Nets: Sixth Senseless

Jan 30, 2006  •  Post A Comment

Sometimes big things come out of small dinner parties.

Last November Warner Bros. Chairman and CEO Barry Meyer and CBS Corp. President and CEO Leslie Moonves found themselves at the same dinner party. They have known each other for decades, first working together when Mr. Moonves was a development executive at Lorimar Television and Mr. Meyer was supervising Warner Bros.’ purchase of Lorimar.

At the dinner, Mr. Moonves and Mr. Meyer asked each other how their respective affiliate deals were going with CBS-owned UPN and Warner Bros.-co-owned The WB. Mr. Moonves had had some preliminary discussions with the Fox-owned UPN stations to continue their relationship with the network. With Fox owning the UPN affiliates in the nation’s largest markets, including New York, Los Angeles and Chicago, securing a renewal with Fox was deemed essential. Mr. Meyer said he had also started preliminary discussions with partner Tribune Entertainment about the distribution over its stations of The WB.

With no Fox deal renewal in place for UPN and no Tribune renewal in place for The WB, the two men began talking about an idea that had been discussed privately and in the marketplace for years-could the fifth and sixth networks combine their resources to make a stronger, more profitable business?

Mr. Meyer and Mr. Moonves didn’t waste time finding out. They immediately enlisted the help of their two longtime trusted top lieutenants, Nancy Tellem, president of CBS Paramount Network Television Group, and Bruce Rosenblum, president of Warner Bros. Television Group.

Like their bosses, Ms. Tellem and Mr. Rosenblum have known each other for 20 years, since they started at Lorimar within weeks of one another as low-level business affairs executives in 1986. Later, both worked for Mr. Moonves when he ran Warner Bros. Television-where Mr. Meyer was Mr. Moonves’ boss.

Instead of opting for protracted meetings with an army of executives, the quartet of Mr. Moonves, Mr. Meyer, Ms. Tellem and Mr. Rosenblum worked largely solo and allowed two huge companies to quickly-and most incredibly, quietly-pull off one of the largest network broadcasting deals since UPN and The WB were formed over a decade ago.

The fact that the deal got done is directly attributable to those relationships, Mr. Meyer told TelevisionWeek last Wednesday.

“When you put together a deal like this that is so complex, with different parties, it involves a level of confidence and trust,” he said. “You don’t get that overnight.”

In particular, Mr. Meyer said, he and Mr. Moonves relied on Mr. Rosenblum and Ms. Tellem to work through the countless details necessary to make The CW a reality.

“They really did the yeoman’s chores,” Mr. Meyer said. “They would not be shaken by the problems. They really did develop a strong strategic view that this was the right thing to do. And they would not let things get in the way of getting things done.”

“We have been so inextricably linked together professionally,” Ms. Tellem said. “It is a very unusual situation.”

Very quickly, Mr. Meyer said, the quartet realized that “The biggest thing was figuring out a programming model that took a lot of the potential conflict out of the mix.”

In other words, that meant avoiding a situation in which Mr. Rosenblum and Ms. Tellem would be pressuring their colleagues-and each other-to make decisions about programming, because their parent companies owned different projects. That potential problem went away when they agreed that going forward, all shows from either company on The CW would be equal co-productions, Mr. Rosenblum said.

“If [CBS Paramount Network Television President] David Stapf develops a show, Paramount will produce the show, but both production companies will be on the screen,” Mr. Rosenblum explained in an interview with TVWeek at the National Association of Television Program Executives convention in Las Vegas. “Both companies will share the deficit financing, and both shows will share the profits coming out of those series. Third parties come off the top, we take a small distribution fee, whoever is distributing it, [with a] 50/50 profit down the middle.”

That means creative decisions at the network are made without ownership being an issue, Mr. Meyer said.

“When it comes time for scheduling or renewal we have an equal interest in having it renewed or not renewed,” he said. “We needed an innovative way to solve the biggest point in a potential joint venture. Bruce and Nancy came up with one.”

The fine print did remain an issue up until right before the announcement, with Ms. Tellem noting that on the Sunday before, all four of them were on the phone ironing out last-minute details. But on the flight from Los Angeles to New York for the Jan. 24 announcement, Ms. Tellem noticed something as she traveled with Mr. Rosenblum and Mr. Meyer to meet Mr. Moonves.

“It’s not like you’re sitting with strangers. It’s like you’re with friends and colleagues,” she said. “That made the deal much easier to make in the sense we knew each other well enough we put our cards on the table.”

Remaking the Model

The CW goes back to the model that The WB founder Jamie Kellner envisioned when he created the network, which includes a reverse-compensation structure, Mr. Rosenblum said. But the creation of UPN changed that equation.

“Once two companies tried to take that one seat, and there really is room for only one seat, we were competing for affiliates and we no longer charged them,” he explained. “Now that the two companies have decided to merge, this new network will in fact have that fifth seat at that table and will be able to go market by market and generate a reasonable amount of money in the form of reverse compensation. That is an effective secondary revenue stream for the new network.”

Of course, if Fox or some other player now starts a new sixth network, and a bidding war evolves for stations to carry either it or The CW, that plan could implode.

The negotiations to dissolve UPN and The WB and start The CW expanded beyond the four principals only when they needed to, Mr. Rosenblum said, for example, when outside law firms were employed to handle legal matters.

“A lot of the hurdles were not the traditional business decisions,” he said. “They were the traditional legal protections that are necessary when you have a joint venture between two publicly traded companies.”

Garth Ancier, chairman of The WB, was involved early in the conversations, Mr. Rosenblum said, and was willing to provide help. But after helping launch Fox Broadcasting in the 1980s and working on the early stages of The WB a decade ago, he “had no interest in another start-up network,” Mr. Rosenblum said.

The decision to go with UPN chief Dawn Ostroff as The CW’s entertainment president over The WB’s David Janollari “was extraordinary difficult,” Ms. Tellem said, noting that the four had all worked with Mr. Janollari when he was a development executive at Warner Bros. Television, where he had shepherded “Friends.”

“It was the most challenging decision between us,” Mr. Rosenblum said, noting that he and Mr. Meyer called Mr. Janollari hours before the Jan. 24 press conference in New York to tell him the news of the new network and the dissolution of The WB.

Describing Mr. Janollari as an “exceptional” executive, Mr. Rosenblum said, “We’re hopeful he decides to stay” with The CW in some capacity, potentially as a producer of new series.

Another difficult moment was breaking the news to staffers at The WB, Mr. Rosenblum said. Immediately after the announcement in New York, he and Mr. Meyer flew back to Burbank, Calif., to tell The WB employees themselves, before Mr. Rosenblum flew to the NATPE convention.

“You can’t overlook that a lot of people have spent 11, 12 years of their lives building The WB,” Mr. Rosenblum said, describing the launch of The CW as “bittersweet.”

Ms. Tellem said it was “a very, very difficult decision” to have to make
, knowing people at two networks are going to lose their jobs.

But it was a decision that ultimately had to be made, Mr. Meyer said, if either company wanted to own a viable, money-making network.

And as a content-making studio, “Our strategic need for a platform for programming is greater than it’s ever been,” he said.