Lee Masters - Big Man on Campus
By Regina Joseph
While the arrival of digital television for the masses is still some time away, it is not surprising that the major broadcast companies are gearing up to create new content to offer their potential subscribers. The most recent player to take the plunge into the world of interactive television is Englewood, Colo.-based Liberty Media Corp., the programming arm of cable giant Tele-Communications, Inc. (TCI). In September 1998, Liberty Media launched a new unit to create content for interactive television called Liberty Interactive Media (LIM). But beyond the launch, the big news at Liberty Interactive is its new chief executive, who officially started on Jan. 1, 1999. Not your typical dry, hard-charging leader like TCI's John Malone, Lee Masters,the 48-year-old former president and CEO of the 24-hour cable network E! Entertainment Television, takes the helm at LIM as a true Hollywood insider.
Masters' mandate at LIM is to create content that takes advantage of advanced set-top receiver hardware for digital television and other convergence appliances. Masters is uniquely qualified for the task. Having begun his career as a radio disc jockey, he moved on to become a programmer, station manager, then owner of several radio stations. Twenty years later, Masters switched to television and landed at a company that has become a foundry for digital media impresarios: MTV. The cable music channel cofounded by Robert Pittman--who now ploughs digital media furrows as the president and COO of America Online (AOL)--was a natural destination for Masters, whose contacts and expertise within the music industry have long established him as a respected--and well-liked--figure. At MTV, he developed the strategy for the network's transition away from videos to show-based programming--a process that fundamentally restructured the network and significantly increased its advertising revenues.
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Masters already envisions a music channel, one that may emerge as the front-runner for Liberty Interactive's debut product.
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But Masters' career-defining challenge arrived when he joined E! Entertainment Television in 1990. Initially perceived as a second-rate cable channel with nothing but endless movie trailers and Z-list on-air talent, E! fought for Hollywood's least appetizing table scraps. Once Masters applied his understanding of programming and branding, creating such breakthrough shows as Talk Soup and The Howard Stern Show, E! developed a following that catapulted it into the definitive celebrity-news source on TV. Since Masters' arrival, the network's revenue has grown at a compound rate of more than 70% annually. A majority-owned subsidiary of the fourth-largest domestic cable company, Comcast Corp. (nasdaq: CMCS), E! Entertainment Television reaches 53 million homes in the U.S. and has experienced ratings increases of 300%. Abroad, E! programming can now be seen in more than 400 million homes in 120 countries.
Not bad for a former disc jockey. But Masters is about to face his most challenging assignment yet: digital television. The look and feel of digital television remains a source of endless debate for both engineers and broadcasters. Until the consumer public sees the array of options (both content and technological) and decides which will become the mass-market favorite, undertakings like Liberty Interactive will remain, at best, colossally expensive experiments. "Given the changes both in audience and hardware, people want programming and services designed for their lives," says Masters. "What's so great about this medium is that we can develop shows that have a service component built in. But our absolute mandate is to view all our development as content first. Once you get people watching, then you can lay over that a transactional element." Which means essentially that once viewers are glued to the tube as a result of interesting programs, you can get them to pay for related merchandise, and thus extend the revenue potential.
Masters' entrepreneurial agility was in evidence when Forbes Digital Media spoke with him about his plans for the company last month. Before even starting his post, he had some clear ideas about some of the venture's first projects.
"The first order of business will be the development of our business model," says Masters, even as he concedes the difficulty of that enterprise. "Conceptually, though, we've got it pinned." That conceptual development refers to what Masters foresees as Liberty Interactive's introduction of 12 to 15 channel categories. As MTV became the globally recognized brand for music video delivery over cable, and E! for celebrity information, Masters projects channel categories like travel, health, music, financial services and books.
"For a lot of these channels," says Masters, "we'll be looking at creating joint ventures. For example, a travel channel could involve a partner like Discovery Channel, which is part of the Liberty family. A health channel could also feature the involvement of Discovery, as well as other companies. The idea is to find content relationships where they make the best sense and build programming around that. Then, through commerce partnerships, bring in the additional transactional layer." Content may be king in Masters' world, but, within the context of interactive television, it's nothing without the option of being able to buy the merchandise that comes along with it.
Masters already envisions a music channel, one that may emerge as the front-runner for Liberty Interactive's debut product. Given Masters' background, this direction hardly comes as a surprise. But this potential MTV competitor gains a significant boost from TCI's entrenched interests in the entertainment business. Forged in January of 1998, the TCI Music division (nasdaq: TUNE) cobbled together the music media web site SonicNet, along with other digital music services such as the pay-per-view music channel known as The Box and the digital radio firm DMX. As part of the complex series of connections between TCI, Liberty Media and Liberty Interactive, Liberty Media contributed its 86% interest in TCI Music to Liberty Interactive. In addition, Liberty Media will cede to Liberty Interactive the former's agreement with TCI regarding the development of interactive video services. This arrangement provided Liberty Interactive with a unique opportunity to leverage this digital music triumvirate of web site, video channel and radio service into its premier channel offering.
"One of the beauties of having a music video channel is the low-cost structure involved," says Masters. "I can see the creation of 10 to 12 very narrowly targeted subdivisions of a music channel, based upon music genres, because people tend to be genre-oriented in their listening tastes. We envision this as finely dividing a music service, which is much more efficient across demographic lines."
For example, a heavy metal subdivision of a music channel would probably hold the greatest appeal for males from the ages of 12 to 17, while a pop subdivision would be likely to hook suburban females from the ages of 12 to 17. By creating these niches, advertising can be sold on a cumulative basis across a number of subdivisions, allowing advertisers the ability to select an advertising package that reaches target audiences more precisely. "We could handle ad sales in a number of ways," says Masters, "depending on what makes the best sales sense."
Since he hopes to have programming content available in time for the first shipment of digital set-top boxes, Masters estimates that a music channel will debut sometime in the second half of 1999. "We are fully committed to creating the next generation of broadband content," Masters states. "Developing programming and content for the convergence of the TV and the web through the set-top box is the single greatest growth opportunity for value creation. And who better to partner with than Liberty Media?" |
