Catching its breath - Broadcasting & Cable

Catching its breath

Oxygen turns to traditional television to get a second wind
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Here's a surprise: People want television to be entertaining. They want television in a context they recognize and less of the free-form, nontraditional format that makes up much of Oxygen, especially the two-hour, live, prime time anchor known as
Pure Oxygen.

Nine months into launch,
Pure Oxygen

is being moved to daytime.

"The audience likes the idea of
Pure Oxygen
," says Geraldine Laybourne, chairman and CEO of Oxygen Media. "The problems are with the format. They want longer, story-based pieces that are more personal. They want it to be more predictable, in terms of where pieces will be, and they want more entertainment," she adds.

Laybourne is holding forth at her office above the Chelsea Market in lower Manhattan. Two large, gilt-framed portraits lean against one wall-one of Leo Hindery, once the head of AT&T's cable division and the architect of Oxygen's carriage deals, and the other of Rob Stengel, former head of programming for the former Continental Cablevision. Whenever one of them used to visit Laybourne, she'd hang his portrait on the wall.

Now, Laybourne is weathering a wave of press speculation that Oxygen is floundering financially and she's looking for someone to buy her out.

"We are not selling our company," she responds. "We are in a planned round of funding that we expect to close ahead of schedule."

Oxygen's $100 million investor, Vulcan Ventures, has no intention of getting out either, says Vulcan president Bill Savoy. "As investors, we are consistently pleased with how Oxygen Media has been performing," he maintains. "They are carefully and successfully executing their business plan in a very competitive market. We plan to be long-term partners with Oxygen."

Oxygen had about $300 million in the hopper before this round. The target is now $470 million, up $20 million from the original figure, based on a decision to buy rather than lease studio space. "You can't raise all of that immediately, because you don't exist" as a fully developed company, she explains, shrugging her shoulders at press reports that spun the fundraising into desperate measures.

The implosion of a couple of the Oxygen Web sites and a stream of exiting executives hasn't helped matters, nor did cutting back production during the summer and laying off 18 employees.

"We didn't plan well," Laybourne notes. "Every show takes a summer hiatus. It's tough to do live TV every day. You need to take a breather. We didn't plan for it but realized we had to do it."

Oxygen Editor-in-Chief Sarah Bartlett and producers Martha McCully, Mark Pertin and Amy Critchett left the company during the summer. Mark Farrell, the head of comedy, and Robin Berlin, vice president of talent and development, left two weeks after Oxygen debuted.

"We hired 600 people in a year, and that's not necessarily the way to get as careful a fit as when you can do it slowly over time," Laybourne says. The company now employs approximately 700 people.

Employees at Oxygen are asked to sign an agreement to
not

talk to the press, but insiders have said that, to work there, you have buy into the hype and not everyone has done that.

Oxygen launched in a self-congratulatory deluge. Oprah Winfrey's participation was held up like a television seal of approval, and her daytime show is still a staple on the network. Advertisers bought in to the tune of $70 million.

The new women's network would defy the traditions and set a standard for convergence. Interactivity was its conceit. Content was going to morph out of stories gleaned from online feedback. Marcy Carsey and Caryn Mandebach, equity partners in Oxygen and two of the hottest sitcom producers in television, were in charge of making the vision manifest. When asked last year how they intended to translate their sitcom success into live, free-form television, Mandebach replied incredulously, "You just don't get it."

The viewers didn't get it either. Instead of the creatively fertile feedback Oxygen executives expected, they got requests for the very thing from which the network was trying to break away: scripted shows.

"We're doing a lot of adjusting," Laybourne says. "Prime time becomes entertainment. It will take some time. We're not ready to do scripted comedy five nights a week."

They are ready to bring in acquisitions, something Oxygen resisted in the beginning. Pre-launch, Laybourne repeatedly said the network would be "100% original." By launch, it was probably 95% original, with a scattering of 1930s-era movies
.
The old movies are out. Debbie Beece will be the point person to bring in the new. Beece, former president of Nickelodeon Pictures, joined Oxygen earlier this month as its first president of programming.
Roseanne
, a scripted comedy from Carsey-Werner now in syndication, is already in the pipeline for 2003. Oxygen will get a window for
Dot Comedy
, the new series it's co-producing with Carsey-Werner for ABC.

Laybourne says launching with mostly originals was "the right thing at the right time. It's always possible to do acquisitions. The nice thing is that we can adjust the programming. It's not like we have 65 episodes and 'have a nice day,'" meaning money wasn't thrown into inventory that later flopped. Original programming was also something cable operators were howling for since so many established networks were spinning out digital spawn filled with recycled programs.

Laybourne was also adamant about getting analog carriage when she hit the circuit with Oxygen. Her first deal, with Hindery at AT&T, was a most-favored-nation agreement that paid Oxygen 19 cents per subscriber. The deal called for AT&T to give Oxygen 3 million subscribers the first year and 2 million each in 2001 and 2002,
if

they could get matching numbers from other operators.

It was harder than Laybourne anticipated. The license fee made the deal too rich for a lot of smaller operators, and the major MSOs were getting at least $5 per sub for analog subscribers. Oxygen was offering either $1 or one year free. By trading equity and accepting deals that combine analog and digital carriage, Laybourne has drummed up deals for 32.8 million subscribers by the end of 2002, a rate that puts Oxygen among the fastest-growing networks in cable.

The atmosphere at Oxygen is considerably calmer than last year at this time, when the network was getting 50 to 100 press requests a week. If she could do anything differently, Laybourne claims she'd launch much more quietly.

"I'd never tell anyone I had any partners," she notes. "The expectations were incredible. People expected 'Nick for women' in the first year. I'll be much more comfortable in a position where we can overdeliver."

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