Credit: Saverio Truglia for Ad Age

How Fox Is Building Its Empire

Buoyed by the Colossal Success of Hip-Hop Drama, Fox Ad Chief Toby Byrne Plots the Network's Next Move

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Like Lucious Lyon, Toby Byrne is building an empire. He isn't a hip-hop mogul in the midst of a familial power struggle, but as the ad sales chief for all of Fox Networks Group, he is charged with leading a suddenly emboldened regime.

That was far from the case in October, when Mr. Byrne was appointed to the newly created role. At the time, Fox looked more like a fallen kingdom. The network lagged its broadcast rivals in ratings; many of its freshman series, including the ambitious 24/7 reality show, "Utopia," were canceled early on; its flagship "American Idol" continued to lose ground; and the network group was grappling with a major managerial shakeup.

But after six months at the helm, Mr. Byrne will have a very different story to tell when he brings the company's broadcast, cable and digital assets to market as a unified group during this year's upfront. Much of that is due to "Empire," Lee Daniels' sudsy mid-season drama, which broke ratings records by growing its audience every week during its 12-episode run. The show, which follows a hip-hop producer whose ex-wife and three sons vie for the throne of his music business after he is diagnosed with a terminal illness, is not only a ratings blockbuster, but has become part of the cultural zeitgeist.

"When 'Drip Drop' plays during SoulCycle, you know it's at the forefront of culture," said Melissa Shapiro, president-investment, MediaVest, referring to one of the original songs from the series.

The first season averaged 13 million viewers and a 5.1 rating in the 18-to-49 demographic. That's viewership on the day of broadcast alone. To put this into perspective, the last time a broadcast drama put up a bigger demo was during the 2008-09 season, when ABC's "Desperate Housewives" averaged a 5.2 rating.

But "Empire" has given Fox more than just a hit. It's also given the network a new perspective on selling ad time, having aired the first season with limited commercial interruptions, as well as a blueprint for future success in terms of programming.

"Empire" couldn't come at a better time for Fox, whose prime-time ratings have declined 20% season-to-date from the same period last year (although last year Fox got a bump from the Super Bowl). And the network's biggest selling point -- its younger-skewing audience -- has diminished.

Fox's median viewer age has climbed to 49 years old from 46 in 2010 and around 38 in 2004. While it still remains younger in comparison to rival broadcast networks -- ABC, the next youngest, has a median age of 55 -- media buyers, in their continual hunt for young demographics, had begun questioning the network's value.

While one show doesn't necessarily make a network, "Empire" has boosted Fox's perception in the ad community.

Billie Gold, VP-director of buying and programming research at Carat, said that because "Empire" aired for just 11 weeks, it has had minimal impact on Fox's overall ratings for the season. But it's given Fox wind at its back. "The network certainly needed a bit of good news and positive press heading out of this season, and 'Empire' was just what the doctor ordered," said Ms. Gold, adding that the series managed to slightly lower Fox's median age below last season's 49.8.

'Empire' will be the biggest selling point for Fox during its upfront pitch.
'Empire' will be the biggest selling point for Fox during its upfront pitch. Credit: Fox

"Going into next season, Fox has something to tout, some momentum and a base to build upon. Before that they pretty much had little to no good news about their network's performance," added Ms. Gold.

As such, "Empire" will be the biggest selling point for Fox during its upfront pitch, so much so that during development meetings Mr. Byrne, a nearly two-decade veteran of Fox who led ad sales for the broadcast network, joked that if the audience took a shot every time "Empire" was mentioned during the upcoming presentation, they'd all leave smashed.

"I can't count on my hands and feet how many times 'Empire' was mentioned [already]," said Amy Ginsberg, managing director-investment at Initiative. "They are really leaning on it to guide everything they do."

Fox says its experiment with a limited commercial load in "Empire" -- reducing the number of ads that ran during the first season -- was an attempt to improve the viewer experience. But that limited inventory also made the finale a premium property, costing some advertisers as much as $600,000 for a 30-second spot. That's on par with big-ticket sports like NBC's "Sunday Night Football."

This isn't the first time Fox has experimented with limited commercials; it did a similar test in 2008 with the first season of "Fringe." But the need for innovation in TV advertising is certainly more pronounced than it was seven years ago.

Fox is considering other ways to innovate commercial formats for the next season of "Empire;" it remains to be seen if season two will also air with fewer ads. "I think everyone who has a commercially supported business needs to take a good look at their commercial formats and be open to innovation," Mr. Byrne said.

Innovation is also at the heart of Fox's decision to realign its ad sales group, which resulted in reducing head count and the departure of 17-year Fox veteran Lou LaTorre, who had served as president-ad sales for cable networks.

Fox, in particular, had a history of keeping its ad sales for each division in rigid silos. Mr. Byrne is breaking down those walls, a necessity as agencies and their clients seek to reach audiences based on targets beyond age and sex demographics. The reorganization better positions Fox to operate in this way and compete with the likes of NBC Universal and Turner Broadcasting, which have allowed advertisers to buy audiences across their portfolios for several years.

Mr. Byrne said Fox is now developing new ad products and advanced data and measurement solutions to enable advertisers to capitalize on content no matter the platform.

In December, the network's parent, 21st Century Fox, bought TrueX, an ad-tech company that allows viewers to choose how they interact with streaming-video ads. On Fox.com, for example, viewers can opt to view one interactive ad instead of several traditional ads.

"Advertisers need networks to be healthy," said Gary Newman, who along with Dana Walden, added oversight of the broadcast channel to their purview as 20th Century Fox studio chief in July. "If we are getting [their] message out in a week's time and can show them it is being seen with good measurement, it's in their best interest to stick with us. If they give up on broadcast it will be hard to find reach elsewhere."

"Empire" will not only serve as a model for how the network approaches advertising, but as the standard for launching new series. Under Mr. Newman and Ms. Walden, Fox is being rebuilt as a home for bold, culturally relevant series.

"The regime before us aspired to programming you see on cable networks," Mr. Newman said. "These shows tend to be grittier and darker. They have loyal fans, but the audience level is smaller than what we aspire to. That's not where we are looking to find our next hit."

Instead, the programming lens for Fox is broader, more accessible and brighter, Mr. Newman said. "We look forward to something not on air instead of looking back over the last year or two and trying to recreate what's worked."

Fox has ordered pilots for "Minority Report," a sequel to the 2002 Steven Spielberg movie; "Frankenstein," about a corrupt cop who is given a second chance at life when he is brought back from the dead; and "Rosewood," an investigative series.

When it comes to comedy, Mr. Newman said he is on the hunt for shows that are relatable, like family and workplace comedies. The network has green-lit the pilot "The Grinder," starring Rob Lowe; "Grandpa," starring John Stamos as a longtime bachelor who finds out he is a father; and "48 Hours 'Til Monday," starring Rob Riggle.

The network is also refocusing its unscripted strategy following the failed social experiment "Utopia" and the departure of reality chief Simon Andreae in January. Fox put plenty of marketing muscle behind "Utopia," which threw together 15 strangers to build a new society. It was scheduled to air several times a week and 24/7 online for a year, but was canceled after just two months.

"'Utopia' was a bold swing and I applaud the attempt," Mr. Newman said. "But it felt like it wasn't eventful enough to command the attention they were looking for. It needed something to feel more urgent."

Under Corie Henson, new exec VP-alternative entertainment, Fox is eyeing reality shows that are more family-friendly. "We are not interested in train wrecks or humiliating and making fun of people," Mr. Newman said. "We want you to laugh with them, not at them." He points to "MasterChef Junior" as the type of unscripted programming you will see more of on Fox.

Mr. Newman is "hopeful" that "American Idol" will be part of its unscripted portfolio next season. "It turned a corner creatively," he said, and while "Idol" premiered to a new low of 11.2 million viewers, down 19% from last year's opener, he notes that the veteran singing show is retaining audiences better than it has in several years.

Like most other broadcasters, Fox has adopted a 52-week programming strategy, rolling out limited series and specials throughout the year to keep content fresh and reduce repeats. This year Fox will revive "The X-Files" as a limited series and air a live staging of the musical "Grease."

"To be a successful network you need to create an ongoing, vibrant relationship with the audience," Mr. Newman said. "We don't have a nightly newscast or late-night show; we don't have personalities that are identified with the network, so to do that we have to give viewers a steady diet of specials and events."

And, of course, Fox will give viewers more of "Empire," which has proven not only good for the network, but the industry as a whole. Its breakout success demonstrates that people will still watch live TV if given the right content.

"'Empire's' story is something any ad-supported network should be happy about. … There's nothing particularly modern about its distribution or approach. It's just a good show and cast," said Chris Geraci, president-national broadcast, OMD. "But it proves that traditional TV is still a very large stage."

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CORRECTION: An earlier version of this article said "American Idol" premiered this season to 17.9 million viewers. That was the figure for an earlier season; the premiere in January drew 11.2 million.

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