Fox Business Network Debuts
Rupert Murdoch has entered a dark horse in high-stakes races before, and won.
On Monday, the News Corp. media titan trots out the Fox Business Network. Two years in the making, the channel will challenge General Electric Co.'s highly profitable CNBC network as it seeks to redefine business news for average Americans faced with increasingly complex decisions about their financial futures.
Murdoch already has knocked CNN off the cable news throne with Fox News Channel. Can he do the same to NBC Universal's profit machine, whose audience of affluent professionals is one of the most sought-after advertising targets?
"CNBC has a monopoly on an in-demand demographic, but never underestimate Murdoch," said Porter Bibb, a managing partner at Mediatech Capital Partners, a financier of media businesses. "Success might take a while, but this is the right thing for them to do."
Fox defines success - aside from ratings - as expanding the business news audience by "demystifying" the subject, according to Kevin Magee, the Fox News executive vice president in charge of the new business channel. There are plenty of people not watching business news because it's presented in an "off-putting" way, he said.
On opening day, the station declared its approach more Main Street than Wall Street, but showed off some risky business, too, CBS News correspondent Kelly Wallace reports. There was an interview with Times Square's infamous "Naked Cowboy," and chats with traders during happy hour at a bar.
Magee would not disclose the programming schedule, citing competitive concerns. But FBN's flashy Web site promises the network will cut through jargon to speak to the average investor, echoing comments by Murdoch last month that his channel will be for Main Street instead of Wall Street.
Other executives at Fox News have said CNBC is not friendly enough to business and focuses too much on scandal instead of positive corporate deeds.
They "intend to target middle America," said Chris Roush, a business journalism professor at the University of North Carolina at Chapel Hill. That likely means coverage of such topics as how to save for retirement or get the lowest credit card rates, or when is the right time to buy a house, he said.
Bibb said that strategy could attract a solid audience: "Every poll shows that people are concerned with economics above all else, except maybe war."
Fox Business managing editor Neil Cavuto told Wallace: "There's a pool of money but more importantly, a pool of underserved viewers out there."
Although CNBC says it's not worried - "The question isn't whether we're ready for them, but whether they're ready for CNBC," said network president Mark Hoffman - it has already made changes that some see as a reaction to Fox. CNBC has added a business newsmagazine, retooled its pre-market show "Squawk Box" and added the personal investing program "Fast Money." Personal finance guru Suze Orman has been hired for a weekend show.
Bloomberg TV, the only other dedicated business network, also has recently spruced up its shows, putting more anchors on TV and less scrolling data.
The tactic of selling business news to the consumer has failed before - CNNfn folded two years ago. Roush said CNN didn't invest enough time or money in the channel, a mistake Murdoch is not likely to repeat.
Magee wouldn't disclose any cost figures or a timeline for reaching profitability at FBN. SNLKagan media analyst Derek Baine estimates FBN will lose about $185 million over four years before posting a profit in 2011. But Murdoch has shown he is willing to spend heavily over long periods to get what he wants.
Murdoch recently surprised the newspaper world with a rich, unsolicited bid for Dow Jones & Co., netting him the crown jewel of business news publications, The Wall Street Journal. He was derided 11 years ago when he started Fox News Channel, but it charged past industry leader CNN in six years and hasn't been caught since. Fox News averages 1.5 million viewers a day, while CNN draws 758,000 - virtually the same number as when it had the field to itself.
Fox thinks it can expand the total number of niche viewers again, playing down the idea of a direct competition with CNBC. "Our goal is essentially to broaden the pie that watches business news," Magee said.
In charge of the new network is Roger Ailes, the man credited with changing cable news by making Fox News a personality-driven channel. He also ran CNBC in the early 1990s. Neil Cavuto, the popular Fox News Channel host with the highest-rated business program on cable, is managing editor of business news and will also work as an anchor.
Many of his colleagues are attractive young women with backgrounds in news and business, led by Alexis Glick, a former CNBC correspondent and co-host of NBC's Today Show. David Asman, host of Fox News's "Forbes on Fox," is also expected to have a prominent anchor role.
The network landed its first bona fide business-world star last week: Carly Fiorina, the former CEO of computer and printer maker Hewlett-Packard Co. known for her flamboyant personality.
"I like the talent they have hired, and I think they can deliver a mainstream business program," Roush said. But that may not be what advertisers want - or the way to make money with a business channel.
CNBC attracts a wealthy audience of financial professionals and business executives, which allows it to demand premium prices from advertisers. The network collected $250 million in ad revenue last year, for an estimated operating profit of $60 million, despite a paltry average daytime viewership of 267,000. CNBC is available in 90 million of the nation's 110 million households.
"It's not about ratings for CNBC, it's about the demographic," Bibb said.
Fox Business Channel, which will start in about 30 million households, already has the distribution to get more viewers than CNBC. Half of that is through DirecTV Group, the satellite broadcaster News Corp. is selling. It also is on the digital tiers of top cable companies Comcast Corp. and Time Warner Inc., but is not carried on Cablevision Systems Corp., which serves the wealthy New York suburbs.
Baine estimates Fox will get about 11 cents per subscriber per month from the distributors; CNBC receives an estimated 27 cents per subscriber, or about $292 million a year.
That puts pressure on Fox to get boost ad revenue. But if its demographic is different, advertisers might not pay as much.
"They will have a much tougher time making money than people think," Roush said.
And that, Bibb said, is why Fox has spent more time talking about the incumbent than its own programs.
"Ailes is trying to convince advertisers that his network is a viable competitor - before it even has an audience," he said. "Fox wants to ride the wave of high-priced advertising targeted at financial professionals that CNBC has been mining." Those are primarily insurers and financial services firms like E*Trade and Ameriprise, and high-end travel and hotel companies.
"They're basically saying, 'Trust what we're doing here because of our success with Fox News,"' said Sheri Anne Brill, a senior vice president at Carat Group, a media services firm.
Brill says Fox will get the ad volume it wants because of Ailes and the cachet of being with a potential winner from the start. Fox has said it can deliver a well-heeled demographic, noting that its news channel's viewership is more affluent than that of both CNN and MSNBC.
But Roush thinks FBN eventually will veer away from Main Street and fight for the high rollers.
"This network will end up being a lot more like CNBC than what they let on," he said. "In six or nine months, we'll see a lot about Wall Street and the stock markets."
Bibb said Fox probably would succeed if it went that way, because "Murdoch's got an ace in the hole" - The Wall Street Journal.
CNBC has an exclusive agreement with the paper through 2012, although analysts expect Murdoch to try to buy out the deal. Magee said the contract doesn't cover all Journal content, and that "the lawyers are going through it."
When Murdoch gets his hands on the Journal, then the competition will really begin, Bibb said.
"When he starts the WSJ Network or something with that brand, then he can go head-to-head with CNBC - and kick butt."