Mindy Herman's True Hollywood Story

BY ANDREA FIGLER

In her Hollywood office, Mindy Herman has a pair of framed jerseys signed by players from the Los Angeles Kings and Philadelphia Flyers pro hockey franchises, along with a helmet once worn by hockey great Wayne Gretzky.

If she worked for, say, ESPN, Herman's sports shrine might not attract any notice. But the diminutive Philadelphia native ? and lifelong hockey nut ? is the president of E! Entertainment Television Networks, which has cornered the market on brazen and occasionally titillating talk shows and documentaries, such as Howard Stern, E!: True Hollywood Story and Wild on E!.

Since joining the network a year ago, Herman, 39, has had little time to indulge her passion for sports. She has set the ambitious goal of launching four new networks over the next decade that will help broaden the assets of the private company ? 80% of which is owned in a joint partnership between Comcast Corp. and the Walt Disney Co. ? and secure its success in the digital age. While she declined to discuss specific plans, Herman says that all the new networks will, like E!, generally focus on lifestyle issues. She would also like to increase E!'s distribution by nearly 13%, to 80 million homes.

?I joke that I want to be a 2.0-rated network,? Herman says, alluding to the fact that E! has never risen above a 0.57 rating, or 385,000 households, on a quarterly basis in the past three years, according to Nielsen Media Research.

?It might take me four channels to get there,? she says in her Philadelphia accent. ?But we will be more successful in the long run with a lot of channels.?

It took more than ten years for E! to reach its current distribution in 71 million U.S. households, moving itself from a niche Hollywood network that was widely considered an industry joke to a channel that's now included on most expanded basic packages offered by satellite and cable providers.

The fact that E! remains an independent network ? even though it's controlled by two giant partners ? will make it difficult for executives to successfully launch four new lifestyle channels, according to Jack Myers, chief economist and CEO of The Myers Group, a consulting and research firm that follows cable networks.

?The challenge for E! is that it's essentially a stand-alone network,? Meyers says. ?They're operating at a severe disadvantage.?

For starters, the independent status gives E! less leverage to toss around. Larger conglomerates, like AOL Time Warner or Viacom, can bundle weaker networks with several stronger ones to guarantee carriage.

And although E! has grown significantly, ?I think they still have to work on their core E! brand,? Myers says. ?They are not yet recognized by the national advertisers or the local cable operators as one of the core driving networks behind the growth of cable.?

Operators and advertisers still do not view E! as a primary channel in the way that they do Discovery or The History Channel, he says.

But Herman may be the one to take E! to the next level, he adds.

?We cover a sexy industry. To the extent that we are a mirror for the industry, we do have to cover the gamut of popular culture.?
mindy herman of e!

In Herman's first year on the job, cable operators already see an improvement in how E! communicates with its core constituents, according to Myers' research. Herman has helped the network promote a single brand identity, a clear programming focus, and a better audience definition, he says.

The amount of cable operators that rate E! as very favorable for local advertisers has more than tripled in the year since Herman started. National advertisers also are starting to warm to the idea that the entertainment channel might soon become a primary network, Myers adds.

One key may be Herman's resume. Her experience in helping News Corp.'s FX channel and, more specifically, her leadership at pay-per-view aggregator InDemand, has given her an edge in negotiating deals with operators, several cable industry executives say.

At InDemand ? a company created and owned by most of the top cable operators ? Herman saw firsthand what operators' priorities and needs were, she explains. ?That gave me a real grassroots understanding of the strengths and weaknesses of their business, as well as the threats and opportunities that the operators were facing,? she says.

Meanwhile, Herman has spent a significant portion of her first year tinkering with programming. One order of business, sources say, was getting a cleanup of some of the station's grittier behind-the-scenes shows about porn stars. True Hollywood Story, for instance, has profiled the porn actresses Linda Lovelace and Savannah, and Herman is said to have felt that the network was veering too far into sleaze.

A source within the adult entertainment industry says that E! has indeed become a little more conservative since Herman came aboard. ?They are not using as many hardcore adult porn stars as they were,? this person says.

Herman doesn't dispute the change, though she disagrees that her tenure had anything to do with it. What she did, she says, is help draw the fine line that allows E! to cover the entertainment industry in a sexy way without being salacious.

?We cover a sexy industry,? she says. ?To the extent that we are the mirror for the industry, we do have to cover the gamut of what is within the popular culture at the time.?

Herman also has helped to create an upcoming slate of new shows in hopes of finding the next signature franchise like Talk Soup or True Hollywood Story.

One new show, Totally True TV Tales, will give entertainment fans a behind-the-scenes look at television shows. Each 30-minute program will give viewers an inside scoop on what really happened on and off the set of dramas and sitcoms such as Seinfeld. Another program, E! POV, will give a celebrity a portable camera for a day to capture every detail of his or her life.

While these shows seem like logical extensions for the network, another series to debut in 2002 ? Royalty A to Z, which gives the inside dope on England's royal family, the Windsors ? might appear a bit peripheral to the network's entertainment coverage niche. The show will take viewers inside the palace gates for a look at royal life and the world's most famous family.

?Our genre is entertainment and pop culture,? Herman explains. ?At the heart of what makes those categories special to people is celebrity. The royal family ? Diana, William, Charles ? are pop culture icons.?

Herman denied that this move is an attempt to gain an older audience than the network's current demographic of 18-to-49-year-olds. In fact, if the series is done right, it will fit E!'s younger 18-to-34 year-old demographic perfectly, she says.

For instance, she's thinking of focusing one of the series on the issues involved with dating a prince. ?I mean, do you get picked up on the first date?? she says with a smile.

But whether the royal family series will hit home with young American viewers is a gamble, says Bill Carroll, vice president and director of programming for Katz Television Group, a company that sells advertising for local networks to national advertisers.

E!'s judgment has been off before. Back in the early ?90s, the network produced News Weasels, a show that satirized the entertainment news of the day. Despite the enthusiastic backing of Lee Masters, E!'s highly regarded former president and CEO, the series bombed with viewers and was yanked in less than four weeks.

?That was the most notorious failure,? says Masters, now the president of Liberty Digital.

The problem was that the series didn't appeal to E!'s core demographic of young people. About 20% of all new programs on E! fail to connect with that audience ? which Masters says gives E! a far better track record than the broadcast networks.

But even if Royalty A to Z fails, E!'s brand is already prepared to go the distance. Indeed, the network has become such a fixture that it's regularly lampooned on NBC's Saturday Night Live ? a sure cultural barometer.

?You can tell how well something has become a part of the culture when a comedy show starts to satirize what you're doing,? says Carroll of Katz Television.

E! originally started out as a niche cable network called Movietime.

Time Warner Cable, Home Box Office and five other operators owned the network, which was floundering at the time with a low-rent collection of movie trailers and celebrity trivia. In 1990 the group hired Lee Masters to transform the niche network into a powerful brand.

Masters spent eight years at the network, creating such successful shows as Howard Stern and Talk Soup. He also helped convince Joan Rivers to serve as host for E!'s red-carpet coverage of the Academy Awards. Strong celebrities such as Rivers and Stern helped put the network on the map, giving the channel a unique edge in covering Hollywood.

By 1994, the network reached 30 million subscribers.

Then, in the following five years, the number of E! subscribers exploded, riding on a wave of growing U.S. interest in entertainment news.

?Certainly ten years ago, most folks could not tell you what was the highest-rated show on television or what was the box office gross for a movie,? Carroll says. ?And I would guess that if you stop 10 people on the street anywhere in America right now, they could tell you about network battles, which shows might be back next year and that The Mummy opened with record numbers.?

But it may have been O.J. who helped E! the most. The O.J. Simpson murder trial, which E! covered gavel-to-gavel, helped transform E! from a niche network to a channel that became standard on expanded basic packages.

Since the Simpson case, even news networks such as CNN and MSNBC are devoting more coverage to entertainment news, such as the speculation that ?70s TV star Robert Blake murdered his wife.

E! has benefited from the saturation with celebrity and gossip.

?The entertainment industry has so permeated the culture that it's not surprising that a cable network would have success in appealing to that,? Carroll says.

In 1997 Comcast and Disney saw the trend and bought a majority control of the network. Comcast, which owns 50.1% of the 79.2% owned by the Comcast/Disney partnership, enjoys the revenues produced by its subsidiary.

E!'s net revenues grew to $183.9 million in 2000, compared with $32.4 million in 1993, according to Derek Baine, an analyst at Kagan World Media, the media industry newsletter and data book publisher that, like CableWorld, is a subsidiary of Media Central. Net revenues should grow another $40 million by 2002, he estimates.

While the network's revenues have been growing at a steady clip, its programming expenses have been rising slightly, giving the network strong cash-flow margins, Kagan reports. E!'s cash-flow margins have been above the industry average by at least 5% in the past few years.

E! officials would not comment on the network's margins, revenues or programming budget.

E! has saved some money by having its in-house studio at its offices on Wilshire Boulevard in Los Angeles. In the 1990s, the network built the studio for the express purpose of controlling production costs.

While the network has a reputation for paying on-air talent and production staff low salaries ? A.J. Benza, the host of Mysteries and Scandals, is said to earn a relatively paltry $1,000 per episode ? Herman says the tight budgets enable E! to fill more hours with original programming. And that in turn could help Herman develop programming to fill new networks.

In 1998, for instance, E! spun off Style, a network devoted to fashion news and features. E! launched the channel due to increasing viewers' demand for shows that focus on style, beauty, fashion, home design and the people and events in those worlds.

Style, as it happens, also does what networks should do in the digital age: deliver a niche audience. With hundreds of channels now available on digital cable or satellite, viewers can flock to what interests them most.

Kenneth Bettsteller, E!'s chief operating officer, says the network is trying to use E!'s strong distribution to leverage carriage for Style.

?Our issue is how do we work creatively with the operator in terms of packaging the two to get the proper distribution,? he says. ?We are clearly laying the groundwork for the next couple of network ideas.?

Gerald McKenna, vice president of strategic marketing for cable operator Cable One, confirms that E! is trying to package Style with E! in its carriage negotiations.

While Herman would not disclose details of her negotiations with operators, she says she wants the four new channels to be along the lines of Style and to be used as leverage for digital tiers. Almost all of E!'s cable carriage is currently analog.

She says she also wants to do a better job integrating programming from Style and E! with E! online, the network's Internet division, which was created in 1996.

While Herman believes this will help enhance E!'s overall brand, future income generated by television-commerce, or t-commerce, might be hard to find for the network. For example, E! doesn't have the volume to compete with bricks-and-mortar retailers or Amazon.com to provide low-priced DVD movies, Herman explains.

Style, however, may have its own unique online and shopping revenue opportunities, she adds.

?A lot of fashion is not as price-sensitive (as other consumer goods), so you're able to generate a little better margin,? she says. ?No other site focuses on that, so we can really take ownership.?

She plans to use expertise from E!'s sister company, the shopping channel QVC, to develop a t-commerce opportunity within 12 months.

But before she gets to that, she'll work to present several lifestyle concepts to create new networks to her board of directors over the next several months, she says. She adds that she'll research the network's focus group studies and audience profile information to see how she can find some more niches to exploit.

Unfortunately for Herman, those niches probably won't include a network focusing on the lifestyles of pro hockey players.

?It's not about what I like,? she says with a laugh. ?It's about our viewers.?