Ted Harbert

Ted Harbert2008 was an exceptional year for the Comcast Entertainment Group (CEG) and its channels E!, The Style Network and G4. All three experienced record-breaking ratings, and that is very good news for Ted Harbert, the company’s president and CEO, especially with all the doom-and-gloom forecasts of recession and continued declines in advertising for 2009. Harbert, along with a number of media analysts, believes that cable channels will be the least affected by the downturn, particularly those that are delivering targeted upscale demographics, as the CEG channels are.

What has been driving the high ratings is programming that has caught on with viewers. On E! the topical stripped shows E! News with Ryan Seacrest and Giuliana Rancic, The Daily 10, The Soup and Chelsea Lately have been outperforming expectations, and as Harbert explains, keep the brand polished and the ratings up. That’s not to say that shows like The Girls Next Door, Snoop Dogg’s Father Hood and Keeping Up with the Kardashians haven’t also been performing well.

The Style Network targets young women with programming and information about beauty, weddings, family, fashion, home and personal style. The year brought record-breaking viewership, and a key show has been Ruby, the highest-rated original series in The Style Network’s history. Ruby was a bit of a gamble. After all, what kind of appeal can a show about a 500-pound woman trying to lose weight have? Apparently, huge (no pun intended), as Ruby has made a very personal and emotional connection with viewers, who tuned in each week to see her struggling with shedding pounds, all the while supported by a group of colorful and sympathetic friends. The Style Network has also benefited from the loyal fan base created by the shows Clean House and Kimora: Life in the Fab Lane.

G4 goes after 18- to 34-year-old males, probably the toughest demographic for any TV network, mainly because that group seems to be everywhere but in front of the TV set, preferring video games and a host of websites to traditional television offerings. Nevertheless, G4 also had its best year ever in 2008, with series like Attack of the Show and X-Play. And as a sign of how new-media savvy its target audience is, G4tv.com is getting as many viewers as the linear channel is.
This wide range of popular shows is fueling all of CEG’s businesses, from new media, where E! Online has become a profitable business, to the Comcast International Media Group, whose president, Kevin MacLellan, heads up program sales, the launching of channels around the world (E! is in 164 territories and The Style Network is in 83 countries), and the rollout of local versions of E! Online.
With a healthy balance sheet and an inexhaustible content pipeline, Harbert is cautiously optimistic about 2009. He shares his vision for CEG in this exclusive interview.

WS: Analysts are saying that in the U.S., cable television will suffer the least from the advertising downturn. What do your channels offer advertisers that they can’t get elsewhere?

HARBERT: An incredibly efficient media buy. Sometimes it takes a downturn—it’s unfortunate, none of us want it—to get the media buyers, who are now being told by their bosses to really crunch the numbers and look for what the best deal is. I’m going to make a corollary to our international business as well, because you could ask what’s going to happen if budgets are cut for the program buyers—how will that impact our international program sales? Sure, there will be some downturn, but I think we’re going to do very well, because both on an advertising basis and on a program-­sales basis, we offer the best possible deal. On a cost per rating point, advertisers just do much better. We’re such an efficient buy. And on all three of our networks, unlike many cable and broadcast networks, our demographics are so superior. We have a very young median age, and in many cases on the E! network, 20 years younger than most of our cable and broadcast competition. Our median age is about 32 years old, which is extraordinarily young. And we also deliver such an upscale 18-to-49 demographic ABC, we call it the upscale affluent market breaks: professionals with high income, $75,000-plus and even $100,000-plus. They are just extraordinary numbers.

The Style Network is the exact same thing. In its concentration on female viewers, in what we call VPVH—viewers per viewing household—it ranks number one or two in so many of those upscale market breaks. So, say you’re a media buyer sitting at your desk in New York and your boss comes in and tells you the client, whether it be the automotive business, which is in trouble, or anything from Procter & Gamble to Johnson & Johnson, needs more efficient buys. And you really don’t want to pay those high CPMs [cost per thousands] that other networks are demanding for an eroding or older audience. What are you going to do? You go through all your numbers, and what pops up? The Comcast Entertainment Group as being really efficient upscale buys.

I really hope we can avoid any kind of downturn, but I’m not going to kid you, some businesses will scale back their marketing budgets. But I think we are one of the last companies to get cut. Advertising cuts from the automotive business are going to hurt ESPN and the broadcast networks. Fortunately, advertisers have learned in past recessions that if you pull out of television, you’re in big trouble—it just doesn’t work. You’ve got to remain in the marketplace. I’m really hopeful that we’ll stay very strong and the same thing will happen for Kevin’s team overseas. We’ll have to wait to see what happens in the ad-sales business internationally and the affiliate business. But in program sales, I look at the ratings for some of those new dramas that are going around the world, and that is a lot of money for very low ratings. And yes, our programs’ ratings might be lower, but they are a really efficient buy. And I think they’ll find the same thing that we find here, that we’ve got good escapist entertainment at a price point that makes it almost a no-brainer. Broadcasters still have to put something on the air; they’ve got to program their networks.

WS: In light of the writers’ strike and how the broadcast networks have had to rethink their business, can they learn from the cable model of producing and scheduling programming? It’s more cost-effective, isn’t it?

HARBERT: Yes, the cable model is more cost-effective, and I want to make a point about the writers’ strike. I see my pals at the broadcast networks still pointing to the strike as one of the reasons why their ratings haven’t bounced back. I have to just step back and object because it doesn’t make any empirical sense to me—the writers’ strike was many months ago. The networks had all summer to promote their new fall schedules the way they always do. I just don’t think most programs have caught on. There are a few exceptions. Whereas old tried-and-true favorites on broadcast networks, like NCIS, is a good example of networks learning from the cable scheduling model. Not only is NCIS winning its midweek time period, Tuesday night, but now, because they are doing poorly on Friday night, CBS is scheduling a repeat of NCIS on Friday night, and it was the number one show on Friday night as well. That’s what cable has been doing for 20 years. It’s OK to repeat shows that people like. The broadcast networks are going to have to really understand that because of people’s viewing schedules, just giving them one opportunity to watch a show is not the right methodology.

Sure you can make the show available on your website or on Hulu, but I have to again question that. Though NBC is struggling with Heroes, which is a well-made program, they’re saying it’s down to 7 million viewers, but another 2 million viewers watch it on the digital offering. And I say, how happy are you with that? Are you monetizing that? Is it cannibalizing your network run? We don’t stream full-length versions of our shows because our affiliate deals don’t permit it, but if I could, I’m not sure I would, because we’re still in the business of trying to deliver high ratings to the advertisers. And if a few households with people meters are watching a show on Hulu instead of watching it on NBC, doesn’t that affect their ratings? And does the monetization come out the same? I don’t think so. I understand they want to give viewers the opportunity to see shows in other places, and I think CBS putting NCIS on a couple times a week is really smart. However, when they’re setting the fall schedule, instead of spending all the money on a new show that fails, just put on something you know the audience likes. There is no shame in it anymore. No one has to be embarrassed by saying, yeah this is a hit show so we’ll put it on twice a week. I frankly think that is how they are going to be able to maintain their business model—get more use out of their successful shows and not put on as many high-cost new shows.

You also can’t answer everything by just putting on a lot of reality shows, because you can reach saturation. Those shows don’t grow on trees. They may be cheaper, but frankly the network model for reality competition and game shows isn’t at all what the cable model is. They spend seven figures on a lot of those reality shows, and, sure, they have some additional production value, but they don’t deliver the additional ratings. We’ll spend $400,000 or $500,000 on those shows and get so much more out of them. I understand the desire to have a point of distinction, to be different and not just join the cable club, but at some point you are going to have to show a profit to your board of directors. So I really think they have to do some hard examining of the model.

WS: In the case of a show like Ruby, doesn’t the emotion in that show trump the production values?

HARBERT: Yes, absolutely. What counts is what character grabs somebody, what emotion grabs some­body, and that’s the way to win the viewer. With my kids, who don’t watch much television on the big TV, but watch it on their laptops, I don’t know if production values are the deciding factor for them.

I always try to put TV viewing into terms of a couple sitting out in Kansas—I call them Harry and Ethel. I always wonder, Is Harry saying, “Come on Ethel, let’s watch that show, it’s got great production values!” Now, if you go to a huge James Bond movie to see somebody spend $150 million, you’re really blown away by the energy of that movie. But since tele­vision can’t compete in that category anyway, we all end up getting equalized. And frankly, spending $3.5 million to $4 million on so many of these network dramas that just aren’t delivering ratings—that model is just plain broken.

WS: How important are your websites in extending the brand and connecting more with viewers?

HARBERT: They’re crucial. When I got to the company, the websites we did were just promotional tools. They were sort of a TV Guide for the networks. You just can’t get away with that anymore. Today they are businesses unto themselves. They have to have their own content, their own reason for being. Sure, there are places on the sites where you can see what’s on the linear network, but that’s only a small part of it. I look at E! Online as an up-to-the-minute version of Us magazine. We put on so much of our content, so many pictures, so much video. The increase in video on E! Online has been just extraordinary, and that’s what we sell to advertisers.
G4tv.com is as popular as the linear network. They do a brilliant job of covering everything that young guys care about, including technology, video games and Internet culture, and it’s really growing by leaps and bounds.

Mystyle.com is pretty much a new business for us. It started in 2008 and it is a fantastic female destination. It’s got so many interactive features that allow you to find out what’s available in big retail stores in your area that will look good on you or for your home. It’s really its own business. Mystyle.com is up 300 percent year-on-year versus the network’s website last year.

The real truth, though, is that while the use is growing, we have to watch the monetization of these sites. There are a lot of popular sites connected to TV networks, and the sales department goes to the agencies and says, “Look at all these users we have,” and it’s difficult for the agencies. Just imagine the administrative task of buying commercial time on all the networks you want to buy and then get all the sites you want to buy. The technology and the creativity, frankly, are ahead of the advertising business monetizing them. But it will happen. I don’t think there are a lot of rules, but I think one of the rules is, where the eyeballs are, the money will follow. So it’s OK if our usage is a little ahead of our monetization; we know we have a good business there. E! Online has already proved to be a profitable business and I think the others will get there as well.

WS: Would you consider making acquisitions if the right opportunities come along?

HARBERT: We always are. Here is the good news about the financial strength of this company. We had a terrific 2008 and we predict very solid growth for 2009, even taking the recession into consideration. We’re in strong shape at this company, a division of Comcast, and so is Comcast. So the answer to your question is, Yes, from program acquisition to website acquisition to international acquisition, this company looks at everything, as does our management in Philadelphia. It’s got to make sense and be able to contribute to the long-term growth of the company, but Comcast is in a position to do strategic acquisitions if they want.