Fox Entertainment Group, Inc.

views updated

Fox Entertainment Group, Inc.

Public Company
Incorporated: 1998
Employees: 12,000
Sales: $8,589.0 million (2000)
Stock Exchanges: New York
Ticker Symbol: FOX
NAIC: 512110 Motion Picture and Video Production; 512120 Motion Picture and Video Distribution; 513120 Television Broadcasting; 513210 Cable Networks; 551112 Offices of Other Holding Companies

Fox Entertainment Group is one of the world’s biggest players in the entertainment business. Its main components consist of Fox Broadcasting Company, which comprises the Fox television network of 29 television stations; Fox Cable Networks, comprising several cable networks; Fox Filmed Entertainment, including Twentieth Century Fox film studios, television, and animation divisions; the FOX News Channel; and Fox Sports Enterprises, which consists of holdings in the Los Angeles Staples Center and ownership of the Los Angeles Dodgers. Among its best-known productions are the television series The Simpsons, The X-Files, and Ally McBeal; the films The Grapes of Wrath (1940), South Pacific (1958), The Sound of Music (1965), Star Wars (1977), and Titanic (1997); and special-interest programming, such as Fox Kids shows and live racing events. The company’s smaller holdings include the National Geographic and golf cable channels, interests in the New York Knicks, the Fox Sports World Espanol channel, and Telecine, a pay-television service in Brazil.

1904 to the Great Depression: The Early Years Under William Fox

In 1904 a Hungarian immigrant named William Fox (originally Wilhelm Fried) bought a New York nickelodeon for $1,600 and built the failing business into a successful entertainment company, eventually owning 25 theaters in New York. After teaming up with B.S. Moss and Sol Brill to open the Greater New York Film Rental Company, he formed the Box Office Attraction Company in 1913 to produce films, which were in huge demand and short supply at the time.

By 1915, Fox had consolidated operations into the Fox Film Corporation, moved the company to Los Angeles, and embarked on a movie-making career. Within a few years, Fox had established his studio as a major supplier of films around the world. At the end of the decade, his company was producing 50 films a year and was worth nearly $200 million.

The company continued to prosper throughout the 1920s, producing movies, creating a chain of elegant movie palaces in cities around the country, and pioneering sound-on-film technology in newsreels and feature films. However, circumstances changed during the 1930s. Although some of film’s best-known movie stars (Henry Fonda, John Wayne, Loretta Young), were introduced during this decade, the Great Depression hampered the fledgling film industry just as it did the rest of the U.S. Fox had borrowed heavily to finance the technology and equipment his new industry and innovations demanded, and now he could not pay back the millions he owed. He struggled to save his company but had to sell his shares.

In 1936, the Fox Film Corporation merged with Twentieth Century Pictures, creating Twentieth Century Fox. That same year, William Fox was forced to declare bankruptcy. Although he planned to return to the movie business, he never did. He was injured in a car crash, convicted on tampering charges, spent six months in jail for bribing a judge, and spent his remaining years battling ill health until he died in 1952 of heart failure.

The 1940s Through the 1970s: New Life as Twentieth Century Fox

During the 1940s and 1950s, Twentieth Century Fox once again became financially solvent and began producing movie hits. Although the political and social upheaval of the 1960s resulted in many sober and experimental films, Twentieth Century Fox continued to win over audiences with hits such as The Sound of Music and Doctor Dolittle. It also did well with television productions during this period.

After some success in the early 1970s with the movies M*A*S*H, Patton, and The French Connection, the company enjoyed during the latter part of the decade one of its most lucrative periods when special-effects films hit the screen. Star Wars, the twice-rejected sci-fi flick of newcomer George Lucas, was Fox’s financial boon of the era. Although the studio spent more than three times its original budget on the film, it collected more than $200 million in ticket sales worldwide to more than make up for its investment.

The 1980s: News Corp. Creates a Television Network

In 1981 oilman Marvin Davis bought Twentieth Century Fox for $722 million, and a few years later, Rupert Murdoch’s News Corporation, Ltd. purchased 50 percent of the company from Davis. In 1985 News Corp. purchased the remainder of the company for $575 million. Although Fox continued its success with action films and blockbuster dramas during the 1980s and 1990s, Murdoch envisioned a media company that encompassed a television network with programming seven nights a week to compete with ABC, NBC, and CBS. However, News Corp. was riddled with $675 million in debt at the time and many observers were skeptical that Murdoch’s proposition was viable. Nevertheless, Murdoch bought six television stations from communications company Metromedia and established the Fox Broadcasting Company (FBC).

In the first two years, FBC lost $136 million, but was being broadcast on more than 100 affiliate stations across the country. Its first show, The Late Show Starring Joan Rivers, was cancelled after just a few months following controversy surrounding the antics on the show. However, Married with Children, FBC’s next experiment, proved an adequate success and the cornerstone of its limited programming at the time. This program helped established the network’s major demographic: 18 to 34-year-old viewers.

Sticking to this demographic proved a wise choice for FBC. In 1990, the company made its first profit, following the success of a prime-time animated show called The Simpsons. Continuing to cater to its target audience, FBC succeeded with shows such as In Living Color and America’s Most Wanted. FBC also benefited from their programming innovation of initiating new series in August. By releasing new shows in August, Fox was able to steal viewers from the other networks, which were following industry tradition and airing re-runs at this time of year.

Fox Broadcasting Company created a stir in 1993 when it spent $1.6 billion for a four-year package for the rights to broadcast NFL football, outbidding CBS and establishing itself as a major sports network. Analysts predicted the company would lose money in the sports arena, but by 1995 Fox was talking about developing its own sports network to compete with ESPN. Through a joint venture with Tele-Communications Inc., Fox purchased a 50 percent interest in Liberty Media, a TCI division that owned 15 regional sporting networks. These network affiliates combined with the rest of Fox’s sports ventures to form a new company called Fox Sports.

By now Fox had 22 regional cable networks that aired 14 major-league baseball teams, 15 NBA teams, 11 NHL teams, and a handful of college sports broadcasts. The company’s vision was to cater to local sports enthusiasts by offering local programming tailored to the area it served. Fox followed each of its sports broadcasts with two hours of sports news.

The Mid-1990s: The Fourth Network Comes of Age

Despite its many successes, Fox struggled to establish its identity in the mid-1990s. At this point, the company still delivered its programming via satellite to a few affiliate stations, most of which broadcast on UHF. Murdoch was eager to replace these affiliates with VHF affiliates and thus reach a much broader audience.

In 1994, News Corp. struck the deal that began Fox’s ascent to major network standing. The company bought New World Communications Group, Inc. for 2.5 billion, giving Fox 10 new stations, increasing its total to 20. Fox was now assured of reaching 40 percent of all television-viewing households.

In 1995, Fox branched out into children’s programming, forming a partnership with Saban Entertainment, Inc. to launch children’s channels around the world. The two companies consolidated in 1996 into Fox Children’s Network, which became the number one children’s programming service in the U.S. In addition to Fox’s television broadcasts, its Fox Kids Countdown radio show was broadcast on more than 180 stations, and its quarterly kids magazine had 13 million readers per issue.

In late 1996, Fox spent $100 million to launch its own 24-hour cable news station. Four years later, after overcoming obstacles to get cable providers to carry the network, Fox had the fastest-growing news channel, equaled CNN’s ratings, and reached 54 million viewers with broadcasts that were admittedly conservative and employed newscasters who strayed from the stoicism of the mainstream networks.

Company Perspectives:

It is the daily dedication and professionalism of the thousands of Fox employees that fuel our Company’s greatness. It is their work, often done under enormous creative pressure and time constraints, that gives life to our Company and enjoyment to our millions of customers. Our focus in the coming years must be to direct this huge pool of energy toward an even better future: better products and services, deeper connections with our customers, new and more lucrative sources of revenue and, most importantly, sustained growth for our shareholders.

When Fox celebrated its tenth anniversary as a broadcast medium in 1997, it was divided into the Fox Group, Fox Television Group, and Fox Entertainment. The company also had something of a reputation for delivering trashy television. That reputation and a significant drop in ratings for its most popular show, The X-Files, indicated it was time for another change. In 1998, the Fox Entertainment Group was formed to comprise all the company’s television, sports, and movie divisions. Analysts and investors welcomed the change, as it would put the business on a par with other media moguls, such as Disney and Time-Warner. News Corp. followed the renaming by selling 13.4 percent of the Fox Entertainment Group’s shares in an initial public offering in 1998. After the offering, which raised $2.8 billion, making it one of the largest offerings in American history, News Corp. owned about 80 percent of the new company.

Fox Entertainment Group also continued its cable interests. In 1999, the company bought out half of Liberty Media’s remaining holdings in Fox Sports for $1.425 billion; this allowed it to consolidate the sports and cable interests into one entity. Fox still remained strong as the leader in global filmed entertainment with a 20 percent share of the viewing audience. The news and sports stations had more than 40 million and 62 million subscribers, respectively.

Fox Entertainment Group’s plans for the future focused on maintaining its 18 to 34 demographic and continuing its success as a fourth major network television channel and movie producer, making more blockbuster movies, expanding its cable services, producing hit television shows, and preserving its sports and news interests.

Principal Subsidiaries

Fox Broadcasting Company; Fox Filmed Entertainment; Los Angeles Dodgers, Inc.; New York Knickerbockers; New York Rangers.

Principal Operating Units

Fox Broadcasting Company; Fox Cable Networks; Fox Filmed Entertainment; Fox News Channel; Fox Sports Enterprises.

Principal Competitors

AOL Time Warner; Carsey-Werner; DreamWorks SKG; Liberty Media; MGM; NBC; Sony Pictures Entertainment; Universal Studios; USA Networks; Viacom; Walt Disney; ABC; UPN; CBS.

Key Dates:

1904:: William Fox buys a New York City nickelodeon.
1913:: Fox’s Box Office Attraction Company begins making movies.
1915:: Fox Film Corporation established.
1930:: William Fox forced to sell his shares of the business due to heavy personal and corporate debt.
1935:: Fox Film Corporation merges with Twentieth Century Pictures.
1981:: Marvin Davis buys Twentieth Century Fox.
1985:: Rupert Murdoch’s News Corporation, Ltd. buys Twentieth Century Fox.
1986:: Fox Broadcasting Company (FBC) established.
1993:: Fox purchases rights to broadcast NFL football.
1994:: News Corporation, Ltd. buys New World Communications Group.
1995:: Fox forms a partnership with Saban Entertainment, Inc.
1996:: Fox News Channel (FNC) is founded.
1997:: Fox buys International Family Entertainment.
1998:: Fox Entertainment Group is founded and undertakes its first public offering.
1999:: The company buys out half of Liberty Media’s remaining holdings in Fox Sports.
2000:: Cable networks consolidated into Fox Cable Networks. Fox News Channel is launched.