FOX Quietly Gears Up Its Business Channel To Challenge CNBC

(From The Wall Street Journal -- By Julia Angwin)

RUPERT MURDOCH, chairman of NEWS CORPORATION, has been promising a FOX NEWS business cable channel for more than a year, hoping to surpass GENERAL ELECTRIC COMPANY's CNBC in the ratings the way FOX NEWS CHANNEL has eclipsed CNN.

But in contrast to FOX NEWS's guns-ablazing launch nine years ago, NEWS CORPORATION this time is treading more carefully. "You never pull the trigger until you know you can win," ROGERS AILES, the architect of FOX NEWS, told an audience of media executives in New York in March.

Now, after numerous missed deadlines for the start-up, Mr. Murdoch is nearing an agreement with TIME WARNER INC.'s cable division to carry a FOX NEWS business channel, according to people familiar with the situation. The channel is currently slated to launch in the first half of 2006, a person close to the channel says. Of course, talks with TIME WARNER could break down and the launch date could be pushed back again.

For FOX NEWS, which passed CNN in 2002 as the nation's No. 1-rated cable news channel, the stakes are higher -- and the potential downside far greater -- than when it launched as a scrappy upstart nine years ago. The market for business news on television has cratered since the bursting of the dot-com bubble -- many people have lost interest in watching the day-to-day gyrations of the stock market. TIME WARNER's CNN recently shuttered its CNNFN financial news network because it attracted tiny ratings and never won wide distribution. And CNBC, although profitable, has been struggling to boost its lagging ratings.

Mr. Ailes, chairman and chief executive of FOX NEWS, has reluctantly agreed to run the FOX business channel, according to people who know him. Mr. Ailes, whom Mr. Murdoch lured away from CNBC in 1996 to launch FOX NEWS from scratch, has been reluctant to put his reputation on the line a second time, these people say. FOX NEWS has become a ratings success and an important contributor to NEWS CORPORATION's bottom line. FOX NEWS spokesman BRIAN LEWIS didn't return phone calls.

A former REPUBLICAN strategist, Mr. Ailes is known for thinking like a political tactician, so his public diffidence about the new venture may well be an attempt to lower expectations. Mr. Ailes said he has urged Mr. Murdoch to stop announcing launch dates. "I keep telling Rupert, 'Quit saying that,' "Mr. Ailes said at the gathering of media executives. "I'd like to do it this year, but I'm not in any hurry just to do it." He said the channel, to succeed, would have to reach 40 million homes within the first three years. "All these pieces have to come in line," he said.

Indeed, successfully launching a cable channel has never been harder, given how cluttered the dial has become. Most cable operators will make channels available only at the high end of the dial, on digital channels that reach fewer than half of cable subscribers. Low-numbered channels are prized because they reach all cable homes.

As a result, many new cable networks launch with just a few million homes and never get traction with viewers or advertisers. "You can get on, but if you're not in the top 100 channels, no one goes there," says DAVID BERNKNOPF, an Atlanta media consultant.

In addition to launching the new channel on cable, NEWS CORPORATION also plans to make it available on its own majority-owned DIRECTV satellite service, which has 14 million subscribers. But people familiar with the situation say Mr. Murdoch didn't want to go ahead until he had an agreement with TIME WARNER CABLE, because it controls the crucial Manhattan market. DIRECTV's satellite dishes can't always receive clear signals amid the Manhattan skyscrapers, and some buildings don't allow them. But the market, a thicket of WALL STREET traders, advertisers and media executives, is considered critical to the successful launch of a financial news channel.

People familiar with the situation say FOX is hoping to get a low-numbered channel in NEW YORK CITY for its business news channel but will settle for a digital channel in TIME WARNER CABLE's other markets. In May, NEWS CORPORATION President PETER CHERNIN hinted that the company might not launch the business channel if it couldn't get enough "affiliate support," meaning carriage on cable channels. "We would really want to feel comfortable with the affiliate side before we do anything," Mr. Chernin said on a conference call with investors.

When NEWS CORPORATION launched FOX NEWS CHANNEL in 1996, Mr. Murdoch offered to pay cable operators $10 per subscriber to sign them up and filed a lawsuit against TIME WARNER when it declined to carry the channel. The channel launched with limited distribution of just 17 million homes, but now reaches 87 million homes.

Advertisers say they welcome a competitor to CNBC. "We would all still love a viable option to CNBC," says TRACEY RIENER, a vice president at MPG, an ad-space-buying company owned by HAVAS SA with clients including FIDELITY INVESTMENTS. CNBC's ad rates of nearly $30 per thousand viewers are unjustified given its small audience, she says.

Based on NIELSEN MEDIA RESEARCH data, CNBC's BUSINESS DAY programming, which runs Monday through Friday from 5 am to 7 pm, has been drawing an average audience of 153,000 viewers in 2005 -- in 2000, CNBC drew an average of 383,000 viewers during the same time period.

CNBC says NIELSEN's in-home ratings don't capture the significant number of viewers who watch CNBC at the office. "CNBC's highly desirable audience of business leaders, executives and affluent individual investors cannot in any way be measured by NIELSEN's in-home-only system," a CNBC spokeswoman says. The network's proprietary research indicates that CNBC viewers have a median household net worth of more than $1.3 million, she says, adding, "Advertisers know they can only reach this elusive and exclusive audience on our air."

CNBC has had some success with a recent new program, MAD MONEY WITH JIM CRAMER, which has been averaging 163,000 viewers at 6 pm ET -- 61% above the average for that time period in the months before the show's March 14th debut.

DOW JONES AND COMPANY, publisher of THE WALL STREET JOURNAL, is a co-owner with NBC of CNBC's television operations in ASIA and EUROPE. DOW JONES also provides news content to CNBC in the United States.

The Saturday morning lineup of business shows on FOX NEWS CHANNEL -- BULLS AND BEARS, CAVUTO ON BUSINESS, FORBES ON FOX, and CASHIN' IN -- already draws higher ratings than CNBC's lineup. In the season to date, each of those shows has been drawing audiences of more than 800,000 viewers, according to NIELSEN MEDIA RESEARCH.

Mr. Ailes hasn't yet begun developing a programming lineup or hiring talent for the new business channel, according to people who know him. But these people say it will probably resemble the Saturday shows on FOX NEWS, which feature lively debates about stock picks and business trends. The telecasts also are peppered with political debates that play to FOX NEWS's conservative political leanings. Earlier this month, for example, on CASHIN' IN, STUART VARNEY, a regular contributor and occasional host on FOX NEWS programs, lambasted DEMOCRATS for obstructing PRESIDENT BUSH's plan to privatize SOCIAL SECURITY.

Mr. Varney said the president's SOCIAL SECURITY reform proposals died in part "because the DEMOCRATS are going to obstruct everything and say no to everything." Later, he accused a guest of "taking a line out of the DEMOCRATS' playbook. The DEMOCRATS hate markets because they say they're risky." Mr. Varney says he expresses his opinions freely when he is a guest, and plays the role of umpire when he is a host.