Monday, May 3, 2010

CBS Corporation

Fact File:

Founders: William S. Paley.

Distinction: Made television journalism respectable and influential.

Primary business: TV and radio programming.

Annual sales: $7.373 billion.

Number of employees: 28,900

Major competitors: ABC, Fox Entertainment, NBC.

Chairman, David McLaughlin; president and CEO: Met Karmazin.

Headquarters: New York, N.Y.

Year founded: 1927.

When Walter Cronkite returned from a reporting trip to Vietnam in 1968, he solemnly

took his familiar place behind the CBS Evening News anchor desk and changed the

course of a war. After the camera’s red light blinked on, the “Most Trusted Man in

America” stared momentarily at his immense but invisible audience. Then, he gravely

dropped his bombshell. “Our nation,” Cronkite began, carefully measuring his words,

“is mired in a stalemate” in southeast Asia that can only be ended by negotiating with

the enemy. Over at the White House, President Lyndon Johnson grimaced. “If we

have lost Walter,” he told his aides, “we have lost the country”.

Many journalists who traveled to the war zone around that time also returned with

similar pronouncements. That was one reason why Johnson and his initiatives were

rapidly losing public support. But when Cronkite said the cause was hopeless, the

opposition rose to new levels. CBS News shaped public opinion almost without peer

in those days, and its venerable anchor was revered by millions. Even the president

recognized it: if Cronkite said the war was lost, then the war was lost.

Such was the impact of the Columbia Broadcasting System’s TV news department. It

carried weight on a par with the nation’s top newspapers–sometimes even surpassing

their influence. Its relevance grew as Edward R. Murrow, Eric Sevareid, Howard K.

Smith, and a handful of others first earned their stripes covering World War II for the

CBS radio network. After the war, CBS moved into television and maintained its

journalist momentum with Murrow’s breakthrough documentaries, along with his

scathing 1954 report on Sen. Joseph McCarthy, which ultimately brought about the


crusader’s downfall. It also leveraged these triumphs into other

programming areas filled with the brightest stars on TV, becoming widely known as

The Tiffany Network and exuding an aura of respectability that was never seen in

broadcasting before (an rarely seen since).

The network with the “eye” logo had come a long way since William Paley first

pulled it together precisely four decades earlier, and for Americans it was the only

broadcaster worth watching. Successors to Paley, Murrow, and Cronkite did not

always take heed. And when network television in general hit difficult times at the

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close of the 20th Century, CBS was one outlet that fell particularly hard.

William S. Paley was born in Chicago in 1901. His welltodo

family owned the

Congress Cigar Company. When Paley graduated from the University of

Pennsylvania’s Wharton School in 1922 he entered the family business. After signing

a contract to advertise the company on a new local radio station, however, Paley grew

increasingly enamored with the upstart medium. In 1928, he decided to switch from

tobacco to broadcasting.

Paley began by purchasing a small group of radio stations that he renamed Columbia

Broadcasting. To quickly establish it as a significant force in the industry, he

relocated its headquarters to New York’s Madison Avenue and revamped the way it

contracted with affiliates. (At the time, broadcast leader NBC charged stations to

carry its programming; Paley, on the other hand, gave his shows away in return for

five hours of affiliate airtime each week that he could then sell to advertisers). The

change was wellreceived

and boosted his affiliate total 47 after one year and 70 after


Much like Internet visionaries would discover in later years, Paley also recognized

from the start that a key to the medium was controlling its content rather than the

boxes that it played on. He understood that future growth and profits would come

more easily if he concentrated on improving the quality of this content, so in 1930 he

initiated broadcasts of the New York Philharmonic’s Sunday concerts along with

other original programming. He also created a musicians’ booking agency called

Columbia Concert Corporation, and turned Columbia Records into a recording


These innovations caught on, and Paley utilizes similar ideas to build the industry’s

top news staff. He excused himself from the network’s daily operations after the war,

but continued overseeing the new associated television network as it climbed to the

top rung in broadcast programming. Under his overall supervision, CBSTV


breakthrough dramatic offerings with exciting game shows, and highbrow


fare with lowbrow

soap operas. Respected reporters were signed to bolster the news

department, while popular performers were brought aboard to lead the entertainment

division. With homegrown stars (such as Lucille Ball) and those plundered from other

networks (including NBC’s Jack Benny), CBS rose to the top just as TV hit its stride.

The golden age of television continued through the 1950s, and CBS was among the

biggest beneficiaries as millions of Americans added sets to their homes. Its march

was slowed briefly, when the decade’s infamous quizshow

scandals touched the


CBS entry in the genre, The $64,000 Question. Louis G. Cowan, who

created the series before becoming president of CBS television, was forced to resign

in 1959 when it was revealed that his show was among those that had been secretly

scripted to ensure a specific outcome.

But the slowdown proved to be only temporary. Cowan’s successors boosted profits

through the mid1960s

by canceling classy (but expensive) live dramas and replacing

them with silly but popular halfhour

comedies (such as The Beverly Hillbillies).

CBS lost to rival RCA around that time in the race to develop the first massmarket

color set, but it refocused on content and maintained its ratings lead. This continued

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into the early 1970s when CBS–still building on the serious impact that Cronkite and

his news division were making on the national conscience–introduced

groundbreaking “realistic comedies” such as All In The Family to go along with its


newsmagazine, 60 Minutes. Once again, it was turning the medium in

unprecedented directions.

The network stayed atop the industry for another decade, when it was overtaken by

perennial rival NBC. But the proliferation of cable TV, satellite transmissions, and

videocassette recorders ultimately proved a far greater threat to its survival. The rapid

growth of this technology gave viewers more choices than ever, and they began

turning away in droves. The simultaneous appearance of newcomers like Fox–and,

eventually the Internet–took additional slices out of the viewership pie.

Ironi9cally, deregulation boosted profits for all when it was initiated in the 1980s.

Broadcasters were no longer required to air public affairs and children’s shows,

which freed their schedules for more marketable programming. At the same time, the

number of commercials that could be run each hour was increased. These changes

attracted outside corporations suddenly interested in owning a chunk of the highprofile

industry. During a brief period in the mid1980s,

major purchases were made

by Capital Cities Communication (ABC), General Electric (NBC), and Time (Group

W Cable). CBS joined the parade when it was absorbed by Laurence Tisch of Loews

Corporation, a conglomeration of theaters, hotels, tobacco and insurance companies.

In less than a year the new CEO divested CBS of its recording, publishing, and

magazine divisions. He also cut millions in overhead, primarily through massive

layoffs that included more than 200 staffers from CBS News.

When founder William Paley died in 1990, the writing was on the wall. Tisch’s

moves had come amidst increasing competition and the aging of the core CBS

audience, which most observers took as an unmistakable sign that the Tiffany

Network’s glitter was serious tarnished. In 1995, Westinghouse Electric Corp. bought

Tisch’s stake and the turmoil deepened.

By the late 1990s, CBS television was struggling mightily, but its parent corporation

was forging ahead with big plans. Westinghouse CEO Michael Jordan announced that

radio and broadcast TV holdings would be integrated with new Internet and cable

ventures. Fresh shows were being prepared for younger viewers. And work was

progressing to regain rights to broadcast National Football League contests, which

were lost to Fox in an embarrassing fiasco that proved to be one of the biggest

disappointments in CBS’s 700–year history. Rumors of another buyout–perhaps by

the newly merged Time Warner, or Barry Diller’s USA Networks–circulated

regularly, but Jordan and other execs consistently denied them.

All that changed as the century’s end drew near and Jordan announced his retirement.

He was replaced by Mel Karmazin, a creative wheelerdealer

who had sold his chain

of radio stations to CBS in 1997 but stayed on to run them. (He also became the

company’s largest individual shareholder through the deal, and was accordingly

added to the CBS board.) Within months of his absorption into the CBS fold,

Karmazin, convinced Jordan to let him run the television stations it owned. In short

order he was president of the company and a major industry player.

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After Jordan stepped down, Karmazin really became aggressive. He spun off some of

the company’s business, and increased its presence on the Internet. He boosted sales

efforts, cut costs, and regained rights to the NFL. Most significantly, he also

engineered the biggest media merger of all time: Agreeing to allow CBS to be

acquired by Viacom Inc. By combining Viacom’s Paramount film studio, it’s MTV,

VH1, and Nickelodeon cable networks, and its Blockbuster video chain with CBS’s

TV network, 16 ownedandoperated

television stations, 160 radio stations, and

various other holdings, the deal was designed to create the secondlargest

media firm

in the world. Whether it can regain the cachet enjoyed during its influential heyday,

of course, still remains to be seen.

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