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What Icahn Likes

Attack on Time Warner underscores strength of Phil Kent’s Turner division 2/10/2006 07:00:00 PM Eastern

Asked recently about Carl Icahn’s assault on Time Warner, Turner Broadcasting System chief Phil Kent is characteristically reserved. Only when repeatedly pressed about the attack shareholder’s fierce criticism of his parent company Time Warner’s myriad missteps, Kent finally exposes a hint of a smile, saying, “I’ve never heard him say anything bad about Turner.”

When Icahn last week blasted Time Warner in a lengthy plan to break the company into four parts, Kent’s cable networks division outshone everything else. In the litany of Time Warner divisions’ bad deals, pits of red ink and securities investigations, the worst criticism of Turner: no major cable network startups in recent years. Not so bad.

Icahn’s advisers show what Time Warner’s financial statements already revealed: Turner enjoys strong ratings, great cash flow and good overall growth.

Kent’s performance as president/CEO of the division bears inspecting—especially at a time when the cable universe is more splintered than ever. He is pushing for more original programming at the entertainment networks and stronger individual news programs.

Time Warner doesn’t disclose a lot of detail on his division but says that, in 2004, subscription revenue rose modestly while ad revenues jumped a healthy 11%. TNT finished 2005 as the top basic-cable network in prime time. However, the network has slipped in recent months and is regularly beaten by a resurgent USA Network. CNN seems to be finding a direction after spending five years adrift. Cartoon Network is suddenly in ratings trouble.

In an industry where division chiefs tend to be showmen, Kent cuts a fairly low profile, avoiding interviews and public forums. It’s a pose he picked up at Creative Artists Agency, where he spent six years as an agent packaging TV shows: assembling writers, producers and stars, then shopping the combination to cable networks and syndicators. His successes included HBO’s Tales From the Crypt and 1st and 10, which were pioneering cable shows in their day.

Current and former Turner officials say Kent’s greatest ability is minimizing internal turf wars. “In a big company, he’s a really smart guy and really a collaborative person,” says Scott Sassa, the ex-president of Turner Broadcasting, who hired Kent in 1993. “His skill is getting different divisions to work together but feel they’re not losing pride of authorship.” But he firmly holds executives to account for their mistakes, as plenty of ousted CNN execs can attest.

Kent apprenticed in many different parts of the TV industry: developing TV shows for syndicator Blair Entertainment, running Turner’s home-video division, starting numerous international networks for the company and ascending to become president/COO of CNN.

He left CNN in 2001 after TBS Chairman Jamie Kellner named Walter Isaacson chairman of the news network, passing Kent over. The former agent chilled for nearly two years, and then Time Warner came calling, asking him to replace Kellner and run all of Turner’s news and entertainment operations.

The morning we met, Kent had just left a breakfast where NBA Commissioner David Stern was talking about the difficult balancing act of new media. Revenues from Web and cellphone TV are exciting but, for now, are small, and new players threaten to lure away sports leagues’ primary customers, TV networks. “What David Stern said was, 'How do you keep your $800,000-a-year business from undermining your $800-million-a-year business?’”

Since TNT is paying the NBA around $365 million a year for basketball games, Kent thinks it’s a pretty good question.

But aren’t Kent and other media chiefs guilty of a similar sin, concentrating far more of their companies’ energy on new media than potential revenues will justify anytime soon? “Absolutely, but that’s not a bad thing,” he says. “I don’t have to babysit TNT every day. I’m not going to second-guess Steve Koonin [president of TNT and TBS].”

Kent is tired of the press hype over every cellphone, TV or iPod blip but notes one of CNN’s financial strengths stems from its early push into “the dotcom thing.”

He spends plenty of time working on old media. One challenge is original programming, long a minefield at Turner’s biggest networks. “I would love to have had the track record developing original comedy on TBS that we have had with drama on TNT.” After a decade of misfires, TNT finally found success with originals last year in crime drama The Closer and miniseries Into the West. Kent wants TBS to follow suit.

“We got on the reality train for a while,” he says. TBS’ The Real Gilligan’s Island bombed in its second season, and other shows didn’t work, notably Minding the Store, behind the scenes in comedian Pauly Shore’s family’s Los Angeles Comedy Club.

The big question is why bother? TNT and TBS haven’t suffered without them, thriving on their off-network dramas and sitcoms, movies, and sports. Even a successful network like FX generates more ratings from theatrical releases than from original series like Nip/Tuck and The Shield.

Kent says TNT and TBS advertisers still need to impress advertisers with more than just gross ratings. “A really good original series,” he says, “has a disproportionate effect on solidifying brand perception.”

He believes that CNN has finally found its groove. He says the biggest change by CNN President Jon Klein, a former CBS News executive, has nothing to do with Anderson Cooper. It’s assigning stronger producers to run individual shows. “The deficit at CNN in the past was skill level of producer,” Kent says.

When the network is hot, no one in TV does a better job gathering news, but its shows weren’t compelling when the war, storm or scandal died down. Nodding to Fox News’ successful talk and commentary shows, he says, “We have a competitor that has a programming formula that works better in a slow news environment.”

He sees Turner charting a new direction in GameTap, an online subscription service focusing on older “classic” videogames. It’s a departure partly because the games have nothing to do with Turner’s existing networks. Such departures are critical, he says, “not just about where we run day to day but where are we going to be five years from now?”

I asked Kent my favorite question: What scares you? His first answer: “Besides the United States Congress?” Politicians’ and regulators’ recent flirtations with à la carte cable—forcing cable systems to sell basic networks the way they sell HBO and Showtime—worries him because it would upend the economics of his networks.

Even the much touted “family tiers” threaten him: Cable operators are generally excluding CNN from their family packages because of the risk that live shots might show something graphic. Depending on how many homes adopt the tiers, CNN could lose 5%-20% of its distribution.

But his biggest anxiety is the personal risk CNN staffers face every day: “I pinch myself in disbelief that we haven’t lost more people in Iraq,” Kent says. That’s underscored by the severe injuries suffered by ABC News anchor Bob Woodruff and cameraman Doug Vogt two weeks ago.

How does he cope with the controversy Icahn is trying to gin up? “This is not a distraction for me. I don’t think it’s a distraction for any of the operating CEOs at Time Warner. I’ll use Dick Parsons’ line: 'We have one thing in common with Carl Icahn: We want to get our stock price up.’”

E-mail comments to jhiggins@reedbusiness.com

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