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Dec 17, 2001  •  Post A Comment

Posted Monday, Dec. 17, at 10:45 a.m. (PT); last updated 2:30 p.m.

NBC buys KNTV in San Jose

NBC will immediately begin throwing its marketing firepower behind KNTV’s scheduled Jan. 1 switch to an NBC affiliate from a short-time independent now that NBC has formalized plans to buy the San Jose station from Granite Broadcasting for $230 million in cash.

More billboards, radio and television spots and other forms of local marketing will become more evident this week as NBC turns up the promotional juices on the change, sources say.

The transaction, which is subject to regulatory approval, is expected to close in the first half of next year. Since the first quarter of 2000, KNTV has been scheduled to assume NBC affiliation for the San Francisco/San Jose/Oakland market from KRON on Jan. 1, 2002.

Granite will operate the station under that affiliation agreement until the acquisition is approved. The KNTV acquisition will bring the number of NBC owned-and-operated stations to 14. In addition, 11 Telemundo stations are on track to become part of the NBC stations group when the Peacock’s acquisition of Telemundo closes in the new year. The Telemundo station in the San Francisco market will give NBC a duopoly there.

The deal brings to an end the highly controversial only “pay for play” reverse compensation arrangement ever between a network and one of its affiliates. When the KNTV deal is closed, Granite will no longer be required to make payments over the next nine years to NBC for the KNTV affiliation, reaching 1.5 million local homes and another 2 million area homes through cable. NBC is expected to capitalize on the AT&T Broadband cable connection in San Francisco by possibly launching new interactive services in the tech-savvy market, sources say.

NBC had been negotiating to acquire Young Broadcasting’s longtime NBC affiliate KRON, but those talks failed last week when a price could not be reached. Sources close to the discussions said NBC’s last offer for KRON was $460 million, much less than the $800 million Young paid for the station several years ago and still wants to redeem.

Not surprisingly, Young Broadcasting announced Monday it has hired Credit Suisse First Boston to help it sort through “the options” it has for monetizing its TV station assets.

Industry analysts say debt-encumbered Young may have to sell one or all of its stations within the next year. Buyers could include NBC, The Walt Disney Co., Fox Broadcasting and Viacom, depending on whether stations are cherry-picked or sold wholesale. KRON’s cash flow will begin sinking like a stone after the Jan. 1 affiliation change. Conversely, KNTV’s cash flow is expected to double within four-plus years as a result of being an NBC affiliate in a top market, analysts say.

‘SNL’ hits ratings high: NBC’s “Saturday Night Live” matched its highest overnight rating since its Sept. 29 season opener, with its Dec. 15 edition posting a 7.6 rating/18 share household average in Nielsen Media Research’s metered markets. Last Saturday’s edition of the 26-year-old late-night staple (11:30 p.m. to 1 a.m., ET), hosted by Ellen DeGeneres and featuring musical guest No Doubt and a special appearance by New York Mayor Rudolph Giuliani, matched “SNL’s” best numbers since Jan. 20, 2001 (8.3/19) in the overnight local markets.

In the New York market, the Dec. 15 edition of “Saturday Night Live” surged to a 9.7/21 household average. National ratings are due from Nielsen this Thursday.

Vivendi, USA strike deal: Barry Diller got what he wanted Monday: lots more money, lots more power, and more time to achieve his career-long goal of owning a broadcast network.

French-based Vivendi Universal’s $11.7 billion acquisition of the 57 percent of the USA Networks Inc. entertainment assets it doesn’t already own will make Mr. Diller one of the industry’s most wealthy and powerful men, with economic influence and contacts to force industry change and make other major acquisitions.

Mr. Diller will be chairman and chief executive officer of the new Vivendi Universal Entertainment joint venture without salary and without an employment contract, reporting to Vivendi Chairman and CEO Jean Messier.

Additionally, Mr. Diller, 59, will solely control and oversee his thriving interactive businesses-to be renamed USA Interactive-including Home Shopping Network, Ticketmaster, Hotel Reservation Network and Expedia.

Mr. Diller said he decided to go to work for someone else again-something he swore he would never do since his days of building and leading TV networks at Fox and Paramount-for the sheer joy of having the money and power to realize some of his career-long goals.

Mr. Diller will have a 1.5 percent stake, worth $275 million, and options to acquire a larger stake in or to cash in on the new Vivendi Universal Entertainment joint venture. USA Networks Inc. shareholders will have a 5.4 percent stake, valued at $1 billion, and Vivendi Universal will own 93 percent.

USA will use some of the proceeds of the deal to acquire back the 43 percent stake Vivendi owns to create the separate, publicly traded USA Interactive.

In the new USA Interactive, Mr. Diller will have a 7.4 percent stake, John Malone’s Liberty Media Corp. will have an 18.6 percent stake and Microsoft Corp. will have a 3.3 percent stake. However, other shareholders will not have any veto rights or voting control in USA Interactive, although they will have USA board representation.

Vivendi, which is exchanging its 43 percent stake in USA Networks Inc., will receive warrants so that it can participate in the upside as the company’s cash flow grows from a current 15 percent annual growth rate to 33 percent during the next several years. Liberty also will come out of the complex deal selling its 27 percent stake in European cable TV company Multithematiques to Vivendi Universal, and gaining a 3.6 percent stake in overall corporate parent, Vivendi Universal.

Mr. Diller relied on Herb Allen and JP Morgan Chase as advisers on the deal. Vivendi Universal used Goldman Sachs and Morgan Stanley Dean Witter.

The new Vivendi Universal Entertainment joint venture is valued at about $22 billion, including debt, and the companies will pay more than $1 billion in taxes on the deal.

USA Interactive will be valued as a $10 billion stand-alone interactive entity whose profitability is second only to that of eBay. The company also will have a $3 billion war chest to make acquisitions. Analysts speculate Mr. Diller could buy Yahoo!, eBay or even Amazon.com. Although it will remain a publicly traded company and could use its stock in deals, Mr. Diller said he likely will use the cash horde for acquisitions.

“We just set free the power of USA Interactive, which you will see grow and develop over the next year,” Mr. Diller said. “USA’s course is clear and independent,” he added, nixing speculation that he eventually may roll his interactive assets into Vivendi Universal.

Mr. Diller spoke Monday morning to analysts, who asked about him dividing his time and energy between the traditional entertainment and interactive worlds. “I have two real hearts going,” he said.

“I will serve at the pleasure of both Mr. Messier and myself,” Mr. Diller said, speaking of the former investment banker who masterminded the USA deal that many said would never happen given Mr. Diller’s insistence on autonomy. Vivendi is buying back the assets Mr. Diller acquired from then Universal chief Edgar Bronfman four years ago for $4.5 billion. In snaring Mr. Diller, Mr. Messier gains instant credibility with Hollywood’s production community and on Wall Street.

“I have over the course of the year gained enormous respect for what Jean-Marie is trying to accomplish in building a first-tier media and entertainment company,” Mr. Diller said, conceding the two companies can achieve together what neither can do separately.

“I’ve essentially been an employee my entire business career. … But I also yearned to have my own company in whatever shape or size I am comfortable or capable of creating or acquiring. I believe I have achieved the goals I set out and I will continue
to ‘have my own company’ at USAI,” Mr. Diller said.

“I will take my leadership in Vivendi Universal Entertainment happily under the direction of Jean-Marie Messier,” he said.

Sources say one of his first objectives will be to acquire a broadcast network, such as NBC, from its corporate parent, General Electric. New GE Chairman Jeff Immelt is supportive of expanding NBC through mergers and acquisitions. NBC and Mr. Diller’s USA Networks Inc. in recent years have been close to securing a strategic alliance.

AMA at odds with NBC over TV liquor ads: The American Medical Association late Friday called NBC’s decision to air liquor ads “shockingly irresponsible.”

“The decision by NBC to accept advertising for liquor is shockingly irresponsible and should be reversed immediately,” the AMA said in a statement. “It is obvious the network is putting its desire for profit far above the health of our nation-especially young people, who develop many of their ideas and expectations about alcohol from watching TV.”

The AMA also said the network’s guidelines for the ads “are nothing more than window dressing designed to fool the public and distract critics of this preposterous plan.” The organization said it will continue to work for “total statutory prohibition” of alcohol ads on television.

‘SNL’ hits ratings high: NBC’s “Saturday Night Live” matched its highest overnight rating since its Sept. 29 season opener, with its Dec. 15 edition posting a 7.6 rating/18 share household average in Nielsen Media Research’s metered markets. Last Saturday’s edition of the 26-year-old late-night staple (11:30 p.m. to 1 a.m., ET), hosted by Ellen DeGeneres and featuring musical guest No Doubt and a special appearance by New York Mayor Rudolph Giuliani, matched “SNL’s” best numbers since Jan. 20, 2001 (8.3/19) in the overnight local markets.

In the New York market, the Dec. 15 edition of “Saturday Night Live” surged to a 9.7/21 household average. National ratings are due from Nielsen this Thursday.

Fox sweeps Sunday in key demos: Fox swept up Sunday prime time in the adults 18 to 49, adults 18 to 34 and teen demographics while CBS won the night in households and total viewers, according to preliminary Nielsen Media Research fast national data.

Thanks to a half-hour overrun of NFL gridiron telecasts, generating a top-ranked 8.1 rating/24 share among the core adults 18 to 49 demo from 7 p.m. to 7:30 p.m. (ET), Fox’s lead-out sitcoms-“King of the Hill” (4.7/13), “The Simpsons” (6.6/17) and “Malcolm in the Middle” (6.5/16)-similarly won their time slots.

From 7 p.m. to 9 p.m., Fox had about double the numbers of ABC’s “Wonderful World of Disney” Christmas-themed “Winnie The Pooh” and “Charlie Brown” specials in teens (5.5/19 vs. 2.2/8) and adults 18 to 49 (6.5/16 vs. 3.8/9). NBC’s presentation of the movie “Antz” came in last in adults 18 to 49 (2.6/7), but second in teens (2.8/9).

Even Fox’s recently faltering veteran 9 p.m.-to-10 p.m. drama “The X-Files” exhibited 11 percent week-to-week improvement in adults 18 to 49 (4.9/11) and 14 percent in adults 18 to 34 (4.9/13). In the competitive 9 p.m. hour, ABC’s “Alias” tied “X-Files” in adults 18 to 49 (4.9/11) and came in second in adults 18 to 34 (4.3/12), but also improved 9 percent and 10 percent compared with its week-ago averages.

Fox won the night in adults 18 to 49 (6.0/15) and adults 18 to 34 (6.2/18), improving by healthy 28 percent and 24 percent margins week to week, respectively.

CBS took the 9 p.m.-to-11 p.m. frame in households (12.3/19) and total viewers (18.1 million) with its mass-appeal telefilm “A Town Without Christmas,” although it came in third in adults 18 to 49 (4.3/10). Along with CBS getting winning measures in households with “60 Minutes” (11.1/19) and “Touched by an Angel” (10.4/16) to open the evening, CBS took the night in households (11.5/18) and head count (16.8 million).

NBC proved somewhat hamstrung by a repeat showing of the well-traveled “Titanic” (Part 1), which came in third in households (6.7/11) and total viewers (10.8 million) while finishing second in adults 18 to 49 (4.6/11) from 9 p.m. to 11 p.m. Benefiting from a somewhat stronger “Alias” lead-in, ABC’s “The Practice” tied “Titanic” with a 4.7/11 in adults 18 to 49 during the 10 p.m. hour while sinking the doomed passenger liner in households (7.8/13 vs. 7.0/11).