A+E at 30: How a Tiny Network Became a $26 Billion Success Story
This story first appeared in the April 4 issue of The Hollywood Reporter magazine.
At the dawn of the 21st century, A&E Television Networks faced a conundrum.
Beginning in 1994, the company had prospered by airing reruns of NBC's Law & Order, which brought in giant audiences on its flagship network, A&E -- aka the Arts and Entertainment Network. As the end of the syndication contract for the show approached in 2002, the price to renew had soared to four times the $155,000-an-episode originally paid. The network was forced to let the show go.
"Losing that deal was the best thing that ever happened to our company," says Nancy Dubuc, 45, president and CEO of (the now-renamed) A+E Networks, now a conglomerate of 10 channels. "Our creativity kicked in and we started creating brand-defining scripted and nonfiction series." Says Abbe Raven, 60, the former CEO and longtime executive who became chairman in 2013, "We couldn't allow one show that we didn't own to tip the scale of the network."
As A+E Networks marks its 30-year anniversary, that decision was one of dozens that have led to juggernaut shows, ratings boosts, strategic acquisitions and growth in more than 160 countries -- and big money: Today, A+E's total value is estimated by Investopedia at $26 billion, up from an estimated $19 billion in July 2012, when Hearst and Disney bought out Comcast's 15.8 percent stake for $3 billion. (This was at Comcast's request because it needed money to buy from General Electric the half of NBCUniversal it did not already own.)
Last year, the company enjoyed some of its highest-ever ratings, boasting 18 of the top 50 shows on all of cable. Its flagship channel, A&E, ranked fourth among all cable networks in the key 18-to-49 age group thanks to such programs as Duck Dynasty, Bates Motel and Storage Wars. History, the network once best known for Hitler documentaries, was the No. 3 channel on cable last year among viewers 25-to-54 and No. 2 among men, behind only ESPN. Since A+E's 2009 acquisition of the ratings-challenged Lifetime, it now ranks sixth in cable among women 25-to-54.
But the risk-taking hasn't netted all rosy results. The company experienced a full-on publicity nightmare in December when Phil Robertson, the patriarch of A&E's juggernaut reality show Duck Dynasty, made controversial remarks about gays and African-Americans in a GQ article. The fury that followed led the network to suspend Robertson. By Dec. 28, A&E reversed its suspension, submitting a statement that it had consulted with advocacy groups and that Dynasty was not a show "about one man's views."
"We really have moved on," says Raven, declining to comment further on the brouhaha. (Viewers may not have: Dynasty ratings are currently down by more than half, from nearly 12 million viewers a year ago to 5.2 million.)
Lifetime hasn't had it easy, either. It's still battling intense competition from Oxygen, OWN, We, TLC and others. It has a hit reality show in Dance Moms but overall has found it difficult to launch other reality programs. Formerly a Bravo property, Project Runway has performed well, but some critics contend it wasn't worth the huge investment and ensuing legal battles. Also, in the past year, Lifetime has killed many of its scripted series, from the critical flop The Client List (after two seasons) to the well-regarded Army Wives (after seven seasons) as it searches for a narrative hit.
Dubuc can point to some recent successes on the Lifetime front, including the 2011 Emmy-nominated anthology Five (featuring a segment directed by executive producer Jennifer Aniston), 2012's redux of Steel Magnolias with an all-black cast and Marc Cherry's Devious Maids, whose September finale lured 3 million viewers.
"We took the principles we learned with A&E and History and are applying them to Lifetime's evolution," says Dubuc, who hopes to do the same with the recently rebranded FYI. Formerly The Biography Channel, FYI will be a lifestyle channel that Dubuc hopes will grab a piece of the highly competitive female-lifestyle demo.
Amid its metamorphoses, A+E has done a good job of providing stable leadership. It has had only three CEOs in three decades -- Nick Davatzes (1983-2005), Raven (2005-2013) and now Dubuc while growing into a mega-conglomerate of 10 U.S. networks and 52 global networks.
"What I admire," says Anne Sweeney, the outgoing co-chair of Disney Media Networks and an A+E board member since 1995, "is they've been unafraid to be experimental, bold and really program to the audience."
These strategies have taken the company's flagship channels -- A&E, History and Lifetime -- far afield from the original mission that brought each one to life. "Programming has to evolve," says Brad Adgate, senior vp research at Horizon Media (which works with A+E). "MTV doesn't play music anymore. The biggest programs on AMC are Walking Dead and Mad Men -- not movies. A+E has gotten younger and bigger through a combination of unscripted programs and event programming."
Raven reiterates that the end of Law & Order reruns led to a reality show boom, starting around 2004, that has allowed A+E to brand its channels with low-cost programming. "It was really the beginning of more real-life programming," says Raven. "Shows like Growing Up Gotti and Dog the Bounty Hunter spawned a lot of copycats. Within a year of their debuts, we lowered the average age of A&E by 20 years. That had never been done before."
This sea change also brought about a giant evolution at History, whose breakthrough came in 2007 with the reality series Ice Road Truckers, followed in 2009 by Pawn Stars, which became the highest-rated show on History. The game-changer, however, was the channel's foray into scripted storytelling: the 2012 miniseries Hatfields & McCoys, starring Kevin Costner, which netted 16 Emmy nominations and three wins, and helped spawn the drama series Vikings.
The company also has been aggressive in attracting A-list talent. Among them is Carlton Cuse, the Lost executive producer who is now the co-executive producer of the Psycho prequel, Bates Motel, which premiered last spring to more than 3 million viewers. Cuse praises A&E for being strategic in its notes and its unabashed promotional efforts. "At a broadcast network, you're one of eight or nine shows launched in a given year all competing for the same marketing resources." By launching fewer shows, Cuse says, A&E was able to focus its marketing efforts on Bates, leading the show to enjoy a season-long average of 3 million viewers. "I feel like I got the royal treatment," says Cuse.
Cuse also points to the deals A+E made to get Oscar nominee Vera Farmiga and Freddie Highmore signed on as Norma and Norman Bates to illustrate how the company goes the extra mile. "Both deals were very complicated," says Cuse, adding that one caveat allowed the then-20-year-old Highmore to finish college in the U.K. and still do the series. "For a lot of networks, that would have been a deal ender."
Raven and Dubuc believe that being a private company owned both by a public company (Disney) and a private company (Hearst) has helped them take risks as they have dealt with ever more competitors in every aspect of their business. "A lot of them are fearful of competition and worry about their stock price," says Raven, "where we're really worried only about our audience. If we are successful with them, our relationships with advertisers and affiliates will be strong. We are a content company now, and that's our No. 1 priority."