AFFILIATING WITH THE LOCAL STATIONS
The networks did not steal one another’s affiliated stations. Government regulations permitted only one affiliate per network in a given market, so there was room for all. Also, regulations made it difficult to shift a license from one local station to another, another constraint on network poaching. Still, the genteel attitude of the networks toward one another did as much as the regulatory environment to temper their competitive zeal.
There is no doubt that a frontal assault by Murdoch, even one that ended in defeat for Fox, would have been costly for the networks. Had he competed on the price of ads, they could have matched him. But since his revenue stream was much smaller, the dollar damage to them would have been far greater. Had he bid for their programs, they could afford to pay more, but again, they had a whole schedule to defend and he was just starting out. For Fox and for the networks, abandoning the old game of carefully moderated competition for a bruising, no-holds-barred battle would have been painful.
P213
Advertising
Murdoch followed the lead of the established networks in subscribing to the code of conduct that put a limit on the number of advertising minutes for each half hour of prime-time broadcasting. He established his price at 20 percent below what the networks were charging per rating point. This discount was only marginally aggressive. If he were to attract advertisers to his new, unproven, and much smaller network, he had to offer them something. By pegging his prices to those of the networks, although at a discount, he signaled that he intended to cooperate, but he also let them know that they could not match him on price. If they lowered their rates, he would maintain the 20 percent discount and lower his. Since their advertising revenue would dwarf his for the foreseeable future, the pain to them would be much greater.
Programming
Here again, Fox did not confront the networks head-on. It started with a limited schedule of original programs. The first established star Fox hired was Joan Rivers, to host a late-night talk show. Rivers had already been passed over by NBC in favor of Jay Leno to follow Johnny Carson on The Tonight Show. The other programs in its first years were also ones that the established networks had either rejected outright or were not likely to run. Studs, Married with Children, and The Simpsons were either too vulgar 粗俗庸俗的 (though this may be hard to believe from the vantage point of the twenty-first century) for the other networks, or in a cartoon format, which they reserved for Saturday-morning children’s shows or Disney specials.
Murdoch had made his fortune in print journalism by following the path of sensationalism in his papers. Even his broadsides were tabloids. Fox Broadcasting adopted the same approach. By going down-market, it reduced direct competition with the other networks. If this kind of programming was going to win Fox an audience, it was more likely to come from independent stations, either broadcast or cable, that were already carrying similar fare. It also targeted a teenage and youth audience that had no established viewing habits and was more easily attracted.
Room for only one more
The manner in which Fox secured local stations, priced its advertising, and filled its time slots with entertainment sent strong signals to the networks that it was not going to make trouble. It did not appear checkbook in hand to steal any of their established programs or stars or woo極力爭取 their local affiliates. Its advertising, though offered at a discount, was still pegged to the network rates, and it did not intend to expand supply by reserving more time for ads. The message to the networks was this:
1.We intend to abide by the rules of your game.
2.Though you can probably crush us if you choose, it will cost you much more to fight us than to let us in. And since we have made the Fox Broadcasting System a part of our global media strategy, we are not going to go easily or quietly.
3.The smart move is to let us join the club.
Considered as a prisoner’s dilemma game, Fox signaled that it wanted to join the networks in the most profitable box on the board. It was the smart move for the networks, provided they did not see Fox as the first of a number of new entrants who as a group would clearly spoil the party. Had they been faced with that challenge, they would have had no choice but to nail its hide to the barn door as a warning of what other entrants might expect. But Fox could demonstrate that it was, if not unique, at least exceptional in the field of potential networks. It had bought the six Metromedia stations, added a few others, and signed up local affiliates, which gave it national distribution. Anyone else would have to get in via cable, which would be expensive for viewers. Fox’s network also was also part of a media empire that included a film studio and many newspapers and magazines. Those relationships may have looked formidable to the networks, even if they turned out to be less important than Murdoch anticipated. Putting all these features together, Fox could make the case that no one else was likely to try to enter the network business with the same prospects.
nail its hide to the barn door :
To nail someone's hide to the barn door means to give somebody a very bad time
給對方一些顏色瞧瞧
THE BUSINESS TRANSFORMED
The networks did not try to kill Fox Broadcasting when it was still in its infancy. They read Fox’s signals correctly, that it would behave itself if allowed to survive. And so it did, at least for a while. But over time, the environment changed and became more competitive. Regulation was loosened to allow more cable stations to enter and expand their offerings. Subscription cable channels grew in number and appeal. Broadcast technology via satellite continued to lower the cost of distribution to local stations. The distinctions between a network and a large syndicator were breaking down, as syndicators bought first-run programming from studios and delivered it directly to independent stations on shared advertising terms. Home electronic devices like the remote control and the VCR became virtually ubiquitous, further shrinking the hold that stations had on viewers and, more important, allowing viewers to avoid watching the advertising that was footing the bill 付帳單 for the whole enterprise.
These developments lessened the potency 力量 of the competitive advantages that had made the network industry so profitable. The new owners of ABC, CBS, and NBC moved to cut costs by reducing staffing at the news bureaus and elsewhere, and lowering the amount they spent on programming. All of these changes had been in the works when Murdoch and Fox were moving into the business. They continued during the period while Fox was establishing itself.
The presence of Fox, combined with the decline in profitability and the change in ownership of the other networks, ultimately undermined the culture of cooperation that had held the competitive juices in check. The networks were no longer the comfortable and clubby collection of longtime associates. By 1993, Fox outbid CBS for the rights to broadcast National Football Conference games, ending a relationship of many decades’ duration and sparking an extended bidding war that finally undermined the profitability of football contracts. A few years later, ABC was angling to steal David Letterman Letterman from CBS, not a trick that Leonard Goldenson would ever have tried on William Paley. It was the sort of thing in which Coke and Pepsi were expert.
WHAT ABOUT SYNERGIES?
The intended lynchpin of Murdoch’s strategy had been integration, the idea that Fox Broadcasting, including the Twentieth Century Fox studio, the network, and the owned and operated stations, would have opportunities for additional profits because of their tight relationships with one another and with the other parts of the News Corporation’s media holdings. As well as using Twentieth Century Fox to feed the Fox network, he planned to syndicate shows overseas. But synergies, while often invoked to justify overpaying for an asset, are difficult to realize in practice. What added benefits were to be realized by putting companies in the supply chain under the same ownership? If the industry is protected by barriers to entry, the firm is already earning superior returns on capital. If the industry is competitive, then contracting with a sister company adds nothing to either firm’s earnings. In either case, it is hard to identify any gains from putting the two firms under the same ownership.
Clearly there were no barriers to entry in the production segment of the business. New players emerged all the time, thanks to the allure of the entertainment world. Companies in this business, as we should expect, had historically earned very low returns on investment. The other networks did not own any studios, in part because of regulation but more importantly because they had always found it less costly to let the studios do the creative work. In the case of Twentieth Century Fox and Fox Broadcasting, if the studio had a program that gave every indication of drawing a large audience, what would be gained from offering it to Fox Broadcasting at anything less than the going market rate? And if it had some shows that were not as promising, why should Fox pay more for them than NBC or ABC? Money might be moved from one corporate pocket to another, but the net gain to the corporation would be zero. So long as there was no shortage of supply, Fox Broadcasting gained nothing from its connection to the studio. So long as it could produce shows that other networks wanted, Twentieth Century Fox gained nothing from its connection to the broadcaster. What about advertising time? Suppose Fox Broadcasting was unable to sell out its advertising slots. Might it not use that spare time to promote movies from Twentieth Century Fox, and do it at no cost to the studio? Perhaps, but if the time were available for nothing, the audience could not have been attractive to paying advertisers. Maybe the studio would be getting something for nothing, but it could not be very much.
advertising on a poorly watched network could not have been the source of Murdoch’s synergy strategy. Fox’s other supposed source of synergy was the ability to syndicate the studio’s programs to international outlets. Here again, the issue was whether anything was to be gained by doing the syndication in a sister company of the same corporation, or going to outsiders. If international syndication was a competitive industry, there was no joint benefit in keeping syndication in-house. The syndicating arm could charge no more than could the competition, nor could it charge less and still make a profit. If international syndication was not competitive, if, that is, in certain markets, established firms were protected by barriers to entry, then the syndicating arm of Fox would be operating at a disadvantage. In this case, the studio would be better off contracting with a powerful company already in the business. Again, nothing in the corporate relationship between the studio and the syndicating arm would produce any benefit.
The history of Fox’s entry into the network industry stands at the crossroads of many of the ideas in this book. The three networks enjoyed competitive advantages and barriers to entry, thanks to captive customers, government regulation, and significant economies of scale. They made a lot of their money from their ownership of local stations, which were like tollgates on the road advertisers needed to travel. The three networks had learned to play the prisoner’s dilemma game and not engage in price wars, either in the amount they would pay for program content or in the rates they would charge advertisers. These high returns, and the barriers to entry on which they depended, were one of the reasons Murdoch decided to start a competing network. He played the entry/preemption game, which we discuss at length in the next chapter, like a master. He made it clear to the incumbent networks that it would be cheaper for them to let him into the club than to try to strangle his network in the cradle. Fox succeeded in establishing itself as a fourth network where previous entrants had failed. Despite Murdoch’s brilliance and the skills of the established networks in avoiding costly price wars, the idyllic situation did not last for network television. Changes in government regulations and in technology both undermined most of the competitive advantages that had made the networks so profitable. Cable stations, VCRs, even the remote channel changer diminished customer captivity 囚禁 滯留時間 and made the networks less attractive to advertisers, which were the primary source of revenue. The networks are still with us, Fox included, but they are not the cash-generating machines they used to be. Finally, the Fox strategy was aimed at deriving benefits from owning businesses that boosted one another’s profits. The studio would supply programming content to the network and its affiliated stations, unsold advertising time could be used to promote films from Twentieth Century Fox Studios, and the company would own a syndication operation to sell the programs overseas. Murdoch was a media baron, and if he could integrate all the components in his holdings, surely some synergies would result. But in practice, synergies also depend on barriers to entry. If the various links on the supply chain are in markets where there are no barriers, there is simply no extra profit to be extracted from a common ownership structure.
strangle his network in the cradle 將他的媒體網路放在嬰兒籃活活掐死
strangle 勒脖子
cradle 嬰兒籃
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