VH1 is trying to work its way through an identity crisis.

The network was floundering in the early 1990s, sacrificing its niche as an all-music channel geared to the post-MTV generation in favor of scheduling broader entertainment offerings such as standup-comedy series, the gossip-oriented gameshow “Rumor Has It” and reruns of the sitcom “WKRP in Cincinnati.”

These programs were pulling in a few more viewers than the average musicvideo, but the network was losing its focus and its personality, says Jerry Dominus, senior partner and director of national broadcast, J. Walter Thompson. “VH1 started doing so many different things,” he says, “we just couldn’t get a handle on it.”

Barry Rosenblum, president of Time Warner Cable of New York City, agrees, saving, “VH1 was all over the place. It was locked into short-term thinking.”

Losing patience with a channel that was befuddling cable operators, ad agencies and viewers, the parent company, MTV Networks, a unit of Viacom, fired VH1 president Ed Bennett a year and a half ago and hired John Sykes, a music industry executive whose career has included stints as exec VP of talent for EMI Music, president of Chrysalis Records and VP of programming for MTV.

Sykes’ mandate was to strip away just about all of the non-music-related programming and get the network back to being a music refuge on the cable dial for 25-to-44-year-old adults who, as Sykes puts it, “have outgrown the rap, metal and grunge music videos” that are the backbone of MTV’s playlist.

“From all of our focus-group studies and telephone research, we uncovered a whole lot of viewers who are starved for music but have nowhere to go,” says Sykes.

But the bad news is that as VH1 has begun the shift in programming strategy, the already low ratings of the network have fallen steadily since the 14% dropoff in total-day Nielsen ratings for the fourth quarter of 1994, compared with the same period in 1993. In the first quarter of 1995, VHl’s total-day ratings are off 5% from those of a year ago. The decline is 14% year-to-year in April and 10% in May. In June, VH1 had the same 0.23 rating as it did in June 1994.

However, Sykes says he’s not pushing any panic buttons because VH1 is on the way toward chalking up the fattest profits in its 10-year history.

While the network keeps a tight rein on its programming and production costs – an estimated $35 million or so in 1995, according to sources – advertisers are falling all over themselves to buy time on VH1 (and on just about every other cable and broadcast outlet) in what’s shaping up as a binge year for media buying. VH1 harvested a total of $52.4 million in ad dollars in 1994, according to Paul Kagan Associates, but sources say the network’s ad-dollar figures will climb by a dazzling 20% in calendar 1995, to about $63 million.

One reason ad revenue is so high, says Harvey Ganot, executive VP of advertising sales for the MTV Networks, is that, despite the painfully low household Nielsens, “we’re delivering on our promise of getting viewers who are urban, upper-income and sophisticated,” a demographic that fetches premium prices on Madison Avenue.

But that revenue is not benefiting many cable operators, who say they don’t even bother to try to sell the two minutes an hour VHl makes available to cable systems for local advertising spots.

“VHl has an uphill battle on its hands,” says Jerry McKenna, VP of marketing and creative services for Post-Newsweek Cable, a top-25 multiple-system cable operator. McKenna says if the ratings don’t show any improvement, Post-Newsweek will use the next contract renewal to try to yank VHl off the most widely circulated tier on its systems and slap it onto separately priced tiers. These tiers are known as cable Siberia because they often reach only a fraction of a cable system’s subscribers and confront the network with potentially serious erosion of its advertising base.

Wayne Vowell, general manager of Scripps-Howard Cable of Sacramento, one of the largest cable systems in the U.S., is even more disenchanted with VH1, saying that “I had to take VH1 to get the MTV channel. Viacom had me by the short hairs.” With its 50-million-plus subscribers, Vowell says VH1 has become “a huge cash cow” for Viacom, which he acknowledges will fight to the death before letting Scripps-Howard banish it to cable Siberia.

But that stance is not unusual to Viacom – just about every cable channel insists on preserving its slot on the tier that captures all of a given system’s subscribers because that’s what Madison Avenue wants, and the rule of thumb for a successful network is that it should harvest about two-thirds of its revenue from the sale of advertising. (The other third comes from monthly subscriber fees filtered to the network by cable systems.)

And not all cable operators are down on VHl. “Some of the network’s programming is on target,” says Stuart Lipson, VP of programming and ad sales for Century Communications, a top-15 MSO. He cites the live June 22 “VHl Honors” special as the kind of event “that will drive viewers to the network.”

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