BET Holdings Inc.

founded: 1980

Contact Information:

headquarters: one bet plaza, 1900 w street ne
washington, dc 20018-1211 phone: (202)608-2000 fax: (202)608-2595 url: http://www.bet.com

OVERVIEW

BET Holdings Inc. is a entertainment and media company that specializes in programming for African Americans. Its entertainment division operates the Black Entertainment Network (BET), an advertiser-funded basic cable television network with more than 60 million subscribers, which accounts for more than 90 percent of the company's revenues. BET also offers the digital cable channels BET Gospel, BET on Jazz, and BET Hip-Hop. The company's media division operates BET Pictures, Arabesque Books, and BET International. BET also owns a majority stake in BET.com.

BET was founded in 1980 by Robert L. Johnson, who continues to serve as the chief executive officer as he has done since the company's inception. Although the company went public briefly in the 1990s, for the majority of its history, BET has been a privately owned company, with Johnson holding a controlling interest. In 2001 Johnson and co-owner Liberty Media sold BET to media conglomerate Viacom for a deal worth $3 billion in stock options and debt takeover. As a part of the settlement, Johnson signed a 5-year contract to remain as the company's executive leader.

COMPANY FINANCES

The latest financial figures available are from fiscal 1997, ending July 31, 1997, the last year that BET was an independent, publicly owned company before being taken private by Johnson and Liberty Media and sold to Viacom as a wholly owned private subsidiary. In 1997 BET reported a net income of $23.8 million on revenues of $154.2 million. Of that total $80.6 million was generated from advertising sales, $69.3 million from subscriber fees, and $4.4 million from other sources. Of advertising dollars earned, $51.7 million came from national spot advertising, $21.2 from infomercials, and the remainder from direct response advertising (30- or 60-second spots for merchandise not sold in stores).

HISTORY

BET television is the brain child of Robert L. Johnson, who was working as a lobbyist for the National Cable Television Association in 1979 when he approach Dr. John C. Malone, head of cable giant Tele-Communications Inc. (TCI) with the idea of introducing a cable channel that specifically targeted African Americans. Malone liked Johnson's proposal and provided him with a half million dollars to start BET Cable Network, with Johnson serving as the new company's president, chief executive officer, and director. In 1980, having secured agreements with cable providers Warner, ATC, and TCI, BET went on the air. Anheuser Busch, Coca-Cola, and Sears were among the channel's first advertisers.

BET began operations by broadcasting two hours of music per week to 3.8 million viewer in 350 market areas. By 1984, bolstered by investment from Taft Broadcasting and Time's HBO, programming increased to 24 hours a day, 7 days a week with more than 6 million subscribers. The network continued to grow at a rapid pace. Three years later, in 1987, subscriber numbers had more than doubled to 15 million, and the company posted a $1 million net income on $10.7 million in revenues. The following year revenues grew to $15.1 million, and net income tripled to $3.2 million. By 1990, BET, which opened a $12 million production facility in Washington, D.C. in 1989, was posting a net income of more than $6 million on revenues that neared $36 million.

In 1991 BET went public and reestablished itself as BET Holdings Inc. It is the first company ever traded on the New York Stock Exchange with a majority of the ownership in the hands of African Americans. In August 1991, through its newly formed wholly owned subsidiary Paige Publications Inc., BET began to publish Young Sisters and Brothers, a national lifestyle magazine for black American teenagers and young adults, which it published until the magazine was discontinued in September 1996. In December 1991 BET purchased 44 percent of Emerge Colorado Inc., giving BET a controlling interest in the company, which published Emerge, an issue-driven magazine that provided a black perspective on news with commentary and analysis. Four years later BET purchased entire ownership of the magazine and, in 2001, BET ceased publication of the magazine. In 1992 the company was rocked by scandal when the chief financial officer and comptroller were terminated from their positions for allegedly embezzling nearly $700,000. Also, the Cable and Television Consumer Protection and Competition Act of 1992 went into effect, threatening to hamper BET's growth. Nonetheless, the cable channel continued to do well, with net income reaching $11.7 million on $61.7 million in sales.

FAST FACTS: About BET Holdings Inc.

Ownership: BET Holdings Inc. is a wholly owned private subsidiary of Viacom Inc.

Officers: Robert L. Johnson, Chmn. and CEO; Debra L. Lee, Pres. and COO; Robert Ambrosini, CFO

Employees: 565

Principal Subsidiary Companies: BET Holdings includes cable channel Black Entertainment Television (BET) and digital cable channels BET Gospel, BET Jazz, and BET Hip-Hop. The holding company also includes BET Pictures, Arabesque Books, and BET International, as well as owning a majority stake in the Web site, BET.com.

Chief Competitors: As a part of the Viacom media empire, BET competes on a broad level with other major media companies, including Time Warner and ABC. Other individual networks that compete directly with BET include the WB, which offers some programming targeted toward African Americans, as well as smaller cable channels Major Broadcasting Cable Network (MBC) and New Urban Entertainment (NUE-TV).

In 1993 BET Direct was launched. The channel used infomercials and direct marketing commercials to sell merchandise targeted to appeal to BET's subscribers. In 1996 BET Direct began to market Color Code skin products, an exclusive BET offering sold at drug stores and retail outlets. However, the venture quickly provided unsuccessful, and the company abandoned the product line in September 1997. In the same year, BET acquired an 80 percent interest in Avalon Pictures Inc., which provided the company with a national satellite pay-per-view channel. In January 1997, the Company opened the BET SoundStage restaurant, an entertainment-themed restaurant targeted to African-American customers, at Disney's Pleasure Island in Orlando, Florida. BET was also awarded the NEA Award for the Advancement of Learning through Broadcasting for its original half-hour children's program "Story Porch," which featured celebrities telling stories. Partnering with Encore Media Corp. in 1996, BET began broadcast of a premium film cable channel, BET Movies/Starz!3.

In 1998 Johnson, disappointed with BET's performance on the stock market, joined with Liberty Media Group to reclaim private ownership of the company, with Johnson holding a 64 percent interest and Liberty holding the balance. The company was reorganized as BET Holdings II Inc. However, the arrangement was relatively short-lived. In 2000 Johnson announced the sale of his company to media giant Viacom, which also owns MTV, VH-1, CBS, Nickelodeon, and Showtime, for $3 billion. The deal, completed in January 2001, translated into $2.4 billion in Viacom stock options for Johnson, who accepted a five-year contract with Viacom to remain at the helm of the company he founded.

STRATEGY

Viacom's strategy to squeeze the most from its new acquisition will be to grow subscriber numbers and increase advertising rates. Whereas in 2001 MTV averaged $8,000 for a 30-second advertisement, for the same amount of ad time, BET averaged $1,500. Viacom will increase BET's customer base by packaging it with other cable channels in its arsenal. Viacom will also start pushing BET advertising to its customers who regularly advertise on its other networks.

INFLUENCES

From its inception, BET has undergone some identity confusion between viewers and BET corporate management. As a black-owned media company, many hoped that BET would be a new, fresh voice for the African-American community. Yet BET's consistent programming of rap music videos, old sitcoms that employed typical black stereotypes, comedy showcases, and infomercials has disappointed those who hoped that a network that was not under the control of whites would offer more. However, considering BET's target audience, the network may be right on the mark. According to a BET survey of African Americans in 2001, 55 percent of blacks between the ages of 30 and 44 believe that rap and hip hop culture have a predominantly negative influence on young blacks; however, only 28 percent of blacks between the ages of 18 and 29 agreed that hip hop and rap were negative factors.

BET also came under fire from many in the African-American community, including Rev. Jesse Jackson and NAACP President Kweisi Mfume, for "selling out" to Viacom. Johnson has defended the sale, noting that the new relationship will offer BET new opportunities and resources for programming and distribution. Thus, criticism of its new ownership may go unnoticed by senior BET executives as long as the media company remains at the top of its industry as it has done for more than 20 years. However, BET may soon be facing serious competition for the first time. Major Broadcasting Cable Network (MBC) and New Urban Entertainment (NUE-TV) are upstart cable networks aimed to the African-American population. Although the two networks combined tally only 7 million subscribers, compared to BET's more than 60 million, both boast strong, seasoned executive leadership and have secured distribution deals with industry giants Time Warner, Fox, and Comcast. Johnson has voiced little concern to this point regarding the new networks, noting that significant success depends wholly on garnering a large investment from a major corporation, a feat the networks have yet to accomplish.

CHRONOLOGY: Key Dates for BET Holdings Inc.

1979:

BET debuts its television network with two hours of music programming per week, reaching 3.8 million cable subscribers in 350 markets

1984:

BET begins broadcasting twenty-four hours a day, seven days a week

1987:

Sales approach $7 million; viewer numbers surpass 15 million

1991:

BET becomes the first black-owned company to be listed on the New York Stock Exchange

1996:

Joins Encore Media Corp. to create BET Movies/Starz!3, a premium cable movie channel catering to African Americans

1998:

BET returns to private ownership, with founder Robert L. Johnson holding 64 percent of the stock and Liberty Media Group holding 36 percent; renamed BET Holdings II Inc.

2000:

Goes online with bet.com, offering African Americans information and resources in such areas as news, music, finances, lifestyles, food, health, and career

2001:

Cable giant Viacom buys BET for $3 billion; name changed to BET Holdings Inc.

CURRENT TRENDS

Despite BET's network presence can be found in more than 60 million American homes via basic cable subscriptions, Nielsen ratings show that BET's prime time programming earns only 1 percent of the African-American viewing audience. Thus, on any given evening, only 350,000 black Americans are tuning in to BET. Yet Viacom and BET executives need not be concerned, considering BET consistently posts profits and garners the interest of advertisers looking for access to a large audience at a smaller price tag. Within its cable niche, BET is king of the hill.

Although BET will continue to build its programming around its core categories of music videos, reruns of syndicated shows, and movies, the network has increased its offerings of original programming. How I'm Living features interviews, tours through the homes, and in depth looks into the lives of African-American celebrities, and Oh, Drama is a women's daytime talk show. NYLA provides entertainment news, and The Way We Do It, hosted by Rick Smiley, airs an hour-long variety show on Saturday evenings. New programming includes BET Nightly News, BET Tonight, and Lead Story.

As a new member of the Viacom family, BET may also have new access to negotiate with Paramount Pictures and Showtime, both Viacom divisions, to show reruns of their movies. The network will also be gradually experimenting with original productions. In 2001 its film division announced that it had begun production on a new film, A Huey P. Newton Story, developed in association with the Public Broadcasting System and directed by noted black filmmaker Spike Lee.

BET'S VIEWER CHOICE AWARDS

In 2002 BET announced its plans to host the Second Annual BET Viewer Choice Awards, which allows BET viewers to vote via the BET Web site for their favorite actors, athletes, artists/groups, music videos, movies, and songs. Individual artist categories include female hip hop, male hip hop, male R&B, female R&B, gospel, best group, and best new artist. The 2002 leading nominees for best music video were Bow Wow, "Take Ya Home"; Aaliyah, "Rock the Boat"; B2K, "Uh Huh"; and Alicia Keys, "Fallen." At the event held during the summer of 2002, Muhammad Ali was presented with BET's Humanitarian Award, and the rock group Earth, Wind, and Fire was honored with a Lifetime Achievement Award.

PRODUCTS

Although the BET Network, which generates more than 90 percent of revenues, is the company's foundational product, BET Holdings has an array of smaller interests, such as digital cable channels BET Gospel, BET on Jazz, and BET Hip-Hop. BET has also experimented with film production, book publishing, a BET line of apparel, financial services (including a bank card in partnership with Chevy Chase Bank of Maryland) and BET restaurants. BET.com, launched in 2000, in partnership with Liberty Digital, News Corporation, USA Networks, and Microsoft, has become a prime choice of African Americans surfing the Web.

SOURCES OF INFORMATION

Bibliography

hubbard, lee. "bet: fear of a black boycott." africana.com, 10 december 2001. available at http://www.africana.com.

mckissack, fred. "bet: the king of black mediocrity." the progressive, january 2001.

miller, robert g. "robert l. johnson: a business titan-redefining black entrepreneurial success." black collegian, october 2000.

murphy, kathleen. "bet aims to extend its brand." internet world, 1 november 2000.

"tavis smiley's dismissal by bet outrages blacks across the nation." jet, 16 april 2001.

smith, max. "viacom buys bet." africana.com, 29 november 2001. available at http://www.africana.com.

williams, christopher. "a canny bet." barrons, 7 may 2001.

woellert, lorraine. "bet's robert johnson: a $390 million gamble on synergy." business week online, 21 august 1998. available at http://www.businessweek.com.

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. bet holdings inc.'s primary sics are:

2731 book publishing & printing

4833 television broadcasting

4841 cable & other pay television services

7812 motion picture, video tape production

also investigate companies by their north american industry classification system codes, also known as naics codes. bet holdings inc.'s primary naics codes are:

511120 periodical publishers

513220 cable and other program distribution

551112 offices of other holding companies