FX Aims For HBO's Cachet

Higher-brow original programming is grabbing audiences and advertisers

In 2002 the hit cop drama The Shield won a Golden Globe, putting FX Networks on the map for the first time in its then-eight-year existence. The accolade was toasted heartily at the News Corp.-owned channel, which had often been dismissed as just another rerun outlet in the 400-channel TV universe. It was also a big step toward overcoming what everybody in TV was feeling at the time -- HBO envy. Then CEO Peter Liguori believed FX could also create programming that pushed buttons and boundaries, the risky formula that had established Home Box Office as an Emmy Award-winning machine. A higher profile for FX would be increasingly critical in the years ahead, in any case, as it faced tough negotiations to stay on the basic cable roster. Advertisers, Liguori promised his executive team, would get on board with these new shows.

Trying to position FX as basic cable's answer to invincible HBO (TWX )may sound brazen, but News Corp. founder Rupert Murdoch is no stranger to taking on entrenched TV players. Fox Sports (NWS ), his powerful collection of regional sports networks, has triggered more than a few headaches at ESPN in recent years. Fox News (NWS ), once a long-shot effort to unseat stalwart CNN (TWX ), quickly captured the ratings crown. So Murdoch didn't hesitate to embrace the idea of a channel whose shows could be water-cooler chatter. "There was a huge push to create buzz," says Derek Baine, a cable analyst at consultant Kagan Research.

Today, FX is home to some of the most original shows around. Following The Shield, FX won critical acclaim in 2003 for Nip/Tuck, a quirky drama about Miami plastic surgeons, and last year for the post-September 11 firefighter drama Rescue Me, starring Denis Leary. FX took its boldest step yet this summer with Over There, about U.S. soldiers in Iraq -- the first time an ongoing war has been depicted in the U.S. on the small screen. Although fiction, its combat scenes are more graphic than most of the images found on the nightly news.

Aside from the gritty topicality of Over There, FX also has the advantage of revenues from distribution fees and advertising. Ad-free HBO, which has 28 million subscribers, relies on the extra $12 or so a month people are willing to pay to receive its shows. An HBO spokesman declined to comment on comparisons. FX, now in 89 million households, is drawing a younger audience. It ranks among the top five cable channels for share of the prime-time audience of 18- to 34-year-olds. That's great news for Murdoch, whose larger drive is to push News Corp. into younger markets. As part of his recent foray into Internet businesses, including the July purchase of Intermix Media Inc.'s (MIX ) MySpace.com, FX can play a strategic role via cross-promotions and advertising packages for his new Net businesses.


For FX's gameplan to be successful though, it will need to establish itself, as HBO did starting in the 1990s, as a haven for creative writers and producers. Already, it's becoming a bigger draw. Actress Glenn Close joined the cast of The Shield last year. Morgan Spurlock, director of the anti-fast-food documentary Super Size Me, created and hosts the reality show 30 Days, about people put in trying situations for a month. Last spring, Liguori was elevated to run Fox Entertainment. His successor, John Landgraf, a former NBC programming executive, is keeping fresh shows coming and supporting them with big marketing campaigns. "The things that branded HBO best were The Sopranos and Sex and the City," he says. "Our decision is to do the same thing [with our hits]."

It was Landgraf who envisioned a series about the war in Iraq. He pitched the idea to Liguori in late 2003, before he joined FX as president of entertainment. TV has always dealt with current events, he says, "so it seemed odd to me that nobody was willing to deal with this war." Landgraf reached out to his longtime idol, NYPD Blue and Hill Street Blues writer/director Steven Bochco, to be executive producer for Over There. Landgraf, 47, is working with actor George Clooney and director Steven Soderbergh on a series set in modern times based on the Ten Commandments.

As FX focuses on the present, HBO seems to be looking backward as it struggles to reassert itself after the end of Sex and the City. Its latest project is Rome, a $100 million, 12-part series that begins in 52 B.C. That follows another period project, Deadwood, a Western set in 1877 that was created by NYPD Blue veteran David Milch.

To maintain FX's momentum, Murdoch appears willing to keep its purse strings open. After enduring years of put-downs about Fox's lowbrow reality shows, Murdoch enjoys having well-regarded shows on his roster. It doesn't hurt, either, that the numbers look good. FX's revenues nearly doubled from 2000 to 2004, to $489 million, according to Kagan. And ad revenues alone tripled in that period, to $212 million.

Some of those revenue gains are being eaten by higher programming costs as FX broadens its slate, particularly in the search for comedies. So far that effort hasn't been a barrel of laughs. Two of this summer's entries, It's Always Sunny in Philadelphia, about three friends who own a bar, and Starved, focusing on men with eating disorders, bombed. Still, Landgraf sees his channel as a maverick operation. "There's a scruffy, can-do attitude," he says. "It's how I imagine the early days of Nike (NKE ) or Apple Computer (AAPL )."

Of course, Landgraf need look no further than his own corporate headquarters for can-do attitude. Just ask CNN and ESPN.

By Dana Goldstein in New York

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