Cablevision Electronic Instruments, Inc.

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Cablevision Electronic Instruments, Inc.

200 Menlo Park Drive
Edison, New Jersey 08837
U.S.A.
Telephone: (732) 650-3400
Toll Free: (800) 253-0186
Fax: (732) 650-3892
Web site: http://www.thewiz.com

Wholly Owned Subsidiary of CSC Holdings, Inc.
Founded: 1976
Employees: 4,000
Sales: $464.4 million (1998)
NAIC: 443112 Radio, Television & Other Electronic Stores; 44312 Computer & Software Stores

Cablevision Electronic Instruments, Inc. operates The Wiz, one of the largest retailers of consumer electronics in the United States. Its main products are video and audio equipment, home office equipment, compact discs and other prerecorded music, digital video discs, and videocassettes. A subsidiary of Cablevision Systems Corporation’s CSC Holdings, Inc. subsidiary, Cablevision Electronic operates about 40 Wiz stores, all in the New York City metropolitan area. The Wiz accommodates the parent organization by selling Cablevision’s telephone, online, and Internet access services; tickets to the two New York City professional sports teams the company owns (the New York Knicks and the New York Rangers); and tickets to other events at Cablevision-owned Madison Square Garden or events at Radio City Music Hall, which Cablevision leases and manages.

Two Decades of Growth: 1976–95

Norman Jemal, aided by his four sons, started Nobody Beats the Wiz when he opened a store in 1976 on Fulton Street in downtown Brooklyn. Little is known of the reclusive founder or the early years of his business; indeed, the Wiz introduced a Founder’s Day sale in 1993 without ever mentioning his name. Employees—and even former employees—were reluctant to say anything to reporters about the Jemals. One staffer would not even give his name in order to say that the company had nothing to say about the Jemals. A former company executive who apparently chose to remain anonymous despite having nothing bad to impart, told James T. Madore of News day in 1998, “They are good people to work for because they treat you like family. They also take secrecy to the extreme.”

By 1986 Nobody Beats the Wiz had 11 stores and was doing an estimated $200 million in annual sales. The chain entered New Jersey and Long Island that year by purchasing six Lafayette Electronics/Circuit City stores. It opened its first superstore in 1987, in Scarsdale, New York, and in 1991 introduced even larger stores, the first of them in Lake Grove, Long Island. Nobody Beats the Wiz was a heavy advertiser, reportedly running some 180 radio and television commercials on any given day. Such superstar athletes as football Hall of Famer Joe Namath, New York Giants quarterback Phil Simms, and New York Knicks center Patrick Ewing plugged its wares.

During the late 1980s and early 1990s several players in the New York metropolitan area’s intensively competitive consumer electronics field went bankrupt, including Crazy Eddie Inc., Newmark & Lewis Inc., 47th Street Photo Inc., and Trader Horn. Nobody Beats the Wiz took full advantage of the opportunity, having opened, by mid-1992, 14 stores since 1988, for a total of 36, including five in Connecticut and a 25,000-square-foot superstore at Broadway and Eighth Street in Manhattan. The company spent $45.6 million on advertising in 1992. A survey found the Wiz first in market share among metropolitan area consumer electronics customers, with 17 percent.

In 1994 Nobody Beats the Wiz began selling personal computers and allied products in order to counter competitors such as Computer City and CompUSA, who were entering the New York market. It also established a home-shopping and business-to-business division that year to boost sales still further. Wiz booths at concert venues such as the 25th-anniversary Woodstock Festival sold compact discs. The chain’s sales level rose from an estimated $500 million in 1993 to about $775 million in 1994.

In 1995 Nobody Beats the Wiz moved into the Philadelphia area, Holyoke, Massachusetts, and upstate New York as far north as Albany. There were signs, however, that the chain was beginning to lose impetus for the first time, as Circuit City Stores Inc. and Best Buy Co. began moving into its territory. In October 1995 suppliers and competitors announced that nine of the 13 Wiz music outlets in Washington, D.C., had closed or were in the process of closing. Even so, company sales rose to about $950 million that year, and it was the nation’s third largest consumer electronics retailer.

Overexpansion Leads to Bankruptcy: 1996–97

Nobody Beats the Wiz entered the Boston metropolitan area in 1996 with glitzy displays and advertising promising deep discounts. The chain’s 62 stores rang up at least $1 billion in sales that year and earned $30 million in net income. Shortly before the end of the year the company, which had always devised its own ads, hired Bozell Worldwide to introduce a more sophisticated approach. “The days are gone when you can scream and yell at consumers,” a Bozell executive told Harry Berkowitz of Newsday. He said that the agency would focus more of the company’s advertising budget on television and target fewer but “better quality” customers. Nobody Beats the Wiz had spent $87 million on advertising in 1995.

Nobody Beats the Wiz kept up with the times by introducing Internet access at its New Jersey stores in 1996 and adding custom-built personal computers to its line of products the following year. It also opened a large store on midtown Manhattan’s Fifth Avenue. By 1997, however, the chain was in financial trouble because of increased competition, general weakness in the nation’s consumer electronics sector, overspending on advertising, and perhaps an overgenerous policy on returns. Vendors were receiving late payments or no payment at all, and some ceased making shipments. A realtor told Judith Messina of Crain’s New York Business, “In the past two years, they’ve expanded very rapidly, opening up extremely large 50,000-square-foot stores. Those units are expensive and, in some markets, maybe not necessary.” The Wiz reached its maximum size of about 67 stores at this time, but some were in bad locations, not easily seen by motorists.

Nobody Beats the Wiz’s weakest link was New England, where commercials by such New York sports stars as Derek Jeter of the Yankees had little appeal and “slam-bang, push-it-in-your face promotion” was distasteful, a Boston marketing professor told Madore and Randi Feigenbaum of Newsday. Prodded by its principal lender, Congress Financial Corp., the chain announced in July that it would close stores in Framingham, Holyoke, and Saugus, Massachusetts, and Meriden and Newington, Connecticut, to focus on business in its core New York metropolitan area. But as the Christmas season approached, the Wiz’s financial situation was so dire that it sold 30 percent of the firm to Paragon Capital L.L.C. for $27 million in order to be able to fill the stores with merchandise through the end of the year.

This measure failed to buy enough time for Nobody Beats the Wiz, which soon faced numerous lawsuits from unpaid landlords and equipment suppliers. The company filed for Chapter 11 bankruptcy protection in December 1997, closed 17 of its roughly 50 remaining stores, and received court permission to draw on a $150 million line of credit in order to pay $132 million worth of debt. Only secured creditors could expect payment, however, because the company owed $354.6 million.

Cablevision to the Rescue: 1998–99

Nobody Beats the Wiz seemed doomed for dissolution at this point, since no major electronics retailer filing for bankruptcy in the New York area had emerged from Chapter 11 in more than a decade. But in February 1998 the company was sold for $101 million to Cablevision Systems Corporation James Dolan, chief executive officer for the giant cable-TV, sports, and entertainment company, said outlets like the Wiz were valuable marketing tools for selling Cablevision’s wares, such as cable modems and advanced digital set-up boxes. Cablevision also owned Madison Square Garden as well as the Knicks and Rangers sports franchises. It also was providing cable television with much sports and entertainment programming and had taken a 25-year lease on Rockefeller Center’s Radio City Music Hall.

Cablevision moved quickly to restore the chain—renamed The Wiz—to health. By May 1998 it had persuaded many vendors to resume shipment of goods. An interim management team, recruited from the retailing consultant Carl Marks Group, hired The Lord Group advertising agency to produce a new campaign. The Wiz signed a three-year agreement to offer Bell Atlantic Mobile service to any customer buying a mobile phone. In-store kiosks sought to sell Cablevision’s Optimum Online Internet access to purchasers of Wiz-stocked cable modems. The parent company signed a $1 billion deal in 1999 to have Sony Corporation build digital set-top boxes for its cable customers, with Wiz stores as distribution sites.

Bill Marginson, founder of a Dallas-based chain of appliance and furniture stores, assumed the position of president and CEO in December 1998. The chain moved its headquarters from Carteret, New Jersey, to Edison, New Jersey, consolidated warehouses, and dropped marginal merchandise such as toys, sunglasses, and watches. A fall 1998 survey found that 16 percent of all Long Island residents had visited a Wiz store within the last three months, ranking the chain second in its field only to P.C. Richard & Son.

Key Dates:

1976:: Norman Jemal opens the first Wiz store in Brooklyn.
1986:: Nobody Beats the Wiz chain consists of 11 stores.
1993:: Sales reach $500 million.
1994:: Nobody Beats the Wiz begins selling personal computers.
1996:: Chain reaches peak, with about 67 stores and over $1 billion in annual sales.
1997:: Nobody Beats the Wiz files for bankruptcy protection, following a period of overspending and industry downturn.
1998:: Cablevision buys the chain for $101 million.

Although The Wiz resumed heavy print and television advertising, the emphasis changed from price discounting to product features, custom service, warranties, and in-store financing, according to an April 1999 Newsday story. Dolan said that Cablevision service centers were being established in the stores and that better light and interactive displays were in the works. Renovations were planned for 15 stores in 1999. “You can expect us to further invest in the retail area on behalf of The Wiz,” he told Madore. “We think it’s there, and now that we have stabilized the business we’ll begin to take advantage of the synergies.”

Some retail observers questioned whether The Wiz could flourish except as a deep discounter. A trade journal editor told Madore, “They are a big chain, not an upscale boutique…. The Wiz has to offer entry level products at low prices and to respond to what Circuit City, P.C. Richard and others are doing.” He said that a focus on consumer service required better-quality sales clerks and added, “there still needs to be improvements on the store level.” In addition, a research analyst wrote that “This shift in strategy is negatively affecting near-term revenues.”

The Wiz chain consisted, at the end of 1998, of a warehouse and 40 retail stores. Revenue from the date of acquisition came to $464.4 million in that year, of which audio equipment accounted for 39 percent, video equipment for 24 percent, and home office equipment for 20 percent. The remaining 17 percent came from compact discs and other prerecorded music, digital video discs, VHS video and other prerecorded movies, and warranty and service contracts. Cablevision Electronic sustained a loss of $24.5 million. Newsday reported in October 1999 that The Wiz might end the year with losses of $20 million because of problems in converting to a new inventory system and the chain’s deemphasis on price competition. Earlier in the year, Cablevision executives had been hopeful that The Wiz would return to profitability in 1999.

There were 39 Wiz stores in late 1999: 17 in New York City, 13 in New Jersey, six on Long Island, and one each in Westchester County, New York; Rockland County, New York; and Connecticut. As many as 25 were planned for the future. Three new “concept” stores designed to better market Cablevision goods and services were due to open in the near future; one of the three, a 25,000-square-foot outlet in Bay Shore, Long Island, was scheduled for completion in November 1999.