FOX BROADCASTING COMPANY

U.S. Network

The FOX Television Network was established, amidst shock, controversy, legal wrangling and uncertainty in 1985. The historic significance of this event may be judged by six interrelated factors, the daring prime mover, Rupert Murdoch, the economic environment at the time, the complacency of the major television networks, disenchanted affiliate stations, the Federal Communications Commission (FCC), and the volatile nature of television programming.

Raised in Australia, Rupert Murdoch, has been described by Merrill, Lee and Friedlander as "a free-market socialist with political leanings of a conservative nature." He is considered to be a "secretive, suspicious person," one who "alienates many people--especially government leaders." These assessments are not surprising given Murdoch's aggressive business methods and the powerful conglomeration of media holdings he has accumulated throughout the world.

Of the 150 newspapers and magazines he owns, about half the media markets are in Australia and one-third in Britain. In addition to his newspaper empire, he also owns television and cable systems in the United States and Europe. Among the many magazines he owns, TV Guide, with its circulation of 40 million, is of particular importance as far as TV is concerned.

In 1984, Murdoch purchased half ownership of 20th Century-Fox film corporation. The following year he acquired the remaining half of the corporation. These two purchases, totaling $575 million gave him control over an extensive film library and rights to numerous television series (for example L.A. Law and M*A*S*H).

With this enormous programming potential in hand, he was in a good position to form a television network, the FOX Broadcasting Company. In October 1985, Murdoch bought six independent, major market stations (WNEW-TV, New York; KTTV-TV, Los Angeles; WFLD-TV, Chicago; WTTG-TV, Washington, DC; KNBN-TV, Dallas; KRIV-TV, Houston). Later he acquired WFXT-TV in Boston. These stations enabled him to reach about 20% of all television households in the United States. For the first time since the 1960s the major networks were to experience a kind of aggressive competition that would threaten their very existence.

The founding of the FOX Broadcasting Company must be placed within a context of the general economic uncertainty and decline of network television. According to Sydney Head and Christopher Sterling, 1985 was the first year that network revenues fell slightly. By 1987, total revenues of ABC, CBS and NBC had dropped to $6.8 billion. For the first time ever, CBS recorded a net loss for the first quarter. As a result, all three networks adopted austerity measures, cutting budgets, laying off personnel and dumping affiliates.

To the big three, the competition of the FOX network could hardly have occurred at a worse time. FOX itself was not spared financial hardship. In 1988 the company lost $90 million and in 1989, $20 million. To hedge against increased profit erosion the three networks began to diversify their interests in cable television and shore up their owned and operated stations.

Economic uncertainty also affected network affiliate relationships. ABC, NBC and CBS tended to dominate the powerful and lucrative VHF stations throughout the United States, with the less profitable UHF stations being in the hands of independents. With the advent of the FOX network, a number of the VHF stations, previously affiliated with the major networks, jumped ship, providing a lucrative advantage to Murdoch. Some claim that Murdoch's exclusive National Football League contract was an added incentive to switch their allegiance. In one agreement with station group owner, New World, the FOX network gained 12 new stations which ended their affiliation with "Big Three" networks. Such "fickle behavior" on the part of affiliates, sent shock waves through the established networks which had complacently relied upon their loyalty.

Opposition to Murdoch's aggressiveness did not go unchallenged by the networks. Americans have long been suspicious of the power and influence of foreign investors. For this reason, the navy strongly opposed British Marconi's monopoly of radio telephony in 1919, forcing the formation of RCA. Moreover, FCC licensing regulations specified that only American citizens could own broadcasting stations. The FCC also regulated cross-ownership of media companies to avoid antitrust abuses.

 

 

 

In an attempt to thwart Rupert Murdoch's growing influence, the FCC, spurred on by NBC and the NAACP, investigated his citizenship and the ownership structure of the FOX network. Murdoch became an American citizen in 1985, just prior to the founding of the FOX network. He also disclosed that FOX would assume virtually all economic risk for and reward of acquired stations. His disclosures were backed by sworn declarations of key FCC staffers and the independent legal counsel of Marvin Chirelstein of Columbia Law School.

Some reports claimed the disclosures were, in fact, deceptive. Murdoch's Australia-based News Corporation owned 24% of the FOX voting stock (just below the legal limit of 25%); the remaining 76% belonged to Barry Diller (20th Century-Fox) who was an American citizen. In fact, News Corp. indirectly owned 99%, a reality which the FCC either ignored or failed to see. Still, in keeping with deregulation trends, and despite temporary congressional freezes, the FCC found in favor of Murdoch. This decision was a great victory for Murdoch and a major disappointment to the networks.

The new network strengthened its position with several strategies. By reducing the number of prime time hours offered each week and providing no morning shows or soap operas, FOX has given its affiliates much more freedom to schedule their own shows and commercial announcements. Rather than compete with the major networks using counter program strategies, FOX has tried to offer entertaining, low cost shows to its affiliates. Some programs in late night fringe (the Joan Rivers and Chevy Chase hosted talk shows) have not done well but others such as Married...With Children, 21 Jump Street, The Tracy Ullman Show, Beverly Hills 90210 and The Simpsons have been successful. The probable reason for these successes is that they target younger, trend following viewers devoted to light entertainment. In addition to this pattern setting, somewhat controversial program strategy, Murdoch has spent lavishly to obtain the rights to National Football League football, a major coup.

FOX's vertically integrated structure (a combination of 20th Century-Fox, FOX Network and Fox Stations) is also well suited to produce and distribute a large number of quality shows. The substantial collection of films in the vaults of 20th Century FOX remain a rich resource, still to be developed.

-Richard Worringham

FURTHER READING

Fanning, Dierdre. "A Different Brand of Entertainment." Forbes (New York), 30 November 1987.

"FOX Gives Itself Three Years to Pass Big 3 Networks." Television Digest (New York), 26 June 1995.

Head, Sidney, and Christopher Sterling. Broadcasting in America. Boston: Houghton Mifflin, 1956; 7th edition, Princeton, New Jersey: Houghton Mifflin, 1990.

Larson, Eric. "Will Murdoch be Outfoxed?" Time (New York), 17 April 1995.

Merrill, John, John Lee, and Edward Friedlander. Modern Mass Media. New York: Harper and Row, 1990.

Robins, Max. "How Foreign is Fox?" Variety (Los Angeles), 5 December 1994.

Schmuckler, Eric. "NBC Challenges Fox Ownership." MediaWeek (Brewster, New York), 5 December 1994.

Smith, F. Leslie. Perspectives on Radio and Television. New York: Harper and Row, 1990.

Vivian, John. The Media of Mass Communication. Boston: Allyn and Bacon, 1993.

Wharton, Dennis. "Rupert Requests Relief." Variety (Los Angeles), 15 May 1995.

Zoglin, Richard. "Room for One More? The Fox Network Makes its Move Into Prime Time." Time (New York), 6 April 1987.

_______________. "Murdoch's Biggest Score." Time (New York), 6 June 1994.