News Corp. says it’s not trying to buy all of UPN

Apr 30, 2001  •  Post A Comment

Twentieth Century Fox Television’s sale of “Buffy the Vampire Slayer” to UPN perhaps symbolizes parent company News Corp.’s growing involvement and cooperation with Viacom in their future joint ownership of UPN.
The fall 2001 series deal seemed to spur rumors last week that News Corp. is about to conclude a deal with Viacom for either half ownership or a complete acquisition of UPN.
“What is irritating is all of these reports about Viacom being in active discussions to sell all of UPN to us,” said a senior News Corp. official, who requested anonymity. “Both Viacom and News Corp. would have joint management, not us taking control of the whole network.”
During a first-quarter earnings conference call, Viacom President and CEO Mel Karmazin confirmed the company has been in discussions with News Corp. subsidiary Fox Entertainment Group, but officials from the latter stressed there are no ongoing talks-particularly not on the topic of selling all of UPN on a wholesale basis.
A joint management structure, while somewhat surprising given Viacom’s previously strained UPN marriage with Chris-Craft Industries (before a court dissolved the latter’s half-interest in 2000), could be considered more palatable given the Federal Communications Commission’s recent relaxed stance on the dual network-ownership rule.
The FCC ruled two weeks ago to grant Viacom a waiver on dual ownership of both CBS and UPN. Media analysts said the ruling also effectively opens the door for Viacom to actively seek an equity investor such as Fox Entertainment Group to share some of the financial burden of operating UPN.
Another key ingredient to the growing mutual relationship with News Corp. is the conglomerate recently agreeing to a five-year extension of the UPN affiliation on eight of the 10 major-market Chris-Craft Industries TV stations News Corp. bought for $5.4 billion in a pending acquisition. (The other two Chris-Craft stations in the deal are an ABC affiliate in Salt Lake City and an NBC affiliate in San Antonio.) The eight UPN affiliates, including top markets New York (WWOR-TV), Los Angeles (KCOP-TV) and San Francisco (KBHK-TV), account for roughly 19 percent of the network’s national broadcast coverage.
Viacom, on the other hand, is the owner of 19 UPN affiliates (accounting for roughly 22 percent U.S. coverage), but a larger concentration of its stations come in medium-size markets-13 of which are under the top 10 markets. Fox Television Stations and Viacom now own 31 and 38 stations apiece, respectively, with each at slightly more than 40 percent FCC-recognized coverage. Both are lobbying actively to be allowed to stay above the current 35 percent U.S. ownership cap.
“I think Mel would be amenable to giving up some control over UPN because his stations probably bill less than half what Chris-Craft’s stations bill in the top markets,” said a competing network distribution executive who requested anonymity. “What Mel is more interested in doing is [local station] duopolies, multiplying revenues and limiting his downside risks. I am sure this is all a big duopoly dance where both Viacom and News Corp. are looking at some potential swaps and whether they can expand the current ownership cap.”
Outside of how long it takes both to work through the ownership issue, media watchers think it is also taking time for Viacom and News Corp. to hash out the cost of gaining an equity interest in UPN and assuming up to $1 billion in debt on the network’s balance sheet.
Clearly, while UPN is going to have to revise its long-term plan to break even, it appears that Mr. Karmazin’s signing off on a $2.3 million-per-episode acquisition of “Buffy the Vampire Slayer” spells a renewed commitment to put the network back on track. Although WB officials suggested the licensing deal with 20th Century Fox strongly hinted of self-dealing, given News Corp.’s ownership of eight UPN affiliates, UPN’s corporate backers did agree to spend almost 30 percent more than The WB’s final offer of $1.8 million per episode.