Will Oprah Abandon OWN?

Oprah winfreyDuring an interview on CBS This Morning, Oprah Winfrey said if she ever wrote a book about OWN, it would have a title of 101 Mistakes.

What was Oprah’s most devastating error? Oprah confessed to her co-host, Charlie Rose, and her best friend, Gayle King, that she launched OWN “when we really weren’t ready to launch.”

Regarding Oprah’s 15-month-old joint venture with Discovery Communications (DISCA), she said, “Had I known it was this difficult, I might have done something else.”

Since the former daytime TV queen was averaging less than 300,000 viewers during primetime for OWN, would she dismantle her cable network and return to broadcast? She could call Bob Iger, her old friend and CEO at Walt Disney (DIS) who manages ABC, and say, “Bob, just give me back my big, beloved broadcast TV audience.” She would have an instant on-air hit again.

However, don’t count on Oprah giving up on OWN, at least any time soon. The other evening
at Radio City Music Hall, Oprah finished the day as dramatically as she began it. She appeared on stage with Tony Robbins, a fellow evangelist, as he preached about “Living Fearlessly.” It was a two hour Lifeclass program, which OWN aired live. Oprah told the audience, “Self-empowerment and fulfillment is the real and only reason I did a network.” A little later during a commercial break, Oprah joked, “Building a network, I get to face my fears every day.”

Everyone left Radio City Music Hall that night feeling more personally emboldened and believing Oprah would steadfastly forge ahead with her entrepreneurial struggle. She said to us, “You are what you believe. I’m God’s child. That means I can do anything.”

In the meantime, a bit of good news arrived that gave encouragement to Discovery: OWN had started to receive subscription fees from cable operators, such as Comcast (CMCSA), which carried the network for free in the beginning. Discovery invested all of the initial capital, $312 million, in OWN for the rights to the Oprah brand, her presence and her library. Oprah, who became CEO of OWN last summer, does not receive a salary from Discovery. Unfortunately, in order for Discovery to earn a profit on its investment, it had to increase sub fees and satisfy major advertisers, like Procter & Gamble (PG) and General Motors (GM), which had high hopes for OWN.

While some have speculated that David Zaslav, the Discovery CEO, will cut his losses, it’s more likely he will exercise some degree of patience. Although Zaslav is notoriously restless and fiercely competitive, he has too much of a personal investment in OWN to walk away. Zaslav is the one who originally came up with the idea for the network and convinced Oprah, who had always dreamed of having an enterprise called OWN.

So far, OWN’s problems don’t appear to be hurting Discovery. With $4.2 billion in 2011 revenues, Discovery has been one of the hottest media stocks. Its shares rose to an all-time high of $51.18 and helped to raise Zaslav’s compensation in 2011 to $52.4 million, including vested options. Zaslav refused to comment on the issue, but reminded his Discovery colleagues that it takes a “journey” to build a successful cable network. He noted that it took years for Fox News and Bravo to achieve the large audiences they enjoy today.

Discovery learned this lesson the hard way with one of its own cable networks, TLC. Discovery initially positioned TLC as a hip channel, using stars and an “L.A.” feeling. TLC struggled as its viewers preferred to watch shows targeted to middle America. Today, TLC is a top-rated network among female viewers with shows such as Toddlers in Tiaras and Cake Boss. What’s the lesson from this? Know your audience, listen to their wants and respond accordingly.