Turner Broadcasting System Inc.

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Turner Broadcasting System Inc.

founded: 1965

Contact Information:

headquarters: 1 cnn center
atlanta, ga 30303 phone: (404)827-1700 fax: (404)827-2437 url: http://www.turner.com

OVERVIEW

Turner Broadcasting System Inc. is a broadcasting conglomerate that was swallowed by an even larger corporation in 1996 when Time Warner purchased the company, making it part of what is considered to be the world's largest media concern today. In addition to owning CNN and its allied news operations, TBS, The Cartoon Network, and Turner Classic Movies, the company also owns the Atlanta Braves professional baseball team and Atlanta Hawks professional basketball team, as well as World Championship Wrestling.

Founded in 1965 by the colorful Robert E. "Ted" Turner III, Turner Broadcasting has grown from a single independent television station in Atlanta into an international cable broadcasting giant. Its founder's shoot-from-the-hip style has captured almost as much media attention as the accomplishments of his cable television network.

The merger of Turner Broadcasting and Time Warner in the latter half of 1996 represented the culmination of years of discussion between the two companies. The resulting mega-media corporation was considered the largest in the world, with estimated annual sales of $21 billion. At that time, Ted Turner was named vice chairman of Time Warner.

COMPANY FINANCES

Turner Broadcasting is a wholly owned subsidiary of Time Warner. Time Warner reports indicate that in the first quarter of 1998 Turner's cable networks posted operating earnings of $153 million on revenue of $728 million, compared with a net of $114 million on revenue of $594 million in first quarter of 1997. Turner's Filmed Entertainment recorded an operating loss of $15 million on revenue of $372 million in the first quarter of 1998, compared with net income of $6 million on revenue of $397 million in the first quarter of 1997. For all of 1997 Turner's cable networks posted operating earnings of $660 million, while the Filmed Entertainment division reported operating earnings of $207 million.

ANALYSTS' OPINIONS

There is no shortage of opinion about the founder of Turner Broadcasting. In the late 1970s and early 1980s the media dubbed him "Captain Outrageous." Time magazine called him "rambunctious." After the merger, Time posed the question: "What does Ted want? He certainly wants an active role in management, as he made clear in forcing Levin to carve out a fourth operating division for him that includes Time Warner's HBO and Cinemax, besides CNN and the other former Turner Broadcast properties. His game plan might include lifting the company's stock price by selling off assets, cutting debt, and pressing for lower costs. 'Ted is magic,' says fellow industry maven Glenn Jones, CEO of Jones Intercable. 'He can do things and say things that nobody else can do and say, because he's Ted.' Ted is also a bundle of contradictions. He has a tendency to employ his mouth and brain sequentially, but has an entrepreneur's penchant for bold ideas. He brings a shopkeeper's mentality to some costs, yet spends lavishly on quests such as the Goodwill Games, and doesn't want to get rid of favorite assets such as the Atlanta Braves. He abjures debt, but it almost drowned him after he bought MGM for about $1 billion in 1986."

HISTORY

Robert E. "Ted" Turner III started in media with a profitable billboard advertising business. It was from this that in 1970 he began amassing interest in broadcasting companies. First, Turner purchased a small Atlanta television station, and founded Turner Communication Corp. By its second year the station had become the leading independent television station in the South. Its call letters, WTSG, they quipped, stood for "Watch This Station Grow."

Somewhere along the way Turner's personality became almost as high profile as his businesses. He suffered numerous nicknames for his wry, loud, and often outlandish comments and behavior. These included "The Mouth of the South" and "Captain Outrageous." He had remained ever opinionated, although he seemingly grew a bit more mellow in the mid- to late 1990s with age and marriage to Jane Fonda.

In 1979 Turner, seeing the advent of satellite, changed the station's call letters to WTBS, which he dubbed a "superstation." From its beginning it has broadcasted an eclectic mix of classic television shows and movies as well as sporting events, namely the Braves and Hawks games. The station reportedly reached 5.8 million viewers in the 1990s.

In 1980 Turner made his boldest move yet by starting a 24-hour, all-news station known as Cable News Network (CNN). The station would go on to earn an unprecedented reputation for being first with breaking news, most notably with the attempt on then-president Ronald Reagan's life in 1981 and with live footage of the explosion of the space shuttle in 1986.

After an unsuccessful attempt to purchase CBS in 1986, Turner decided to buy MGM/United Artists instead. It was a questionable move, but the $1.4 billion purchase enabled Turner to launch Turner Network Television (TNT) in 1988 and later, Turner Classic Movies. The biggest rift with the movie-loving public during this period involved plans by Turner to colorize and air what had been classics in black-and-white cinema.

In the early 1990s Turner continued to invest in movie operations with purchases of Castle Rock Entertainment and New Line Cinema. The purchase of the Hanna-Barbera library, with investors, enabled him to create The Cartoon Network. Time Warner's 1996 merger with Turner Broadcasting, in which Gerald Levin, chief executive officer of Time Warner, paid a reported $7.57 billion in stock for the company, made it the biggest media conglomerate with estimated sales of $21 billion. This brings together Time Warner's considerable holdings—Warner Bros., HBO, Cinemax, TIME, Book of the Month Club and Little, Brown Publishers, and the Atlantic and Elektra recording labels—with Turner's equally considerable holdings that include CNN, TBS, TNT, and a vast film library.

Consumer and media watchdog groups concerned about the merger said the government should closely scrutinize the deal. The Federal Trade Commission, these groups allege, does prevent the reduction of competition in cable programming and distribution, but said there should be some means by which unaffiliated broadcasters could get access to a cable system, and asked for additional leased-access channels on the Timer Warner cable systems. For Turner, the deal gave him a 10 percent stake in one of the largest media operations in the world. He also became head of HBO as part of the deal.

In early 1998 Turner Broadcasting announced plans for a significant expansion of its facilities in Atlanta, its home base. The company planned to build a $52 million production facility on its Techwood complex not far from downtown Atlanta and spend another $20 million to redesign its CNN Center. The new production facility was to expand to 127,000 square feet, including a 20,000 square-foot, all-digital studio and post-production facility. Work at CNN Center was scheduled to include a redesign of the complex's main atrium to give it the feel of a television studio.

FAST FACTS: About Turner Broadcasting System Inc.

Ownership: Turner Broadcasting System Inc. is a wholly owned subsidiary of Time Warner Inc.

Officers: Robert E. "Ted" Turner III, Founder & VChmn. of Time Warner; Terence F. McGuirk, CEO, Chmn., & Pres.

Employees: 7,000

Principal Subsidiary Companies: Turner Broadcasting's subsidiaries include Castle Rock Pictures, New Line Cinema Corp., Turner Advertising and Marketing, Turner Broadcasting Sales Inc., Turner Program Syndication, Turner Educational Services Inc., Turner Home Entertainment International, Turner Program Services Inc., Turner Publishing Inc., and World Championship Wrestling.

Chief Competitors: As a major force in the world of cable television, Turner Broadcasting's principal competitors include Cox Enterprises; KingWorld; MCA; Microsoft; NBC; Savoy Pictures; TCI; Viacom; Walt Disney; and Westinghouse.

STRATEGY

Interviewed by the Atlanta Journal and Constitution in May 1998, Ted Turner said he expected competition in the cable television industry would continue to intensify: "All of us will have to work harder and smarter to maintain our positions and grow." Although Turner acknowledged that the cable television industry had made significant strides in recent years, he emphasized that there is still much to be done. One area in which cable needs to close the gap with network broadcasters is in the area of advertising rates, Turner said. In the late 1990s there were only 27 cable channels that Nielsen Market Research considered large enough to include within its viewership surveys. Cable was gaining a great deal of ground against the networks in terms of viewership, however. The number of network shows with Nielsen ratings of 10 or greater fell from 87 percent in 1987 to 24 percent in the first half of 1998. Most of the networks' losses have represented cable's gains. "We are approaching rough equivalency," Turner told the Journal and Constitution. "When you put all of Time Warner's networks together, the viewership is virtually greater than any other individual network."

INFLUENCES

After the Turner/Time Warner merger, speculation arose as to the reason for the mega-deal. In Levin's thinking, according to a Time magazine analysis, "By marrying content, such as films and television, with distribution—networks and cable systems—Time Warner will always have an outlet for its products. The Turner deal is an extension of that thinking. Cable is still a superb pipeline for television and interactive services, but now that consumers can find more avenues of distribution, such as direct satellite broadcasting and wireless cable, it is losing some of its allure. Some cable analysts are actually calling for a slowdown in capital spending, saying that the telephone companies' efforts to bring video to the home are going so badly that cable companies can upgrade more slowly, charge the content providers more to get on the pipeline and thus raise revenues dramatically."

CURRENT TRENDS

Ted Turner, founder of Turner Broadcasting and vice chairman of Time Warner, expects that the cable industry's continuing gains in viewership will eventually pay off in the form of sharply increased advertising revenues. Interviewed in May 1998 by the Atlanta Journal and Constitution, Turner said he wasn't willing to wait for that to happen. Instead, said the journal, "He's pushing himself, his channels, and the industry as a whole to take viewership from the big networks. His chief weapon is programming."

According to Turner, cable programming "needs to be newer, fresher, better, and more expensive. Our goal at Time Warner and the other networks is to upgrade our programming every year." He suggested that this should include such things as cable premieres of theatrical movies. In just the first four months of 1998, Turner spent more than $45 billion to outbid the networks to the television rights to such films as Austin Powers, Wag the Dog, Lost in Space, and As Good as It Gets.

Another step Turner is taking to gain ground on the networks is by increasing original programming. According to the Journal and Constitution, Turner's TNT cable station nearly doubled its production of original movies in 1998 to 17. Of the technological advances affecting television, Turner said he expects cable to go all-digital, which would put cable on an even playing field with direct broadcast satellite services.

CHRONOLOGY: Key Dates for Turner Broadcasting System Inc.

1961:: Edward "Ted" Turner takes over Turner Advertising Co. from his father
1970:: Turner Advertising merges with Rice Broadcasting and becomes Turner Communications
1976:: Turner purchases the Atlanta Braves major league baseball team; SuperStation WTBS is developed for cable systems around the country
1977:: Turner purchases the Atlanta Hawks professional basketball team
1980:: CNN debuts
1986:: TBS buys MGM/UA Entertainment
1991:: On the night of the Desert Storm invasion, 11 percent of U.S. households tune in to CNN, compared to less than 1 percent on a normal night
1996:: Time Warner buys Turner Communications

CORPORATE CITIZENSHIP

Ted Turner, known for his outspokenness and his large pocketbook, has championed numerous causes, most notably population control and the environment. Turner has stated that he would give away 90 percent of his wealth to a foundation in order to preserve the environment. His current foundation donates an estimated $7 million a year, or 7 percent of Turner's net worth. But when he began bragging that he was more philanthropic than Bill Gates and Warren Buffett, he got caught, according to Forbes. "Turner has a way of exaggerating," according to a 1996 article in Forbes. "In 1994 he announced he was giving away another $75 million in three chunks of $25 million each for his alma maters, Brown University and the McCallie School in Chattanooga, Tennessee, and his sons' alma mater, the Citadel. Hold the applause. Turner didn't actually give $25 million to Brown. He gave $1 million in each of the past three years—$3 million. He's promised $1 million in 1997 and a final $1 million in 1998. In all, $5 million. What happened to the other $20 million? He put that much worth of Turner Broadcasting shares in a charitable trust in 1994. Each year Brown pays him 6 percent in interest income—$1.2 million a year, or $6 million after five years. Turner will be ahead of the game by $1 million at the end of five years." He had also pledged to give an additional $350 million in Turner Broadcasting shares to his foundation in order to keep his holding in Time Warner intact. Turner's net worth was a reported $2.1 billion in 1996. "In the final analysis," opined Forbes, "a capitalist's role is to create capital which, long after he has become a footnote in the history books, enriches the whole society. Andrew Carnegie may be remembered for his libraries, but it was his steel plants that made the country rich enough to support libraries."

In a move that quieted most of his critics, at least about the extent of his philanthropy, Turner in 1997 announced that over the next decade he would donate $1 billion—about one-third of his estimated personal wealth—to the United Nations.

GLOBAL PRESENCE

CNN has become the leading international news network because of its comprehensive global news coverage and its round-the-clock broadcast schedule. In 1997 the Japanese units of Turner Broadcasting and Time Warner teamed up with Japan's Itochu Corp. to launch the first 24-hour cartoon channel in Japan. Starting in the fall of 1997 Cartoon Network Japan went on the air, putting characters like Bugs Bunny and Elmer Fudd on Japanese television screens. The channel featured both Japanese and Western animation, including more than 10,000 titles from Time Warner's library.

SOURCES OF INFORMATION

Bibliography

haddad, charles. "interview with ted turner: never at rest." atlanta journal and constitution, 3 may 1998.

lenzer, robert. "the mouth of the south puts his foot in it." forbes, 14 october 1996.

moriyami, ayumi. "round-the-clock cartoon channel to debut in japan." reuters, 11 june 1997.

"oversight sought." broadcasting & cable, 9 december 1996.

saporito, bill. "time for turner: in buying turner broadcasting, time warner's jerry levin got what he always wanted. but in ted, did he get more than he bargained for?" time, 21 october 1996.

saporta, maria. "turner to expand atlanta facilities." atlanta journal and constitution, 5 february 1998.

turner entertainment networks factbook, 1998. available at http://www.pathfinder.com/corp/turner/index.html.