Three Blind Mice … How the TV Networks Lost Their Way

THE OPEN MIND
Host: Richard D. Heffner
Guest: Ken Auletta
Title: “Three Blind Mice…How the TV Networks Lost Their Way”
VTR: 9/4/91

I’m Richard Heffner, your host on THE OPEN MIND. And after years in the media I know that when Frank Stanton, the brilliant president of CBS and broadcasting’s true statesman for almost three decades, writes that the book Three Blind Mice: How the TV Networks Lost Their Way is, as he noted, “the best book ever written on network television”…it is! And it is, indeed.

That’s way I’ve invited journalist, commentator Ken Auletta as my guest today. For it is his new Random House volume that Dr. Stanton and others have praised so.

Still, I would begin our program by asking Mr. Auletta: So what? It’s an intriguing story he tells, to be sure…blow by blow how CBS, ABC, and NBC first were bought out, then “lost their way” to such an extent that the percentage of American households watching primetime television on the networks slipped from 92% in 1976 to around 60% here in the early 1990’s. And the slide continues.

But were they “three blind mice”? Wasn’t the network way really lost just as inevitably as night follows day with the very advent of changes in communications technology that unavoidably stripped these three giants of their one-time exclusivity, their oligarchic domination of what Americans saw and heard? With six out of every ten American homes now wired for cable that carries scores and scores of competitive channels, and with a competing videocassette machine in nearly 3 out of every 4 homes, how could the networks have done anything at all but “lost their way”…and, what really made it “their way” in the first place? So that’s the first question, Mr. Auletta. What did make it “their way”?

Auletta: Well, I mean, they had a near monopoly. If you go back to ’76, the year you cite in your introduction, that year the average home had seven channels. Today the average home has 33 channels. That…back in 1976 the programming was done for the viewer by the networks. The big three, like the big three auto companies. Then, as happened to the Japanese…the big three auto companies, the challenge from Japan came along…cheaper, more fuel efficient cars… well the same thing happened with cable and Fox Network and the VCR, and technology. Some of that was inevitable. However, what wasn’t inevitable and the part of the saga that we’re, we’re talking about here with the networks that was suicide as opposed to homicide, is that the, the networks allowed their cost structures to get out of control. That is to say that at the same time they were losing viewers, they maintained this high overhead 8,000 employees, basically, too fat…they became smugly complacent, and instead of saying “we really have to try and own some of these new technologies, like cable…we have to try and…why can’t we be cable programmers…why can’t we buy this new upstart CNN” that Ted Turner, which CBS could have bought, which NBC and ABC could have bought as late as the early 80s, but in their self-satisfied way decided they didn’t have to do it, that they would continue to be forever the big three networks. Well, they weren’t. They were, I think smugly complacent…Bill Paley told me before he died in one of a series of interviews I did with him, “We were complacent”, he said, “We did sit back. I wish we had not sold some of our cable investments as early as we, as we did. And that we had more patience to suffer losses for a more extended period because it would have eventually been very profitable for CBS”. So I think that, that the networks instead of treating what they did as a newsstand where they offered many different products, saw themselves as a single product entity. And, that was a mistake, in retrospect.

Heffner: Now, mistake…how can you, how can you assign whether guilt, or blame or whatever to such bright men because they were all very, very bright men. How did they mistake their road?

Auletta: Well, I mean, first of all, you have to look at, as I tried to do in this book, we’re talking about the human factor, not just business logic. You’re talking about human logic, and sometimes they’re different. That is to say when you go, even today, new owners come in and they’re determined to change the way the business is done and determined to make it clear to the people who work at the network that your competition is not just the other two networks, but the competition from cable and the Fox network and the VCR and independent stations. Yet despite that bias that they have that kind of hold-them-by-the-lapels-and-shake-them-bias, every day all three network owners check the overnight ratings to check how they did against the other two networks. So they are still skewed into this false competitive position vis-à-vis the other networks and not at all as cognizant as they might be of their competition from the outside. So Larry Tisch, for instance…we’re talking about what the new owners have done…

Heffner: Yes.

Auletta: …that suggests a certain smugness, not to mention what the old owners did to suggest…

Heffner: Or didn’t do.

Auletta: …or didn’t do to suggest smugness, but Larry Tisch decides after the first two years of cost-cutting and getting blamed in the press for that, of cutting in Hollywood, and, and not paying any attention to Hollywood and getting blamed for that, of running lousy shows and falling into third place for the first time at CBS and getting blamed for that, he decides “God, I’ve got to buy some good news”. So what does he do? He winds up spending beginning in May of 1988, a total of $3.6 billion dollars to buy sports rights, to buy good news, for CBS. He had no illusions that he was going to make any money for CBS on that. He never thought he’d lose the kind of money he’s going to lose this year on sports. But, but nevertheless he was trying to buy good news. Larry Tisch succumbed to the solution that he could buy good news, that he could somehow use…and he justified, he rationalized in his mind that “I could use the, the sports as a platform to promote shows in my primetime schedule”. He came up with all kind of cockamamie rationalizations for basically doing something to “stop that bad news from, from falling on my shoulders’, and “stop embarrassing me with all of my friends on the Metropolitan Museum Board and the New York Public Library Board”. But I think he was being very human, and he…but he was following human logic, not business logic. And human logic has more to do with panic and vanity and, and, and greed sometimes than it has to do with dollars and sense logic.

Heffner: But you say “not following business logic”, yet you’re talking in each of these instances, ABC, CBS, NBC, of smart, smart successful businessmen.

Auletta: Absolutely…good…for instance, GE comes in. GE is arguably one of the best managed companies in the world. It’s the third most valued company in the world. When, when you look at what they do, their great productivity numbers, great profitability numbers, they are heavily invested in research and development and hi-tech industries, growth industries. They’re a brilliantly managed company, and Jack Welch, the head of General Electric, is a brilliant CEO. But he comes in there and, and what does he find? He finds that every time he…if he cuts off the Xerox copies of press clippings to executives at NBC, or if NBC decides to do that, they get a negative story in the press about it. So he, he looks at the overhead at NBC, and he says, “We should be cutting out half the employees here”. But he…he and then Bob Wright look at the, at the facts that if they do that, they’re going to get punched in the nose in the press, and employees are going to go out on strike, and you’re going to have all this embarrassment, and, and hell-raising about doing something that he would get praise for doing at GE. In fact he cut one out of four employees at GE over a five year period after he took over in the early eighties. So what does Jack Welch and more important, Bob Wright, who is president at NBC do? They…well, they make cutbacks at NBC…they don’t make nearly the kind of cutbacks they would really like to make because they’re…because of the human logic, the fear they have that they would be embarrassed with negative stories in the press.

Heffner: Now, again, you seem to be talking about inevitability. You seem to be talking…in distinguishing between what you call human logic and business logic…how so would you or I, or let’s just pick three other people, or groups of people, done any better, or are you talking about something that’s inevitable?

Auletta: Well, what is inevitable is that the networks will continue to lose audience. It is inevitable when you have a world where the average number of channels is now 33 versus 7 in 1976, and in many cable television sets you buy you have 150 channels you can get. So viewers have more choices and they will exercise their choices…those choices in what I call a “video democracy”. So the networks are bound to decline further. What is not inevitable is that, that you still…it’s still the business of hits. These new owners came in and their background was cost control, not revenues, not production of hits, not Hollywood, not the dream magic box of, of network television. Unlike, say, Paley, who was a man who, who thought about the programs and watched them. These are people who don’t consume their basic products that they make at the networks. So what happened is that, that they didn’t spend very much time all…at all three networks at first, the new owners, thinking about the product, what appeared on the screen. And, and worrying about it, and living with it, and watching all those pilots and watching the shows in, in…as they played on their network. And what happened was they didn’t think enough about hits and revenues that those hits will generate, and they thought more about controlling costs. But when you really look at their budget, this was a false start because the budget, only 20% of that budge is overhead. 80% of the budget is what gets on the air. And they weren’t focused in those first two years on that.

Heffner: Of course, you mention Mr. Paley. And it’s true, Paley did, as you note in Three Blind Mice, put his emphasis upon revenue, on what you took in with the programs you put on the air rather than expenses. But you also make the point here that CBS was seeing hard times before the transfer.

Auletta: Absolutely. No…that was inevitable. The hard times were inevitable. The fact that the new owners had to cut costs was inevitable. The fact that they had to attack the smug, self-satisfied culture that existed at the three networks, that was inevitable, too. And I think they’re right to have done that, by the way. I don’t have any quarrel with the new owners in doing that. My quarrel with them, and, and what I, what I expose, I think, in the book, is how insensitive they were as managers. For instance, take NBC. NBC was a company that under Grant Tinker, who was very much a throwback to the great good old days, as people will sometimes romanticize the past, sometimes fairly, sometimes not, and he was a man who basically took NBC from third place and helped build up its confidence, gave it a sense of direction. “We want quality programs – “Hill Street Blues”, “Cheers”, “The Cosby Show” – we just want the best stuff”. And, and, and by 1985 and ’86 NBC suddenly is in first place in the ratings. It happens to be the year that GE buys NBC, and instead of stepping back and giving a round of applause to those wonderful people that…at NBC…who five years in the wilderness had lead them out, and the network was now number one, they said, “We’re not going to congratulate you. We’re not going to cheer for you. This is the Marines. It’s a constant struggle. What are you going to do for me tomorrow”? So even though NBC was wildly successful under Grant Tinker, suddenly these people were made to feel like weenies, who worked at NBC, and the morale plummeted and understandably plummeted because the attitude at, at…of the new owners at GE of NBC was “We have to instill a sense of insecurity in order to create an entrepreneurial culture at NBC”. In fact, the Tinker model was a very different model, “we have to instill the sense of security, so the people will take chances”. And I think that’s what happened, and I think ABC/Cap Cities has had better success in the five and six years since the…since each of the networks were taken over because they have operated more on the management principle of trying to instill a sense of security rather than insecurity.

Heffner: I gather you’re saying then that no matter what, given the nature of the proliferation of channels, of, of avenues of entertainment and news, too, they were going to have hard times.

Auletta: Yes.

Heffner: And then it was a matter of how they managed…

Auletta: The decline.

Heffner: …the hard times.

Auletta: How you manage decline, and whether you…not only how you manage decline for the network, but how you then steer your network or your company, don’t just think of it as a network, into other…finding new sources of revenue…cable programming, more channels, overseas outlets, doing more of your own production in-house, which is possible, doing more news in-house and putting it on the air and they packaging and selling it…basically thinking in a more entrepreneurial way as well.

Heffner: But, you know, it’s interesting. In Three Blind Mice you say they had to make cuts…

Auletta: Yes.

Heffner: …and you say you are sympathetic with those cuts. As I…

Auletta: Not all the cuts, but I’m sympathetic with the idea they had to make cuts.

Heffner: Certainly the ones in news do not seem to elicit your sympathy.

Auletta: No, because they were done stupidly. I mean I think…

Heffner: Is that the only reason? Now, look at yourself as a newsman. Was…wasn’t…isn’t there in Three Blind Mice that residual newsman’s sympathy?

Auletta: No.

Heffner: …feeling that this is, this is the place.

Auletta: No. I…there is a…I’ll tell you where the sympathy that’s in the book and in my person, and that is a sympathy for the sense that news is a public calling, a public trust. And that these new owners didn’t share that religion in by and large. I think the Cap Cities people do more than Tisch and, and Wright and Welch do. But the sense that, that I am in a profession and if I’m Tom Brokaw or Peter Jennings, or Dan Rather or, or some…or Fred Frances at NBC News, they go out every day and they really believe that they represent the public. I mean I don’t question their sincerity in that and I feel that as a reporter I am out there to try and report the news as I see it and try and educate the public to what I see as the truth…report on that truth. And I don’t think that calling, that sense of calling was shared by all of the new owners and the people in news felt that…they felt that the new owners worshipped at a different church, which was the church of shareholder responsibility, rather than the church of public responsibility.

Heffner: Well, let’s, let’s turn to the church of shareholder responsibility. As a newsman you’re sympathetic to the notion of public trust in news. What about entertainment? Is there no public trust?

Auletta: Of course there is. I think there is. I think, I think the public trust is that if you’re running NBC, you don’t put a show like “Nightingales” on eth air, which is a show I report on…

Heffner: Yes, you certainly did.

Auletta: This is a show that was pitched to NBC with a one-line pitch by Aaron Spelling, who is the man who manufactured such shows as “Charlie’s Angels” and “Dynasty”, and “Love Boat”, and he pitched it to Bran Tartikoff in a parking lot at 20th Century Fox and he ways, “My idea for a new show is student nurses in Dallas in the summer, the air conditioning breaks and they sweat a lot”. And of course Brandon Tartikoff…

Heffner: 40…

Auletta: …and NBC bought it. “40 share”, he said, “40 share”, which is a hit. And, and the truth is that when, when I read those scripts and sat in those casting sessions as they allowed me to do, and saw the pilot of that show, I was absolutely appalled. I couldn’t believe these really intelligent people…Brandon Tartikoff is one of the smartest people I met in the course of doing this book, I mean he’s a really talented man, and a good guy. And yet I couldn’t believe he was seducing himself into believing, just as Larry Tisch seduced himself into believing he would spend his $3.6 billion dollars on sports well…Brandon Tartikoff seduced himself into believing this piece of garbage would be a 40 share. It was hard to believe.

Heffner: Was it a 40 share?

Auletta: No, it flopped. It was a show (laughter) that appeared, was rejected by the, by the viewer and lead to howls of protest from consumer groups.

Heffner: Yeah, but just a minute…are there no 40 shares that are as “garbagey” as you describe this one program?

Auletta: Oh, sure, there are no 40 share anymore in network television.

Heffner: Well, that…no such thing as you’ve described…

Auletta: But, but yes, there are lots of shows, I mean “The A Team” was a show introduced in Grant Tinker’s reign, which was really the first hit to power NBC back to ratings supremacy, for the first time, actually. And, and that was a piece of garbage.

Heffner: That’s why I really want to get…

Auletta: 40 share…

Heffner: …at your…and 40 share…it’s not 40 share though…and 40 share…

Auletta: And garbage.

Heffner: …garbage and 40 share.

Auletta: Oh, absolutely. You know there’s a lot of junk, including “Petticoat Junction” and shows that Mr. Paley put on over the years…

Heffner: Okay…

Auletta: …that were garbage.

Heffner: …where does that lead you, Mr. Auletta, to your own conclusions about what should be in terms of the ways in which we inform and entertain ourselves? What are the obligations? What’s the public trust?

Auletta: I, I think because you are dealing with a limited resource which over the airwaves, I mean the government has to parcel out that air space because it’s so limited…I think you have an obligation to try and do, not just news, but, but some programming in primetime and in children’s time and day time that is not prurient, that, that is uplifting and that educates because I think your…the attitude should be that we’re not just in the entertainment business, we’re also in the education business, and I don’t think enough of that sense is there both by the way today under the new owners, as well as under the old owners of yesterday. But I think that, that if I were running a network which I wouldn’t want to do, but if were and I have that attitude I’d probably be fired in…first of all I’d never be hired, but…today, in this dog-eat-dog world where your…where they’re basically worrying about how they’re going to make any money…

Heffner: Or, or 30 years ago…I just…

Auletta: That’s right (???)

Heffner: …I just put an Edward R. Murrow speech into my Documentary History of the United States, and there Ed said, he didn’t know anywhere where it was written in the Constitution that the owners of broadcast licenses had to increase, blindly increase their revenues, their profits, year after year after year…it was nowhere written in the Bill of Rights or anywhere else in the Constitution.

Auletta: But, you know, it was, it was easier to make that argument when you had proprietor-ownership of the networks, as you did with Paley and Goldenson and Sarnoff, the original founders of the three networks. Today, when public companies are running the three networks, they have a, they have a much more compelling argument on their side to say, “Listen, we’re a public company. We have to worry about shareholder responsibility and, and we have to therefore maximize our profits, otherwise our shareholders are going to take the money and go elsewhere”. I would like to argue and I would argue, by the way, that government has a role to play in at least jaw-boning these, these institutions that, that are using the public airwaves to try and use them to, to educate a little more…

Heffner: Spoken…

Auletta: …and uplift a little more.

Heffner: Spoken like a true print journalist about his electronic…

Auletta: No, no…

Heffner: …colors…

Auletta: …I…you see, I would argue that as a print journalist that, that The Daily News, or The New York Times, or The New York Post has a public responsibility as well. I don’t think they should be naming rape victims…alleged rape victims. I don’t think they should be running too much scintillating material. I’m talking about print…

Heffner: Yes.

Auletta: …okay?

Heffner: Okay.

Auletta: I think we should be “sourcing out” things, unlike The National Enquirer which doesn’t. And so I think there’s a public obligation in print as well as in TV. Where, where I do think…I do think that many people in TV often come back and say, as the new owners do, “Well, you know, newspapers have to earn a profit. Magazines have to earn a profit. Whey shouldn’t we, at the networks, be asked to earn a profit?” And they should be. It’s a business. I don’t quarrel with the fact that it’s a business, but to go back to your quote from Murrow, the question is how much profit do you have to earn and what do you give back…okay, we asked that of individuals, “What do you give to charity?”…

Heffner: Well, I ask Auletta that question…how much profit and what’s your answer then?

Auletta: I don’t have…

Heffner: What are you going to allow them?

Auletta: I don’t…I don’t think government should be in the business of allowing or disallowing…

Heffner: Just jaw-boning?

Auletta: Well, I…jaw-boning…they can do several…yeah, I don’t want…I don’t want the government to regulate the profits of a private business. Period. I’ve…that is my view. You may disagree with it, but I…

Heffner: No…

Auletta: That is…

Heffner: Let’s put that down as a given…

Auletta: That’s it…that’s m y given…that’s my given.

Heffner: Then how do you accomplish what else you’ve said you want to accomplish?

Auletta: Well, I mean, for instance, I think you will…the government accomplished more back in t he 50s and 60s and even into parts of the 70s than they do today by jaw-boning. I mean that works by threatening Congressional hearings, or actually holding Congressional hearings and forcing the hang of Paley or Goldenson or Sarnoff to do more public programming.

Heffner: Where is the Newt Minow when we need him, you mean?

Auletta: I think we need Newt…Newton Minow and someone who, who would who would argue as he did in the early sixties that television has become a vast wasteland, rather than the head of the FCC under Reagan, Fowler, who argued that television was no different than a toaster with pictures.

Heffner: Okay. We don’t have that now. So what…

Auletta: No pressure from government.

Heffner: …alright, now then Auletta’s doctrine is pressure from government.

Auletta: I want to see more pressure from government, but I want to see that…I want to see that there’s pressure on the new owners elsewhere…I want to see that the people who are running the network are pressured into thinking not just about their shareholder responsibility, but about their public responsibility. I think they do have a shareholder responsibility, but I think they also have a public responsibility. I don’t think they should…I think that sometimes you say, “We have an obligation to run a presidential debate in 1988”, even if NBC is running the Olympics that year from Seoul, and what did the president, the new incoming president of NBC News say? He said, “We don’t have an obligation to run a presidential debate. They can watch it somewhere else”. I think that’s an outrageous position for a news president to be making. That’s a business position. That’s just dollars and sense logic and has nothing to do with the public trust.

Heffner: Well, let me ask you this…at a time when we have the kinds of coverage…coverage that you’re talking about , and you’ve written about so well in Three Blind Mice, what is the illogic about saying, “The picture is on Channel Z, why must we have it on X and Y and W and Q as well?” The conventions for instance.

Auletta: Well, I don’t know that you have to have live coverage for four days of the conventions. I don’t think you, you…you know if it’s tedious, and nothing is going on and it’s not really a civics lesson in any important respect, but basically just to satisfy the vanity of some politicians who are standing up and making speeches, I don’t think there’s an obligation necessarily to cover that. And it may be that that’s covered by C-Span and CNN and others, but I think the networks have to cover it. I think there’s an obligation to cover…

Heffner: All of them covering the same damn thing?

Auletta: They can do it differently. They can do it more inventively. In fact, they do. I mean I remember the ’88 convention. The truth of the matter…’88 conventions that…ABC did some things, including Jeff Greenfield, did much more inventive coverage from the floor and analysis than was done on the other networks, and I think you could do that. It’s just a matter of being a little more creative. But I think when the networks have the kind of mass audience they still retain, 62% is still a mass audience. 57% or 55% for network newscasts is still a mass audience…I think you have certain obligations to cover certain things.

Heffner: You obviously feel that it is important to this democracy that we do have a mass medium, that we are able to reach people, and that the networks continue to do so in whatever form.

Auletta: One of, one of the real problems in our democracy is, is what Madison talked about in Federalist Paper No. 10, factions, and the notion that, that you have many different voices and no common ground in which to meet. But with all of their flaws, one of the things the networks provided was a common church, a common experience for all of us Americans. 79% of Americans watched “Roots”, that…roughly that percent was watching, and more, was watching the evening newscast. They shared common experiences and, and they, they bonded together in some ways as Americans. When the networks cover…dropped all coverage for 4 days when John Kennedy was assassinated and wouldn’t run any ads by Frank Stanton order, first, by the way at CBS…that created a sense that we’re all in this together. One of the dangers coming down the road is that free television will become a dinosaur and that you may come to a point where the networks can no longer afford, 5 or 10 years from now say, to pay for the world Series rights, or Super Bowl rights. And what happens then when the viewer looks up and they say, “The only way I can watch the Super Bowl is if I have cable”, and only 65% or 70% of Americans, and those who have the money to afford cable, can afford it. Then you’re in a situation where you really have a “has versus have-not”.

Heffner: Is that a prophecy?

Auletta: Yeah.

Heffner: You think that’s going to happen?

Auletta: Yeah, I do. I think…I think the Congress in their, in their dubious wisdom will wake up too late to realize that this is going to happen, and it will have happened by the time they wake up, and then there’s going to be hell to pay.

Heffner: No road back, either.

Auletta: No, because the networks are basically finding that, that there’s no way to make money on sports anymore. And so they’re going to abandon sports and Larry Tisch’s experiences just confirms that. I mean here he spends all his money, $3.6 billion dollars, and he’s going to lose money on sports. So what are we in this business for? Sports business, maybe we should get out of the sports business…leave it to regional…let’s buy some regional sports networks. By the way, both ABC and NBC own…ABC owns 80% of ESPN and NBC bought Tisch’s regional sports (laughter) networks in the business with Doan and some others.

Heffner: So when you come back ten years from now…and I’m getting the cut signal…we will find that there are no more networks in the way we know them now.

Auletta: Well, you will have networks, but they will have a different shape than they have today. They may not be doing certain things we now take fro granted, like news, or sports or day-time programming.

Heffner: Ken Auletta, thank you so much for joining me today on THE OPEN MIND. I appreciated it and I can heartily recommend Three Blind Mice.

Auletta: Loved it. Thanks.

Heffner: And thanks, too, to you in the audience. I hope you’ll join us again next time. And if you care to share your thoughts about today’s program, our guest, please write to THE OPEN MIND, P.O. Box 7977, FDR Station, New York, NY 10150. For transcripts send $2.00 in check or money order. Meanwhile, as an old friend used to say, “Good night and good luck”.

Continuing production of this series has generously been made possible by grants from: The Rosalind P. Walter Foundation; The M. Weiner Foundation of New Jersey; The Edythe and Dean Dowling Foundation; The Thomas and Theresa Mullarkey Foundation; The New York Times Company Foundation; The Richard Lounsbery Foundation; and, from the corporate community, Mutual of America.