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Reality Check: What Is OWN’s Real Prognosis?

PASADENA, CA - JANUARY 06:  Oprah Winfrey speaks during the OWN: Oprah Winfrey Network portion of the 2011 Winter TCA press tour held at the Langham Hotel on January 6, 2011 in Pasadena, California.  (Photo by Frederick M. Brown/Getty Images) *** Local Caption *** Oprah Winfrey

There's nothing new about Americans basking in the faults and foibles of the rich and famous: Not only do we like to think stars are just like us, we want them to screw up in spectacular fashion. But celebrity Schadenfreude seems to be reaching an all-time high when it comes to Oprah Winfrey and the seemingly endless troubles of OWN, the infant cable network the former Queen of Talk oversees in partnership with Discovery. In recent days, the news that OWN had canceled its Rosie O'Donnell talk show and was also laying off a couple dozen staffers as part of a downsizing/restructuring prompted a wave of apocalyptic stories, with outlets stumbling over each other to serve up instant autopsies. SNL Kagan analyst Derek Blaine even put out a scathing report Wednesday speculating that Discovery is considering a plan to pull the plug on the network. Are things really that bad for OWN? Or is the network simply experiencing the normal growing pains associated with a start-up cabler, albeit far more publicly and with few seedlings of success to help mask the usual misfires? We gathered all the evidence, talked to a few of our trusted sources in the cable business and put it all through Vulture's trusty Fact-o-Matic Reality Check Machine. Warning: This story will not end with anyone getting a car.

Let's start with one thing that is not in dispute: Overall ratings for OWN have been soft, often failing to meet modest expectations set forth by the network before it launched.

During 2011, the network averaged about 250,000 viewers in prime time, a bit better than the Speed Network or BBC America, but about half as many as female-focused Oxygen. Original OWN CEO Christina Norman had said she expected to double the small tune-in achieved by the network OWN replaced, Discovery Health; instead, it barely matched those ratings. OWN's biggest bet on a non-Oprah program, Rosie O'Donnell's early evening talk show, failed to draw much a crowd for its first episode (around 500,000 viewers) and went down from there.

It's also true that there's been an insane amount of staffing turmoil at OWN. The troubles began during the network's lengthy gestation, when its first programming chief left after less than a year on the job. Her replacement didn't last much longer, while OWN's original CEO, Christina Norman, was pushed out barely six months after the network's January 2011 sign-on. At the start of this year, Winfrey's best bud, Gayle King, gave up her daily show on OWN in order to co-host CBS's umpteenth attempt at a morning show. And this month, more restructuring: About 30 staffers were laid off in order to reduce costs, changes were made to some key exec positions, and O'Donnell's show was shut down. 

The numerous shake-ups that have accompanied OWN's early ratings disappointments stand in contrast to the patience with which cable networks generally face early failure. Take FX: It's now a top ten network with a bevy of hit shows, but for its first eight years in existence, the Rupert Murdoch–owned cable network went through several incarnations (live talk! Buffy repeats!) before finally establishing a niche with its HBO-for-basic-cable brand around the time The Shield arrived in 2002. Oxygen, in which Winfrey was actually an original investor, also caused barely a ripple for years after its 2000 launch; it didn't finally click until NBCUniversal took over in 2007. And in both cases, while there were course corrections and exec shuffles along the way, those changes mostly happened gradually. And now Viacom is still being patient with Spike, which after several revamps over the past decade just spent another big chunk of change unsuccessfully trying to woo young men to the network with original comedies and reality shows.

The fast and seemingly panicky OWN moves are particularly surprising, considering how Winfrey and her Discovery partners seemed aware at the outset that most cablers tend to grow slowly. Last June, Discovery Communications CEO David Zaslav told an investors conference that OWN would not travel a straight line to success: "We're going to have to fall down a bunch of times," he said. Winfrey echoed that sentiment: "Don't judge OWN until after three years," she told Entertainment Weekly last May, recounting a conversation she had with Lorne Michaels in which the producer told Winfrey it would take time for the network to find its audience.

One person familiar with OWN's economics insists this week's restructuring wasn't a simple reaction to low ratings. Instead, he argues the network was overstaffed from the outset, hiring nearly twice as many full-time workers as the typical cable start-up. The layoffs simply bring the channel in line with others of its size, he adds. This seems accurate: Even from the outside, OWN's splashy, lavishly decorated headquarters in L.A.'s Miracle Mile district make the relatively spartan offices of many broadcast networks look like trailer parks. Nonetheless, by making so many staff changes and dropping a high-profile show such as O'Donnell's after just a few months, Winfrey and the OWN team seem to have only played into the hands of external naysayers who've been predicting failure for the network even before its launch. 

This is a shame, because there have been glimmers of hope for OWN during its first year, and even more in recent weeks. Season 25: Oprah Behind the Scenes, while not a monster hit, got tons of media and online buzz; unfortunately it was, by design, a one-and-done kind of series. Welcome to Sweetie Pie's might not have been the next Pawn Stars, but its respectable numbers indicate OWN can do feel-good unscripted series without wallowing in the celeb-reality gutter. And Winfrey herself has been drawing big numbers with her Sunday interview series: Her chat with Whitney Houston's daughter drew a whopping 3.5 million viewers, almost unheard of for a barely year-old channel. Interviews with Steven Tyler and Lady Gaga have also notched strong tune-in, finally providing OWN with a platform to hype its other, non-Oprah shows. 

Unfortunately, this uptick came too late to save O'Donnell's show. The Rosie Show started promisingly, at least from a creative point of view: Critics came close to giving it rave reviews, and O'Donnell seemed to shed the activist image she had cultivated during her tenure on The View. But, as others have already noted, Rosie was handicapped from the start by Team Winfrey's insistence that the program originate from Harpo Studios in Chicago. Doing a celeb-driven show on a start-up cable channel from anyplace other than L.A. or New York was pretty much suicide, one veteran entertainment publicist told Vulture: "Oprah could get anyone she wanted to come to Chicago, but there was no way anybody was going to fly guests out there on a regular basis," he says.

Winfrey (and perhaps O'Donnell) also sorely overestimated how tough it is to draw viewers to a talk show day in and day out in 2012 (particularly at the WTF-time slot of 7 p.m., when the young women aged 25 to 54 whom OWN targets are either eating dinner or getting the kids ready for bed). Conan O'Brien's tough time at TBS should have been a warning: While Coco's show launched big, within a few months, it was pulling in well under one million viewers, despite a much bigger marketing campaign than O'Donnell got and a better time slot. O'Brien has bounced back since TBS finally gave his show a decent lead-in (reruns of The Big Bang Theory), but it's hard to understand why execs at Discovery didn't tell Winfrey and O'Donnell that launching a nightly talk show on a brand-new network with no lead-in support was simply never going to work, unless the person hosting the show was named ... well, Oprah. Starting the show out as a once-a-week venture, or at least waiting until Winfrey's Sunday program was fully up and running, should have been a no-brainer. 

This naïveté about how the cable business works brings up another key issue with OWN: As talented as many of the folks associated with the network are, it's not altogether clear that those talents extend to parenting an infant cable network. "Part of [the problem] is that Oprah has never run a channel and is on a steep learning curve," says one executive with deep roots in the cable business. "And Zaslav, while a talented deal-maker, is a not an experienced operator, marketer, or programmer who can provide expert guidance." This isn't to suggest that either Winfrey or Zaslav are without relevant experience. Zaslav has helped build several Discovery networks into cable powerhouses, sometimes after serious stumbles at the start. Case in point: His first attempt to make over TLC five years ago was pretty much a disaster, but after a course correction, the network morphed into a nonstop hitmaker (Jon and Kate Plus 8, Toddlers & Tiaras). Winfrey, meanwhile, has the name recognition and celeb Rolodex that should allow OWN to break through the cable clutter on a regular basis, as long as Winfrey stays engaged in being an on-air presence. But as our cable exec notes, Zaslav and Winfrey have never been in the trenches creating, scheduling, or marketing hit programming for a cable network, and that's what OWN needs most right now. Add to this the fact that OWN is "entering an already overcrowded field in terms of cable channels in general and cable channels targeted at women specifically," and the exec notes it's not surprising the channel is "having an unusual number of issues."

So, back to the original question: Are things really that bad at OWN? Officially, both Winfrey and Discovery say they remain all in. Winfrey reaffirmed her commitment when announcing this week's layoffs, while Discovery dismissed the notion it planned to pull out: "We're 100 percent committed to OWN and have no plans to make any changes to the venture," Discovery communications head David Leavy told Vulture. Given how often OWN and Discovery have switched gears at the network, it's hard not to at least imagine a scenario where everyone throws their hands up in frustration because the network hasn't been an out-of-the-box hit. Still, the recent restructuring and layoffs, combined with O'Donnell's cancellation (cost savings: upwards of $30 million over two years, according to a source with knowledge of the matter), should make it easier for OWN to start turning a profit. What's more, industry insiders will be watching to see how Discovery's negotiations with cable operators turn out: If Zaslav can convince them to pay as little as 20 or 30 cents per subscriber (up from basically nothing right now), then OWN will start generating a ton of cash, supplying a cushion as it hunts for hits. Indeed, if both OWN partners actually do mean what they say, it would not be unprecedented for them to keep slogging along with the network for a few years, trying out different kinds of shows while searching for a brand identity that clicks with viewers. They can then hope to be blessed with the one ingredient often essential to any successful cable network: luck. As one cable exec notes, "Big, channel-defining hits often come out of left field."

Photo: Frederick M. Brown/Getty Images