Its rapid rise has surprised even its most staunch supporters. But since its inception three years ago, the Fox Children’s Network has become the top-ranked network of children’s television on Saturday mornings and weekdays.

Under the leadership of Margaret Loesch, 47, the network has been able to survive mounting competition from cable to win audiences through non-traditional programming and financial strategies, focusing network image, and creating viewer loyalty t h rough affiliate participation.

“FCN reached number one more quickly than many had anticipated, because Fox made a total commitment in terms of capital, quality and focus of management, and development of the idea,” says Harry J. Pappas, president and CEO of the Visalia, Calif.-based Pappas Telecasting Companies, which owns Fox affiliates KMPH in Fresno, Calif., and KPTM in Omaha, Neb.

“FCN invested heavily in the production of high-quality animation and writing , and has come out with programs that are fresh and bright with great appeal to children, and are not made according to formula,” adds Pappas, a major participant in the Fox affiliate push for a children’s network. “Some of the other programming in barter syndication has a bit of sameness to it. But ultimately, the arbiters of what is best are the audiences.”

In ratings, Fox shows have consistently dominated the top spots among children ages 2-17 weekdays and 6-17 Saturday mornings, and ranked among the most popular shows for ages 2-17 on Saturday mornings.

Diversity has largely accounted for its winning strategy in both creative and financial arenas. FCN offers 19 hours of weekly programming — four on Saturday mornings, two on weekday afternoons, and one on weekday mornings — through 10 suppliers, the largest of which is Warner Bros.

It’s mostly animated lineup includes high-action drama with “Batman,” high fantasy with “The X-Men,” silly comedies like “Droopy, Master Detective” and Animaniacs,” mystery adventure with “Carmen San Diego” and family sitcoms like “Bobby’s World.” A live-action comedy adventure, “The Mighty Morphin Power Rangers,” debuts in September.

Along the way, the shows and award-winning interstitial programming have taken care to address social concerns as diverse as pregnancy and death, to fear of seeing a dentist, to religious diversity and tolerance.

FCN has also broken tradition with scheduling. Rather than introducing series at the beginning of the fall and spring seasons, the network continuously unveils new shows throughout the year.

“The biggest single frustration I had as a producer was the lack of time the networks gave me to do shows properly,” says Loesch, who worked for Marvel and Hanna-Barbera before jumping to Fox. “I was always making compromises. So when I came to FCN, one of the changes I wanted was not to be shackled by starting dates if they compromised the quality of the program.”

Beyond allowing for better program quality, the rolling schedule — coupled with the range of shows — enables FCN to keep viewers interested, more effectively promote each new show, and maintain FCN’s image of constantly offering something new and fresh.

As a result, the network’s core audience of mainly 6-to-11-year-old boys has been expanding to include more girls and teens as old as 17. Fox hopes this group will ultimately become part of its adult viewing audience.

The effort hasn’t been lost on suppliers, who are as thrilled as their audiences. “We were interested in being in the Monday through Friday business,” says Jean MacCurdy, president of Warner Bros. Animation, which supplies five animated series to the network.

“We’d had great success with ‘Tiny Toon Adventures’ in syndication and with FCN entering into weekdays and competing head to head with Disney, we thought it was the best place to make a home,” she adds. “We’ve gotten nothing but creative support from Fox for what we’ve attempted to do.”

Stepping beyond the programming, FCN has established an affiliate-supported 5 -million-member national Fox Kids Club through its free Totally Kids Magazine. The publication, which boasts some 12 million readers and is customized for each market, features word games, articles about FCN shows and characters, children’s letters, contests, health and nutrition tips and discount coupons for local restaurants and movie theaters.

“We developed the club for stations as a turnkey operation,” says Bert Gould, vice president of marketing promotion and program strategy. “They can make it as huge as they want, using memberships as a basis for sponsoring local events, or not do anything, in which case, they’ll still have a fully functioning Kids Club.”

Although the $ 5 million-plus Fox annually sinks into the publication is only partially offset by advertising and has yet to make a profit, FCN execs measure it’s value in other ways. “I have to believe it has enhanced our audience,” says Loesch. “The idea is that we’re a network that kids can join. Our affiliates are very supportive, because it helps them further integrate into the community.”

Fox has applied a similar strategy of diversity and community to its business relationships. “Our business affairs people tear their hair out, because there are so many different deals,” laughs Loesch. “It took tremendous capital outlay to start the network, so we’ve had to find creative ways of keeping costs down. There’s actually room for broadcasters to be in partnership with us, which is pretty unique.”

Per-episode license fees range from $ 200,000 to $ 360,000, with the cost of some episodes running as much as $ 500,000.

“In some cases, our producers are partners,” says Loesch. “They put up all the money for production and we give them some returns of the ad revenue.

Other times, we pay a straight licensing fee. In still other cases, like with ‘Tom & Jerry,’ we cover a partial production fee, while Turner pays the other half and retains ownership for their library. For ‘Bobby’s World,’ we pay all production costs and own the show and merchandising rights.”

FCN’s advertising revenueshover around $ 140 million, about equal to those from children’s programming on cable and syndication, and $ 10 million more than on the networks, according to the Advertiser Syndicated Television Association in New York. But despite its success, says Loesch, FCN expects to not pay back Fox Broadcasting’s initial 1990 investment of approximately $ 50 million before 1996.

As for the future: “I would love to expand to Sunday morning, but our affiliates are not supportive at this time,” says Loesch.

“They still have syndicators who come in and pay them cash instead of selling time on the network. The Fox family is a very challenging one, because it’s 139 independents at heart. As supportive as they are, they still want to have some time periods that they program, so it’s a constant negotiation between the network and affiliates.”

Affils were partners

Still, Loesch is optimistic. “In order to launch FCN, Fox made the affiliates partners,” she adds. “So when we are profitable, stations will start getting checks. This has given them incentive to support the network.”

Affiliates aren’t the only challenge to expansion. A more immediate one will be the new guidelines the Federal Communications Commission will effect next year redefining and raising the amount of educational content in children’s programming.

“The FCC is now saying they want children’s programming to be curriculum-based, but they haven’t spelled out exactly what that means and stations have been in a real frenzy and confusion,” says Loesch.

“I’m not sure broadcasters can be effective in teaching curriculum. Unless a program is entertaining, children won’t watch it. Kids are in school from Monday to Friday, so they’re not going to be interested in going to school on Saturday.

“What we’re trying to do is deal with themes and issues that aren’t dealt with in the classroom — racial and gender tolerance, the Golden Rule, child safety. Our goal is to provide study guides that can allow for follow-up work in the schools, based on the programs.”

How all of these plans will factor into the looming digital compression and interactive media remains a mystery. “We’re still trying to catch up with the rapidly changing technology, but it’s still several years off,” says Loesch. “Our biggest challenge still is in te story-telling.”

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