Oprah Winfrey's OWN Channel Finally Set To Make Profit

Ms. Winfrey conferred with the co-presidents, Erik Logan and Sheri Salata, about booking a trip to Mr. Armstrong’s hometown, Austin, Tex., reserving airtime for Thursday night and announcing the “get” to the press.

What no one said on the call was that this interview — maybe Ms. Winfrey’s biggest since her 1993 sit-down with Michael Jackson — could be a turning point for OWN, which has been low-rated since its birth two years ago.

Another turning point — perhaps even bigger — came this month when OWN started to pocket substantial per-subscriber fees from some of the biggest cable and satellite operators in the country.

Some of these deals were made before OWN even had its premiere. The operators agreed to pay just a penny or two per subscriber a month until January 2013, and then start paying nearly 20 cents a month on average, according to people with direct knowledge of the deals who asked for anonymity because the details were confidential. The fees increase over a span of several years.

Multiply those dimes and quarters across most of the 83 million homes in which OWN is available (but not all — at least one deal is still pending) and the value for Ms. Winfrey and Discovery Communications is plain. Discovery, OWN’s other owner, has said that the channel will turn a profit for the first time in the second half of 2013. Discovery has invested more than $400 million to date.

Paul Maxwell, who runs MediaBiz, a television industry reporting and consulting firm, said OWN was now where Discovery hoped it would be at birth. “They see a lot more to do,” he said. “But they think they’re on the right track now.”

The OWN story is a reminder that cable is a niche business, one built on serving loyal but often small groups of fans.

Ms. Winfrey remains just as well-known now as she was three years ago, her last full year hosting “The Oprah Winfrey Show” on local television stations, said Henry Schafer of Marketing Evaluations, a research firm that publishes proprietary Q Scores for celebrities. But her emotional connection to consumers is not nearly as strong as it was then.

Her Q Score — a combination of both traits — dipped to 22 in 2012 from 31 in 2010 among adult women. Although Ms. Winfrey remains above the average of 16, “she’s been out of focus for a while,” Mr. Schafer said.

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Big scoops like the sit-down with Mr. Armstrong can bring her back, at least temporarily. OWN is trying to capitalize on the interview by spreading it over two nights, by raising advertising rates and by running some ads for other programs on the channel. To make sure people can find the interview, OWN is running Internet and print ads and promoting a channel finder tool.

“When Oprah does what you know she’s going to do — get the big gets — it just provides a big spotlight on all the good that’s been going on,” said Mr. Logan, who cited two successful reality shows, “Welcome to Sweetie Pie’s” and “Iyanla: Fix My Life,” and an Emmy Award for Ms. Winfrey’s “Super Soul Sunday.”

Success for OWN is relative. Last year, 325,000 people watched the channel on a typical night, 160,000 of whom were 25 to 54 years old. About 50 broadcasters and cable channels had a bigger audience. But OWN was up about 30 percent over its first year, 2011.

Publicly, the low point for the channel seemed to come in March 2012, when the channel decided to lay off 30 employees, about 20 percent of its work force. The layoffs and the cancellation of a talk show by Rosie O’Donnell helped the channel to save $50 million a year and achieve profitability more quickly.

But Discovery was hounded by questions about whether the channel was going to be shut down, and the sour headlines stung Ms. Winfrey, who a week later, on “CBS This Morning,” said: “Had I known that it was this difficult, I might have done something else.”

By then, OWN was beginning to rebound from its ratings lows. Behind the scenes, the low point actually came 10 months earlier, in May 2011, when Ms. Winfrey and Discovery dismissed the channel’s founding chief executive, Christina Norman.

That was a signal that the venture was in real trouble — the channel’s ratings at the time were lower than those of the obscure health channel it had replaced — and needed saving. Three months later, Ms. Winfrey, now finished with her daytime talk show, took over as chief executive and named Mr. Logan and Ms. Salata as presidents.

“We’ve always said to ourselves, ‘Slow and steady, slow and steady,’ ” Mr. Logan said in a phone interview on Wednesday.

That’s the mantra for every young cable channel, but arguably no channel has ever received as much scrutiny as OWN, because no channel has had the backing of a superstar like Ms. Winfrey. On CBS last spring, she faulted OWN for “launching when we really weren’t ready to launch,” while she was still busy with her daytime talk show.

(In interviews more recently, she has been cheerful about OWN and its future. “We have made the pivot,” she proclaimed on ABC’s “Good Morning America” in October.)

The channel also suffered from overly optimistic projections, even when it was still in the planning stages. The six million or seven million viewers who watched Ms. Winfrey during the daytime didn’t all flock to her prime-time interviews. The highest-rated interview to date, with Whitney Houston’s family after her death last year, drew 3.5 million viewers. Traffic to Oprah.com (another part of her joint venture with Discovery) has leveled off.

But OWN has captured a significant share of the African-American viewing audience, which partly explains the channel’s decision to sign a deal with Ms. Winfrey’s fellow superstar Tyler Perry, who is known for his sitcoms that star African-American actors. Mr. Perry’s new scripted series will make its debut on OWN in May.

The channel has also attracted viewers during the day with repeats of “Dr. Phil” and “The Nate Berkus Show;” updates on old episodes of Ms. Winfrey’s own talk show; and a heavy dose of crime and mystery reality shows from other Discovery channels.

While episodes of “48 Hours” and “Main Street Mysteries” may not be exactly on brand for Ms. Winfrey, they do rate. Mr. Logan said OWN was grateful to have the repeats for now, and expected to become less dependent on them. “We’re focused on creating more depth for the network,” he said.

article by Brian Stelter via nytimes.com