Pushing Comcast’s Buttons

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This year at the Academy Awards, Comcast Corp.’s programming czar, Jeff Shell, was on-site, in the production truck of E! Entertainment Television, a network that covers Hollywood stars and events closely.

The Oscars are entertainment’s equivalent of the Super Bowl. Red-carpet coverage of actors and actresses on hand for the awards is one of the biggest events of the year for E!, one of the Comcast channels Shell oversees.

“With our multiple cameras and locations, and significant talent, our show resembles more and more a live pre-game show for a big sports event … kind of like NFL on Fox,” Shell said.

His behind-the-scenes vantage point also gave Shell, president of Comcast Programming, a chance to see the company’s newest star in action: Ryan Seacrest.

Seacrest, most famous for hosting the American Idol talent contest on Fox, was master of ceremonies for E!’s Live from the Red Carpet pre-show Oscar coverage, interviewing actresses like Naomi Watts.

Seacrest is the kind of star Shell hopes will bring new sizzle to the best-known of Comcast’s programming networks. Besides its Oscar coverage, E! is also using Seacrest as a co-host of the daily E! News, its daily entertainment newscast.

Adding Seacrest is one of the ways Shell hopes to refurbish a brand that aspires to be the TV authority on entertainment and celebrity news.

“I actually felt, when I joined the company a little less than a year ago, that E! was, and had been, adrift for a while,” said Shell. He now feels “somewhere between happy and thrilled” about the network.

In his first year as Comcast Programming president, Shell has enjoyed successes and setbacks.

Shell’s mandate: Consolidate the operations of Comcast’s disparate portfolio of cable networks and maximize the performance of each.

Since his start last May, he has managed to secure the cable rights to National League Hockey and Arena Football League games for OLN, formerly Outdoor Life Network. That meant it was also an indoor-sports network.

Comcast has also anted up for big-ticket programming to stock its networks, like buying Survivor reruns for OLN. The network will be rebranded this fall, now that Shell has completed consolidating affiliate-sales for his various networks.

And while Shell is not generally in favor of starting new traditional networks because of the difficulties of getting carriage, he is not standing still. He plans to launch a “virtual” horror channel, an on-demand and broadband service, as an outgrowth of Comcast’s joint venture with Sony Corp., using content from the Sony Pictures and Metro-Goldwyn-Mayer Inc. libraries.

But since coming to Philadelphia, Shell also has had disappointments. Comcast failed to secure a package of National Football League games, which could have been a foundation for transforming OLN into a powerful, nationwide, high-visibility sports network like ESPN.

This year Comcast also unsuccessfully tried to expand its portfolio by acquiring Turner South, a network focused on sports and regional entertainment, according to several officials familiar with the situation. Fox Cable Networks Group wound up buying the network.

In another setback, distributors balked when Comcast tried to use the NHL package to get OLN upgraded to programming tiers seen by at least 40% of their subscribers. EchoStar Communications Corp., owner of the 12 million subscriber Dish Network direct-broadcast satellite platform, dropped OLN. The National Cable Television Cooperative Inc., a buying consortium of smaller MSOs, sued.

Dish has not restored OLN to its lineup. That means Shell has his work cut out in expanding the reach of one of Comcast’s signature networks.

“Comcast’s programming assets present a big challenge for him, but he’s always shown that he can rise to challenges,” said Dan Fawcett, executive vice president of programming acquisition at Dish rival DirecTV Inc. Fawcett worked for Shell at Fox Cable, when Shell was president there from 2000 to 2002.

ODD LOTS

The Comcast stable is an eclectic assortment of networks that includes E! and its spinoff Style; The Golf Channel; OLN; Style; PBS Kids Sprout; game lifestyle net G4; Asian culture programmer AZN; four Comcast SportsNet-branded regional sports channels; and stakes in TV One, SportsNet New York and Comcast Sports Southeast.

The most-watched national Comcast channel is E!, with an average audience of 437,000 viewers per quarter-hour in primetime in the first quarter, according to a Disney ABC Cable Networks analysis of Nielsen Media Research data. By contrast, top-rated USA Network averaged 2.6 million viewers.

Comcast wields enormous power in distributing programming, as the nation’s largest cable operator, with 21.4 million subscribers. But as a supplier of content to other cable and satellite distributors, the Philadelphia-based operator has never been a big player.

To address this, Comcast two years ago made an unsuccessful $66 billion bid for the assets of The Walt Disney Co.; and reached agreement with Sony to deliver Sony and MGM movies on Comcast channels and video-on-demand services, after the Japanese entertainment company and Comcast jointly acquired the Hollywood studio.

The deal gave Comcast access to a mother lode of Sony and MGM content that ranges from movies like In the Line of Fire and Peggy Sue Gets Married to TV shows such as The Facts of Life and Diff’rent Strokes.

Shell is a Harvard MBA, characterized as a savvy deal-maker and strong leader.

Comcast chief operating officer Steve Burke lauded Shell for his willingness to take gutsy risks, from signing off on E!’s hire of Seacrest to analyzing the economic justification for putting NFL games on OLN.

“He’s totally fearless,” Burke said. “There are executives who wake up in the morning and say, 'How do I get through today without making a mistake?’ And then there are other executives who wake up in the morning and say, 'How do I change the world?’ And Jeff is in the latter category.”

CONTENT BUILDS CLOUT

Comcast wants to increase its programming businesses because it believes that “that distribution can help content, and … content can help distribution,” according to Burke, who Shell reports to. If Comcast had more content, for example, it would have even more programming for its on-demand and broadband platforms, he said.

“So Jeff’s charge is to help us grow our content business profitably, but also, in so doing, help us make our distribution business that much better and more competitive,” Burke said.

Shell’s retooling of Comcast networks is still a work in progress. For instance, G4 is moving beyond programming about video games — by melding interactivity into episodes of the original 1960s Star Trek series, for instance — and OLN will get a new name later this year.

Comcast is still looking for new sports rights for OLN, and is reportedly among those negotiating for an annual $150 million Major League Baseball package that includes a regular-season game of the week. But right now, Comcast’s content unit is still eons away from having the clout, and leverage, that media powerhouses such as Disney, News Corp., MTV Networks and Turner Broadcasting System Inc. wield, say numerous media-industry executives.

Disney and MTVN, for instance, use their most-powerful brands, such as ESPN or Nickelodeon, to help drive up license fees paid by distributors, like Comcast itself or Dish Network, and to help expand carriage for their other networks.

Shell doesn’t have that kind of compelling, must-have programming as a bargaining tool, industry executives say. The NFL package would have helped transform OLN into a real national sports network, an aspiring ESPN.

Shell’s big scores — securing NHL rights for $135 million last August, and then nabbing Arena Football in February — are not the game-breaking content acquisition that NFL games would have been.

“Hockey was a step forward, but a small step forward,” said Bob Gutkowski, chairman of Marketing Group International and former chief of Madison Square Garden Network.

“Ultimately, they’re going to need more professional product, and the NFL would have been perfect for them,” Gutkowski said. “So it’s an opportunity lost that they may never get again.’’

Shell, however, is not fazed. “On the NFL side, we always said all along that the NFL was something we’d love to have, but it had to be the right kind of deal, and it ended up not being the right deal for us,” he said.

TIGHTROPE WALK

An alumnus of Disney, Shell left Fox Cable to serve as CEO of Gemstar-TV Guide International Inc. He left the interactive program guide-maker to join Comcast last year.

At Fox Cable, Shell first did what he is trying to do at Comcast: create a programming group that skillfully bundles and leverages its assets.

“He’s walking a bit of a tightrope between the need to be somewhat brash and bring lots of elements under control in his shop, and then build something new,” said Jeff Abbas, president of the NCTC.

Take Comcast’s aggressiveness in asking distributors to increase OLN’s carriage after the network got the NHL package. Distributors that had OLN on sports tiers were told they would not get live hockey telecasts unless they put the channel on more widely watched analog or digital basic tiers.

But that move irked several of OLN’s affiliates, who alleged it violated their carriage deals, and the NCTC sued —a move that reportedly caught Comcast off-guard, one cable official familiar with the situation said.

Shell is nothing if not driven, said OLN president Gavin Harvey, who knew Shell from when they were both at Fox.

“We basically came from the same culture, which is very aggressive, very entrepreneurial,” Harvey said. “We use that word acceleration. We believe we live in a world of intense competition, and we want to win.”

When Shell’s appointment as chief of Comcast content was announced, Harvey said people asked him what Shell was like.

“Buckle up, because he gets a lot done in a day,” Harvey told them.

When the NCTC sued OLN, in short order Shell flew to the co-op’s headquarters in Kansas to resolve the dispute personally. After his intervention, the suit was settled.

IN-HOUSE CONSOLIDATION

His accomplishments to date also include setting up a centralized affiliate-sales operations for Comcast’s national networks, just as ad-sales had been consolidated, for greater efficiency.

Last year, Comcast’s national networks had $919 million in revenue from advertising and program licensing fees. That was a 16.7% increase from 2004, according to a Comcast securities filing.

“We’re really building a network group here, taking advantage of the fact that we have a bunch of channels,” Shell said.

He brought in another Fox Cable veteran, Bill Bridgen, as executive vice president of distribution and network development, to handle negotiations on a national level with cable operators and satellite companies. Brad Fox, E!’s former vice president of affiliate sales, was promoted and named Comcast Network’s executive vice president of affiliate sales and marketing, managing field operations.

Both men report to Shell.

“Jeff has done an extraordinary job in the last nine months,” said Janice Arouh, Hallmark Channel’s senior vice president of distribution and service and a Fox Cable alum. “He dived right in, getting the NHL rights. And consolidating seven organizations into one is not an easy task, and making it come together quickly, and getting the right people in the right spot.”

FUMBLING THE NFL

But even fair-haired boys encounter disappointment. The inability to land the NFL package — which the league in January decided to keep in-house, for its own NFL Network — may wind up being Shell’s, and Comcast’s, biggest reverberating setback.

Football would have helped transform 64-million subscriber OLN into a national-sports force to be reckoned with, as well as turning it into a tool for Shell to use to raise rates — and drive distribution — for it and other Comcast networks.

Comcast, according to league and network officials familiar with the negotiations, offered more than $300 million annually for eight Thursday and Saturday games late in the season in primetime. A sweetener: The NFL could get an equity position in OLN.

But having already scored roughly $24 billion in rights fees from NBC, Fox, CBS, ESPN and DirecTV, the league had a huge amount of money in the bank and apparently decided that it could reap more value in the long run by keeping the games in-house. They are going onto the league’s own 36-million subscriber NFL Network.

As for Comcast, “they were out there with this hockey deal, swinging this big stick, assuming they were going to have the NFL, and it didn’t happen,” one network affiliate-sales chief said. “Now they’re sitting there with this slightly improved product without the muscle to really use it as the weapon they were hoping to.”

HAMMER TIME

Shell views it differently.

“Leverage is a double-edged sword,” he said. “Leverage, yes, on one side, the NFL would give a channel a lot of leverage, but the price you need to get, the distribution you need to get, to monetize that is pretty significant.”

Despite the failure to land the NFL games and the misfire on getting more carriage for OLN because of its hockey games, Shell maintains OLN isn’t “in purgatory,” and has seen some ratings gains.

In the first quarter, OLN’s primetime household ratings were flat, achieving the same 0.2 rating as a year ago. But its total viewership rose 23%, to 196,000, according to Nielsen.

Cablevision Systems Corp. and Adelphia Communications Corp. eventually did agree to carry OLN on tiers seen by 40% of their subscribers. But Echostar still hasn’t restored OLN to its lineup. Shell says, in fact, that the ability to get distribution for channels that charge licensing fees now is the toughest he’s ever seen since he’s been in the cable industry.

“The Lifetime-EchoStar battle was a real eye-opener for a lot of people,” he said. “If it wasn’t clear to everybody already, it really hammers home the fact that your brands have to be very tightly focused and directed.”

In that case, EchoStar dropped the highly rated women’s network and sibling Lifetime Movie Network early this year, saying the price hikes sought for carriage were outlandish. The two networks are back in Dish’s lineup.

In fact, Shell argues that this is Comcast’s advantage when it goes to distributors regarding its networks.

“The leverage that we have is that our channels are reasonably priced and pretty sharply focused on brand and performing well,” Shell said, in outlining the changes during the past year at E! and OLN.

“And I can almost see someone rolling their eyes when I say that, but if you look at our channels, the one thing that we really have with our channels is that we have the most focused set of brands out there of any programming group,” he said.

STRATEGY SHARPENING

Yet sharpening the focus of the Comcast networks’ brands is one of Shell’s top priorities.

Shell succeeded in getting Comcast to open its wallet for marquee programming for several of his networks, not only pro hockey but for pricey reruns of the CBS reality hit Survivor for OLN, a $10.7 million package; the PGA Tour for The Golf Channel; as well as off-network rights, and 10 new episodes, of Fox’s The Simple Life for E! for an estimated $700,000 to $800,000 per episode.

“Paris Hilton and Nicole Richie are the poster children for celebrity pop culture, and the chance to get a show like that was a great thing,” Shell said.

As part of this process OLN will be rebranded this fall, before the start of the new hockey season, to better reflect its transformation from an outdoor field sports channel to one that encompasses pro hockey, Professional Bull Riders, the America’s Cup 2007, the Boston Marathon, Survivor and the Tour de France.

“OLN is a network all about competition,” Harvey said. “It’s about man versus man, man versus nature, man versus beast.”

OLN expects to see a ratings lift come April when it airs more than 50 NHL playoff games, as well as the first two games of the Stanley Cup Finals.

But overall, hockey has yet to produce any blockbuster numbers for OLN, averaging a 0.2 rating, although that was double the 0.1 average for the year-ago time periods, according to Nielsen.

REACHING HIGHER

This year OLN is also remaining committed to the Tour de France, with plans to air 320 hours of coverage of the cycling event, even though the event won’t have the draw of superstar Lance Armstrong.

“You can’t replace a transcendent — I don’t even want to say athlete, he’s a personality, he’s an icon — you can’t replace that,” Harvey said. “The question is how many Lance fans are going to come because now they sampled the tour and they say, 'This is a pretty good event.’ ”

Gutkowski called the Tour de France and hockey playoffs “fine product … but lower-hanging fruit.”

What OLN really needs is “the Tour of NFL or Tour of Major League Baseball or Tour of the NBA,” according to Gutkowski.

Comcast’s other major network asset is E! Comcast is reportedly in talks, which have dragged on for months, to acquire Disney’s 40% stake in the network.

Shell says E! under network president Ted Harbert has returned to its positioning as the TV “gold standard” of celebrity pop culture.

Both Shell and Harbert had been unhappy with the snarky turn E! had taken before they came on board, when Mindy Herman ran the network, with shows E!: True Hollywood Story razzing celebrities and tawdry fare like The Howard Stern Show and The Anna Nicole Show.

The signing of popular talent like Seacrest, who last month started anchoring the E! News daily broadcast, whose ratings are way up, are all part of taking the network back to its roots, according to Shell.

According to Harbert, Shell has made it clear how important branding — versus just ratings — is in cable.

“Jeff has been invaluable with his advice and his experience about how to burnish the brand,” Harbert said, citing, for example, not sending mixed messages with racy shows like Wild On. “His real support has come from getting our management in Philadelphia to support us with the resources we need to go achieve that.”

Coming up: The Daily 10, a countdown of the day’s Top 10 pop-culture stories, for instance.

In the first quarter, E! household ratings were flat, at a 0.4, while its viewership was up 13%. E! News ratings were up 55% from a year ago.

POP GOES THE LEADER

Still, E! is facing challenges to its status as the TV source for celebrity-pop culture information. One usurper: the music and pop-culture channel VH1.

“E! seemed like they were the go-to place for that, and now VH1 seems to have stepped into that arena,” said Shari Anne Brill, vice president and director of programming services for Carat USA.

She cited the ratings success of VH1’s The Flavor of Love, which pulled in nearly 6 million viewers on the same night that The Sopranos returned to HBO, after a two-year absence.

Laura Caraccioli-Davis, senior vice president and director of Starcom Entertainment, said that bringing in Seacrest “was a big win” for E!.

“The changes that they’ve made have been in a really positive direction,” Caraccioli-Davis said.

Nonetheless, she added, “When you want to get pop culture, but packaged in a way that’s really entertaining, I think the first destination has been VH1.”

While E! took a detour, doing programming about Hollywood’s “underbelly” and unflattering celebrity portraits, VH1 was portraying pop culture “in a very positive, fun way” that clicked with viewers, said Caraccioli-Davis.

Shell and Harbert deny that VH1 has surpassed E! A recently commissioned brand study, they said, showed otherwise.

“The E! brand is the No. 1 source for people to go to celebrate the world of entertainment, pop culture, celebrity and Hollywood,” Harbert said.

In contrast, the study found that “people couldn’t describe the VH1 brand … People actually don’t know what VH1 stands for.”

VH1 declined to comment.

WAITING FOR THE MOVES

In 2004 Comcast joined lead player Sony in acquiring MGM for $4.9 billion. That acquisition gave Comcast access to movies and TV shows for its on-demand platform from Sony and MGM’s libraries — and potential content for new networks.

Last June, MTVN veteran Diane Robina was named president of a joint venture, Comcast-Sony Networks, which was formed to create new cable networks using programming from the Sony library. Robina reports to Shell.

Out of that partnership, Comcast plans to launch a horror on-demand service.

The new brand, set to be unmasked on Halloween this year, will include on-demand programming, delivery by broadband connection to home computer screens and, down the line, wireless delivery as well.

That will likely be Comcast’s model for new programming services going forward, according to Shell.

Earlier this year, for instance, Comcast launched Exercise TV, a fitness-oriented video-on-demand service providing televised workouts when viewers request them.

Comcast did launch the preschool network PBS Kids Sprout — a joint venture with PBS, HIT Entertainment and Sesame Workshop — last fall as a conventional network, but it’s a project that pre-dates Shell and whose success is up in the air. Sprout (see “Long Hard Climb,’’ March 20, p. 20) remains far behind Nickelodeon and Disney Channel in the competition for young viewers’ eyes.

“It’s harder and harder to find business models that work in the current environment for new [conventional] channels,” Shell said. “It’s hard enough to hang onto the bandwidth that you’ve got for existing channels.”

Mike Reynolds contributed to this story.

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