by Allen Salkin
The Cooking Across America chefs, who came to include Bobby Flay, Mario Batali, Emeril, Sara Moulton, and other Food Network personalities, along with popular chefs from PBS like Jacques Pépin, were paid around $2,000 each plus a free flight and a hotel room for appearing. Ticket prices were raised to as high as $120. By 1998, 75 percent of attendees were buying merchandise, including chef’s jackets, cookbooks, and T-shirts.
The rising stars played the part. After a show was over, the troupe would usually head to the trendiest restaurant in town. Joe Allegro noticed that more and more “chef groupies” were tagging along. At a tour stop in Las Vegas, Sissy stripped down to her underwear and dove into a fountain at the Bellagio Hotel. Others followed her.
“We were having an Upfront party at the Roxy in New York near the Village. It was open to media, advertisers, some fans. Emeril is there, myself, Michael Lomonaco, Bobby before Bobby became Bobby. The people that liked my show just wanted to get a hug. But Emeril was a rock star. There were these three drop dead gorgeous women. One comes up and she says, ‘Oh, Bam, will you sign my breasts?’ Emeril looked at me and then back at her. ‘If you let Curtis hold them, I’ll sign them.’”
—CURTIS AIKENS
New Owners Again!?!
Even as Food Network under Erica Gruen had haphazardly found a hit in Emeril Live and was finally establishing such critical components as an effective marketing department, HGTV, Scripps’s own lifestyle cable channel, was quietly executing the vision Ken Lowe had laid out for it from the start. Three years into its launch, it was enjoying far more financial success than the investors in TVFN were. There may have been no parties where stars stripped down to their underwear in public, but under Lowe, the Knoxville-based channel was soberly attracting advertising dollars at a record pace. Researchers reported that viewers were “addicted” to shows such as Room by Room, a half-hour interior makeover, and Gardening by the Yard, shot in a Tulsa backyard. By 1998, two years ahead of schedule, HGTV was on the verge of turning a profit.
Ken had been ahead of the media game for a long time. As a boy in rural North Carolina, he had set up a pirate radio station in his backyard. After graduating from the University of North Carolina, where he became fast friends with a future disc jockey named Rick Dees, Ken joined Scripps in 1980 as general manager of the company’s radio properties. In 1988, he was promoted to VP of television programming, promotion, and marketing.
In a Scripps culture where many of the top brass were old newspapermen, Ken stood out as a media futurist. With a shock of brown hair over a heavy brow that seemed to provide cover for his narrow gray-blue eyes, Ken had a gaze so steady it bestowed an anchoring gravity. He was so good at selling his ideas that he achieved at Scripps what Tryg had not been able to do at ProJo: convince the moneymen that cable networks were potential gold mines.
Tryg had succeeded in getting ProJo to invest in two lifestyle TV ventures, Joe Langhan’s food channel and a health network, but that was as far as he had gotten. And Food Network’s failure to meet its earning targets had not helped his campaign.
Ken had conceived of a home and garden network after he visited a Home Depot and realized that each aisle could be its own television show, and then pitched the idea to the Scripps board around 1993. Ken had brought in two big magazine racks covered in blankets. During his presentation, he had dramatically unveiled the racks; they were full of lifestyle magazines—home design, gardening, food, family travel, and others. They were all thick with advertisements, and, unlike the categories of other successful magazines—news, sports, and music—no one had created cable channels to mine these rich veins of popular interest. He thought each lifestyle topic could be its own channel, and he believed that Scripps should have multiple lifestyle networks, a cable empire. But initially his goals were modest; he wanted the board to green-light just one channel focusing on home and garden projects. HGTV would be a good place to start, Ken told the board. Home repair and remodeling were a $106 billion business; lawn and gardening, $75 billion. A lot of that money was being spent by women. Besides Lifetime, there were no established networks aimed at women. He wasn’t proposing more soap operas and tearjerker-of-the-week movies. He wanted to give women news they could use and sell advertising on the back of it.
“Look, this money is going to end up somewhere in television,” he said at presentation after presentation. “And a cable network is the place.” The Scripps board went for it, granting him $25 million and agreeing to upgrade a production facility Scripps had bought in Knoxville, Tennessee, to serve as HGTV headquarters.
Ken had long appreciated Food Network’s focus on the advertiser-friendly female market, even if he’d disagreed with Scripps’s decision to invest in it early on. He did not like the CNN-with-stoves approach. He insisted HGTV shows, including its own handful of cooking shows, be softer and more elegant. He made sure HGTV producers spent time choosing fun background music and gentle tones for voice-overs, believing these touches mattered to women.
Ken occasionally heard that Scripps-owned cable providers were not impressed with Food Network and that subscribers were complaining about it, asking for other channels to take its place. He also knew that without subscriber fees, the food channel was floundering financially.
Back in May 1996, the Scripps board took ProJo’s offer to buy their small stake for roughly what they had invested, $11.4 million. But Ken, who had not been consulted on the sale, was disappointed, wishing there was a way Scripps could have taken control of it rather than backing away. He foresaw Scripps as the master of “category television,” and he and Frank Gardner, Scripps’s senior vice president of television, had regularly talked about adding channels. If Scripps could bring its solid middle-America sensibility to Food, they could remake it into a blockbuster, Ken thought.
Then the opportunity to snatch it fell into his hands. In February 1997, A. H. Belo Corporation, a Texas media conglomerate, bought ProJo for $1.5 billion. Belo’s CEO, Robert Decherd, wanted ProJo for its broadcast stations and its still-profitable newspaper, Providence Journal. During the purchase negotiations, however, Tryg and the ProJo board had insisted that its 56 percent stake in Food Network be valued at a whopping $300 million. Decherd, eager to own the other assets, agreed to the valuation, over the objections of his investment bankers that Food Network was not worth nearly that much. The stake in Food Network was barely mentioned in news coverage of the sale.
After the deal closed, Decherd had sent several lieutenants to Food Network headquarters to go over the books. Joe Langhan got the sense that the Belo people did not understand the cable business or like it much. Knowing their own staff lacked expertise, Belo hired Jack Clifford as a consultant. Always one for bold statements and full of belief in any project with which he was involved, Jack told the Belo executives at one point, “Someday, this Food Network is going to be bigger than your whole company put together.”
They laughed.
Decherd’s reps communicated no vision for the network’s future. They left Erica in charge and told her to do what she’d been doing. The Food Network staff wondered if Belo might shut the money-losing network down. “This party might be over,” Joe confided to a few staffers after the visit.
Tryg wound up with a lot of Belo stock and went to Texas to meet with Decherd. Always on message, Tryg told him that profits of the “mature” broadcast and newspaper businesses were “due to fall off a cliff” as new technologies like cable and the Internet rose. He argued that Belo ought to use Food Network and other cable ventures ProJo had been exploring to build a third leg of its company—Internet and cable. They would all profit from this approach.
But Decherd was uninterested in the business of cable networks and he expressed his resentment over what he said was ProJo’s extortionate valuation of Food Network. After Tryg made a second trip to Texas, it was clear that Decherd wanted to get out of cable. Tryg thought that was a huge mistake, and sin
ce he owned a chunk of Belo stock, it could hurt him badly. He promptly sold all of his stock and told his ProJo associates to do the same.
“Today it is bigger than their whole company put together.”
—JACK CLIFFORD
In the summer of 1997, Belo hired investment bankers to unload their stake in Food Network. When word reached Scripps, Frank suggested to Ken that Scripps offer to trade a recently acquired San Antonio station to Belo as part of a deal for Food Network. It could be attractive to Belo because it would give them stations in major Texas cities and they could then spread the costs of news coverage throughout the state.
The Scripps board was thrilled with what Ken was achieving with HGTV, but they had seen the mixed bag of shows on Food Network and were skeptical that it could become profitable, despite Emeril’s budding success. Belo seemed interested in making a deal, but Scripps executives remained far from sure, especially since Reese would not be bought out as part of it. His 5 percent share had always been separate from ProJo’s stake; he’d kept it even after the Belo takeover. Scripps managers who had dealt with Reese in the early days were telling stories of his irascibility. Why take on a money-bleeding cable channel with the troublesome Reese attached to it when moneymaking, unhindered broadcast stations were such cash machines?
Ken confided in Frank just how frustrated he was at the internal resistance to the deal. “Oh, my God, I can’t believe we got Belo convinced. Now we’ve got to convince our own guys? Don’t they understand the opportunity here?”
The two men realized they were sticking their necks out. Food might take Ken’s focus away from HGTV, and no matter how right the idea of making a play for Food Network seemed, there were serious hurdles, some swiftly jumped, some stubbornly high.
Meanwhile, Tribune, which had maintained its 30 percent stake in Food Network, had the first right to buy a majority stake if it came up for sale. Ken flew to Chicago and met with Jim Dowdle, still the Tribune CEO. His son had become an advertising salesman for Food. But since helping put the initial deal together, Tribune itself had invested few manpower resources and little attention in Food Network. As of 1997, there had been no profits.
“Jim, here’s the deal,” Ken said. “We need you guys to step aside, pass on your right of first refusal and let us buy the network.”
“Yeah,” Jim replied quickly. “You know, we wouldn’t know what to do with it. You guys go ahead. We’ll be good partners.”
In fact, Tribune was willing to divest itself entirely, and Dowdle let it be understood that for about $50 million, Scripps could have its 30 percent stake. But Ken’s bosses at Scripps nixed the idea. Why take on almost total ownership when the risk could be spread? If Food kept losing money, part of the burden would fall to Tribune’s deep pockets, and if it tanked completely, the $50 million would be good money after bad. Scripps’s executive team was not even squarely behind buying Belo’s 56 percent stake.
Before the board was to vote on the Belo deal, William Burleigh, the CEO of Scripps, called Ken to warn him. “Hey, I just have to tell you that this is not going to go very well. I’ve already heard from two of the directors who are going to vote it down.”
Ken wanted this deal. Building a fleet of cable networks was his mission, and he had staked a lot of his reputation on making it happen. If the Belo deal failed, he’d be in the same boat as ProJo had been, holding one network and no leverage, operating a sideshow, HGTV, alone down in Knoxville.
Burleigh, a former newspaper reporter, continued, “Look, I’m for it. You know that. But, you know, my CFO’s not. Corporate development is not.” The corporate development guy was the one who had bad memories of dealing with Reese from the early days.
When Ken dialed into the conference call a few minutes early, he heard some board directors engaging in typical pre-meeting chatter.
“What’s this call about?” one director said.
“I think we’re going to talk about the Food Network,” another responded.
“Food Network?” the first director said disdainfully. “That sounds like something my wife would watch.”
Ken heard the men laugh. “Ha ha ha.”
When Ken’s turn came to make his pitch, he seized on what he’d just heard and made it the very reason for making the deal. “The reason you guys approved HGTV,” he said, “was you saw very clearly the opportunity to target women. Women are going to have more buying power. There’s very few networks, hardly any in the whole cable lineup, that target women. This will complement HGTV.”
Some directors continued to protest. This was not HGTV, which they had shaped from the start. Food Network was broken, they said. And in New York. “How are we going to fix it?” asked one director.
Frank and Ken chimed in. “That’s our job. We’ll take care of it, we’ll fix it.”
In the end the board voted unanimously in favor of buying Food Network.
After the investment bankers held negotiations in New York, Ken and his team were allowed to inspect the studios Reese had built at 1177 Sixth Avenue, and see exactly what it was they were about to buy.
Riding up the elevator to the thirty-first floor, Ken wondered about getting supplies upstairs, and asked himself who in the world would put a food network up in a high-security office building in Midtown Manhattan? When he was shown the kitchen, his nose curdled. This looked nothing like the modern new studios HGTV had in Knoxville. Here there were fruit flies, a rank smell of seafood, drying meat, stale spices, trapped smoke, all wafting through the ridiculously cramped office area. College radio stations were more professional-looking than this.
Oh, my God, he thought. What are we buying? The fact that the mayor’s wife was working there only added to the swirling, illogical miasma. Ken’s inner dialogue continued, even as his face betrayed nothing. You really think you can make this work? This thing is broken.
His team headed back to the offices of Scripps’s investment bankers. The team—Ed Spray, the programming chief of HGTV, Mark Hale, the head of production, and Susan Packard, in charge of selling the network to cable providers—were so shell-shocked that they tried to talk Ken out of the deal, arguing that the purchase would take away their focus from HGTV. Food would be a burden to fix. “Things are going so well at HGTV, why in the world would you want to buy this broken-down network?” one of them asked.
Inwardly, he had the same argument with himself: This is a bigger bite than I thought it was gonna be, he thought. Ken did his best to fend off the doubters, not letting on about his own misgivings. It would have been difficult for him to take any other position. He was the networks guy. One was not enough. As imperfect as this was, who knew when another chance would come?
“Don’t worry about what you just saw,” he told them, steeling himself. “Don’t think about a cable channel. Think about a brand, how many places we can get this network, how many things we can attach to it.”
By the end of the conversation, nobody was thrilled about the deal, but they were swayed by Ken’s conviction. He had proved naysayers wrong before, so his people would wade into this fruit-fly-infested place.
When Ken had first pitched HGTV, focus groups had come back highly negative about every aspect of it. One researcher said, “The name HGTV sucks.”
Ken had thrown the research in the trash. He had heard a quote years earlier from the management guru Peter Drucker that he repeated often: “The best way to predict the future is to create it.”
Back at his hotel, Ken put doubts about Food Network into the mental trash. Once he brought it into the Scripps family, a smart bunch of Midwestern and Southern folk, it would be able to flourish, he told himself. It just needed a bit of scrubbing and healthy guidance. Ken could create its future.
“I wondered, ‘How is this thing even legal? Why did the Health Department not shut it down?’”
—KEN LOWE
The d
eal was announced in September 1997. In exchange for KENS-TV, a broadcast TV station in San Antonio, and its companion AM radio station, Scripps received from Belo 56 percent of the Food Network and $75 million. Analysts valued the TV and radio stations at $200 million and calculated that Scripps had paid $125 million for a majority stake in a financially unstable, niche cable network. In announcing the acquisition, Scripps said it expected Food Network to turn “cash-flow positive” within three or four years, but that it expected to lose $10 million in the current year.
Privately, Scripps offered to buy out Reese for $6 million. He considered it, but one of Ken’s lieutenants quietly told Reese that if he held on, profits would come soon. “Just so you know, we’re going to make you very rich.” Reese decided to keep his stake.
—
One night, Eileen called Susannah Eaton-Ryan at home. In the brief gap during which Belo let the network run itself, Eileen had reveled in the freedom of her job, and Erica had encouraged her to experiment. But now news articles about the sale were mentioning the economic sense of meshing HGTV and Food and producing shows at Scripps’s 45,000-square-foot production facility. Eileen fretted. What would become of her show ideas, of her whole career?
“They bought the network,” Susannah told her. “If they want to paint the walls yellow, that’s their prerogative.”
Ken understood that the appearance of a new boss from the provinces would spook the Food Network staff. He did not want them to bail before his team figured out what changes to make, so he gave a speech at the Sixth Avenue offices shortly after the deal closed, and assured them that nothing had been decided. “Okay, you know, here’s the deal,” he said. “We’re buying you guys. I think we’re your third or fourth parent. But welcome to this family, a sisterhood of networks. We like what you do. That’s why we bought you. We want to grow this network.