Oprah Means Business

For the past 15 years, Oprah Winfrey repeatedly told her team that production of her daily talk show was only the beginning. “This is the foundation of greater things to come,” she would tell her managers as she developed a dizzying array of partnerships and spin-offs – a venture with Hearst Magazines to produce her own, self-titled publication; new syndicated television shows with life coach Phil McGraw and leading chef Rachael Ray; made-for-TV movies; a reality TV show, The Big Give, for the ABC television network; theatrical film releases such as Beloved and The Great Debaters; the Broadway musical The Color Purple; a retail outlet; and a lucrative $55 million XM Satellite Radio Inc. deal. In the midst of these accomplishments, her team could only reluctantly imagine more greatness.

But early on, Winfrey had an even grander vision: to create a television network. “And I think it should be called OWN,” she recalls saying to Stedman Graham, her longtime partner. “It just works out. Those initials: O-W-N.” She wrote in her journal that this new network would provide useful, meaningful programming. The entry was dated May 24, 1992.

In 2007, when her development group asked if she would meet with David Zaslav, Winfrey admits she didn’t even know who he was, but she admired his work. The recently installed president and CEO of Discovery Communications, a series of cable networks, had been responsible for the Planet Earth series that fascinated her. The admiration was mutual. Zaslav, who in his new role had already helped improve Discovery’s stock by more than 50%, was a fan of Oprah’s media message – “Live your Best Life” – and proposed a 24-hour opportunity to encourage viewers to think differently about health, relationships, and other aspects of their lives. “I got up from the meeting and said, ‘David, come with me. I want to show you something,’” she remembers. Winfrey then revealed the prophetic page she had ripped from her journal. Oddly enough, she found it in a desk drawer she was clearing just a few days before the meeting. “Absolute divine order,” she said.

As the 54-year-old dynamo prepares to unveil the Oprah Winfrey Network in 2009 – in which she will hold a 50% stake – she asserts that divine inspiration, not strategic planning, is the catalyst for her company’s success. Her formula, which also includes a solid business team and sound financial controls, has taken Harpo Inc. (Oprah spelled backward) from a five-person production company to a 430-employee multimedia conglomerate that grossed $345 million in 2007 (No. 14 on the BE INDUSTRIAL/SERVICE 100 list). She is one of a handful of black billionaires across the globe, with a net worth estimated at $2.5 billion. Winfrey says: “I haven’t planned one thing–ever. I have just been led by a strong instinct, and I have made choices based on what was right for me at the time.”

She also owns every piece of her franchise: the content, name, brand, and studio, placing her in command of her

CELEBRATING 10 YEARS! Join us for the landmark 10th Annual Black Enterprise Women of Power Summit hosted by State Farm, March 2—4, 2015, at Fort Lauderdale Harbor Beach Marriott Resort & Spa, Fort Lauderdale, FL. This exciting, one-of-a-kind executive leadership summit is designed to train, equip and encourage women to become industry leaders, learn career strategies, and discover proven work—life balance techniques. Register Now! https://blackenterprise.com/wps

own destiny – and in a position to influence the consumer and lifestyle habits of millions of viewers, listeners, and readers worldwide. Additionally, she represents a brand of business leadership focused more on long-term value creation than meeting quarterly profit projections. She has also developed some of the industry’s most successful media partnerships. Because of these achievements, BLACK ENTERPRISE has named Harpo Inc. its 2008 Industrial/Serv ice Company of the Year.

FOLLOWING INSTINCTS
Winfrey has spent her entire business career beating the odds. Intuition and timing have been her strongest allies in her ascent. “She’s got a really good gut,” says Gayle King, her best friend, XM radio host, and editor-at-large of O, The Oprah Magazine, “and her gut doesn’t fail her.”

By the age of 22, Winfrey had broken barriers as the first black woman to co-anchor the news in the Nashville, Tennessee, and Baltimore markets. In 1978, the 24-year-old discovered her niche, switching from delivering news to co-hosting People Are Talking, a local talk show, to fulfill contractual obligations.

In 1984 she was offered the opportunity to

revive a fledgling morning show called A.M. Chicago at ABC affiliate WLS-TV in Chicago. However, she told Tim Bennett, the station’s anxious promotions manager (who would become Harpo’s president years later), that she would not be involved in any promotions, particularly because she believed the promotional campaign in Baltimore created a misleading expectation of her performance there. “For me, the most important thing has been to get the lesson,” Oprah explains. “That is the mantra for my life. Get the lesson and then you can move on.” Her strategy: speak at local events to increase her visibility and spread the word about the Windy City’s latest talk show phenom.

It worked. Within six weeks of her debut, she was beating the award-winning king of daytime talk shows, Phil Donahue, in his own city. “It was unbelievable,” recalls Bennett of how quickly the show’s ratings continue to increase. “Big stations in big markets are like battleships. They take years to turn around.” A year later, the program was renamed The Oprah Winfrey Show. The stage was set. Her message of transformation and empowerment would resonate with housewives and female professionals alike. She became a national sensation.

One of Winfrey’s shrewdest business moves was acquiring the rights to her talk show. In fact, Bennett calls 1988 a “magical moment.” Under the Financial Syndication Rules, the Federal Communications Commission did not allow networks or their stations to profit from distribution. As a result, syndication companies were enjoying all the profits. The law, however, did not restrict talent from brokering a distribution deal. So Winfrey proposed buying the show from ABC and, through a syndication agreement with King World, she agreed to continue to air the show for five years on the network’s stations. The Oprah Winfrey Show was sold as a lead-in to local news, one of the most profitable time slots in TV.

Winfrey gained complete creative and financial control of her program – a feat accomplished by only one other on-air talent at the time: the late Johnny Carson. Today, with a few exceptions, it’s virtually impossible for talent to own a show since those FCC rules have long been rescinded, and networks are no longer restricted from profiting in distribution deals.

Bennett notes positioning also significantly impacted Oprah’s financial success. “The network had an opportunity to put Oprah on the network in daytime,” he explains. “If they had done that, she would never have gone into syndication, [which] is a more lucrative business. If you are on ABC in daytime, let’s say like The View, you’re going to get one paycheck from ABC. Oprah gets 222 paychecks from all the TV stations, from every single market, every single month.”

BUILDING AN EMPIRE: MISTAKES MADE, LESSONS LEARNED, A WORKING PHILOSOPHY DEVELOPED
On the day Winfrey met with BE, she was visibly under the weather; her voice was scratchy, and her eyes were weak. Her big, curly tendrils were gracefully pulled from her face. Winfrey had moved up our appointment in hopes of getting home a bit early to rest, but an endless list of meetings and phone calls made that impossible.

It’s typical for her schedule to be grueling: a car picks her up at 6:30 a.m. and, after roughly two hours of hair and makeup, she does a live and, sometimes, a taped show. She must also meet monthly deadlines for completing columns and cover shoots for her magazine. In March, she embarked on a 10-week live, online seminar for her book club, and she also hosts a weekly 30-minute show on her XM channel. Then there’s the charitable initiatives she’s passionate about, developed, and managed through O Philanthropy. They include the Oprah Winfrey Leadership Academy for Girls in South Africa, which she spent more than $40 million to open last year; and Oprah’s Angel Network, for which she’s raised more than $70 million since 1998. “She’s probably one of the hardest-working people at the company,” says King. “At a time when she really could kick back and relax, I honestly think she’s working harder now than she ever has.”

Despite her ailments or appointments, Oprah would not have cancelled this interview. In her 22 years of business, she remembers canceling only three meetings due to dire situations. “The greatest fear for me of ever canceling is that you’re going to disappoint somebody,” she explains. “It’s no small thing. I take it personally. That’s what commitment means to me.”

We met in her large,

invitingly warm office, accented with art, books, and tons of photos of family, friends, colleagues, and celebrities who document what she calls a “miraculous life.” At the far end of her office facing her desk hangs a significant piece of art, produced by Whitfield Lovell, one of her favorite artists. The wall-length image is called “Having” and features two African American female entrepreneurs at the turn of the 20th century. Winfrey imagines they were dressmakers by the design of their frocks. Those two women and what they represent, she says, are a source of inspiration and strength. “Before I go into a really serious meeting,” she explains, “I actually come to the wall.”

Winfrey has a unique way of approaching business opportunities. “I don’t care about money,” she casually offers as she sips tea to soothe her throat. “It throws people off all the time in business meetings. They start shuffling papers,” she muses.

Several years ago she met with executives from a large cosmetics company proposing a line for women of color. The deal would have included 80,000 employees nationwide and shelf space in every major department store. In the middle of the talks, she asked: “Why would I do that? Why would I have a cosmetics company?” The response from corporate execs focused on revenue potential and her personal enrichment. She then asked: “And what would be the other reason?” After futilely working to “create a cosmetic line with a purpose,” Winfrey turned down the offer.

She admits to learning some hard lessons as a result of her nontraditional approach to business. Starting with just five employees, she got along for years without management controls or development programs to grow talent as she grew the business. “For too long, I operated this business like a family. After a while you can’t see everybody; you can’t talk to everybody,” she says. “And now you have people managing people who were never managers before.”

She didn’t realize how much the company’s rapid growth taxed her staff. It was more than a half decade before Harpo hired associate producers. During that time, the nationally syndicated superstar was still making lunch runs because the rest of her staff was tied up with booking and producing tasks. For years, Winfrey’s team prided themselves on being a lean operation. In the process, she discovered this strong work ethic also contributed to mass burnout.

In 1994 she re-enlisted her former WLS-TV boss, Bennett, who’d left Harpo in 1990 to manage a television station in Chapel Hill, North Carolina. She asked him to return to the fold and help her put operating systems in place. “I’m just now getting to the point of understanding how strategic planning, creating an infrastructure, and having a vision can be very helpful,” she concedes. “And as I move forward in creating other companies, I’m operating more as a businesswoman.”

As Winfrey tightened her ship, she learned another vital lesson: she’s still her best counsel. At the beginning of the decade, veteran TV executive Geraldine Laybourne decided to start Oxygen, an independent cable network for women. To make the venture work, she courted Winfrey as an investor. Winfrey recalls: “I went along with the Oxygen plan because my lawyer at the time and lots of other people around me said, ‘How are you going to let there be a woman’s network and not be a part of it?’”

The network struggled with programming and branding, and Winfrey eventually reduced Harpo’s programming commitment. “It was an ego decision and not a spirit decision, which is how I make all my decisions,” she says. “The only decisions that get me in trouble are ego decisions.” In 2007, Oxygen was sold to NBC Universal for $925 million.

In the middle of the OWN negotiations in 2007, Oprah again found herself distracted. This time it was the well-publicized sexual abuse charges at her Leadership Academy. She believed that incident, too, was a result of mistakes she made. “My responsibility is to create the kind of leadership that doesn’t allow that kind of thing to happen,” she says. “I asked God, is this happening because I shouldn’t have a network? What is this here to teach me?”

“And the lesson for me was that I spent a lot of time building that school from the outside in,” she explains. “I spent five years fighting with the South African government. I picked every single fabric, every basket. I picked the girls. And

the lesson was you should have started from the inside and worked your way out. So what is more important than the structure is the infrastructure. If you can do that with this network, then you will be successful.”

Winfrey strongly believes that intuition is a guiding force. “That is truly the way my life works. I believe it works that way for everybody, but you have to allow yourself to be in the space where you are carried by the flow of life and not pushing upstream,” she maintains. “When you are in the flow, all things come as they should, all the time. I believe you can move into the stratosphere. I believe there is no ceiling.”

TAKING HER BUSINESS TO THE NEXT LEVEL
Housed in several buildings in the heart of Chicago, which employees informally refer to as the campus, Harpo Inc.’s vertically integrated operation pulsates with energy. All the means of production for its various units – several studios for television, radio, and online productions; set design facilities; the new television development group; and the executive offices – are within its employees’ reach.

Aside from the diverse group of businesses within the Harpo organization, Winfrey has successfully leveraged several lucrative partnerships. In 2000, after being romanced by several major publishing houses, she chose to partner with Hearst to launch O, The Oprah Magazine, which continues to produce unprecedented newsstand and subscriber success. “One out of three readers who bought it on the newsstand subscribed to the magazine, which believe me, in the magazine business is unheard of,” asserts Cathie Black, president of Hearst Magazines. This joint venture, with circulation at 2.4 million and more than 16 million readers, represents one of Hearst’s three most profitable magazines, along with Cosmopolitan and Good Housekeeping. Launched with $50.9 million, O grossed $311.3 million in revenues in 2007 according to Publishers Information Bureau.

When the satellite radio company XM approached Winfrey about an alliance, it served a heavily male, gadget-oriented audience. Says Nate Davis, XM’s president and CEO, “We wanted to reach out to a mass market, especially women, people who listened to more than just sports.” In February 2006, XM signed Oprah to develop a channel and increase the network’s visibility in a three-year, $55 million deal. The result: Oprah & Friends, with roughly 1 million listeners. Added to DirecTV in 2007, it is now carried in 16 million homes. The channel launched in September 2006; at the end of that year, XM’s fourth-quarter revenues were up 45% compared with the same quarter the previous year, and the network had almost 2 million more subscribers than at the end of ‘05. “It’s one of our top talk shows on the network,” says Davis. “It’s diversified our audience and increased our listenership in the female audience by 10%.”

The radio partnership proved beneficial to Harpo as well. “We were able to get into the radio business,” Bennett says. “This deal with XM allowed us to quietly learn a business that was close to ours, but not a business that we could’ve jumped in with both feet if it were a terrestrial foundation. And we could not have syndicated our shows across the country with no experience in radio.”

The original proposal called for Winfrey to host her own show, but Harpo’s management team saw this as an opportunity to extend the brand without her carrying the full load as talent. They developed the concept of Oprah & Friends, including regular contributors to the TV show who could now host a radio program. In the past 18 months, the “friends” have nearly doubled. Winfrey, who originally handled spot segments, now hosts a half-hour Soul Series segment.

Whether it’s a homegrown venture or a byproduct of partnerships, at the core of each vehicle remains the mission and message found on The Oprah Winfrey Show. “If you pictured a table and it had a pedestal leg in the middle, if you take that leg away the table falls over,” says Bennett. “Each one of these legs we are adding is a foundational element to keeping this table strong. Each one of these legs is adding value to her message, but they’re also adding a financial support system to her company.”

According to Bennett, Harpo follows a “living” business plan that has the fluidity to meet Winfrey’s spiritualism and business temperament. He conducts monthly budget reviews with the management team and, on a quarterly basis, they explore potential business

opportunities. Most recently, Winfrey signed a production deal with actress Kirstie Alley to join the already successful roster of Harpo programs. And she is committed to finding a CEO and other management talent for OWN. “That’s my No.1 priority,” she says, having learned from her magazine venture that having the right management in place means the operation will demand less of her time.

Her Webinar with Eckhart Tolle, author of A New Earth: Awakening to Your Life’s Purpose, further enlightened her to more dynamic business possibilities, demonstrating that programming less suited for a television audience might find a better fit online. She enthuses: “When I did the Webcast and was Skype-ing (the technology that facilitated the program) with people from all over the world, I went, ‘This is a new day. This is the future.’”

Winfrey continues to use the power of the Internet to tap new audiences through Oprah.com, which provides supporting material from each media arm as well ass original content. Moreover, the Website produces tens of millions of dollars in revenues. On the day the Winfrey-Tolle class was supposed to go live, more than 700,000 visitors were unable to log on because the system crashed. The bandwidth problem, says Bennett, although disappointing, spawned another opportunity: Millions downloaded the program through iTunes and Oprah.com. Throughout the seminar’s duration, it was the No. 1 podcast download on iTunes, and book club membership increased to more than 1.8 million. Currently there have been more than 25 million streams or downloads of the Webinar through iTunes and Oprah.com.

To manage the ever-expanding operation, Winfrey hired Tenia Davis three years ago to head human resources and further tighten operating procedures. As a result the company collaborated with an outside institution to create an internal Harpo University, which includes a year-long leadership program for senior-level employees and middle managers. “We met with professors and customized it around our culture, our way of managing, and our processes, looking at how our businesses would flow,” says Davis of the year-old program.

For one, Harpo is a highly competitive environment. “But there is good competition and bad competition. Our intention is to maximize the good,” says Davis. “With that we first focused on the leadership team to make sure that we would get buy-in and engagement at that level.” Instructors concentrate on managing collaboration, communication, and the importance of feedback.

Oprah’s brand of leadership demands that nothing is taken for granted. There is a cafe on premises as well as Club Harpo, a workout facility, and The Spa at Harpo. All employees start with four weeks vacation and, depending on the department, have up to 11. “I don’t yell at people. I don’t mistreat people. I don’t talk down to people, so no one else in this building, in this vicinity, has the right to do it,” she states emphatically. “Treating people with respect is the most important thing to me. It’s not just talk.”

That message – in and outside the organization – is a large part of her legacy. She has developed a series of ventures through an array of media platforms to communicate her guiding philosophy of dignity, purpose, and empowerment. “Television is the most powerful medium we have,” she continues. “The Internet is close and there will be a hybrid of the two at some point. But that medium inside the home to communicate with people, that visual medium … is the most powerful thing you can have. That is an enormous amount of influence.”

As the distribution contract for her show will terminate in 2011, she looks forward to building OWN, set to launch in 2009, promising it will be more expansive than anything she’s ever developed. “My intention is for it to live beyond me – for it to be a living network of possibilities for people in their own lives,” she asserts. “To be able to say that my life was used in service to help people come to their highest potential, I would do it even if my name wasn’t attached to it.”

CELEBRATING 10 YEARS! Join us for the landmark 10th Annual Black Enterprise Women of Power Summit hosted by State Farm, March 2—4, 2015, at Fort Lauderdale Harbor Beach Marriott Resort & Spa, Fort Lauderdale, FL. This exciting, one-of-a-kind executive leadership summit is designed to train, equip and encourage women to become industry leaders, learn career strategies, and discover proven work—life balance techniques. Register Now! https://blackenterprise.com/wps