Last weekend was a key test for Oprah Winfrey's latest media venture: Would the Oprah Winfrey Network -- OWN -- succeed as her earlier efforts have, or would her jump to cable flounder like Martha Stewart's move to the Hallmark Channel last year?
More was on the line than Winfrey's reputation. The network had promised its initial advertising partners, including giants such as Procter & Gamble (PG) and Kohl's department stores (KSS), that the network would deliver viewers. Many of OWN's initial advertisers had pledged between $10 million to $15 million in ad spending, with Procter & Gamble agreeing to buy more than $100 million in ad time over three years. The network has also demanded premium prices for its commercial time: OWN ranks as one of the country's most expensive cable networks, says Kathleen Kayse, executive vice president of advertising sales at OWN.
"Spot on With Ratings"
Luckily for OWN, the network delivered on its promise, attracting an average of 1.16 million viewers tuning in during prime-time hours during its debut on Jan. 1.
"We were spot on with ratings expectations," Kayse says. Since the network's debut, advertisers who had been waiting on the sidelines have been calling about marketing opportunities, she adds. "We have confidence we'll have a number of significant conversations leading up to the upfront" -- the spring period when networks book advance advertising sales for the following TV season.
But the debut was only the first test. Now, OWN will have to prove it can maintain its viewership levels throughout the year. If it doesn't, will OWN meet the audience guarantees it has made to advertisers, who are paying a premium to reach its female-leaning audience?
Expecting Bumps Along the Way
An audience decline may be somewhat inevitable for OWN, points out Brad Adgate, the director of research for Horizon Media. "The question will be how it does in a month or two from now when the curiosity factor is over," he says.
Every deal OWN makes with an advertiser is specific to that marketer and the show it buys, Kayse says. In making those deals, she adds, OWN approached the market "with cautious confidence," noting that the network has taken into account that viewership may drop after the initial flurry of interest and publicity. Advertisers "are expecting some bumps along the way," she says.
Overall, though, OWN is confident it will both meet its audience guarantees and attract new advertisers to its programs, according to Kayse. One hurdle OWN jumped last year was advertiser concern over the level of Winfrey's involvement, something that the network assuaged with Winfrey's participation in its 2010 upfront. Winfrey is currently winding down the 25th season of her syndicated show, The Oprah Winfrey Show, and is committed to appear on OWN for 70 hours a year.
A First-Year Profit?
OWN's 2011 upfront will be "even stronger than we had last year," Kayse predicts. OWN, which is holding upfront meetings in Chicago and New York in March and April, respectively, will bring out its "star power" during the presentations with advertisers, and interest in the network's planned talk show starring Rosie O'Donnell is growing. "This next [upfront] will be about not only that Oprah is committed, but what do we evolve into, particularly when Oprah leaves syndication," she says.
Partly because advertising demand for OWN has been so strong, the network's partner, Discovery Communications (DISCA), said on Tuesday that it expects the fledgling network to pull a profit in its first year. Discovery, which has agreed to loan OWN $189 million, had earlier said it wasn't expecting OWN to reach profitability until 2012 or 2013.
Although some viewers may fall away after the first few months, they'll likely return once the network "gets its sea legs," notes Horizon's Adgate, who expects the network will be averaging about 1 million viewers a year from now.
OWN will perform for advertisers by staying true to its mission -- providing inspirational television that shows viewers how "to live your best life," Kayse adds. "We know our voice. As long as we don't stray from that, I believe our advertisers will be with us for the long haul," she says.
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