CNBC confronted with a formidable challenger

Former network chief Roger Ailes is heading its new rival from Fox.

By Meg James
Los Angeles Times Staff Writer

August 2, 2007

It was Roger Ailes who came up with the slogan "First in Business News" for CNBC when he was running the channel. Now, he's determined to knock it into second place.

Ailes is a key architect of News Corp.'s new Fox Business Network. The channel, which is scheduled to launch Oct. 15, helped drive media mogul Rupert Murdoch's pursuit of Dow Jones & Co. News Corp. won its $5-billion bid for the company, which owns the Wall Street Journal, this week.

But executives at NBC Universal, a unit of General Electric Co., say that CNBC is not about to cede any ground.

"We take all competition seriously," Mark Hoffman, president of CNBC, said in an interview Wednesday. "We are going to work hard to make sure that we continue to do what we have done historically. We want to be fast and accurate with the information . . . and we are going to be unbiased."

That could be interpreted as a not-so subtle shot at Fox News, which some have accused of incorporating right-wing politics into its coverage. They say Ailes, who built the channel, has infused it with the conservative views of his boss, Murdoch. Ailes ran CNBC from 1993 to 1996.

Fox News executives declined to comment.

Andrew Tyndall, who publishes an online report that analyzes television news, said accuracy could play a role in the skirmish over TV dominance.

"There is really a premium in getting accurate information to investors who are trading on that information," said Tyndall. "There is no other sector that overvalues accuracy as much, and undervalues opinion."

Tyndall questioned whether the TV market for financial news was big enough for two titans. "I'm not so sure that there is an audience that is not being served by CNBC," he said. "The niche isn't that big."

Murdoch -- the 76-year-old billionaire who has built his empire by preying on established media entities that he feels are vulnerable -- is betting that it is.

For years, CNBC has used its near-monopoly in the industry to become one of the jewels of NBC Universal. Last year, the channel brought in nearly $530 million in revenue and about $350 million in profit, according to two people with knowledge of the operation's finances.

Although others have tried to challenge CNBC, none has come close to matching its strength. There was CNNfn, which Time Warner Inc. launched as more of a consumer-focused business channel, but that folded in 2004. And Bloomberg, a supplier of financial data to large investors, has not been a serious threat.

CNBC, which launched in 1989 as the Consumer News and Business Channel, has flourished with a "cream-of-the-crop" strategy. Although its audience is relatively small, it is enormously appealing to advertisers.

"Wealthy people watch CNBC, and those who want to be wealthy," Hoffman said. "We live in a different place," he said, calling it the "C-suite," or the rarefied region that plays well among the CEOs, COOs and CFOs of companies.

Wealthy viewers have allowed CNBC to charge advertising rates that are, in some cases, more than double its cable news channel counterparts, including CNN and Fox News Channel, according to people with knowledge of its rates.

Murdoch's strategy is for the Fox Business Network to force down CNBC's ad rates. CNBC also might find itself spending more money to compete.

CNBC has "huge profit margins and they don't spend a lot of money on programming," said Derek Baine, cable television analyst with SNL Kagan. "But now they are going to have to pay a lot more for talent and programming."

NBC executives have felt that pinch before. In the early 1990s, when Murdoch entered the bidding for sports programming, the fees to televise National Football League and Major League Baseball games skyrocketed.

At launch, Fox Business Network will be available in about 30 million U.S. homes. NBC, meanwhile, is way ahead -- it is available in about 95 million homes.

But Fox executives have had success with cable operators who are usually reticent to add upstart channels to their line-ups. Baine said they are willing to add the new channel, particularly after Fox News Channel's success.

Fox Business Network primarily will be available on digital cable service plans. In Manhattan, it will be available to nearly 1 million Time Warner cable customers who have analog service. Fox executives said it was crucial to be available in as many homes as possible in the world's financial center.

Roger
Ailes

But Fox Business network could have an advantage: the Wall Street Journal. That might give the channel a leg up when competing with CNBC for a small pool of interviewees, including CEOs of companies who seek favorable coverage in the Journal.

There is a hitch, however. Dow Jones has an existing agreement to provide its news reporting to CNBC. But the deal does not preclude Journal reporters from appearing on other TV channels.

"We've had a contract for 10 years and it has been a terrific relationship and we have five years left to go," said Hoffman, who declined to discuss specifics of that agreement.

Some, however, believe that Murdoch might find a way to end the content-sharing arrangement with CNBC.

"Rupert has a knack for getting those things ironed out," said Eric Boehlert, senior fellow at Media Matters, an advocacy group.

Murdoch would be a formidable foe for CNBC. Unlike previous competitors, he is willing to absorb big financial losses. It took four years for Fox News Channel to make money, and longer for Fox Broadcasting.

"The question is can they find the secret sauce like they did for Fox News," asked one top cable executive who didn't want to be identified.

Some observers, including Boehlert, believe that Murdoch and Ailes are banking on the "secret sauce" being the advocacy style of coverage that has benefited Fox News Channel.

Murdoch provided a glimpse into the strategy. At a media conference in February, Murdoch accused CNBC of being too quick to cover corporate scandals.

"We wanted to be a little bit more business friendly, I think, than CNBC has been," he said. "There's just an atmosphere to it that's a little bit negative."