Oprah Winfrey and OWN on the Ropes

TOO BIG TO FAIL? Chicago’s former media queen is struggling to save the network that bears her name. How things went so wrong—and how Oprah is handling the career challenge of her life

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Having to rescue a network isn’t what Winfrey had planned for the next phase of her wonderful life. In 2010, she told Fortune that her idea of a perfect day is working a few hours and then having a leisurely lunch with her friends in Santa Barbara, California, near her Montecito estate. Those pals include the former California First Lady Maria Shriver and the cookbook author Cristina Ferrare, who ended up with a short-lived cooking show on OWN called Big Bowl of Love. (Another example of Winfrey handing out shows to her friends, Discovery insiders gripe.)

Winfrey’s 42-acre estate, which she shares with boyfriend Graham, three cocker spaniels, and two golden retrievers, includes a 23,000-square-foot Georgian Revival main house with six bedrooms, 14 bathrooms, and a home theatre, plus a teahouse, a lake, and several ponds. The shade of the old-growth oak trees on the property, Winfrey has said, is her favorite place to settle in and crack a book. Some people call it Oprah’s Hearst Castle, but she has immodestly dubbed it the Promised Land.

This paradise is 92 miles from Los Angeles, where OWN is headquartered. Winfrey commutes by helicopter. She flies to Chicago—the city that made her a star—much less frequently. When in town, Winfrey stays in the 13,000-square-foot duplex condominium she owns at Water Tower Place. (She has talked about breaking it up and selling off all but 3,000 square feet, which she would keep as a crash pad.)

But as the new CEO assumed command of OWN, one of the most important things on her agenda was right here in the Windy City: The Rosie Show, to be filmed in The Oprah Winfrey Show’s now-vacant West Loop studios.

In 2010, Winfrey decided that the key piece of OWN’s programming day would be a feel-good talk show. At the top of her wish list for hosts was Emmy-winning comedian Rosie O’Donnell, who had helmed her own wildly popular daytime talk show from 1996 to 2002. But that was before O’Donnell came out as a lesbian and then showed an abrasive side as cohost of The View, which Winfrey worried might resurface. (When Winfrey flew to New York to woo O’Donnell, the latter assured her that she would be on her best behavior, according to Fortune.)

Debuting ten months after the network did, The Rosie Show launched last October in prime time amid much fanfare. Its initial viewership, nearly half a million, was respectable by cable standards. But the numbers fell by half in the first week and kept plummeting, hitting an average low of 77,000 during the show’s eighth week.

One of the show’s former staffers says that O’Donnell took the blame for the network’s own failings. Those included airing the show at night rather than during the day, when her natural audience would be more likely to watch. Under pressure to cut costs early on, O’Donnell kept tinkering with the format (Cut back on the live audience! Get rid of the live audience altogether!). “The show was finding its direction,” insists the staffer, who requested anonymity because of a confidentiality agreement.

In March, after five months, Winfrey put the show out of its misery. “The most painful thing was to have to let people go,” she told Rose and King on CBS This Morning. “I had to lay off 30 people.” When Rose asked what that was like for her, she amended: “I, actually, didn’t do it. We had a team of personnel people come in to do it.”

More management reshufflings were announced at the same time, notably the moving of Discovery’s chief financial officer, Neal Kirsch, to the job of chief operating officer at OWN. (More than a dozen top executives have come and gone so far, according to industry watchers.) In a statement, Winfrey implied that the changes were made for financial reasons: “The economics of a start-up cable network just don’t work with the cost structure that was in place. . . . I have a responsibility to chart the course for long-term success for the network.”

The money picture got brighter in April, when Comcast signed a multiyear deal to start paying to carry OWN’s programs beginning in 2013. (A source close to Discovery says that distributors will pay 20 cents a month per household and 30 cents in the “out years” of the deal.) Comcast also agreed to make the network available to an additional three million households. “We are more confident in [OWN’s] business prospects than we’ve ever been,” says Discovery spokesman David Leavy. “Any talk about [Discovery] pulling out or shutting down is completely ill informed.”

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But a network does not succeed by cost cutting and dealmaking alone. The key is creating content that people want to watch. Winfrey has said that she aims to fix OWN one night at a time, starting with Saturday. On March 31, the network debuted a new Saturday prime-time lineup.

The second season of Welcome to Sweetie Pie’s, a reality show about a family-run soul food restaurant in St. Louis, airs back-to-back episodes starting at 8 p.m. Central time. The season premiere ratings more than doubled to 500,000. Nearly 390,000 viewers stuck around for a new original series called Beverly’s Full House, another reality show, which chronicles what happens when former model Beverly Johnson allows her daughter, son-in-law, and their newborn to move in with her.

And Winfrey recently cut a deal to broadcast reruns of the CBS series Undercover Boss, in which CEOs disguise themselves as low-level workers at their own companies. Each episode ends with a heartwarming “reveal” where the boss hands out cash and promotions. “It feels on-brand for us,” Logan says.

So far, so good. During the first quarter of 2012, the network saw an overall 14 percent increase in its target female demographic during prime time versus the first quarter of 2011. However, Winfrey made some rookie mistakes along the way. For example, in February she violated long-standing Nielsen policy by begging her nine million Twitter followers to tune in to OWN during ratings sweeps. “Every 1 who can please turn to OWN especially if u have a Neilsen box [sic],” she tweeted. Nielsen officials publicly chastised her and said that OWN’s ratings for that night would appear with an asterisk because she had tried to influence them. (Winfrey apologized.)

Despite the uptick in total viewers since she took the reins, Winfrey’s own shows are still the network’s biggest draws. Ratings for Oprah’s Lifeclass have risen significantly since last year, when she changed it from a rehash of old Oprah clips to a new show where she works with various experts to solve the problems of studio audience members.

And OWN’s sole blockbuster to date was Winfrey’s March 11 interview with Whitney Houston’s grieving daughter, Bobbi Kristina Brown. That well-promoted episode of Oprah’s Next Chapter drew 3.5 million viewers, making it the second most-watched show that week on cable among women in the sought-after 25-to-54 demographic. It was a testament to Winfrey’s continuing power to land the big interview.

But even if she wanted to, it’s impossible for Winfrey to be on the air all the time. Salata, for one, doesn’t think that’s the key to OWN’s success anyway. “It’s not just throwing Oprah up night after night,” she says. “It’s about doing quality shows that Oprah is excited about.”

Will that be enough to save OWN, let alone turn it into the kind of success The Oprah Winfrey Show was? Don’t bet on it, say many industry experts and brand strategists. For one, demographics aren’t in her favor. Winfrey is pushing 60, and so are many of her viewers. Most advertisers want to capture younger people, who, in marketing parlance, have a higher customer lifetime value. As for carrying the torch of women’s empowerment, well, a new generation has already picked it up, says Christie Nordhielm, a marketing professor at the University of Michigan’s Ross School of Business. “Lady Gaga is doing a pretty good job,” she notes.

Jeffrey Sonnenfeld, a professor at the Yale School of Management, has a more posi­tive take. “There are some limits about how far [Winfrey] can leverage her brand, but she is learning as she is growing,” he says. “What’s really encouraging is her public contrition. So many people start to believe their own mythmaking [and] will never acknowledge their own human frailties. Admitting a mistake actually doesn’t make you weaker, it makes you stronger.”

Words that Winfrey herself would no doubt embrace. While admitting to some trepidation, she told King and Rose on that April day: “I will die in the midst of doing what I love to do.”
 

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