News, Sports, Entertainment … and Innovation

May 19, 2003  •  Post A Comment

The American Broadcasting Company today includes a full-service television network that reaches into every corner of the United States, serving every daypart from prime time to news. A division of The Walt Disney Co., it competes nose to nose with the other major broadcast networks, along with sister divisions such as ESPN, The Disney Channel, Toon Disney, SoapNet and other properties.
It wasn’t always that way. Half a century ago when ABC merged with Paramount Theaters, it was fourth among the networks behind powerhouses CBS and NBC and the fledgling DuMont Network, which soon went out of business.
It wasn’t until the 1970s that the ABC Network had affiliates reaching most of the country and began to be a factor in the ratings of the top shows of the era. Over the years ABC’s contributions to the art of programming, sports and news have been enormous. As it celebrates its golden anniversary, we look back at a network that has become a part of the lives of American viewers and has made a difference in those lives.
ABC started in 1943 as the culmination of a Federal Communications Commission probe into monopolistic behavior by radio’s two dominant players, CBS and NBC. Following a nearly four-year investigation, the FCC, and later the U.S. Supreme Court, concluded that NBC parent RCA, which at the time owned two radio networks, the hugely popular NBC Red and the less successful NBC Blue, had to give up one of the networks to avoid violating antitrust laws.
RCA opted to sell the weaker NBC Blue, and Edward Noble, who made his fortune by creating Lifesavers candy, snatched up Blue for $8 million. He renamed the radio group American Broadcasting System in October 1943 and changed it to American Broadcasting Co. a year later.
While ABC would become an established player in the radio arena, it lagged among the so-called Big 3 networks. That weakness started to matter significantly as attention turned away from radio toward television in the mid-1940s. Under Mr. Noble’s stewardship, ABC sank deeply into debt and was on the verge of bankruptcy unless he could find a buyer.
Mr. Noble received interest from a swath of companies, including General Tire & Rubber, ITT and even CBS. Mr. Noble settled on United Paramount Theaters, which, under CEO Leonard Goldenson, had been spun off from the Paramount film studio following a federal mandate that studios divest their ownership of movie theaters. The $25 million deal was completed in 1951.
By no means a ratings winner through the 1960s, ABC was still generating a lot of interest, particularly among other corporations. In 1965, ABC agreed to be acquired by ITT, a multinational giant that had gone on a buying spree in the ’60s-once snapping up 20 companies in a single month. Though the deal drew criticism that the network’s news division would be unduly influenced by an owner with tentacles into virtually everything, the FCC approved the sale. However, it was ultimately shelved after the Johnson administration got the U.S. Court of Appeals to block the deal. Fearing a protracted court case, ITT withdrew its offer.
The Strategy Worked
Amid all that, ABC continued to work on its programming in a bid to boost its ratings. The saving grace came in the early 1970s when the network began broadcasting Monday Night Football, and started airing TV series such as Three’s Company, which targeted younger audiences. “ABC was definitely ahead of the curve on targeting demographics,” a former ABC executive said.
By the 1977-78 season ABC had 12 programs in the Nielsen top 20. A year later, the network earned $1 billion in revenue, thanks to broadcasting 14 of the top 20 shows. Buoyed by that success, ABC began exploring growth opportunities in cable, acquiring the sports channel that would become ESPN in the early 1980s and later launching other channels such as Lifetime, A&E, the Biography Channel and the History Channel
In 1986 little-known television affiliate company Capital Cities Communications-backed by billionaire Warren Buffet-orchestrated a $3.5 billion acquisition of the network, heralding in what many observers call ABC’s best years. “[Former Cap Cities CEO Thomas Murphy] told us to keep doing what you’re doing, and treat the business like it’s your business,” the executive said.
Though Mr. Murphy, and later Dan Burke, ran a tight ship, sources said that independence, along with a commitment to invest in the programming and news divisions, rejuvenated the network.
One Hit Away
More change came some 10 years later when Walt Disney bought the network for $19 billion in July 1995 in what at the time was the second-highest price ever paid for a company and the beginning of mega-mergers in the media industry.
Since then, ABC’s fortunes have been both good and bad. The network saw a ratings slide reverse with the huge success of Who Wants to Be A Millionaire in 1999, only to see things erode after Millionaire became overexposed. Since then, the network has slipped to third place.
But as Larry Gerbrandt, chief content officer at Kagan World Media, warns, it wouldn’t be smart to write off the network just yet. “ABC is one monster hit away from being back in the game,” he said. “Right now they have no lead-in show to promote other shows. Once they get that hit show, they can promote other shows.”