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Tuesday, January 24, 2006

CBS, Warner to form new network

UPN and WB networks to cease operations this fall

By David B. Wilkerson, MarketWatch
Last Update: 4:22 PM ET Jan 24, 2006

CHICAGO (MarketWatch) -- UPN and the WB, two of the smaller networks on U.S. broadcast television, will cease operations this fall when parents CBS Corp. and Warner Bros. Entertainment form a new network to be called the CW, CBS and Warner Bros. said Tuesday.
Under terms of the agreement, Warner Bros., a Time Warner Inc. (TWX) unit, and CBS (CBS) (CBS.A) will each own 50% of the new network.

Tribune Co.'s (TRB) broadcasting unit and CBS's UPN affiliates have each agreed to sign 10-year affiliation agreements with the new network. The stations include outlets in 20 of the top 25 television markets, including New York, Los Angeles, Chicago, Philadelphia, San Francisco, Boston, Dallas and Detroit.

The CW will program 30 hours a week over seven days for its affiliated stations.
Time Warner's shares rose 18 cents, or 1 %, to close at $17.27, while CBS rose $1.08, or 4.2%, or $26.90. Acme Communications (ACME), owner of eight WB affiliates, rose 15% to close at $4.07. Tribune declined 25 cents, or nearly 1%, to $29.65.

"With this move, we will be creating a viable entity, one well-equipped to compete, thrive and serve all our many publics in this multichannel media universe," said Les Moonves, chief executive of CBS, in a statement.

Dawn Ostroff, currently president of UPN, will serve as president of entertainment at the CW, while John Matta, currently the WB's chief operating officer, will take on that same role at the new venture.

Like all networks, the WB and UPN are forced to react to increasing fragmentation of the media landscape. Not only has the long-awaited "500-channel universe" come to cable and satellite, but video on demand, on various platforms, has given people more control than ever over how, when and where they watch television.

Against that backdrop, Ostroff told MarketWatch the deal was driven by a desire to give 18- to 34-year-old viewers a one-stop venue to find a certain brand of entertainment, regardless of how it will be delivered.

"There's been a lot going on in the industry, just in terms of different talk about new technology, a lot of new ideas for distribution," she said.

"I think this is going to be a network that is very well supported, both technologically, in terms of different kinds of deals that are going to be made, and production," Ostroff went on. "There's just a lot of opportunity all around and it made sense, given where we are in the industry right now."

The CW will be able to draw from the production resources of Warner Bros. Television and Paramount Television, both powerhouses in the industry.

Under Moonves, CBS is being very aggressive in using new technology to reach its viewers in different ways. In November, for instance, the company forged a deal with cable operator Comcast Corp. (CMCSK) to make four of its most popular shows, "CSI: Crime Scene Investigation," "NCIS," "Survivor" and "The Amazing Race," available on demand as soon as midnight following their broadcast on CBS owned-and-operated stations, for 99 cents per episode.

In September, UPN teamed up with search giant Google Inc. (GOOG) to offer video streams of "Everybody Hates Chris" episodes.

While new distribution methods could ultimately play a major role in the CW story, the network is counting heavily on traditional distribution. "It makes sense to have an affiliate group as strong as Tribune, along with the CBS-owned stations, which will make up about 48% of the country," Ostroff said.

She added that the new network hasn't held discussions with advertisers yet. "But I can't imagine that they wouldn't be very excited about the prospect of having a fifth network that's clearly going after a specific demographic, instead of splitting it between two different networks," she said.

The move is an acknowledgment that there aren't enough viewers to "support two networks that are kind of targeting somewhat similar audiences," said James Von Schilling, TV historian and professor of English at Northampton Community College in Bethlehem, Pa.
WB and UPN were both founded in 1995. Each network tried to find their early audience by going after ethnic audiences -- the WB with programs such as "The Wayans Brothers" and "The Parent 'Hood," and UPN with "Moesha" and others.

Later in the 1990s, the WB hit its stride with dramas that had strong appeal to teenage girls and young women, such as "Buffy the Vampire Slayer," "Dawson's Creek," "Seventh Heaven" and "Felicity." However, as these shows lost steam, the network had more difficulty developing new hits in the years following the turn of the century.

Prior to the current season, UPN had found its greatest success with the wrestling spectacle "WWE Smackdown" and the most recent chapter in the "Star Trek" saga, "Star Trek: Enterprise." Last fall, the network garnered some of its best reviews in years when it debuted "Everybody Hates Chris," a semiautobiographical sitcom produced by comedian Chris Rock.
Ostroff is undaunted by the challenge of having to launch a new network after the work she and her staff put into UPN's reemergence this season.

"It will be rebranded, but with programming that's very familiar to those viewers we're trying to attract," she said.

Among WB and UPN shows expected to be part of CW's slate are the WB's "Smallville," "Gilmore Girls," "Supernatural" and "Reba," along with UPN's "Everybody Hates Chris," "Veronica Mars" and "Girlfriends."

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