Thinking Inside theBox

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After launching its TV channel in early 2000, Oxygen had a hard time getting picked up by cable providers in major cities, and during that year its ambitious Web operation nearly collapsed. Laybourne is not the kind of person who refuses to acknowledge mistakes. "I was totally wrong about how we would get to smart fun," she says. "I thought it would be through the Internet." She blames the website debacle partly on the bankers who advised her. "They said, 'Build it and they will come," she recalls. Anyway, she observes, she never would have gotten so much seed money without the Internet component. "Like everything in life," she says, "it's been a blessing and a curse."

Laybourne describes the past few years as messy but instructive. "You learn a hell of a lot more from a mistake than an early success," she maintains. True, but, as she is starting to find out, success is a lot more fun. Last year, things finally started looking up. In December, the channel reached its original goal of being offered in 50 million of America's 80 million cable-watching homes by 2004. The network finally has a big presence in its hometown. Advertisers are taking notice. Now the trick is getting viewers to tune in.

By the time she founded Oxygen in the late 1990s, Laybourne was a superstar, best known for transforming the Nickelodeon network into must-see TV for kids. In that position, too, it took her a while to come down to the level of her audience. She offered up serious fare like a show about kids' dreams (think Pure Oxygen for eight-year-olds). After seven years of struggle, she came up with a hit. Through extensive research, including focus groups with children, Laybourne and her team discovered that kids loved game shows, from Wheel of Fortune to The Newlywed Game. So they created a game show for kids and by kids. Double Dare, which premiered in 1986, starred armor-clad children racing through obstacle courses and getting covered in green slime. It was brilliant, a vivid contrast to typical product-driven cartoons like My Little Pony and Gummi Bears. It was different, it was new, and it was what kids wanted. Laybourne soon solidified her standing with the launch of Nick at Nite and other hits like Rugrats, a cartoon about a ragtag group of kids out to unravel the mysteries of life, like where the light goes when the refrigerator door is closed.

Her early missteps all but forgotten, she was a hot commodity, and in 1995 she left Nickelodeon (then owned by Viacom) to work for archrival Disney, where she oversaw operations of a group of cable networks, including Lifetime. But halfway through her five-year agreement with Disney, Laybourne left. She had spent two decades creating brands and franchises, and now she wanted to strike out on her own.

The money came easily -- a reported $300 million in financing. "It was going to be an opportunity to be part of something great," Laybourne recalls. She touted a grand vision of the convergence of television and the information superhighway. This wouldn't be a regular old women's channel like Lifetime. This would be interactive, whatever that actually meant. The idea attracted big backers like Oprah Winfrey, Paul Allen, and co-founders Marcy Carsey, Tom Werner, and Caryn Mandabach, the team that created hits like The Cosby Show and Roseanne. (Laybourne won't say exactly how much of the company she or her various backers now own; she does say that her stake is less than 25%.) The Internet component of the business launched first, in 1998, and both that year and the next Laybourne was named the 20th most powerful woman in American business by Fortune magazine.

The business, however, was a wreck. "We were trying a million different things," she remembers. "It was a lot of mess." By the time Paul Allen threw in an additional $100 million in December 2000, less than a year after the launch of the Oxygen TV channel, the situation was dire, and it was understood that Oxygen was going to have to undergo a major restructuring. Almost immediately, Laybourne laid off 65 employees, about 10% of her work force, most of whom worked on Oxygen's Internet operations. Today, Oxygen's website is much like every other cable network's, offering basic information like show schedules and sweepstakes information.

The bottom might have been when Oprah, Laybourne's ace in the hole, seemed to be backing off. In exchange for a 25% founder's stake (she currently has a smaller stake, according to Oxygen), Winfrey had invested $20 million in Oxygen and agreed to allow the network to air reruns of The Oprah Winfrey Show. But in an April 2002 profile that appeared in Fortune, Winfrey seemed less than pleased with Oxygen. "It is an investment," she said, when asked if she was happy with it. She went on to express regret about handing over the rights to her show. That wasn't great news for Laybourne, whose celebrity backers were important to her network's cachet. She couldn't afford to alienate a key ally with an ugly contract dispute. So she quickly struck a compromise with Winfrey, who took back the rights to her reruns but agreed to provide footage from the half hour after her show, when she kicks off her heels and relaxes with her guests. She called it, simply, Oprah After the Show.

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Nadine Heintz

The Goods is focused exclusively on products and services for business owners. We won't ignore the latest netbook or the hottest smartphone, but we'll also examine the services, software, and Web-based tools that can help make your business succeed. Nadine Heintz, a senior editor at Inc., edits The Goods, as well as Quick Hits. Send suggestions, comments, and deals to nheintz@inc.com.

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