Video: The Cadillac Runs Out of Gas

CBS Cable, losing millions, folds after less than a year

Everywhere one looked at the National Cable Television Association (N.C.T.A.) convention in Las Vegas last May, people were buoyant about their prospects in a business whose time apparently had come. Last week, however, cable’s optimists got a jolt: communications giant CBS (1981 revenues: $4.1 billion) announced that it would shut down its critically praised but loss-plagued cultural service within 90 days. According to estimates by industry sources, the service had lost $30 million in less than a year. A dispirited Thomas F. Leahy, executive vice president of the CBS Broadcast Group, blamed the recession, and added, “We did not see a 1983 turnaround that would change the situation dramatically.”

CBS Cable was the most ambitious and prestigious of the cultural cable services in the U.S., competing for a small if generally affluent audience of arts aficionados. CBS offered TV dramas featuring Sir Ralph Richardson and Peter O’Toole; a Swan Lake starring Ballerina Natalia Makarova; modern dance choreographed by Twyla Tharp; and Leonard Bernstein conducting Beethoven symphonies. Defining culture broadly, CBS also ran a probing nightly interview series, Signature, and a multi-episode look at modern history narrated by CBS Evening News Commentator Bill Moyers. More than 60% of the shows were produced by CBS, at costs ranging from $25,000 to a hefty $325,000 an hour. Meanwhile, despite a potential audience that CBS market researchers estimated at 5 million households, advertising revenues offset no more than $60,000 an hour of costs, and often less. Said Analyst Joseph Fuchs of Kidder, Peabody & Co. Inc.: “CBS designed a solid-gold Cadillac when what might have worked was a Chevrolet.”

The network twice tried to share its risks and losses, first with 20th Century-Fox, then with its smaller rival BRAVO. But both deals fell through. The mortal blow, some industry insiders claim, was the announcement earlier this month by CBS Chairman William S. Paley, a staunch advocate of highbrow programs, that he intended to retire next spring. By last week, CBS sources said, even Paley was troubled by the losses.

Arts organizations in the U.S., which have looked to cable to help replace federal funds cut by the Reagan Administration, were saddened by the announcement but not surprised. Marc Nathanson, president of the 100,000-subscriber Falcon Communications in California, noted, “We take frequent surveys, and I was always shocked to see that CBS Cable attracted only 2% of our viewers on a weekly basis.” CBS Cable may simply have been the first casualty of an underlying industry-wide problem: total advertising revenue for all of cable last year was $100 million, an anemic .16% of total U.S. advertising. None of CBS’s rivals is making money, either. ARTS, the joint venture of ABC and the Hearst Corp., has lagged as much as CBS in selling ads despite 7.5 million subscribers. It says only its modest production budget has kept losses “within handleable limits.” BRAVO, which offers a mixed fare including cultural shows and foreign films, charges subscribers a fee rather than relying on advertising, but has signed up only 66,000 households. The Entertainment Channel, which imports much of its not-always-highbrow programming from the British Broadcasting Corp., has been distributed only since June. More failures may be in the offing. Commented Thomas Wheeler, N.C.T.A. president, after the CBS announcement: “Clearly we are in a shaking-out period.”

CBS was also hit by a potentially more costly problem last week: a $ 120 million libel suit filed by General William Westmoreland. The suit is the latest upshot of a controversial Jan. 23 documentary titled The Uncounted Enemy: A Viet Nam Deception. The 90-min. program charged that Westmoreland, while commander of U.S. forces in Viet Nam, joined in “a conspiracy at the highest levels of American military intelligence” to misrepresent enemy troop strength during the year leading up to the January 1968 Tet offensive. In July, CBS News President Van Gordon Sauter, responding to criticism, admitted that the documentary, produced by George Crile, had violated some of CBS’S journalistic ground rules, and that the claim of conspiracy was “inappropriate.” But he rejected Westmoreland’s demands for a full retraction, though he made an 11th-hour offer of air time for rebuttal. Thus, Westmoreland now contends, “there is no [other] way left for me to clear my honor and the honor of the military.” Sauter last week labeled the suit “a serious threat to independent journalism.”

By suing, win or lose, Westmoreland will probably force CBS to hand over the internal probe of the documentary ordered by Sauter. But he may also open himself to tough questions about his years in Viet Nam. Observes renowned First Amendment Lawyer James Goodale: “The proceedings will probably be long, difficult and expensive for both sides.”