January 31, 1996
Murdoch to Introduce News Channel as Challenge to CNN
Rupert Murdoch's model for his 24-hour new all-news network is CNN -- Not CBS, NBC or ABC. (154K, 22 Secs.)
By BILL CARTER
EW YORK -- Rupert Murdoch, the chairman of the News Corp. and Fox Inc., on Tuesday became the latest entrant in the business of providing 24-hour news channels, promising to provide a new competitor to the Cable News Network by the end of the year.
Murdoch named Roger Ailes, the former president of CNBC, chairman of the channel; but with no name and no formal plan for distribution, the promised channel inspired widespread doubts about its long-term survival among competitors and cable industry analysts.
Such skepticism has been growing since both NBC and ABC announced plans within the last six months to begin their own news channels, all of which will be chasing the same small pool of news viewers. Most of that pool now supplies the audience for CNN.
The 16-year-old CNN is now a worldwide force in providing news coverage. But in an average hour the American audience numbers only about 400,000 viewers, and many television industry analysts on Tuesday questioned whether enough viewers would ever exist for two all-news channels, let alone four.
"Some of these new channels will fail, that's for sure," said Sharon Armbrust, a senior analyst with Paul Kagan Associates, a media consulting firm.
Murdoch said he believes the audience for news can double, though he said he doubted that "you could have four times the audience" that CNN has.
CNN has become a highly profitable cable service, with a cash flow for 1995 that Kagan Associates estimated at $250 million. But much of its profitability is based on CNN's unique position as the only channel providing full-time news coverage. A small dip in viewing for CNN could drastically erode its profits.
But several analysts suggested that the rush to challenge CNN is at least partly fueled by the desire by the networks to position themselves to provide interactive news programs for on-line viewers.
Larry Gerbrandt, a senior partner with Kagan Associates, said that the question of how many of the new news competitors survive may be determined by how well they devise "alternate strategies" for providing revenue-generating news programs.
"Murdoch may be looking at the future 5 to 10 years ahead," Gerbrandt said. "At that point news may not be as much of a 24-hour service as an on-demand service. You may get consumers ordering up high-speed news summaries through cable modems."
But Ms. Armbrust said in counting on some of these cyberage systems for news delivery, the network planners "may be getting into the computer area of vaporware. They tell you how great it's going to be, but then it doesn't necessarily happen that way."
One senior CNN executive said, "Nobody knows how much money there will ever be in the on-line end of the business, so you better make money on the standard business model of all-news first."
Murdoch's announcement generated more skepticism than the earlier announcements because unlike NBC or ABC, he is starting up a news channel without an existing network news division to supply a framework. Murdoch's Fox news service consists of a small staff that provides reports for affiliates of News Corp.'s network.
NBC's channel, a partnership with Microsoft Corp. to begin in July, will have access to 20 million homes because it will be a reformatted version of NBC's existing America's Talking channel. ABC, whose parent Capital Cities/ABC is completing a merger with the Walt Disney Co., which has no distribution deals in place but which will rely on ABC's position as the leading broadcast news network, will start up early next year.
"NBC announced a channel, and it has both a news organization and a guarantee of solid distribution," said a senior news executive at a competing network, who spoke on condition of anonymity. "ABC announced a channel, and it has a news organization but no distribution. Now Murdoch announces a channel, and he has neither."
What Murdoch does have is Ailes, who experienced great success running two cable channels, CNBC and America's Talking, for NBC, which is owned by General Electric. He left earlier this month when NBC transformed America's Talking to its all-news channel -- and gave control over to Andrew Lack, the president of NBC News.
As Ailes left NBC, it was widely expected he would join forces with Murdoch, since both men share a background supporting conservative political causes. Indeed Murdoch in the past has suggested that his all-news channel would provide a conservative voice to counter what he called the liberal skew of coverage on CNN, which is owned by the Turner Broadcasting System.
Ailes said on Tuesday that the new channel would provide "objective reporting" but both he and Murdoch said their channel would be something "not like" the others. Gerbrandt said an all-conservative news channel would be "an interesting marketing strategy."
On Tuesday, some analysts suggested that Murdoch jumped to hire Ailes to run both Fox News and the news channel as soon as he became available -- and perhaps before he was ready to begin the channel. The idea, some suggested, was to give Ailes a toy to play with, though, given the current state of Fox News as described by some insiders, it may be less a toy than an imaginary friend.
"There is no there there," said one executive who formerly worked for Fox News. One current staff member of Fox News said, "The thing to notice about Fox News is that they keep announcing things that never happen."
Among the announcements cited by this staff member that have so far not come to fruition were a prime-time news magazine program, an 11 p.m. nightly newscast, and a Sunday morning public affairs show.
Ailes said on Tuesday that both the magazine program and the Sunday morning show are priorities.
Other Places of Interest
Copyright 1996 The New York Times Company