ABC Inc.

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ABC Inc.

also known as: american broadcasting companies inc. founded: 1943

Contact Information:

headquarters: 77 west 66th st. new york, ny 10023-6298 phone: (212)456-7777 fax: (212)456-6850 url: http://www.abc.com

OVERVIEW

A multimedia giant, the American Broadcasting Companies (ABC), directly or through its subsidiaries, operates the ABC television network (with 224 affiliates), 10 television stations, ABC Radio Networks, and 26 radio stations. The company's Multimedia Group directs its digital television, interactive television, pay-per-view, video-on-demand, and online operations. The company also has an interest in a number of cable television networks, including ESPN, A&E, and Lifetime. Through joint ventures, ABC is engaged in international broadcast-cable services and television production and distribution. The company also publishes a number of daily and weekly newspapers, shopping guides, and several specialized and business periodicals and books. Additionally, the company provides research services and distributes information from databases.

Throughout its years as one of the leading U.S. television networks, ABC has reported news in the making as well as making a little history of its own. In 1995 the company was purchased by the Walt Disney Company for $19 billion, in what was at that time the second-largest corporate merger in U.S. history.

COMPANY FINANCES

As a subsidiary of Walt Disney Company, ABC does not report independently on its financial operations. However, for fiscal 1997, Disney's Broadcasting Division, which includes most of ABC's radio and television operations, reported operating income of $1.29 billion on revenue of $6.50 billion, compared with operating income for fiscal year 1996 of $1.08 billion on revenue of $6.01 billion. For the entire company, Disney reported net income of $1.77 billion in fiscal 1997, compared with $1.27 billion in fiscal 1996.

ANALYSTS' OPINIONS

"Disney's merger with ABC unites entertainment production and distribution operations that complement each other like oil and vinegar," wrote Stratford Sherman in a 1995 Fortune magazine article. The Federal Communications Commission split studios and television networks apart in the 1970s with regulations known as the financial interest/syndication (fin/syn) rules. Such regulations have lapsed in the 1990s, however, leading to Disney's acquisition of ABC. "So long as fin/syn governed their behavior, entertainment companies had to choose between content and distribution," Sherman continued. "In theory, the much-discussed convergence of computing, telecommunications, information, and entertainment creates a hierarchy of value, in which content, the scarcest commodity, bobs to the top. But reality is more complicated than that. . . . After building up great libraries of copyrighted movies and shows, production companies usually make up for lean years by selling out to a new owner for a fabulous price: Every major studio but Disney has done that more than once. But the leading content companies are getting almost too big to buy, making expansion into distribution a more attractive alternative."

He went on to say, "Both Disney and ABC are in the business of introducing new brands to audiences and then exploiting those brands for all they're worth. With ABC in its grasp, Disney can gain more value from its own TV productions by giving them favorable scheduling and promotion. Similarly, stores in Disney theme parks can sell sports merchandise with the logo of ESPN, ABC's sports channel. The opportunities are endless."

Writing in a 1995 Commonweal article, John Garvey commented, "The fact that ABC News is now in the hands of the Disney corporation has led to a lot of talk about this concentration of power over news and entertainment in a comparatively few number of hands." The objectivity and independence of news organizations such as ABC are now questioned more thoroughly. Garvey claims that recent mergers and mega-mergers resulting in the creation of monopolies like ABC and Disney creates a climate in where profit—and only profit—is the force that drives our economy. Such situations, Garvey feels, create economies in which "the soul goes out of a society."

FAST FACTS: About ABC Inc.

Ownership: ABC Inc. is a subsidiary of Walt Disney Co., which is a publicly owned company traded on the New York and Pacific Stock Exchanges.

Ticker symbol: DIS

Officers: Robert A. Iger, Pres., 46; Preston Padden, Pres., ABC Television Network; Allan N. Braver-man, Sr. VP & Gen. Counsel

Employees: 20,000

Principal Subsidiary Companies: ABC is a widely diversified broadcaster and publisher. Among its subsidiaries are ABC Cable and International Broadcast Inc., ABC Entertainment, ABC News Inc., ABC Publishing Agricultural Group, ABC Radio Networks Inc., ABC Sports Inc., ABC/Kane Productions International Inc., Belleville News-Democrat, Capital Cities Media Inc., Capital Cities/ABC Video Publishing Inc., and Chilton Co. Other subsidiaries include ESPN Inc., Fairchild Publications, Farm Progress Companies Inc., Fort Worth Star-Telegram Inc., Great Lakes Media Inc., Hitchcock Publishing Co., Institutional Investor Inc., Kansas City Star Co., Legal Communications Corp., Miller Publishing Company Inc., National Price Service, Satellite Music Network Inc., Shore Line Newspapers Inc., Star-Telegram Newspaper Inc., and Sutton Industries Inc.

Chief Competitors: ABC Inc. faces keen competition in all of the media arenas in which it operates. These include radio, broadcast and cable television, and publishing. Some of its major competitors include: Advance Publications; Bertelsmann; Cablevision Systems; Capstar Broadcasting; CBS; Cox Enterprises; Discovery Communications; Dow Jones; Scripps; Gannett; Hearst; Knight Ridder; Liberty Media; NBC; News Corp.; TCI; Time Warner; Times Mirror; Tribune; Univision Communications; Viacom; Washington Post; and Westwood One.

HISTORY

Of the three major networks in the United States, ABC is the youngest. The first U.S. broadcasting company was the National Broadcasting Company (NBC). By 1928 NBC had grown so large that its parent company, RCA, divided the company into two networks, the red and the blue, and it is in the blue network that ABC's origins lie. In 1943 NBC sold the less-profitable blue network to Edward J. Noble, who had made his fortune as the head of Life Savers Inc. Noble dubbed his network the American Broadcasting Company (ABC).

At first ABC was only a radio broadcaster. NBC and CBS had been involved in experimental television production and transmission for more than a decade by the time ABC was created, and the new network found the transition to television difficult, a reputation that dogged ABC for years. It was not until 1953, when ABC merged with United Paramount Theatres, that ABC had emerged as a third network of full stature. The following year ABC began a programming relationship with Disney that was perhaps a hint of things to come. As ABC had little access to programs, supplied mostly by advertisers, the president of the newly formed company, Leonard Gold-enson, built stronger ties with Hollywood. According to an article in Newsweek, Goldenson gave Walt Disney a $20 million loan to build Disneyland in exchange for programming. The next year ABC premiered The Mickey Mouse Club, another Disney-created show that would reach number one in the daytime television programming ratings. Roy and Walt Disney took their programming to NBC in 1961.

It was not until 1969 that ABC had its first number one series with Marcus Welby, M.D. Other milestones in ABC programming include the network's first television broadcast of NFL Monday Night Football in 1970; the 1975 premiere of Good Morning America; and the addition of Barbara Walters to the ABC Evening News team and her promotion to news anchor in 1976. The following year, propelled by the eight-day telecast of Alex Haley's Roots, ABC topped the network ratings. The Roots mini-series became the most-watched programming in television history.

It was not until 1980 that ABC finally won the respect accorded to its older TV rivals, CBS and NBC. During the 1980s and the 1990s, ABC broke new ground and stirred up controversy with some of its program offerings, notably Thirtysomething, Roseanne, My So-Called Life, and Ellen. These shows came under fire from some for their portrayal of homosexuality and other previously taboo subjects.

ABC reported $6.38 billion in operating revenue at the end of the 1995 fiscal year. With the various mergers and consolidations through the late 1980s and 1990s, particularly its 1985 acquisition by Capital Cities Communications, the holding company for ABC changed its name several times before Disney purchased the company in 1995 and redubbed it simply ABC Inc. The 1995 merger of Disney and ABC brought together two very complementary companies.

STRATEGY

As the 1997-98 television season approached in the fall of 1997, ABC's ratings were at their lowest level in some time, having plunged 9 percent during the course of the 1996-97 season. The company began to focus on restructuring the network's prime-time lineup. ABC President Robert Iger put together a new team of senior executives to handle some routine responsibilities so that he could concentrate on reworking the network's schedule to focus on family-oriented programming.

CHRONOLOGY: Key Dates for ABC Inc.

1928:: The National Broadcasting Company (NBC) had grown so large that its owner RCA divided the company into two networks
1941:: The FCC rules no single company could own more than one network and orders NBC to divest itself of one of its networks
1943:: NBC sells its less profitable network to Edward J. Noble who dubbs his network American Broadcasting Company (ABC)
1953:: ABC merges with United Paramount Theatres and becomes American Broadcasting-Paramount Theatres (AB-PT)
1954:: AB-PT gives Walt Disney $4.5 million to finish Disneyland and Disney agrees to provide television shows for ABC
1957:: Am-Par records, the music division of AB-PT, brings Philadelphia DJ Dick Clark to the station where he developed "American Bandstand"
1961:: ABC Sports is founded
1965:: AB-PT becomes American Broadcast Companies
1975:: Fred Silverman joins ABC and the network soon becomes number one in prime-time ratings
1979:: "Nightline" is introduced
1985:: Capital Cities Communications purchases ABC; changes company name to Capital Cities/ABC Inc.
1995:: Disney purchases ABC and changes name to ABC Inc.

INFLUENCES

According to U.S. News & World Report, "Access to ABC's prime-time audience opens an enormous door for Disney's television production business. The Magic Kingdom's TV studios currently produce the top-rated show, ABC's Home Improvement, and eight other series airing this fall on various networks." Dennis Hightower, chief of television for Disney, said that he had been hoping to produce a dozen shows over the next couple of years, but with Disney helping to shape ABC's schedule, he will set his sights higher.

CURRENT TRENDS

The trend away from investigative journalism of the type ABC had become known for on its 20/20 news magazine, seemed to accelerate in the wake of suits such as that brought by Food Lion. ABC's PrimeTime Live television show aired a story claiming that Food Lion stores had knowingly sold spoiled meat, fish, and poultry to its customers. Sales in the nationwide chain plunged 9.5 percent that month. Food Lion subsequently sued ABC for fraud and racketeering, claiming that ABC had concocted the story. As a result, Food Lion was awarded significant damage compensation. "It's bad enough that news organizations have to worry about defamation charges that, even if overturned, are nonetheless costly and distracting," wrote Dan Trigoboff in Broadcasting & Cable. As a result of such settlements, news organizations have been more carefully considering whether it is worth their time and expense to conduct investigative reporting, even if they believe it may benefit the general public.

Since its merger with Disney, ABC has been in the process of restructuring. The network appears to be doing something right because its viewing audience is increasing, as well as its profits. However, CEO Robert Iger is the person to credit with the profitability of the company in 1997 and into 1998. In fact, Television Digest reported that ABC and ESPN had increased Disney's operating profit in 1997, and this trend has continued into 1998.

A major challenge and opportunity for growth has been the cable industry. Even if the television broadcasters do everything right, basic cable viewing is on the rise. This trend will continue as new cable networks emerge. Fortunately for the broadcasters, they have expanded their own cable holdings in the 1990s. ABC is a little ahead of its competitors with ESPN, Disney, and interests in Lifetime and A&E, all of which bring in subscriber fees as well as advertising revenues. In fact, the profits from ABC's cable businesses exceeded the profits of ABC's television network in the late 1990s. Nearly 80 percent of children's viewing goes to cable, mostly to Nickelodeon and the Cartoon Network. ABC and the other networks are paying more for programming in an attempt to stop the decline of their viewing audiences. The network attributed its 1997 gain in revenue to "improved performance of sports, news and late-night programming."

PRODUCTS

ABC is a broadcaster and publisher with subsidiaries that include ABC Cable and International Broadcast Inc., ABC Entertainment, ABC News Inc., ABC Publishing Agricultural Group, ABC Radio Networks Inc., ABC Sports Inc., ABC/Kane Productions International Inc., Belleville News-Democrat, Capital Cities Media Inc., ABC Video Publishing Inc., Chilton Co., ESPN Inc., Fairchild Publications, Farm Progress Companies Inc., Fort Worth Star-Telegram Inc., Great Lakes Media Inc., Hitchcock Publishing Co., Institutional Investor Inc., Kansas City Star Co., Legal Communications Corp., Miller Publishing Company Inc., NILS Publishing Co., National Price Service, Satellite Music Network Inc., Shore Line Newspapers Inc., Star-Telegram Newspaper Inc., and Sutton Industries Inc.

CORPORATE CITIZENSHIP

ABC operates the ABC Foundation, which is managed on a day-to-day basis by a board, as well as an executive director, and contributes specifically to the arts, such as museums and the ballet. The company operates a VIP program, which places interested employees into various charitable organizations. There are about 1,000 employees involved in ABC's VIP program.

GLOBAL PRESENCE

ABC is a widely diversified broadcaster and publisher. It operates the ABC Television Network Group, which distributes programming to 224 affiliated stations; 10 television stations, with 6 of them in the nation's top 10 markets; ABC Radio Networks, which reaches more than 3,400 radio stations; and 21 AM and FM radio outlets, all in major cities. As of 1998, there were 6 international Disney Channels in Taiwan, the United Kingdom, Australia, Malaysia, France, and the Middle East.

The ABC Cable and International Broadcast Group is the majority owner of ESPN and ESPN2 in the United States and overseas. ABC Cable is also a partner in the A&E and Lifetime cable networks in the United States. As of early 1998, ESPN, which is seen in 130 countries in 11 different languages, reached 72 million households in the United States and 152 million internationally. The sports network reached 72 million households in the United States. An additional 50 million households subscribed to ESPN2 and ESPNews. Overseas, ABC holds minority interests in the German production and distribution companies TelMunchen and RTL-2, Hamster Productions and TV Sport of France, Tesauro of Spain, the Scandinavian Broadcasting System, Eurosport of London, and the Japan Sports Channel. In addition, it has launched two children's television program services in China.

The ABC Publishing Group owns and operates seven daily newspapers, including the nationally respected Kansas City Star and Fort Worth Star-Telegram. It also publishes weekly newspapers and shopping guides in several states. Overall, the company's diversified Publishing Group produced more than 100 periodicals in the 1990s.

SOURCES OF INFORMATION

Bibliography

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boroughs, don l., et. al. "disney's all smiles: michael eisner puts the powerful magic kingdom on top of the entertainment world with his blockbuster purchase of abc." u.s. news & world report, 14 august 1995.

garvey, john. "whistle while you work." commonweal, 8 september 1995.

loomis, carol j. "buffett to disney: all thumbs up." fortune, 1 april 1996.

mcclellan, steve. "nets are big 4's weakest links." broadcasting & cable, 2 march 1998.

morgan, richard. "mad ave. bums out boomers." variety, 23 march 1998.

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