WB hits to replay on TNT

May 14, 2001  •  Post A Comment

Capitalizing on his access to AOL Time Warner’s broadcast and cable program outlets, Jamie Kellner will multiplex at least two of The WB’s hit series the same week of their initial telecast.
The WB programs will air during a newly designated 10 p.m. (ET) programming block on sibling cable network TNT this fall.
Among the popular dramatic series that could be multiplexed are “Gilmore Girls,” “Charmed” and “Felicity.” The WB’s new hour-long drama, “Smallville,” also is a multiplexing contender. Series selection will depend upon the terms for multiplexing The WB can negotiate with program producers, sources said.
The repeat episodes will air Mondays and Tuesdays outside The WB’s two-hour prime-time window but will compete head-on with the Big 3’s last hour of prime time. The new 10 p.m. block also will include other dramas and movies on the other nights of the week.
As a cross-promotional move, The WB this summer will air one night of Turner library films during which TNT’s new 10 p.m. block will be promoted.
The moves are a direct result of Mr. Kellner’s immediate charge as chairman and CEO of AOL Time Warner’s newly combined television network group: to turbo-sell, market and cross-promote AOL Time Warner’s broadcasting and cable programming cache.
“Our affiliates understand and accept that this must be done in order to grow revenues and ratings,” Mr. Kellner said about the multiplexing plan, which will be explained to affiliates at a special meeting May 15 in New York. “It will significantly increase the audience we can sell, by as much as 25 percent in prime time, and set a model for our advertisers. There will be a direct correlation between the audience increase and ad revenue increase.”
Mr. Kellner, who has jointly commanded The WB and Turner Broadcasting for less than two months, said last week he believes affiliates and producers will be sensitive to the need for The WB to create a new business model that allows it to generate aggregate ratings and ad revenues for its series that are comparable with those of the Big 3 broadcast networks. “We pay as much for our programs. This is the only way we can make the economics work,” he said.
And economics are everything to a 5-year-old network that should finally post its first full year of profits in 2002, if the advertising market doesn’t worsen, after narrowing its losses to about $60 million last year.
Having anticipated the loss of the hit show “Buffy” to UPN, Mr. Kellner said The WB cranked out 28 pilots, from which one drama, five comedies and two reality shows were selected for the fall schedule. In addition to the hour-long drama “Smallville,” the new half-hour comedies are “Maybe I’m Adopted,” “Deep in the Heart” (starring Reba McEntire), “Men, Women & Dogs,” “Raising Dad” and “Off Centre.” The new reality shows are “Elimidate Deluxe” and “Lost in the USA.” (See “At Press Time,” Page 1, for The WB’s schedule)
“Combined with returning hits like `Gilmore Girls,’ `Sabrina’ and `Popstars,’ our new season schedule will be the strongest ever and will keep The WB’s leading 18 to 34 female and kids demographics strong,” Mr. Kellner said.
In another unusual move, Mr. Kellner brought together Turner cable’s top creative people with The WB brain trust on the West Coast last week to hammer out the new fall schedules and to “begin creative collaboration for the future,” he said. Along with The WB’s former programming guru, Garth Ancier, who was recently named executive vice president of programming for the Turner Broadcasting System, Mr. Kellner is clearly taking a team approach to program development, scheduling, selling and promoting.
Major advertisers such as McDonald’s and Nintendo, working through media-buying agency Starcom, already have put their money behind the first-ever integrated Kids’ WB and Cartoon Network upfront deals that include The WB’s “Toonami” branded afternoon access offerings such as “Pokemon” and “The Adventures of Jackie Chan,” also being carried on Turner’s Cartoon Network.
The WB will run the Cartoon Network’s “Samurai Jack” in its Kids’ WB Saturday morning schedule. Kids’ WB will be promoted on The Cartoon Network in a weekly half-hour preview at 7:30 p.m. (ET) Fridays. AOL online kids-related extensions also are included in such pacts.
Working with all of AOL Time Warner, Mr. Kellner said he expects several major corporate advertising deals stretching across The WB and TBS prime time, AOL’s online service and Time Inc. magazines.
Major remodel
To assist in AOL Time Warner’s major cross-media platform strategy, Mr. Kellner is giving the company’s broadcast and cable networks a makeover and promotional boost.
Perhaps the most dramatic changes are being made in Turner’s CNN and CNN Headline News services, which will gradually see more contemporary music, graphics, sets, personalities and promotion. While he is “in awe” of CNN’s news-gathering capabilities, the services need “more drama and excitement,” Mr. Kellner said. He will, over time, increase the integration of AOL online and the CNN news-gathering services and platform, the first major example of which will be the relaunch of “CNN Moneyline” this summer.
CNN Headline News service will be relaunched this summer under a new name and with an always live, two-anchor format. That will allow for the continuous updating of stories and frequent location coverage of breaking news.
“Viewers are used to looking at anchor teams,” Mr. Kellner said. “They enjoy the banter and the interplay of anchors. They want a more contemporary look, music, set and writing for a much richer news experience.”
Of course, the maximum promotional value so far has come from Mr. Kellner’s splashy rehiring of anchor Lou Dobbs and hiring of former “NYPD Blue” actress Andrea Thompson as an anchor on CNN Headline News.
Aside from reinvigorating Turner’s news channels, at the top of Mr. Kellner’s list is capitalizing on the synergies that come from being part of the AOL Time Warner juggernaut, and carrying out both brands’ broadband strategy. The popular content of the CNN, TBS and WB networks will play an important role in helping AOL Time Warner Chairman Steve Case “connect the dots,” as he says.
The Turner cable and WB product also will help the company expand internationally and meet its goal of seeing half its revenues generated from outside the United States within a decade.
The cable and broadcast networks group–which includes The WB, The Cartoon Network, Cinemax, the CNN News Group, HBO, the TBS Superstation, TNT and Turner Classic Movies–generates about 19 percent of AOL Time Warner’s overall revenues and 18 percent of the company’s total earnings before interest, depreciation and amoritization. The group’s Achilles’ heel is its rising program and talent costs; its saving grace is its second revenue stream from subscriptions on the cable side and The WB’s bond with marketer-coveted younger viewers.
Mr. Kellner said he will create new program services using the Turner and Warner Bros. libraries, and would consider acquiring existing services such as Fox Family Channel at the right price.
Analysts estimate subscriptions generate 55 percent of the network group’s overall revenues, with 38 percent coming from advertising sales and 7 percent from content license fees. Although The WB generates only 7 percent of the group’s overall revenues–compared with 60 percent from the Turner cable services and 33 percent from HBO–it provides AOL Time Warner with a significant connection to TV homes.
Even with a single advertising-based revenue stream, “The WB gives AOL Time Warner another outlet for its studio content and, because it uses television affiliates, provides access to a broader viewing audience than the cable networks,” said Tom Wolzien of Sanford Bernstein Research.
Mr. Wolzien expects The WB to scrape together its first annual profit of about $56 million in 2002 but never to see annual profits much above $100 million to $150 million because of its single revenue stream and high program costs.

Moving quickly
Despite his conventional broadcast background, Mr. Kellner says he’s not all that different from his new AOL Time Warner bosses.
“They are builders,” Mr. Kellner said. “They are marketers. They are consumer-centric. They are most of the things I am, so they move quickly.” His marching orders: “Figure out what’s best to do with these businesses and then do it,” he said. Industry sources say AOL Time Warner is likely to opportunistically snatch up a handful of television station groups–including Mr. Kellner’s own 10-station WB-affiliated Acme Communications–once cable cross-ownership rules change and station valuations begin to slide.
Building a major TV station group by weaving together Acme with other solid midsize groups such as Granite Broadcasting or Sinclair Broadcast Group would provide AOL Time Warner with the entry into homes it has been seeking to achieve on cable, although it would have to find ways to make conventional television instantly and affordably interactive, analysts say. It would be easier than buying NBC.
The logic is that midsize broadcasters seeking to take advantage of what is expected to be another major wave of station consolidation might welcome AOL Time Warner stock rather than all cash in a soft and ever-fragmenting advertising market in which station valuations are expected to drop.
Mr. Kellner and other AOL Time Warner executives declined to discuss specifics about the company’s broader TV station strategy.
“We need to take the rest of the markets where we don’t have stations and hopefully be able to finance more development for Acme because it’s growing these stations quickly,” Mr. Kellner said. “Being the newcomer in these markets does make it more difficult, but even with that, if you compare Acme’s performance to any other broadcast group, you can see we are out-delivering the best on a revenue basis,” he said. “Imagine what our revenue numbers will look like when the market returns given that combined station ratings for the Acme stations are up 47 percent from a year ago.”
Fountain of youth
The WB’s corner on youthful demographics is the unique strength upon which all of AOL Time Warner will draw, even though the Turner cable program networks are likely to be the new unit’s growth engine.
As the only broadcast network with a median viewing age under 30, The WB has a lucrative link to young consumers. Its much sought-after 18 to 34 adult demographics have increased 25 percent this season, and its age 18 to 49 audience has grown about 10 percent.
“We will use The WB to drive additional revenues with the Turner networks with larger clients because The WB has been in an inventory shortage position every year for the past four years,” Mr. Kellner said. “You can’t get 25 percent to 30 percent CPM increases unless you have people fighting over inventory.”
But there are other reasons why Mr. Kellner sees himself at a distinct advantage over his competitors. While media giants such as News Corp., Viacom and The Walt Disney Co. also offer multiple-platform deals, no media company except AOL Time Warner commands such a powerful base of broadcasting, cable program and distribution assets that can be cross-promoted, scheduled and sold at will.
More major advertiser television events, such as last summer’s Coca-Cola sponsorship of “Young Americans,” are in the works, and The WB and the Turner cable networks will increasingly interface with AOL online and Time print advertising opportunities.
One example is Time Warner’s “Popstars” platform. The WB will support the launch of a second new musical band this season and will continue to host periodic prime-time specials starring the first commercial success, Eden’s Crush–a group created by the company out of whole cloth that is now on its way to a hit album and summer concert tour.
Big companies, new rules
Although Mr. Kellner sees himself and his company the beneficiaries of vertical integration, they also must wrestle with other media giants who wield the same power. Fox’s recent abrupt move of “Buffy” from The WB to rival UPN is just one example of the changing rules of play. That deal wasn’t just about the $500,000 more per episode UPN was willing to pay for the series–it was also tied to Fox agreeing to a two-year extension of the existing UPN affiliation of the stations News Corp. soon will acquire in New York, Los Angeles, Phoenix and elsewhere (EM, “Call it M-E-L TV,” May 7).
Such complex, unrelated considerations may rock and refocus studio and network relationships in the future, Mr. Kellner said.
Although The WB has had close ties with longtime producers such as Aaron Spelling, the recent “Buffy” incident could prompt networks to seek more ironclad agreements with producers to prohibit such moves from occurring, industry analysts have speculated.
Mr. Kellner declined comment on the kind of agreement he will seek with Fox in the future for 20th Century Fox-produced series such as “Deep in the Heart.”
As a frugal manager, Mr. Kellner said there likely will be more cost cuts, although he doesn’t yet know where. “I’m pretty comfortable with what I see of the management and talent,” he said. “We have a strong team in place both at The WB and at the Turner Network.”
However, pressure is on for Mr. Kellner to rapidly grow the cash flow from the company’s networks group. Despite the ad slowdown, The WB is expected to grow ad revenues about 15 percent this year and cut its annual loss by more than one-third to about $35 million, according to Richard Bilotti, analyst at Morgan Stanley Dean Witter.
Depending on the ad market, the Turner cable networks could grow revenues anywhere from 5 percent to 12 percent this year, with cash flow around 38 percent. Time Warner’s HBO, which is part of a joint venture with AT&T, continues to hum along with subscriber and affiliate fee increases pushing an anticipated 16 percent cash flow growth this year.
Mr. Kellner recently bought a home in Atlanta near Turner headquarters so he can help the company meet this challenge. As he does so, he will be constantly judged against the legacy of a living legend.
“I don’t in any way see myself stepping into Ted Turner’s shoes,” Mr. Kellner said. “Ted has been a rather brilliant visionary and seen opportunities that others didn’t see and took advantage of them. Today it’s using my skills to operate them as best I can.”
Before the new opportunity came up, Mr. Kellner said he was set to leave his post at The WB.
“One of the strange things about this is that this is not what I intended to do with my life at all right now,” Mr. Kellner said. “I was heading in the other direction. I was going to go in a halftime mode starting in July. I promoted Jed Petrick to be president and COO of WB, and I would guide him through the learning process and remove myself the following year.”
But then AOL Time Warner co-Chief Operating Officer Bob Pittman flew to the West Coast and convinced Mr. Kellner to stay. “I need your brain,” Mr. Pittman told him.
“When I accepted this appointment, people who know me well were shocked because they know how much I love Santa Barbara. The idea of moving the family wasn’t in the cards,” he said.
“But all of these things are driven by one thing: the excitement of being able to try to merge all these assets together, because great creative things can come from managing these resources as one unit that wouldn’t be possible if they remained separate.
“I’m a team player, I’m not a solo artist. In some ways now, I’m just the coach of a bigger team.”