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Oct 29, 2001  •  Post A Comment

DirecTV to merge with EchoStar

“We’ve made a $600 million bet that this deal will be approved,” EchoStar founding Chairman Charlie Ergen said Monday in response to questions about possible antitrust opposition to the $26 billion tax-free stock and cash merger with rival DirectTV, part of the Hughes Electronics subsidiary owned by General Motors.

The new entity will be the only pay-TV offering to 30 million rural households underserved or not served by cable, and one of the largest overall multichannel media concerns, matching the size of the largest cable operator, AT&T.

The rival satellite players believe they can accomplish more together competing with cable in creating what principals estimate could eventually become a $100 billion company. They cited the successful rollout of digital cable and pending cable consolidation and deregulation as catalysts to their deal. GM Chief Financial Officer John Devine said, “We’re confident the market will be seen as wider and that the real competition is cable.”

All the same, GM has minimized its downside risk if the deal falls through: EchoStar pays a $600 million breakup fee and still acquires PanAmSat, the $3.4 billion satellite launching service 80 percent owned by Hughes. The principals told investors on Monday they will pursue more than $5 billion in annual synergies, more than half from reduced program costs, reduced churn, eliminating duplicate overhead and instituting a standardized set-top box. Cable operators and large program providers light on distribution, such as Walt Disney, Fox and Viacom, could be adversely impacted, analysts said.

A transition team will determine the new management team under Mr. Ergen, who will remain chairman and CEO of the expanded EchoStar, whose combined 16.7 million subscribers will continue to receive fully digital services under the DirecTV brand name. But analysts warn it’s not over until it’s over since a major antitrust battle still looms with Washington regulators who have warned of scrutinizing such a deal. It will take up to a year to close the deal and secure regulatory and GM shareholder approval. “Despite the definitive agreement, in our view, the process still may be early and News Corp. cannot be ruled out as the ultimate successor to acquiring DirecTV,” ABN Amro analyst John Martin said. A jilted News Corp. could still pull off an upset if the proposed merger meets resistance, and could encourage close regulatory scrutiny that may require some concessions.

The deal, if approved, would pave the way for further cable deregulation and consolidation. However, a combined EchoStar-DirecTV poses a major competitive threat to cable, particularly smaller operators, and will emerge as a major gatekeeper for content. The combined satellite company will control more than 90 percent of the domestic satellite television service. The company will remain based in Littleton, Colo., with 14,000 employees. It is unclear whether GM’s board accepted the EchoStar offer late Sunday in response to Rupert Murdoch’s withdrawal of News Corp.’s long-standing $30 billion bid for Hughes on Saturday.

Mr. Murdoch withdrew the bid out of frustration when GM failed to act on it in a weekend meeting after 18 months of negotiations and numerous deadline extensions. Sources said GM was close to approving the News Corp. proposal, but GM showed a willingness to accommodate EchoStar’s last-minute scramble for financing, yielding to what investors viewed as a preferred combination because of its higher premium and synergies.

Analysts said EchoStar was helped by hiring powerful antitrust lawyer David Boies to represent it. Hughes CEO Jack Shaw cited the leverage, additional rural reach and entrepreneurial management style Hughes achieves by merging with EchoStar.

Despite the bitter setback, Mr. Murdoch vowed Saturday to press ahead with plans for his Sky Global service, which will have a major void in domestic satellite coverage but will dominate the rest of the world, especially Europe and Asia. Still, investors knocked about $2 billion in value off of News Corp. in lower trading Monday as News Corp. declined comment on specific plans for Sky Global. GM, Hughes and EchoStar stock also traded down Monday.

If the EchoStar-DirecTV merger is approved, it pits AOL Time Warner, a major DirecTV shareholder, against Microsoft — which has pledged to back Sky Global — and Liberty Media Corp., which is a 20 percent owner of News Corp. and will have a major Sky Global stake. Mr. Ergen, who built his company on the assets of a defunct BSkyB joint venture with Mr. Murdoch, pulled off the last-minute coup by putting up $2.75 billion of his own EchoStar shares to secure $5.5 billion in cash — half backed by Deutsche Bank and the other half by a GM bridge loan that soon will go to the capital markets. GM has the option of exchanging its future shares in the new satellite company for cash to pay down its sizable debt.

Mr. Ergen, once a financial analyst who began EchoStar with his wife 21 years ago, said consumers will benefit from an accelerated introduction of such services as high-speed Internet access through satellite as a result of the merger.

Mr. Ergen, whose EchoStar is No. 2 with 6.4 million U.S. subscriber to No. 1 DirecTV’s 10.3 million, also said the new company will offer more channels in rural areas and that it will offer uniform national pricing. GM Hughes shareholders will own 53 percent of the new company, EchoStar shareholders will own 36 percent (half of that belonging to Mr. Ergen) and GM shareholders will own 11 percent. Under the proposed terms of the deal, Hughes shareholders receive 0.73 EchoStar shares for every Hughes share, which would be valued at $18.44 each based on EchoStar’s closing price last Friday, or a 20 percent premium.

The announced EchoStar-Hughes deal is based only on letters of intent. There is no signed definitive agreement yet, though the parties are working on it.

Lawmakers react to EchoStar-DirecTV deal: Lawmakers had varying reactions to the EchoStar-DirecTV deal announced Monday morning. Senate Commerce Committee Chairman Sen. Ernest Hollings, D-S.C., said he’s “troubled.” “That kind of consolidation would leave consumers with few, if any, choices,” he said.

House Commerce Committee Chairman Rep. Billy Tauzin is weighing the benefit of increased competition to cable against the loss of competition within the satellite television industry. “Obviously our concern is the impact of having just one satellite company providing multichannel programming,” spokesman Ken Johnson said. The congressman will meet with EchoStar Chairman and CEO Charlie Ergen and DirecTV Chairman and CEO Eddy Hartenstein on Tuesday in his Washington office.

Meanwhile, the deal could run into trouble with rural lawmakers because it would leave rural satellite customers, many of whom have no access to cable, without a choice for dish TV service. But at least one such congressman supports it. Rep. Rick Boucher, D-Va., said the combination is “pro-competitive.” An influential consumer group, Consumers Union, would back the deal if rural customers receive the same pricing and services as urban ones and if the companies stop resisting the entrance of Northpoint, a fledgling wireless video service, into the marketplace. DirecTV and EchoStar insist Northpoint would cause interference to their signals, but Gene Kimmelman, co-director of the watchdog’s Washington office, thinks the concerns can be worked out. “If we’re losing one of the satellite companies we need to move aggressively to get a replacement in the market,” he said. He foresees two benefits of the planned merger: DirecTV and EchoStar, which now duplicate their offerings of local signals in major markets, would free up capacity to offer local service in more cities. And Mr. Ergen might continue to aggressively challenge cable.

The National Association of Broadcasters expressed concern, saying the deal creates a huge monopoly. “At a minimum, government regulators should condition this deal on a guarantee that this additional satellite channel capacity be devoted to carriage of the signals of al
l local television stations,” NAB President and CEO Eddie Fritts said.

MTV to cut staff: MTV is laying off 8 percent to 9 percent of its staff in a sweeping reorganization that was announced to the staff Monday.

In addition to the layoffs of approximately 450 people, the restructuring will include the relocation of TNN operations from Tennessee to New York; the dramatic downsizing of the affiliate marketing department and MTVi; the reconsolidation of Nick at Nite and TV land under TV Land’s Larry Jones; outsourcing MTV animation; the completion of VH1 management reorganization; a restructuring of Nickelodeon; the merging of some Latin American operations and the localization of some international operations.

“These moves are being made in light of many changes in our company and in our industry, and in view of the new economic times,” said MTV Networks chief Tom Freston in a companywide memo Monday.

“Although our business has grown and changed dramatically over the years, we haven’t restructured our organization in any way since we decentralized in by brands in 1989,” said Mr. Freston.

The MTVi online functions are being integrated with MTV Networks’ core businesses and moved back to Viacom’s headquarters at Times Square. A spokeswoman declined to expand on Mr. Freston’s memo or to comment on word that Nickelodeon’s development operation on the West Coast would take a hit.

Mr. Freston also indicated that these changes would produce “the adjustment of our infrastructure and strategic services at each of our businesses, as well as corporately. “Earlier in the year, we cut many marketing and other activities, but it has become evident that a different organizational model was also needed.”

He said “enhanced severance, outplacement counseling and employee assistance counseling” would be offered to those affected by the downsizing.

News Corp. withdraws from EchoStar war over DirecTV: News Corp. late Saturday made good on its promise to withdraw its long-standing proposal to acquire Hughes Electronics and its DirecTV satellite unit for about $30 billion in cash and stock after Hughes parent General Motors failed to reach a decision to sell the unit.

With News Corp. having withdrawn its offer to acquire Hughes Electronics and its DirecTV satellite unit, the board of General Motors now is faced with three options. It can continue to negotiate with U.S. satellite rival EchoStar Communications, which still is struggling to come up with all the necessary financing. It can opt not to sell Hughes, despite shareholder pressure and the need for cash from disposing assets. Or, eventually, it can re-approach News Corp., with whom relations are badly strained.

“We have no option but to withdraw immediately our fully negotiated and financed proposal,” News Corp. Chairman Rupert Murdoch said in a statement issued Saturday night, after the GM board met on Saturday and came to no decision on selling DirecTV. “Hughes would have been an excellent strategic fit for our global platforms and we are disappointed with the board’s inaction in the face of an as-yet-unfinanced counterproposal,” Mr. Murdoch said. GM declined comment.

Following an eight-hour meeting Saturday, the GM board told management to continue studying EchoStar’s proposed cash and stock offer, worth about $30 billion. EchoStar is still struggling to fully fund a $5.5 billion loan, partially backed by Deutsche Bank, to satisfy GM’s demand for cash in exchange for its 30 percent stake in Hughes. This is despite increased rumblings from Washington regulators that a merger of the two domestic satellite companies could be blocked over antitrust concerns.

Some analysts expect GM to scrap plans to sell Hughes at this time since the public value of the unit has been halved to about $14 billion during the past year due to the stock market downturn. Sources close to Mr. Murdoch say he likely will press forward with the formation of his Sky Global satellite unit as soon as the stock market improves, and is unlikely to abandon his pursuit of DirecTV. Mr. Murdoch’s prepared statement hinted of a return to the fray. “There will be no choice for millions of television consumers in rural America,” Mr. Murdoch said.

Ferree to head FCC committee on ownership: Federal Communications Commission Chairman Michael Powell on Monday named Ken Ferree, chief of the agency’s Cable Services Bureau, to head a newly formed staff committee charged with reviewing FCC media ownership restrictions. Reviewing the need for the limits is a top priority for Mr. Powell. “We need to rigorously examine whether current forms of media regulation are achieving the commission’s policy objectives and how changes in regulations would affect the policy goals of competition, diversity and localism,” Mr. Powell said.

Heymann named SVP/GM, Biography Channel: In an appointment aimed at enhancing A&E Television Networks’s Biography brand, Thomas Heymann has been named to the newly created position of senior vice president/general manager, The Biography Channel, leading the newly formed Biography Channel brand group.

In his new position, Mr. Heymann will report to Dan Davids, executive vice president/general manager, A&E Network, and will be responsible for strategic planning, programming, consumer marketing and brand development.

Mr. Heymann joined A&E Television Networks in 1992. As vice president, AETN Consumer Products, he was responsible for the company’s brand extensions, including Biography Magazine, A&E Home Video, AETN Licensing and the AETN Consumer Catalog business. Mr. Heymann also was senior vice president/general manager, AETN Interactive, during the creation of HistoryChannel.com, AandE.com and Biography.com.

In related personnel announcements, John Hartinger, a 10-year AETN sales and marketing veteran, will join the group as vice president, marketing; producer Deirdre O’Hearn will become director, programming, The Biography Channel; and Paulette McLeod, vice president/general manager and editor-in-chief of “Biography Magazine,” will join the group whilePosted Sunday, Oct. 28, at 10:38 a.m. (PT); last updated Monday, Oct. 29, at 2:55 p.m.

DirecTV to merge with EchoStar

“We’ve made a $600 million bet that this deal will be approved,” EchoStar founding Chairman Charlie Ergen said Monday in response to questions about possible antitrust opposition to the $26 billion tax-free stock and cash merger with rival DirectTV, part of the Hughes Electronics subsidiary owned by General Motors.

The new entity will be the only pay-TV offering to 30 million rural households underserved or not served by cable, and one of the largest overall multichannel media concerns, matching the size of the largest cable operator, AT&T.

The rival satellite players believe they can accomplish more together competing with cable in creating what principals estimate could eventually become a $100 billion company. They cited the successful rollout of digital cable and pending cable consolidation and deregulation as catalysts to their deal. GM Chief Financial Officer John Devine said, “We’re confident the market will be seen as wider and that the real competition is cable.”

All the same, GM has minimized its downside risk if the deal falls through: EchoStar pays a $600 million breakup fee and still acquires PanAmSat, the $3.4 billion satellite launching service 80 percent owned by Hughes. The principals told investors on Monday they will pursue more than $5 billion in annual synergies, more than half from reduced program costs, reduced churn, eliminating duplicate overhead and instituting a standardized set-top box. Cable operators and large program providers light on distribution, such as Walt Disney, Fox and Viacom, could be adversely impacted, analysts said.

A transition team will determine the new management team under Mr. Ergen, who will remain chairman and CEO of the expanded EchoStar, whose combined 16.7 million subscribers will continue to receive fully digital services under the DirecTV brand name. But analysts warn it’s not over until it’s over since a major antitrust battle still looms with Washington regulators who
have warned of scrutinizing such a deal. It will take up to a year to close the deal and secure regulatory and GM shareholder approval. “Despite the definitive agreement, in our view, the process still may be early and News Corp. cannot be ruled out as the ultimate successor to acquiring DirecTV,” ABN Amro analyst John Martin said. A jilted News Corp. could still pull off an upset if the proposed merger meets resistance, and could encourage close regulatory scrutiny that may require some concessions.

The deal, if approved, would pave the way for further cable deregulation and consolidation. However, a combined EchoStar-DirecTV poses a major competitive threat to cable, particularly smaller operators, and will emerge as a major gatekeeper for content. The combined satellite company will control more than 90 percent of the domestic satellite television service. The company will remain based in Littleton, Colo., with 14,000 employees. It is unclear whether GM’s board accepted the EchoStar offer late Sunday in response to Rupert Murdoch’s withdrawal of News Corp.’s long-standing $30 billion bid for Hughes on Saturday.

Mr. Murdoch withdrew the bid out of frustration when GM failed to act on it in a weekend meeting after 18 months of negotiations and numerous deadline extensions. Sources said GM was close to approving the News Corp. proposal, but GM showed a willingness to accommodate EchoStar’s last-minute scramble for financing, yielding to what investors viewed as a preferred combination because of its higher premium and synergies.

Analysts said EchoStar was helped by hiring powerful antitrust lawyer David Boies to represent it. Hughes CEO Jack Shaw cited the leverage, additional rural reach and entrepreneurial management style Hughes achieves by merging with EchoStar.

Despite the bitter setback, Mr. Murdoch vowed Saturday to press ahead with plans for his Sky Global service, which will have a major void in domestic satellite coverage but will dominate the rest of the world, especially Europe and Asia. Still, investors knocked about $2 billion in value off of News Corp. in lower trading Monday as News Corp. declined comment on specific plans for Sky Global. GM, Hughes and EchoStar stock also traded down Monday.

If the EchoStar-DirecTV merger is approved, it pits AOL Time Warner, a major DirecTV shareholder, against Microsoft — which has pledged to back Sky Global — and Liberty Media Corp., which is a 20 percent owner of News Corp. and will have a major Sky Global stake. Mr. Ergen, who built his company on the assets of a defunct BSkyB joint venture with Mr. Murdoch, pulled off the last-minute coup by putting up $2.75 billion of his own EchoStar shares to secure $5.5 billion in cash — half backed by Deutsche Bank and the other half by a GM bridge loan that soon will go to the capital markets. GM has the option of exchanging its future shares in the new satellite company for cash to pay down its sizable debt.

Mr. Ergen, once a financial analyst who began EchoStar with his wife 21 years ago, said consumers will benefit from an accelerated introduction of such services as high-speed Internet access through satellite as a result of the merger.

Mr. Ergen, whose EchoStar is No. 2 with 6.4 million U.S. subscriber to No. 1 DirecTV’s 10.3 million, also said the new company will offer more channels in rural areas and that it will offer uniform national pricing. GM Hughes shareholders will own 53 percent of the new company, EchoStar shareholders will own 36 percent (half of that belonging to Mr. Ergen) and GM shareholders will own 11 percent. Under the proposed terms of the deal, Hughes shareholders receive 0.73 EchoStar shares for every Hughes share, which would be valued at $18.44 each based on EchoStar’s closing price last Friday, or a 20 percent premium.

The announced EchoStar-Hughes deal is based only on letters of intent. There is no signed definitive agreement yet, though the parties are working on it.

Lawmakers react to EchoStar-DirecTV deal: Lawmakers had varying reactions to the EchoStar-DirecTV deal announced Monday morning. Senate Commerce Committee Chairman Sen. Ernest Hollings, D-S.C., said he’s “troubled.” “That kind of consolidation would leave consumers with few, if any, choices,” he said.

House Commerce Committee Chairman Rep. Billy Tauzin is weighing the benefit of increased competition to cable against the loss of competition within the satellite television industry. “Obviously our concern is the impact of having just one satellite company providing multichannel programming,” spokesman Ken Johnson said. The congressman will meet with EchoStar Chairman and CEO Charlie Ergen and DirecTV Chairman and CEO Eddy Hartenstein on Tuesday in his Washington office.

Meanwhile, the deal could run into trouble with rural lawmakers because it would leave rural satellite customers, many of whom have no access to cable, without a choice for dish TV service. But at least one such congressman supports it. Rep. Rick Boucher, D-Va., said the combination is “pro-competitive.” An influential consumer group, Consumers Union, would back the deal if rural customers receive the same pricing and services as urban ones and if the companies stop resisting the entrance of Northpoint, a fledgling wireless video service, into the marketplace. DirecTV and EchoStar insist Northpoint would cause interference to their signals, but Gene Kimmelman, co-director of the watchdog’s Washington office, thinks the concerns can be worked out. “If we’re losing one of the satellite companies we need to move aggressively to get a replacement in the market,” he said. He foresees two benefits of the planned merger: DirecTV and EchoStar, which now duplicate their offerings of local signals in major markets, would free up capacity to offer local service in more cities. And Mr. Ergen might continue to aggressively challenge cable.

The National Association of Broadcasters expressed concern, saying the deal creates a huge monopoly. “At a minimum, government regulators should condition this deal on a guarantee that this additional satellite channel capacity be devoted to carriage of the signals of all local television stations,” NAB President and CEO Eddie Fritts said.

MTV to cut staff: MTV is laying off 8 percent to 9 percent of its staff in a sweeping reorganization that was announced to the staff Monday.

In addition to the layoffs of approximately 450 people, the restructuring will include the relocation of TNN operations from Tennessee to New York; the dramatic downsizing of the affiliate marketing department and MTVi; the reconsolidation of Nick at Nite and TV land under TV Land’s Larry Jones; outsourcing MTV animation; the completion of VH1 management reorganization; a restructuring of Nickelodeon; the merging of some Latin American operations and the localization of some international operations.

“These moves are being made in light of many changes in our company and in our industry, and in view of the new economic times,” said MTV Networks chief Tom Freston in a companywide memo Monday.

“Although our business has grown and changed dramatically over the years, we haven’t restructured our organization in any way since we decentralized in by brands in 1989,” said Mr. Freston.

The MTVi online functions are being integrated with MTV Networks’ core businesses and moved back to Viacom’s headquarters at Times Square. A spokeswoman declined to expand on Mr. Freston’s memo or to comment on word that Nickelodeon’s development operation on the West Coast would take a hit.

Mr. Freston also indicated that these changes would produce “the adjustment of our infrastructure and strategic services at each of our businesses, as well as corporately. “Earlier in the year, we cut many marketing and other activities, but it has become evident that a different organizational model was also needed.”

He said “enhanced severance, outplacement counseling and employee assistance counseling” would be offered to those affected by the downsizing.

News Corp. withdraws from EchoStar war over DirecTV: News Corp. late Saturday made good on its promise to withdraw its long-s
tanding proposal to acquire Hughes Electronics and its DirecTV satellite unit for about $30 billion in cash and stock after Hughes parent General Motors failed to reach a decision to sell the unit.

With News Corp. having withdrawn its offer to acquire Hughes Electronics and its DirecTV satellite unit, the board of General Motors now is faced with three options. It can continue to negotiate with U.S. satellite rival EchoStar Communications, which still is struggling to come up with all the necessary financing. It can opt not to sell Hughes, despite shareholder pressure and the need for cash from disposing assets. Or, eventually, it can re-approach News Corp., with whom relations are badly strained.

“We have no option but to withdraw immediately our fully negotiated and financed proposal,” News Corp. Chairman Rupert Murdoch said in a statement issued Saturday night, after the GM board met on Saturday and came to no decision on selling DirecTV. “Hughes would have been an excellent strategic fit for our global platforms and we are disappointed with the board’s inaction in the face of an as-yet-unfinanced counterproposal,” Mr. Murdoch said. GM declined comment.

Following an eight-hour meeting Saturday, the GM board told management to continue studying EchoStar’s proposed cash and stock offer, worth about $30 billion. EchoStar is still struggling to fully fund a $5.5 billion loan, partially backed by Deutsche Bank, to satisfy GM’s demand for cash in exchange for its 30 percent stake in Hughes. This is despite increased rumblings from Washington regulators that a merger of the two domestic satellite companies could be blocked over antitrust concerns.

Some analysts expect GM to scrap plans to sell Hughes at this time since the public value of the unit has been halved to about $14 billion during the past year due to the stock market downturn. Sources close to Mr. Murdoch say he likely will press forward with the formation of his Sky Global satellite unit as soon as the stock market improves, and is unlikely to abandon his pursuit of DirecTV. Mr. Murdoch’s prepared statement hinted of a return to the fray. “There will be no choice for millions of television consumers in rural America,” Mr. Murdoch said.

Ferree to head FCC committee on ownership: Federal Communications Commission Chairman Michael Powell on Monday named Ken Ferree, chief of the agency’s Cable Services Bureau, to head a newly formed staff committee charged with reviewing FCC media ownership restrictions. Reviewing the need for the limits is a top priority for Mr. Powell. “We need to rigorously examine whether current forms of media regulation are achieving the commission’s policy objectives and how changes in regulations would affect the policy goals of competition, diversity and localism,” Mr. Powell said.

Heymann named SVP/GM, Biography Channel: In an appointment aimed at enhancing A&E Television Networks’s Biography brand, Thomas Heymann has been named to the newly created position of senior vice president/general manager, The Biography Channel, leading the newly formed Biography Channel brand group.

In his new position, Mr. Heymann will report to Dan Davids, executive vice president/general manager, A&E Network, and will be responsible for strategic planning, programming, consumer marketing and brand development.

Mr. Heymann joined A&E Television Networks in 1992. As vice president, AETN Consumer Products, he was responsible for the company’s brand extensions, including Biography Magazine, A&E Home Video, AETN Licensing and the AETN Consumer Catalog business. Mr. Heymann also was senior vice president/general manager, AETN Interactive, during the creation of HistoryChannel.com, AandE.com and Biography.com.

In related personnel announcements, John Hartinger, a 10-year AETN sales and marketing veteran, will join the group as vice president, marketing; producer Deirdre O’Hearn will become director, programming, The Biography Channel; and Paulette McLeod, vice president/general manager and editor-in-chief of “Biography Magazine,” will join the group whilePosted Wednesday, Oct. 24, at 1:25 p.m. (PT); last updated at 5:20 p.m.

Columbia TriStar to make development shutdown official

Sony-owned Columbia TriStar Television is expected to formally announce by Thursday or Friday that it will cease all new network series development and production effective next season. A spokeswoman for Columbia TriStar would not confirm or deny whether a shutdown announcement is imminent.

The formal shuttering of network TV production would come on the heels of Sony Corp. of America Chairman and CEO Howard Stringer strongly suggesting to EM (EMonline.com, Oct. 22) that the studio could not find an economic model allowing it to stay in business while trying to compete with the vertically integrated network-studio conglomerates. Sony, which earlier this month sold the Spanish-language Telemundo Network to General Electric’s NBC for more than $2 billion, has been precluded by the foreign ownership rules from holding majority ownership of English-language TV stations and broadcast networks.

According to one Hollywood studio executive, Columbia TriStar executives are reportedly meeting with the broadcast networks to see whether they will take over production on existing series projects in exchange for allowing the Sony studio to maintain a smaller participatory ownership stake in the show.

Under Columbia TriStar Television President Tom Mazza, the studio is said to have more than 50 scripted series — 30 dramas and 20 comedies — in various stages of development for the 2002-03 season. But any sale of the shows to the networks’ in-house or corporate sister studios could be further complicated by CTT’s roster of producers, who would likely have to sign off on any deals for series they are currently developing at the studio. With big-ticket producers like Brad Grey Television, Danny DeVito’s Jersey Television, Mark Johnson Productions and Gavin Polone’s Pariah Productions signed to multiyear deals at CTT, there is also the specter of Sony paying off the remainder of the guaranteed contracts.

It is expected that Columbia TriStar will maintain production on such current network series as CBS’s “King of Queens,” “Family Law” and “Dawson’s Creek” as well as development and production of first-run series for its domestic syndication and cable units.

WB’s ‘Smallville’ showing early signs of strength: Like a speeding bullet, The WB’s second week of Superman prequel “Smallville” led the closing 9 p.m. (ET) hour of the Frog Network’s reinvigorated Tuesday lineup to a 183 percent thrashing of UPN’s “Roswell” in the key adults 18 to 49 demographic. Though dropping a slight 11 percent from its week-ago premiere, “Smallville’s” 3.4 rating/8 share in adults 18 to 49 beat UPN’s “Roswell” (1.2/3) by a nearly 2-to-1 margin, according to final Nielsen Media Research national data.

Based on its strong early returns, The WB is expected to announce Thursday that it will extend a nine-episode order on “Smallville,” giving the Warner Bros. Television and Tollin Robins-produced show a full-season’s 22-episode pickup. Additionally, “Smallville” retained in excess of 90 percent of its premiere audience across most of its key demos. “Smallville” finished first in men 18 to 34 (4.3/12), persons 12 to 34 (4.2/12), males 12 to 34 (4.1/13), teens (4.5/15), female teens (5.2/17) and male teens (3.8/14). Its scores in men 12 to 34 and men 18 to 49 (3.2/9) were the second best in the network’s almost seven-year history.

The strong male returns for “Smallville” are indicative of new viewership, given that The WB’s lead-in drama “Gilmore Girls” skews more heavily to females. “Smallville” also defeated a repeat of Fox’s “Dark Angel” in total viewers (7.3 million vs. 4.4 million) in the time period.

Meanwhile, The WB’s “Gilmore Girls” also scored 13 percent growth week to week in adults 18 to 49 (2.7/8) to finish in a dead heat with UPN’s “Buffy the Vampire Slayer” (2.7/7) during the 8 p.m. hour. “Buffy” dropped a slight 3 percent week to week in adults 18 to 49.

“Gilmore Girls” ranked first in women 12 to 34
(4.8/14), teens (5.0/17) and female teens (7.3/25) for the night in its core demos. “Gilmore” also tallied 6.4 million total viewers, topping NBCs “Emeril” (6.1 million) and “Three Sisters” (6.3 million) and UPN’s “Buffy” (5.7 million).

For the night, The WB’s 3.1/8 score in adults 18 to 49 held even week to week, holding a 55 percent advantage over UPN’s 2.0/5 in the key demo.

United Talent Agency hires Gradinger for biz affairs: In the wake of Michael Ovitz’s Artist Television Group shuttering its TV network production, United Talent Agency has hired business affairs veteran Gary Gradinger to head the agency’s business affairs department. Mr. Gradinger, who served as ATG’s senior vice president of business affairs, will fill the post vacated by longtime UTA business affairs head Gail Fanaro, who has been promoted to the expanded role of general counsel for the Hollywood-based talent agency.

Mr. Gradinger will oversee the business affairs department operations and work with current business affairs executives, including Thora Leiken, James Rothbart and Leroy Simmons. In addition, Gradinger will take an active role in the agency’s prolific television packaging operations, working with UTA partners and television department co-heads Chris Harbert, Sue Naegle and Jay Sures.

At ATG, which he joined at its formation in 1999, Mr. Gradinger oversaw business affairs personnel and the company’s negotiation of rights and talent agreements. Prior to ATG, Mr. Gradinger was vice president of business affairs for Warner Bros. Television.

Back to the Pacific for ‘Survivor 4’: CBS’s next incarnation of “Survivor 4” is going to be returning to the Pacific islands for its anticipated February 2002 or May 2002 sweeps run (EM, Oct. 1). A CBS spokeswoman confirmed that Nuku Hiva, which is part of the Marquesas Islands chain and is northeast of the Tahitian islands in the South Pacific, will be the setting for “Survivor 4.” The summer 2000 inaugural run of “Survivor” was shot on the island of Pulau Tiga, off the coast of Borneo.

It had been previously speculated that the Middle Eastern monarchy of Jordan would be home to the next incarnation of “Survivor,” but the terrorist attacks of Sept. 11 and the ongoing U.S. military campaign in Afghanistan raised safety concerns for show creator Mark Burnett and CBS.

Venture asks FCC to disallow import of out-of-market signals: Venture Technologies Group, which began carrying UPN programming Monday on low-power station WAWA in Syracuse, N.Y., but which has been unable to secure cable carriage on the local AOL Time Warner Cable system, has petitioned the FCC to close the loophole that allows cable operators to import out-of-market signals and not carry low-power stations that have exclusive local affiliate agreements.

Time Warner Cable in Syracuse has been importing the signal of Boston UPN station WSBK-TV to the market, which was left without a local UPN affiliate after Sinclair-owned WSYT-TV switched to The WB in January 2001.

Paul Koplin, president of Los Angeles-based VTG, said, “We offered to provide compensation to AOL to carry WAWA,” but had been unable to get on the Time Warner system in Syracuse, a market that has a 75 percent cable penetration rate. WAWA’s signal reaches 60 percent to 70 percent of the market, said Mr. Koplin.

WAWA, bought by VTG in May, had previously carried home-shopping and “international” programming, said Mr. Koplin. He added that his company launched low-power KTUD as a UPN affiliate 11 months ago in Las Vegas and has been doing very well with the help of cable carriage.

VTG owns and manages 18 TV stations, four of them full-power UPN affiliates, two independents and the rest low-power stations. VTG’s petition, filed Wednesday, asks the FCC to move expeditiously in the direction it had said was “appropriate” in its 1998 Further Notice of Proposed Rulemaking and to “extend the exclusivity rights and network non-duplication protection rules that apply to full-power stations to all station types, including low-power, Class A and noncommercial stations.”

Since August, more long-running feuds between low-power UPN affiliates WBQC in Cincinnati and WBGT in Rochester, N.Y., have ended with their signals being picked up by Time Warner cable systems in those cities. Comment from Time Warner Cable was not immediately available.

Disney, Fox Family complete merger: The Walt Disney Co. has completed its previously announced acquisition of Fox Family Worldwide, Inc. from Haim Saban and Fox Broadcasting Company. The acquisition closed on Wednesday with a final purchase price of $5.2 billion, including approximately $2.9 billion in cash and the assumption of $2.3 billion in Fox Family obligations.

ABC’s Miller writing terrorism book: Terrorist cells involved in the Sept. 11 hijackings of four planes and attacks on the World Trade Center and the Pentagon are the subject of “The Cell,” a book being written by ABC News correspondent John Miller and crime journalist Michael Stone, scheduled to be published in April by Disney-owned Hyperion.

Viacom at a loss: Viacom Wednesday reported a third-quarter loss of $190.4 million, or 11 cents a share, compared with a year-earlier profit of $33.4 million, or 2 cents a share, reflecting Blockbuster-related charges and big advertising losses and increased news coverage costs following the Sept. 11 terrorist attacks. Third-quarter earnings before interest, taxes, depreciation and amortization fell 7 percent to $1.33 billion on flat revenues of $5.7 billion. Viacom’s television unit saw cash flow plummet 19 percent on a 6 percent revenue decline in the quarter.

Viacom President and Chief Operating Officer Mel Karmazin conceded that continued aggressive cost-cutting will prevail as the company seeks to cut about $500 million from $18 billion in annual companywide expenses. Mr. Karmazin said that in the fourth-quarter scatter market, CBS has not discounted ad time in any daypart and that CBS’s fourth-quarter prime-time revenue will be up double digits. CBS wrote $75 million in advertising last week across all its network, cable and radio platforms, he said.

Mel on Sony: Viacom’s Mel Karmazin said he spoke Tuesday with Sony Corp. of America Chairman Howard Stringer about his decision to pull his Columbia TriStar unit out of broadcast network prime-time development due to lack of back-end profits. “I wouldn’t automatically rule out the [possibility] that they will … be back in that business,” Mr. Karmazin said.

WB orders full seasons of three new comedies: After three weeks of strong young demo rating returns, The WB has given nine-episode back orders for its three freshman comedies — “Reba,” “Maybe It’s Me” and “Raising Dad” — to carry each of them to a full-season complement of 22 episodes. Last Friday, The WB’s lineup, which includes “Sabrina, the Teenage Witch,” ranked first for the night in teens (3.1 rating/14 share), women 12 to 34 (2.8/11) and female teens (5.0/21), according to Nielsen Media Research national data.

The pickup on “Reba, whose 1.7/6 in adults 18 to 34, 2.8/12 in teens and 4.4 million total viewers in season-to-date averages leads the lineup, is notable in light of recently strained relations between The WB and series producer 20th Century Fox Television.

In recent weeks, it has been widely rumored that The WB is seeking up to five-year initial contractual terms on new series being pitched for next season from 20th Century Fox due to the Frog Network’s loss of 20th’s “Buffy the Vampire Slayer” to UPN last May. The Big 4 networks are currently seeking five- to 51/2-year initial licensing deals with the studios. The WB typically signs four-year licensing deals, a source for the Frog Network said, and the netlet only wants to be on parity with the larger television networks.

“Maybe It’s Me,” created by Suzanne Martin, a is co-production of Warner Bros. Television and Disney-owned Touchstone Television. “Raising Dad,” whose script funding came from the advertiser-led Family Friendly Programming Forum, was created by Jonathan Katz for Paramount Network Television. “Reba” was created Allison Gibson for 20th.

Fox premieres delayed: Fox is moving the premiere of its top-rated Sunday lineup, including “The Simpsons,” “Malcolm in the Middle” and “The X-Files,” one week later to Nov. 11. A spokesman for Fox said the delay of its Sunday premieres is due in part to CBS’s re-scheduling of “The 53rd Annual Primetime Emmy Awards” — after two postponements relating to the Sept. 11 terrorist attacks — for broadcast Nov. 4. He also said that if Fox’s carriage of the World Series goes to a seventh game, it would be too disruptive to the lineup.

‘Ellen’ on the move: CBS announced that its struggling freshman sitcom “The Ellen Show” is being moved a half-hour later to 8:30 p.m. (ET) starting this Friday. Repeats of popular 8 p.m. Monday sitcom “King of Queens” will be serving double duty in “Ellen’s” former 8 p.m. time slot on Oct. 26 and Nov. 2. From there, CBS has plans to run half-hour specials “Funny Flubs & Screw Ups” on Nov. 9 and Nov. 16. “Rugrats: The Movie” will fill the 8 p.m.-to-10 p.m. Friday slot on Nov. 23.

USA opens its books: In an unprecedented move, USA Networks released its two-year operating budget as the ultimate “guidance” to industry analysts, investors and the press. What is essentially a “peek” inside USA’s books projects that cable network and studio earnings before interest, taxes, depreciation and amortization will grow to $695 million in 2003 after being down slightly from this year to $598 in 2002, on slightly higher revenues of $1.64 billion in 2002 that rise to $1.8 billion in 2003. USA Networks Chairman Barry Diller said the company opted to disclose its operating budget, which it will revise every quarter, because it is a more honest way to assess the potential growth of its businesses, particularly in these volatile times.

Separately, USA reported a 14 percent increase in third-quarter earnings to $246 million on a 15 percent rise in revenues to $1.2 billion. Its networks and studios continued to drive growth with earnings up 31 percent to $155 million on a 19 percent rise in revenues to $398 million. The company gave dramatically reduced fourth-quarter guidance for its core businesses, saying earnings would decline 12 percent to 16 percent on flat revenues due to the continuing backlash from terrorist-related activities and advertising spending that has deteriorated to 1999 levels. The company said fourth-quarter scatter pricing is flat to down 5 percent, which is where it expects ad pricing will stay the first half of 2002. Mr. Diller said the increased advertising weakness “is going to make for a sharp but quicker correction” next year. The company said fourth-quarter scatter pricing is flat to down 5 percent, which is where it expects ad pricing will stay the first half of 2002. Mr. Diller said the increased advertising weakness “is going to make for a sharp but quicker correction” next year.

CBS drama lineup wins Tuesday in key demo: CBS’s all-drama Tuesday lineup posted attractive adults 18 to 49 gains, as the Eye Network took the night in the key demo (4.6 rating/12 share) by marking 7 percent week-to-week growth, according to preliminary Nielsen Media Research fast national data. On a night that had been widely predicted by advertisers and TV critics to be the most competitive of the week, CBS won a Tuesday in adults 18 to 49 for the first time since Nov. 23, 1993.

ABC’s mix of comedies and dramas experienced 11 percent weekly growth in adults 18 to 49 (4.0/11), finishing third behind NBC (4.2/11), which dropped 5 percent week to week.

The evening started out big for CBS, with the military-themed drama “JAG” winning the 8 p.m. (ET) hour in adults 18 to 49 (4.5/13), households (11.9/19) and total viewers (17.8 million). CBS researchers said it was the second-most-watched episode ever for the six-year-old drama.

It also provided a strong lead-in for the Eye’s freshman drama “The Guardian,” which won 9 p.m. in households (10.9/16) and total viewers (15.9 million) and move up 5 percent in adults 18 to 49 (4.2//11). Sophomore drama “Judging Amy” closed out the 10 p.m. hour with a best-ever, winning score in adults 18 to 49 (5.1/14, up 8 percent week to week), winning in households (11.8/19) and total viewers (17.0 million).

Although it unexpectedly won the adults 18 to 49 demo, CBS is expected to face stiffer competition starting Nov. 6 when ABC relaunches “NYPD Blue” and Fox premieres the highly anticipated real-time “24” drama in the 9 p.m.-to-10 p.m. Tuesday time slot.

In fact, Fox ran an all-repeat lineup Tuesday night, including a special repeat airing of “Dark Angel” in the 9 p.m. hour that dropped the time slot 47 percent in adults 18 to 49 (2.3/6) from “Love Cruise’s” series finale (4.3/10) the previous week. It appeared to give ABC an opening for double runs of “Dharma & Greg” (3.9/11) and “Spin City” (4.3/11) to grow 8 percent and 19 percent week to week, respectively, while frosh drama “Philly” (3.9/11) showed a promising 5 percent increase week to week.

Meanwhile, NBC’s struggling 8 p.m.-to-9 p.m. comedy combo of “Emeril” (2.7/8) and “Three Sisters” (2.9/8) remained flat week to week for the hour (2.8/8) in adults 18 to 49. Despite increasing 89 percent on the slumping lead-in hour, “Frasier” (5.3/13) and “Scrubs” (5.3/13) are feeling some of the corrosive impact, down 15 percent and 7 percent week to week. “Dateline NBC” was flat week to week in adults 18 to 49 at a second-ranked 4.4/12 score.

Langer rejoining NBC Human Resources: Pat Langer is coming back to NBC after nearly two years at Lifetime Television to be executive VP of NBC Human Resources. Her appointment takes effect Nov. 26. In addition to overseeing NBC’s employee relations and talent contract negotiations, she’ll also focus on strengthening management across all of NBC’s assets. She will succeed Ed Scanlon, who is retiring after 16 years.

Prior to becoming executive VP of human resources, legal and business affairs at Lifetime in January 2000, Ms. Langer was NBC’s VP of employment law and deputy general counsel. She also had been the network’s ombudsman and head of NBC’s integrity program. She started with the network in 1988 as assistant general attorney.

FX’s bet: The smart money is on a mid-November L.A. production start for “Confessions of a Campus Bookie,” the latest original movie greenlighted by FX. “Confessions” is the true story of a campus bookmaker involved in a point shaving scandal. Kevin Messick will executive produce. Jason Keller wrote the script based on a teleplay by Michael Ritchie. David Krumholtz (“Slums of Beverly Hills,” “The Mexican”) has signed for the lead role and Ernest Dickerson (“Bones”) will direct.

VH1 lifts Heavy: VH1 has gotten Heavy for its online animated-game tied in to this year’s “My VH1 Music Awards” show, set for a live telecast on Dec. 2. The Heavy multiple-choice game can be played at the VH1.com Web site, where fans can also cast their votes in this year’s various “Music Awards” categories.

Heavy, a company formed in 1998 by Simon Assaad and David Carson, creates live action and animated programming related to brand and marketing campaigns for media companies, advertising agencies and consumer products.

Sesame Workshop signs Jinkins, Campbell to development deal: Sesame Workshop, the creator of children’s television series “Sesame Street,” “Dragon Tales” and the newly animated “Sagwa, The Chinese Siamese Cat,” is teaming up with Cartoon Pizza television veterans Jim Jinkins and David Campbell in the development of at least six new properties for children. The creators of some of television’s top-rated children’s series, including “Doug” and “PB&J Otter,” will be housed in Sesame Workshop’s offices in a two-year deal announced Wednesday by Gary E. Knell, president and CEO of Sesame Workshop, and Bill Gross, co-founder and interim CEO of Cartoon Pizza.

(c) Copyright 2001 by Crain Communications