E! Entertainment Television Inc.

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E! Entertainment Television Inc.

5670 Wilshire Boulevard
Los Angeles, California 90036
U.S.A.
(213) 954-2400
Fax: (213) 954-2793

Private Company
Incorporated: 1989
Employees: 330
Sales: $120 million (1996 estimate)

SICs: 4841 Cable Television Services

E! Entertainment Television Inc. is one of the fastest growing cable companies in the United States. The company’s circulation jumped to 31.2 million subscribers in just a little more than five years, a phenomenal increase in the cable television industry, especially considering the fact that cable TV is already saturated. With an aggressive and youth-oriented programming strategy, E! Entertainment has become widely known for its irreverent talk shows, such as “Talk Soup,” “The Gossip Show,” and “The Howard Stern Show,” with a host whose format and jokes are controversial but who is able to boost the ratings of his parent company. In the mid-1990s, E! Entertainment made a major move into the international arena, snatching up such clients as Sky Channel in the United Kingdom, StarTV in Asia, and Orbit in the Middle East.

Early History

The brashness of E! Entertainment Television is reflected in the overwhelming and uninhibited confidence of its creator, Lee Masters. Masters had worked for a number of years as the general manager of MTV, cable television’s most successful music channel. While at MTV, Masters cleverly guided its programming and music to appeal to the 14-year-old to 20-something crowd, a major accomplishment in itself. Masters was a major influence behind the controversial “Beavis and Butthead” cartoon serial as well as programs such as “The Week in Rock” and “Remote Control.” While at MTV, Masters developed the ingenious idea of allowing celebrities more control over the interview process, which translated into more unusual and less predictable entertainment.

In 1989, Masters was lured away from his position at MTV to take control of the Movietime cable channel. Movietime was owned by a consortium of cable television companies, including Time Warner HBO, Continental Cablevision, Comcast Corporation, Cox Cable, and Tele-Communications, Inc. The programming at Movietime, however, was dreadful. Movietime was placed at the higher limits of the cable television dial and played previews of movies over and over again. With only 15,000 subscribers, which some cable television wags described as insomniacs, Movietime was not an exciting channel for viewing. Masters was hired with the understanding that he would have complete authority and control to implement a total reorganization of the cable channel.

Innovative Programming in the Early 1990s

Using the knowledge about cable television, demographics, and celebrity publicity and exposure he gained while working at MTV, Masters began his turnaround of Movietime. The new chief executive officer’s first decision was to rename the cable television network E! Entertainment Television Inc. Masters’s second move was to change the programming completely. Since Americans are generally in awe of film, radio, and television celebrities, Masters decided to develop programs that would provide those celebrities with significant exposure, but in a way they could control. Thus the audience would get to see celebrities, and celebrities would maintain a certain amount of control over their exposure to the public.

This strategy of “controlled publicity” first took the form of talk shows and entertainment news that was filled with “star-studded” celebrities. Without much money to work with, Masters approached the controversial and provocative radio show host and celebrity Howard Stern and convinced Stern to allow E! Entertainment to install robotic video cameras that taped the radio show and all of Stern’s antics while on and off the air. Stern agreed to Masters’s proposal, and E! Entertainment got excellent programming material of one and one-half hours per day at the bargain basement rate of $33,000 per episode, plus a cool $1 million in compensation to Stern. Within a few months of its introduction on E! Entertainment, the “Howard Stern Show” was the cable television’s hottest and highest rated program.

One of Masters’ s most successful ideas evolved into the hit show “Talk Soup.” Airing six times a day, the show excerpted highlights of mainstream daytime network talk shows, such as those hosted by Jerry Springer, Geraldo Rivera, Richard Bey, Montel Williams, and Oprah Winfrey, and juxtaposed this material with out-of-the-ordinary, quirky skits produced by the show’s host and comedian, John Henson. The genius of the show, which reflected the entrepreneurial spirit and creativity of Masters, was that production costs were next to nothing. The network talk shows agreed to give E! Entertainment clips free of charge, in exchange for promoting the next day’s programming. With this free material, the cost of a 30-minute production of “Talk Soup” was approximately $10,000, which was $20,000 to $30,000 less than the costs to produce one of the talk show segments featured on “Talk Soup.” Moreover, advertisers like Nike and Visa paid approximately $1,000 for a typical 30-second advertising slot on the show. Revenues from advertising, from the time the show went on the air, climbed to nearly $30,000, which left a hefty profit of approximately $20,000 per show. From the beginning of its run, “Talk Soup” aired 260 times per year, resulting in a pretax income of more than $5 million annually.

Perhaps the most successful and most lucrative of all of Masters’s cable productions was the creation of “E! News Daily.” The show’s format was ostensibly that of a newscast, but the news was strictly Hollywood. Masters would send out a total of eight camera and sound crews to record premieres, award shows, and movie productions, and to arrange on-the-spot, impromptu interviews of cinema celebrities on a daily basis. The cost for a 30-minute production of“E! News Daily” ran about $15,000 per show, most of which was recovered through advertising slots during the first time the show was aired. Since the show aired three times per day, commercial revenues began to mount by the end of each month. In addition, Masters reached an agreement with the parent company of NBC, General Electric. In exchange for free videotape from crews working at NBC, Masters would give the mainstream network footage from “E! News Daily” for it to run during the late evening and early morning hours when viewership was at its lowest. According to Masters, everybody won since costs were kept low and yet television entertainment continued.

One of the genuine masters of recycled material, Masters then promoted and sold “E! News Daily” to foreign television outlets and to major international airlines, which used selected footage of the program to show to passengers during lengthy intercontinental flights. One would think this idea would be the limit of Masters’s creative entrepreneurism. But it was not. By building a library of tapes that his roving Hollywood crews compiled during the production of “E! News Daily,” Masters had amassed a library of more than 200,000 segments, which ranged from long interviews with celebrities to short, quirky out-takes from movies. At no additional expense, Masters arranged for in-house editors and voiceovers to produce 30-minute specials on celebrities such as Robin Williams and Whoopi Goldberg and behind-the-scenes perspectives on the making of a movie. Again, Masters sold these special segments to foreign outlets and major international airlines, but at a relatively low cost. The goodwill he created from selling inexpensive programs to his customers translated into an agreement with his operators to carry E! at a lower channel number, closer to where the mainstream networks are located. Knowing that millions of people around the world who subscribe to cable TV are in the habit of channel surfing, especially during primetime commercials, Masters arranged to run E! Entertainment’s commercials at times different from the times chosen by the mainstream broadcasting networks, thereby increasing the chance that people who channel surf will stay tuned to his programs.

When the O.J. Simpson trial was first aired on television, with gavel-to-gavel coverage by CNN and Court TV, E! Entertainment began to notice a significant decline in its viewership. As a result, Masters decided to cover the trial as intensely as the other cable television networks. Of course, E! Entertainment’s coverage was not quite the same. For example, one of its reporters began to read faxes on the air from people who commented on the trial, and also began to compare the fashions, hairstyles, and jewelry of the lawyers. Although this unorthodox approach to reporting the trial was controversial and soundly criticized by other members of the media, nonetheless, E! Entertainment’s coverage brought back its viewership.

Growth and Expansion in the Mid-1990s

As revenues began to increase and viewership began to climb, E! Entertainment was able to surprise some of the analysts within the cable television industry. One of the most unexpected moves came when Masters decided to purchase the off-network rights to “Melrose Place,” the megahit with the 20- and 30-something crowd produced by Fox. Masters agreed to pay the price of $200,000 per episode, for more than 100 installments of the primetime soap opera, to build a loyal following and, at the same time, increase his viewership. In addition, Masters reached an agreement with Brandon Tartikoff, head of New World Entertainment, that allowed for the use of E!’s production facilities as an experimental laboratory, so to speak, for innovative shows. In return, E! Entertainment received new shows that were on the cutting edge of hip-hop programming.

By the mid-1990s, Masters was taking a hard but cautious look at the syndication market. E! Entertainment had received numerous unsolicited queries from syndicators and finally decided to take the plunge by signing a major deal with Columbia TriStar Television Distribution for “E! News Daily.” Yet when Warner Brothers decided to produce “Extra—The Entertainment Magazine,” Masters thought it wise to step back from the deal and wait to judge the competition. Masters did not hesitate, however, to enter into an agreement with NBC whereby E! Entertainment would give the mainstream network entertainment news for its various affiliates across the United States. Still, Masters remained wary of making new deals since widespread agreements to syndicate E! Entertainment programs would actually take viewers away from his own cable network.

What catapulted E! Entertainment to the top of the cable television industry was its low production costs. The cable TV industry measures costs in terms of household, and E! Entertainment’s costs in the mid-1990s were well below any of its competitors, hovering at approximately $221, in comparison with the Comedy Channel and Turner’s TNT network where costs per household were reported at $333 and $567, respectively. Masters knew that the only way to keep costs down was to develop inexpensive programming, since both domestic and overseas cable operators were searching for low-cost programs to increase viewership. Acquisition of the “Melrose Place” programs was part of this strategy, as well as a new 30-minute show that reduced and condensed full-length movies to the best parts. The show, called “Cut to the Chase,” was scheduled to lead into reruns of “Melrose Place.”

Additional cost-cutting agreements became part of Masters’ s specialty. He negotiated a contract with Westwood One Radio Network so that a daily newsfeed from E! Entertainment would be shown on Westwood’s 6,000 international affiliates. In return, Westwood agreed to promote programs on E! Entertainment through its syndicated shows, such as “Casey Kasem’s Top 40,” “In Concert,” and “Country Countdown USA.” Masters also acquired more than 500 episodes of “Late Night with David Letterman” and numerous episodes of “The Smothers Brothers Comedy Hour.” “The Letterman Show,” shown seven nights a week in primetime, heightened E! Entertainment’s profile in cable television and brought along a legion of diehard Letterman fans.

One of the most important developments for E! Entertainment came in 1995, when the company made a commitment to expanding its international coverage. Masters signed a pact with the Australian commercial cable system, Optus Vision, to show five of its programming series on the airwaves of three start-up channels. In Europe, Masters signed an international distribution agreement with Reservoir Productions, located in Paris, to license “E! Newsfeed” and “E! News Week in Review.” Another international distribution deal was arranged with Channel 4 in the United Kingdom to show episodes of “F.Y.E!: For Your Entertainment.”

In the mid-1990s, E! Entertainment was on course to increase its viewership to more than 40 million by the year 2000 and, as revenues continued to climb, there was a very good likelihood that the company would achieve its goal. Ten years before, demographic studies indicated that viewers between the ages of 12 and 34 mentioned the three mainstream channels of ABC, NBC, and CBS as their primarily watched networks. By the mid-1990s, however, those statistics changed: the same age group mentioned only one or two of the mainstream channels, along with either cable television’s Disney channel, MTV, or E! Entertainment.