The Kyle Phoenix Blog: Kyle Phoenix Answers: How much has Oprah Winfrey spent on the Oprah Winfrey Network so far?

Sunday, June 17, 2018

Kyle Phoenix Answers: How much has Oprah Winfrey spent on the Oprah Winfrey Network so far?

As with most Harpo, Inc. deals, the non-Harpo partner puts up the bulk of cash and resources and Harpo puts up Oprah-ness for lack of a better framework word, and manages the enterprise. Discovery went as high as $330 million and probably higher, close to half a billion but it became profitable at around $300 mil in debt due to finally creating tent pole shows with Tyler Perry content. This gave them breathing space to find and develop shows and then allow for cable rates to be negotiated --varying from $1.15 to $1.50 per cable subscriber (if you have cable, you’re giving Oprah some money every month)-- which means of the 80 - 100 million homes that receive Discovery's channels that fee is split between each channel as operating capital as advertisers pay for commercial space. Approximately 10 to 15 cents per month times 80-90 million subscribers goes to OWN and the numbers increase as there are access deals with Canada, UK,Australia, India, South America.

That expansiveness is part of what made the deal so attractive to Harpo, a sandbox of it's own to create in, 7 years on the initial agreement, Harpo could walk away at anytime til 2016, having since renewed, through 2025, a stable of shows created for sale to Discovery (Queen Sugar, Sweetie Pies, Greenleaf, The Haves and The Have Nots, etc.) and another revenue cycle for Harpo properties like, past episodes of The Oprah Winfrey Show, Dr. Phil, Dr. Oz, Nate Berkus, Rachel Ray, after their initial run on other networks. Harpo gets paid again and again for it's old and new content.

The challenge is the time it takes to grow a network, keeping Harpo as a profitable company to support itself and extend but not overtax the Oprah brand. Harpo got leaner by closing/selling the 4 square block campus in Chicago for Discovery’s new space in Hollywood, lessening employees, revamping the film division and re-using content library to create Where Are They Now?, a new show of Oprah interviews and now updated material on nearly everyone, major news stories of the past 35 years, this new show naturally is able to stay relevant.
Harpo essentially got a 7 year sponsor while it trimmed itself down to a content distribution and brand extender company.
The synergistic offering is then Oprah’s magazine, radio, film work is part of the loan debt Discovery is paying in that Discovery is buying content, ad space, paying employees, providing space and Harpo then recycles that debt-money into productions that it leases to Discovery to put of channel that increases viewership that allows Discovery to get larger subscriber fees, ad rates and takes out loans to pay Harpo...and the cycle continues. All of this without risking Harpo monies.

The challenge until OWN became profitable in 2013 was to streamline this whole system.

Note: While former President of Harpo and Oprah’s lawyer, Jeffrey Jacobs initially owned a 10% stake of Harpo in the beginning the business add ons since then (magazine, radio, new shows, part of Discovery deal that isn't Harpo content pre-2000) and the fact that Harpo and Discovery had to give Tyler Perry a stake percentage to get so much of his content onto the platform, have lessened his stake in overall take ins because the pie size increased with more diversified extensions. It's probably down to 4-6% of Harpo proper now.

So in a roundabout way, Oprah spent very little as half her staff and management expenses were covered by Discovery having the mass to get a $550 million dollar loan to fund the project and she could bill back all of the work Harpo does for a 50% recoup while making the company leaner and parlaying the relationship for the deal with Weight Watchers (which then advertises heavily on OWN, Flatiron book publishing, forming a separate production company with David Oyewelo and Ava Duvernay, Clipboard a tablet content platform company and the rights to piggyback into other continents on Discovery’s 8 channels and multiplicity of sub relationships with cable networks thereby extending the brand that tunes in folks to TV shows, channel, magazine etc...another systems loop.

Systems building is one of the hallmarks of how to become a millionaire/billionaire.
How to be a Billionaire: Proven Strategies from the Titans of Wealth