This is one of 186 strategies and applications that will appear in Putting Your Small Business on Steroids — 186 Strategies to Increase Your ROI, by John Gifford and Matt Hall.
Having recounted Turner Broadcasting’s history chronologically (see Part 1 and 2 of Ted Turner: Love Him or Hate Him), it is now time to analyze it, identify its components, and see how they were arranged to make the whole greater (sometimes Much Greater) than the sum of its parts.
To the casual observer (or even to many of the media establishment), Turner Broadcasting’s holdings did not look like much, especially early on. People thought that Turner was crazy or a poor judge of business value when he purchased his various properties.
Taken individually, his assets, inherited and purchased, initially ranged from promising to high-loss properties. However, when the components were combined, leveraged through Turner’s creative revenue streams, and harnessed to microwave and satellite cable distribution, they provided a potent source of income.
Below are listed (not unlike a scout for the Atlanta Braves might list and evaluate rookie prospects) the roster of the “businesses within Turner’s business,” with a succinct evaluation of their value when Turner acquired them.
1. Took over Turner Outdoor Advertising from father (billboards), 1963 – still on shaky financial ground 15 months after assuming control
2. Bought 3 radio stations, 1968-70 – performing modestly
3. Bought Ch. 17, WJRJ – losing $900,000/yr., 1970
4. Bought Ch. 36, WRET, in Charlotte, 1970 – it was sold to him as previous
ownership had hit hard times; Turner himself had to stage a “Begathon” to keep the station on the air
5. Bought Atlanta Braves, 1976 – baseball club was losing money and before his purchase was perhaps leaving town
6. Bought Atlanta Hawks (basketball), 1976, Atlanta Flames (hockey), and Atlanta Chiefs (soccer) – 3 sports teams were bringing in modest profits
7. Wins America’s Cup (Sailing), 1977
8. Started CNN – big investment, ongoing infusion of money for beginning years- 1980
9. Bought MGM (eventually just the film library) for $1.5 Billion – “experts” said he overpaid by $200-300 million, 1986
10. Sold minority position in Turner Broadcasting System to consortium of 31 cable owners with added conditions: limitations on Turner’s free-wheeling spending and 7 of cable owners on Turner Broadcasting Board, 1987
11. TNT launched, 1988 – Started with 17 million subscribers (most successful launch in cable history); within a year it had 50 million
The early holdings (except for the Outdoor Advertising business) looked dismal, but numerous synergistic effects began to take hold by 1980, and by 1989 they were paying handsomely. These strategic synergies can be summarized by the following:
#1: Cross-Promotion across holdings
A) Advertising
B) Publicity
#2: Revenue Streams (breadth and innovation)
A) Advertising
B) Direct-response ads (Ginzu Knives, Pocket Fisherman, etc.)
C) Payment by cable operators for his stations’ programming
D) Syndication of content
#3: Distribution multipliers
A) Microwave cable
B) Satellite cable
C) Regional sports network
#4: Purchased properties provided content for his stations
A) Sports teams
B) MGM film library
#5: Increasing returns (success of one enterprise catalyzes subsequent successes)
A) Subsequent networks and stations boosted by previous track record of existing Turner Broadcasting stations
B) Funding opportunities
C) Cable network options
D) Transponder position on the satellite
#6: Coalition
A) Consortium of cable owners bought minority share in Turner Broadcasting System
B) Turner spoke on behalf of cable industry in the media, before Congress
#7: Celebrity Status
A) Enhanced value of stations, sports teams through publicity
B) Enhanced relationship with cable distribution owners
Examined in detail, it is as if Turner put together these components so they would work multiplicatively like so many triple letter and double word scores in a game of “business Scrabble.” In brute detail below are listed the multiplicative effects generated across the separate components of his media empire
1. Outdoor advertising business he inherited from his father
A) Bought additional outdoor advertising firms (to become fifth largest in country)
B) Used this part of business as tax right-off for all of company (using accelerated depreciation)
C) Its profits fueled purchase of radio, TV properties
D) Used to promote his radio stations
E) Cross-promoted with Ch. 17
F) Used to promote his sports teams
G) Spun it off in the late 70’s
2. Bought 3 radio stations, 1968-70
A) Promoted them on any of his billboards that were empty
3. Bought Ch. 17, WJRJ, 1970
A) Put Ch. 17 on microwave cable – added 250,000 audience with first cable commitment (Teleprompter)
B) Up on the satellite in 1976
C) Revenue stream 1: ads (contacts made in billboard part of company valuable in making Ch. 17 ad sales
D) Revenue stream 2: direct-response ads (Ginzu Knives, Pocket Fisherman) ultimately made $1 Million sales annually
E) Revenue stream 3: payment by cable operators for content
F) Paid local rates for content despite regional and verging on national audience coverage
4. Bought Ch. 36, WRET, in Charlotte, 1970
A) Shared programming with Ch. 17 (movies he already had purchased)
B) Shared equipment with Ch. 17
C) Captured NBC affiliation, beating out longer-established rival WCCB through commitment to increasing signal strength and beefing up news department; then sold WRET’s inventory of sitcoms, movies, and cartoons to WCCB, who would have to make up for the lost network programming
D) Ultimately sold WRET in 1980 for $20 million (NBC affiliation was key to high value) to provide start-up funding for CNN
5. Bought Atlanta Braves
A) Use of content filled 3 1/2 – 4 hours of Ch. 17′s programming slots — Even if the Braves were losing a million dollars a year, they made up for it by saving on content acquisition costs
B) Fresh programming up against summer re-runs
C) Extra and different programming for cable subscribers paying $4.95
per month, so cable operator sees value of Ch. 17
D) Made sure Brave’s leasing price did not go up
E) Ensured that no else outbid him for Braves’ broadcasts
F) By buying the Braves, he not only made certain that “the content” did not leave town, but he was seen as a hero by fans for keeping the Braves in town
G) Syndication of Braves with regional network in Georgia, North and South Carolina, Alabama, Florida, and Tennessee (carried in 33 markets)
H) Atlanta Braves player had Channel 17 instead of just 17 as the number on his back (commissioner of baseball made Turner desist)
6. Bought Atlanta Hawks – use of content (3 hours every other day) in winter on Ch. 17; bought Atlanta Flames (hockey) – use of content on Ch. 17; bought Atlanta Chiefs (soccer)
7. Wins America’s Cup (Sailing), 1977
A) Celebrity status enhanced value of stations, sports teams through publicity
B) Celebrity status enhanced relationship with cable distribution owners
8. Started CNN
A) Ch. 17 (TBS) gave lift to CNN credibility with cable owners
B) CNN’s news quality ultimately lent greater credibility to Turner Broadcasting as a whole
C) Gave TNT boost when it sought cable outlets
9. Bought MGM (eventually just the film library)
A) Eliminated leasing expenditures for films
B) Basis for TNT content
C) Syndication revenue
10. Sold everything up to 51% to consortium of 31 cable owners
A) Gave Turner an inside position (more than he already had) with the cable owners
B) Turner and cable industry supported each other when asked to comment to media, Senate hearings
11. TNT launch
A) Most successful launch in cable history at that time
B) Cable owners who were on Turner board and OK’ed TNT’s development controlled 2/3 of all cable distribution, so that TNT’s successful launch was assured
C) Heavy use of MGM film library property gave distinctive programming with no outlay for its content
D) Advertising and cable subscriber fees combined to power sizable returns
E)
12. Direct-response ads (sell-through): Ginzu Knives, Pocket Fisherman, etc.
A) Proven income
B) Reduces need for salesmen to sell ads
C) Not limited by local advertiser-can be sold to anyone, as opposed to local car dealer ad – Combined with increased audience from cable to result in dramatic profits
13. Cable owners
A) Cross-promoted with them
B) On his board
C) He defended cable interests at congressional hearings
14. High-profile ownership: sports, broadcasting
A) Keeping Braves and Hawks in Atlanta was good PR for the whole company
B) Notoriety, combined with America’s Cup triumph lifted Turner into the “Big-leagues” quicker than without
Why examine these practices in so much detail? Because there are many clever tactical combinations that can be replicated in your own small business. You don’t have to use all of the component tactics, but you can take those examples listed and use them as a template to plan innovations in your business that can lead to those “double letter” and “triple word score” effects. Understanding what Ted Turner did can give you a sense of the deep structure of how businesses can make big leaps in profit by working smart, as well as hard.
In the next and final part of the Ted Turner Synergy story, I’ll suggest ways that the Turner scenario can provide a template for generating strategies for your small business.
Tags: indianapolis small business, strategy
