Wall St. And Business Wednesdays: What BET Can Teach Radio One And Comcast

The announced intention of Radio One, Inc. and Comcast Corp. to offer a new cable channel aimed at Black viewers - in competition with Black Entertainment Television - is a case study in relationship-building, classic supply and demand economics, and market segmentation. In the debut January issue of the Black Electorate Insider Newsletter we take a hard look at the financial numbers in the proposed deal and provide our analysis of what the new network will have to do in order to attract Black prospects profitably and increase shareholder value for both corporations over the long-term. The analysis merges a view of the real demand among Blacks for another cable network with the economies of scale in the cable business. Of course, there is plenty of behind-the-scenes "insider" stuff included, pertaining to both Black Entertainment Television (BET) and Radio One.

The first paragraph of a recent Washington Post article on the proposed new network says it all, "The nation's biggest cable-television operator and its largest African American-owned media company are launching a cable channel to rival Black Entertainment Television, which for 20 years has held a near monopoly on programming aimed exclusively at a black audience."

BET actually held on longer than it should have to this supposed monopoly position and would have actually prevented the current challenge had it not violated so many "immutable laws of marketing." The two main laws that it violated were the law of sacrifice and the law of focus. Had BET simply focused on entertainment and sacrificed the news market, from the beginning, it would not be receiving the challenge that it is from Radio One and Comcast. BET, like most companies erred in trying to be all things to all people. It couldn't resist the underserved news market and dove head-first into an ocean full of dangerous currents. BET did so order in to satisfy a small but intense market segment of Black cable viewers and in order to protect its claim on the word "Black," in the mind of both prospects, potential advertisers and cable operators. This zeal to remain first in the mind of cable viewing prospects and existing audiences by owning the word "Black," points to the other problem that Robert Johnson, BET and now Viacom have.

BET will continue to lose market share because it claims to "own" a word that can't be owned in the marketplace. We wrote about this similarly in regards to Russell Simmons' claim on the word "Hip-Hop" in the political marketplace. Cultures cannot be "owned" in the marketplace for long especially through a frontal assault that openly appropriates the culture in the name of the offering. If BET had been called Urban Entertainment Television (UET) or Urban Music Television (UMTV), it would stand a better chance of profitability and of dominating its target market of "Black." It would own the word "Black" without having to openly claim it and it would properly fend off and comfortably be able to douse any expectations that it be the public servant and media philanthropist of an entire community.

The case is articulately made by many economists and marketers that in the mind of a prospect, value is determined by only two macro factors: benefits and price. If value is the result of the benefits/price formula then it can easily be seen that BET's provision of news, which it viewed as a benefit, was really more than that in the mind of an intense minority of Black cable viewers. Its news coverage was not interpreted as a value-added benefit but rather as a basic service that the prospects and customers needed but one which, no matter how hard it tried, BET could not satisfy as an appendage to its entertainment core offering. Frustration grew as a result of the tension caused by BET's apparently cavalier attitude toward providing a necessary service. What BET never accepted and which the new Radio One-Comcast network had better absorb if it is to be successful, is that there has never been nor will there be success and long-term profitability for a single network, within the current structure of the cable industry, in pursuing what the Washington Post describes as a "near monopoly on programming aimed exclusively at a black audience." A monopoly on supply is meaningless if there is no demand or profitability in supplying it. In the cable programming business there are only market categories and a Black market segment within those categories. There is no "Black audience" as a demand market segment. There is a Black sports market segment within the larger "sports" category; a Black news market segment category within the larger "news" category; and a Black music market segment within the larger "music" category. These market segments of larger categories are currently being stifled and impeded by racial politics, regulatory mandates and constraints and a misreading of the demand of Black consumers by multinational corporations and media content providers. But they are still viable, if the content providers and programmers who supply these market segments can achieve inelastic pricing when exchanging their differentiated offering for a cut of cable subscription rates and advertising fees. And if their service can be accessed by the Blacks who desire it.

BET made the mistake of never admitting that it was seeking the leading position in two major market segments in two separate categories. Under the guise of a Black entertainment outlet, BET attempted to dominate the Black music video and Black news market segments. It was an impossible pursuit within the current structure of the market categories. Some suggest that to overcome this problem that BET should have gone half and half 50% music videos and 50% news coverage. That would have been a recipe for disaster. Not only would BET have never satisfied the Black news market segment which includes talk-radio and which gathers its news from websites and a saturated all-news cable outlet market; but it would have lost a greater share of its Black music market segment to MTV and even smaller regional and public access programs which offer a plentiful supply of significant rotation of the most popular Hip-Hop and R&B music videos. By trying to be all things to all people BET would have further violated the laws of sacrifice and focus and lost both its core business (entertainment) and added value proposition (news coverage).

BET also misinterpreted the nature of the responsiveness that the Black community desired the network to have relative to the community's needs and issues. Blacks did not necessarily desire that BET bring cameras to every newsworthy event in the Black community or even provide hard news analysis or a talk show format weaved into its entertainment programming. What Blacks would have accepted and appreciated would have been BET's leveraging its considerable entertainment content and relationships and marrying them with the most important events happening in the Black community. Instead of broadcasting live from the Million Man March or Million Family March, competing with news networks like CNN and C-SPAN, BET could have organized a massive benefit concert for either event or in conjunction with both that would have brought Black America's entertainment community into the spotlight at two of the most significant Black-led gatherings in history. Satisfied with just covering the story, BET missed an opportunity to become part of the story. BET could have organized, produced and aired numerous telethons that would have highlighted major problems in the Black community and helped raise money to fight them, all within the context of its own entertainment format, with appearances and performances from talent that it features and covers in the entertainment world. It is a shame that it took BET so long to put together its own music award show. It should have long-established its own movie award show and ventured into specialty sports programming like exclusive boxing contracts with championship prize fighters. It also could have hosted Super Bowl and NBA pre-game and post-game parties and programming, and exclusive consistent one-on-one interviews with entertainment figures-as-newsmakers. BET has greatly missed an opportunity to capture a viable Black sports market segment that would have had a tremendous cross-over appeal to non-Blacks. It never fully established its monopoly on Black entertainment, forget the mythical and all-inclusive "Black programming category" that the Washington Post alludes to. BET should have had the recent exclusive interview with Whitney Houston, not ABC. It should have sacrificed news, which it did not provide with real depth or promote properly, for sports or drama, if it was serious about leveraging the position it does occupy in the minds of most Black prospects- music video entertainment and comedy- into the more lucrative position it desires - Black entertainment - which if properly evolved would eventually include music, sports, fashion and drama. Eventually these four market segments could expand into their own "all" networks.

As previously stated, having the word "Black" in BET's title only aggravates its problems, as Blacks are not accustomed to having their identity presented in the purely commercial marketplace. And whether in or outside of the marketplace, Blacks have difficulty accepting their natural identity available only in the context of an entertainment offering. BET could have gotten away with this if it had not lost its focus and attempted to satisfy the underserved and underdeveloped "Black News Market" seperately. Instead of forcing Black hard news content into the dominant entertainment format, BET should have offered a spinoff - something like "BNN," the Black News Network. Now, there are serious questions over whether or not cable providers would have accepted or been interested in a BNN. And this is an important consideration. What has to be understood is that most companies aim for their most profitable market segment. Often times this segment represents only 10% of the market, but their patronage at times can represent as much as 60% of all revenue generated. The active, engaged and powerful minority within a majority market frequently rules in business. Just like with getting the Republican Party to make a real sales and marketing pitch to Blacks, it is hard to persuade an entity to devote increasing levels of its time and energy to satisfying demand for it among a comparatively smaller market segment, where risk is involved. Far easier to work the base (the active, engaged and powerful minority within the majority market). BET is actually coming to the right conclusion in leaving the news and edutainment market now. Unfortunately, at this late hour it leaves the impression of betraying its Black constituency in doing so, because it teased them for years with news and "positive" programming and persuaded (read: deceived in the Black prospect's mind) them into thinking the company had a firm commitment to satisfying demand in those markets when it really never did.

BET overpromised and underdelivered and didn't admit this fast enough, nor did it adequately address the perception in Black America that the title "Black" is communal property. Blacks do not mind commerce around the name, but they do believe, irrespective of their level of patronage, that they are the stockholders in any enterprise that wears its name. BET should have admitted its mistake with candor and immediately partnered with another content or cable TV operator or consortium of Black business interests - all with deep pockets - to begin to satisfy the Black edutainment and news market segments, however small they may have initially been. BET did not have to make money off of these operations as their presence would pay a dividend for the company's image and reputation that has now been severely, maybe irrevocably damaged. BET will spend at least as much in fighting the Radio One-Comcast network, lost market share, and in advertising and PR to re-position itself in the mind of prospects, as it would have if it had sought to launch a Black news network years ago.

BET found that it could not satisfy the more intense non-entertainment demands of its "constituents" (not customers), which it opened itself up to by attempting to own the word "Black" in the marketplace and by attempting, in episodic but prominent fashion, to satisfy a broad and underserved Black news market segment. It will be interesting if Radio One and Comcast make the same mistake.

Subscribe to this month's issue of the Black Electorate Insider Newsletter for in-depth analysis of Radio One, Inc. and Comcast Corp's plans for the new network

Cedric Muhammad

Wednesday, January 15, 2003

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