Is Cable One Market Oprah Can't Conquer?

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By Ronald Grover and Andy Fixmer

As the rich and powerful—from Tom Hanks to Barack and Michelle Obama—lined up in May to tape the final episodes of The Oprah Winfrey Show, the door was swinging the other way at OWN, Winfrey's five-month-old cable channel. On May 6, Chief Executive Officer Christina Norman departed in the wake of disappointing ratings and growing losses, becoming the second top executive to leave the Oprah Winfrey Network.

For Winfrey, whose self-help empire includes film production, a hit magazine, and a book club that transformed publishing, cable television may pose her biggest challenge yet. Since its heavily promoted first week, the network's average viewership has fallen from 204,000 to 153,000 people as of May 15, according to Nielsen data. In the lucrative prime-time market, OWN draws an average of just 112,000 viewers in its target audience of 25- to 54-year-old women—less than half those who tune in to Discovery Communications (DISCA) female-skewed channel TLC.

"The ratings have been below our expectations," concedes David M. Zaslav, CEO of Discovery, which owns half of OWN. One result: The channel will lose more than $122 million through 2012, estimates SNL Kagan analyst Derek Baine. That's far from the break-even Zaslav had predicted for this year just five months ago. In its search to find hit shows able to stand out amid cable's clutter, the joint venture spent $216 million through Mar. 31 to launch the channel. That's double Discovery's initial estimates, and the company says it "expects to provide significant additional funding."

Oprah, the channel's biggest hope, has also become its largest challenge. Although Discovery executives trumpeted the power of Brand Oprah, the Queen of Talk has so far been mostly M.I.A. from the channel. While there's a behind-the-scenes series chronicling the final season of her broadcast show, Oprah's syndication contract restricts her from having a talk show on cable before 2012. Instead, OWN fills much of its airtime with Dr. Phil reruns, fashion makeover shows, and reality fare similar to what viewers can find elsewhere. "When you put the Oprah name on a channel, you expect to see Oprah," says David Scardino, who advises clients on entertainment expenditures for ad agency RPA. Winfrey did not respond to requests for comment.

Winfrey will start to pop up more often on OWN after her talk show ends on May 25. In September, her broadcast contract will allow OWN to begin airing vintage Oprah episodes. The channel will air 60 with new intros taped by Oprah herself. In January, Winfrey will start a new show, Oprah's Next Chapter, although so far she's committed to appear in no more than three programs a week. In all, Oprah is required to appear on air for 70 hours annually, twice as many as she initially planned.

"She's an icon, and some of her fans will follow," says Bill Carroll, vice-president of Katz Media Group, which advises TV stations. "The problem is, I can't tell you how many will find it. OWN is on channel 140 on a lot of cable systems."

Oprah has helped promote OWN. Singer Shania Twain appeared on Oprah's daytime show to plug Why Not? With Shania Twain, which premiered three nights later to some of OWN's best audience numbers. Winfrey's talk show also promoted The Judds, a reality show about the country singers, and Becoming Chaz, a documentary of Sonny and Cher's daughter's sex-change odyssey. Keeping up the momentum without Oprah's plugs is a challenge: Ratings for the second installment of Twain's show fell by 35 percent, OWN says.

OWN's overall ratings are below those promised to advertisers, says a person familiar with the numbers. Blue-chip advertisers, some personally pitched by Oprah, include General Motors (GM), Kohl's (KSS), and Procter & Gamble (PG), which reports have said signed a three-year, $100 million deal. Analysts say OWN needs higher fees from cable companies and satellite operators, many of whom have refused to increase the 7 cents-per-subscriber they paid monthly to carry Discovery Health, the channel OWN replaced on their systems.

"They have all the bones in place to be extraordinarily successful," says Tony Vinciquerra, former chairman of Fox Networks Group (NWS). "The one issue is getting a big enough increase to support the programming necessary to pull it all together."

OWN is likely to get a boost when Rosie O'Donnell's talk show premiers this fall. Still, if a hefty dose of Oprah is what it will take to help OWN exploit its potential, Discovery executives were likely reaching for the Maalox when Oprah told the Chicago Tribune on May 9 that she had just met in New York with Broadway producers and could hit the stage soon. "I have a stack of plays in my bag right now that I am reading," she told her hometown paper. "Yes, this is really going to happen. Life is too short."

The bottom line: Although ratings for Oprah's final syndicated shows are soaring, her new OWN cable network has drawn fewer viewers than expected.

Grover covers the media and entertainment industry for Bloomberg Businessweek in Los Angeles. Fixmer is a reporter for Bloomberg News.

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