More than a music channel

Music made Black Entertainment Television profitable. So why does everyone want BET to change the format?
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It's breakfast time on BET, and the camera angle is on a woman clad in black-and-silver animal-print shorts moving her body like Jell-O in a paint shaker. The young man pinned to the wall peers casually out from behind her, rapping in a voice that sounds like equal parts Barry White and James Brown. "Shake it fast. But watch yourself. Shake it fast. Show me what you're working with."

Mystikal's "Shake It Fast" is one of the hottest music videos on Black Entertainment Television. Describe it to Debra Lee, and she smiles like the patient parent of a teenager with multiple body piercings.

"This is the music of the time," said Lee, the Harvard-educated president of BET. She took a break from building Halloween scarecrows with her kids on a recent Saturday afternoon to talk about the network where she's worked for 15 years. Back when she started, there were two offices, 80 employees and 10 million BET subscribers, Lee said. There are now 62.4 million subscribers; 500 employees; production facilities in New York City, Los Angeles and Atlanta; an office tower in downtown Washington; and several peripheral businesses, all valued at around $2.7 billion and all built primarily on the power of music videos like "Shake It Fast.

BET wasn't publicly criticized for its content or its success for nearly 19 years, during which time founder, Chairman and CEO Robert Johnson amassed a personal fortune and branched out into other businesses. Then last year, all hell broke loose when BET was slapped with a very public boycott initiated by the American Federation of Radio and Television Actors. Talent on BET's highest-rated show ComicView was getting paid around 20% of the going rate, AFTRA charged. High-profile celebrities like Jay Leno and Richard Pryor chastised the network for its labor practices, and the floodgates opened. Critics began pounding on BET's programs for being cheap and stereotypical, dismissing it as a music video network. Around half of BET's programming is music-oriented and always has been. Suddenly, BET was supposed to reflect the archetype of black citizenry, something it never tried to do, Johnson said.

"It goes to the fact that, for 20 years, there's been only one BET, and we're expected to be everything for everybody . and that's an unfair equation to put on BET," he said. "No one expected Lifetime to be all things to all women."

As for BET's reliance on music, Johnson said, "Music is and always will be the dominate cultural expression of African- Americans. So if one is an African-American network, music is going to be a big part of that.

BET's critics condemned the network for succeeding at what it set out to do, Lee said, picking scarecrow straw from her sweater. "People say, `All you guys are interested in is making money,'" she relates, palms up. "We're a business. That's what we do."

And BET does make money. The network generated more than $190 million in net revenues last year, according to Paul Kagan Associates. The revenue alone isn't spectacular-about average for a network of BET's size. But it's the network's cash flow that has raised eyebrows. By keeping costs down, BET's cash flow was just under 60% of revenue-the highest operating margin among most basic cable networks, according to Kagan estimates. Conversely, BET reinvested only around 16% of its total revenues in programming, according to Kagan-the lowest rate after the TV Guide Channel.

"It's lack of competition that explains BET's programming," said Clarence Page, a columnist for the Chicago Tribune and a guest pundit on BET's Lead Story. "They are the black-oriented channel. Until another channel comes along to compete for the talent, for the audience, they are it. When you get competition, it's amazing how sophisticated the market becomes."

The closest thing BET has for competition is a couple of start-ups with a lot of resources but very little visibility. Atlanta-based MBC (Major Broadcasting Cable) Network is a family-oriented gospel channel with about $200 million, a film studio, a growing schedule of originals and college sports, but only about 1 million subscribers two years after its launch. Cable operators say they want more programming diversity, but, at the end of the day, the network with the best deal gets the distribution.

Like MBC, NUE (New Urban Entertainment) is also working on a $200 million budget, but the Chevy Chase, Md., company has a much more ambitious program agenda than MBC-to become a black general-entertainment network. So far, NUE principals Dennis Brownlee and Robert Townsend have assembled 50 movie titles and are negotiating for 85 more. They have 75 original and acquired programs in the lineup, including the first syndication run of Malcolm & Eddie. They have struck production partnerships with a digital studio and with Reuters for 1,000 hours of news. NUE has no widespread distribution, but the signal was quietly launched in July.

After years of minimal investment in programming, BET more than doubled its program budget this year to about $80 million. New shows launched this fall include a black biography series; a morning talker called Oh! Drama; and a nighttime news and information show anchored by Ed Gordon. BET has also added Linc's, a black ensemble comedy from Showtime.

BET's new programming initiatives will continue under Curtis Gadsen, the creator of ComicView who became the network's senior vice president of programming last May. Gadsen is trying to program different age demographics in certain dayparts, without losing BET's music-fan base. As a result, a lot of BET's new fall shows are music-related, like 106th & Park: BET Top 10 Live, a music video vehicle shot from BET's new Harlem studios.

"We could not afford to alienate our core audience," Gadsen said. "We've been supported by that audience for so many years, we're entrenched in it."

BET actually has tried to raise the bar and diversify its programming before, but nothing draws eyeballs like rump-shaking and homeboy humor. Lead Story, which Page described as a "black McLaughlin Group," is possibly the most civilized pundit show on television. Lead Story earns around a 0.25 cable rating. On a 24-hour average, twice as many households tune into music video shows. About four times as many watch the prime time play of ComicView.

"The thing we hear the most is, `We want more PBS-type stuff. We want more documentaries,'" Lee said. "But then they don't get the ratings."

The first Black Biography, on music entrepreneur Russell Simmons, got a 0.35, but BET is committed to the series. Henderson-Moore is creating 13 new episodes for next year, although the show will have a different title. (Sources say A&E, originator of the Biography series, has politely told BET to rename its program.) Three new, made-for-TV Arabesque movies are also in production for 2001, down from 10 last year when the franchise was launched. BET will also spend $12 million to market the channel and the new schedule, up from $3 million last year.

"I think BET finally realized the necessity of marketing . off network," said Kelli Richardson, senior vice president for corporate marketing. "Previously, we didn't do anything off network."

Marketing is just part of the game in cable. Even the only black network in the analog world has to compete with more than 100 other channels for eyeballs and bandwidth. Community outreach is crucial, particularly for networks that don't have retransmission leverage to help them negotiate distribution contracts, something BET does not have. To put in local face time and push the local MSO's brand as well as BET's own, Richardson is taking the network to black colleges in 50 markets, doing voter registrations and launching HIV-awareness and gun-violence campaigns later this year.

Around 95% of BET's distribution contracts expire in 2003, said Curtis Symonds, BET's executive vice president of affiliate marketing and sales. Currently, the network charges operators 14 cents a sub, but that will go up half a cent in January. It is Symonds' job to ratchet up that number.

"We're doing the road show now to get the feel for what [operators] are looking for," he said. "Once you start talking about rate increases, they want to know what they're going to get back."

BET's answer is improved programming, more local marketing and more local ad insertion. Operators are inserting local ads in about 75% of BET subscriber homes, Symonds said. BET has hired local ad-sales executives to drive revenue up in that area.

BET's increased emphasis on programming was not necessarily to appease cable operators or gird for NUE, Lee said, but was part of an evolution that started two years ago when founder Bob Johnson loaded BET with $600 million in debt to take it private. (Johnson now owns around 64%, John Malone's Liberty Media owns around 31%, and Lee holds the remainder.) Until that point, Johnson had invested BET's profits into peripheral ventures, including pay television, magazines, restaurants, book publishing, movies, cosmetics, clothing and even a BET-branded credit card. In branching out into so many directions, Johnson was feeding his own entrepreneurial hunger but was also trying to grow BET through other avenues, Lee said.

"Affiliate fees are set," she said, and BET continues to make below-market ad rates-about half of what MTV gets for many of the same music videos. "How else do you grow your business?"

Johnson's latest quest is an airline, but not on BET's dime. If his bid for the Washington shuttle service DC Air is successful, the $142 million comes out of his pocket. Johnson has pulled himself out of the day-to-day operations at BET, focusing more on strategic alliances. He also doesn't rule out the possibility of divesting his piece of BET if a better acquisition opportunity came along. "You always look for opportunities," he said. "It wouldn't bother me at all, taking BET assets and investing in other businesses."

Lee, a former corporate litigator, handles the daily affairs of BET deftly. Regarding the AFTRA run-in, she said the boycott took them by surprise. Since BET considered ComicView a twist on Star Search, it didn't make sense to bring in the union, she said. ComicView was subsequently moved out of AFTRA territory in Los Angeles to Atlanta, but the comics did get a raise-from $150 to $1,000.

Soon after BET's labor pains subsided, it was again in the news, accused by a former chief financial officer of tax evasion in a $21 million wrongful-termination suit filed in Washington Superior Court in August. Reporters got hold of the filing before BET had even heard about it, Lee said. In the suit, former CFO Dwight Crawford claimed he was fired for objecting to BET's bookkeeping, contending that BET's top executives set up a shell company to avoid payroll taxes, tried to write off a $6 million dividend and deducted personal expenses.

"Crawford never raised any of those issues while he was here," Lee said, adding that she asked him to stay with the company and that BET's bookkeeping has been vetted by PricewaterhouseCoopers. The first hearing is scheduled for Nov. 17.

Some cable executives believe that BET should have done more in the public interest because Johnson pitched the channel on the premise of promoting the image of blacks in the media, they say. Others feel that Johnson gets a bad rap because he has promoted blacks in the media more than any other individual in the business.

Fred Dressler, senior vice president of programming for Time Warner Cable, defends Johnson: "Remember, it started as a two-hour-a-week service and grew to its current schedule over time. BET has been viewed as a general-entertainment and information channel with a black perspective. No one ever claimed it was the perspective of every black person any more than any of the broadcast networks represents the perspective of every white person. That is why more channels like MBC and NUE are beginning to spring up and gain support from Time Warner and other cable operators."

Going forward, Lee intends to grow BET the channel and the brand, through videocentric ventures and through music. "We are not running away from music," she said. "That is what we do."

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