for new shows continues, the network hasn't abandoned the star-profile genre. Two upcoming pilots are Tipping Point, about when a star or a trend hits big, and The Next Big Thing, showcasing the latest hot names. Both could become regular series. Explains Berger, "We're always looking for different ways to spotlight someone."
Programming a celebrity network isn't necessarily easy. E! was forced to abandon its popular Celebrities Uncensored, a show in which paparazzi catch stars off guard, after an avalanche of complaints from stars and their handlers. "Some felt we were going in that [tabloid] direction," Sonnenberg says, adding that was never E!'s intention: "We need to have good relationships with the creative community."
Even if Herman doesn't find a hit this summer, she takes comfort in the fact that, in the demo-driven world of cable-TV, E! remains a big moneymaker by delivering precise demographics. Advertisers reward the channel for its hard-to-deliver young and upscale viewers. "There is a certain hip factor to E!" that appeals to clients, says Doug Seay, senior vice president for ad firm Publicis & Hal Riney. He notes that movies, packaged goods, and automotive are among its strongest advertising categories.
According to Comcast, E! started as a $500 million investment and is now valued at close to $2 billion. (Spinoff Style channel is worth $500 million.) Last year, E!'s operating cash flow was $156 million, with an impressive 48.9% profit margin. In contrast, ESPN's $950 million operating cash flow dwarfs E!'s, but the sports channel's high programming costs keep the margins down to about 25%. Still, E! has a long way to go to become the ESPN of entertainment.
"They have very good profit margins, and the programming is not expensive," says Seay, likening the E! network to a broadcast station. "They are relatively lean and mean."
That's partly out of necessity. E! may be owned by Comcast and Disney, but, unlike its competitors, it doesn't enjoy the benefits of big media parents. Both VH1 and Bravo are aided by the reach and cross-promotion opportunities of their powerful entertainment parent companies. VH1 could tempt a star with plugs on MTV's TRL
or CBS's Early Show. Bravo has NBC and Access Hollywood
in the family.
E! spent an estimated $85 million on programming last year, according to Kagan World Media, compared with $156 million at VH1. To keep costs down, many E! shows are produced in-house, and its 14-year library is chock with clips and footage. It is rare that E! would spend more than $100,000 per episode. Says Sonnenberg. "We average 1,000 hours of original programming. You can't do that without being cost-efficient."
Herman still holds out hope for a runaway hit like Anna Nicole, but she cares more about the bottom line. "I'd rather have five networks with a 0.3 and the right demos than one network that does a 1.5. It would be immensely more profitable," she says. "It just doesn't make as good copy."