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CW Out to Set Key Markets

Feb 20, 2006  •  Post A Comment

The CW Television Network began making its pitch to potential affiliates late last week, sending out bid letters to a select group of broadcasters in hopes of locking up a number of important markets within the next couple of weeks, according to people familiar with the situation.

The network began sending letters last Thursday to station groups that own WB or UPN affiliates in large markets and other markets seen as important to The CW, several sources said. The package containing the bid letter included a DVD with clips of shows currently airing on The WB and UPN and features 90 seconds of commentary from CBS Corp. CEO Leslie Moonves, according to one person who has seen the package.

The goal is to reach affiliation agreements in these key cities before hitting the rest of the country, a person familiar with The CW’s plans said. The move was expected (TelevisionWeek, Feb. 13). The bid letter The CW sent last week contains one blank space that station group executives are expected to fill in with a dollar figure representing the amount per year they are willing to pay The CW in reverse compensation, according to the person who saw the letter.

Stations will get three minutes of advertising inventory per prime-time hour. The contract also mentions a Sunday 5-7 p.m. block of programming-a block that WB affiliates have often used to run repeats of prime-time programming, the source said.

CW officials said they hope to have 95 percent coverage of the United States by the time the network launches in September. But the network could face some challenges getting there, thanks in part to a growing skepticism among several broadcasters about the new network’s prospects and questions over the revenue opportunities the network presents to many stations.

The skepticism, which had been rumbling largely under the surface, became fully exposed last week when LIN TV Chairman Gary Chapman publicly voiced specific doubts about The CW’s viability during his company’s quarterly earnings call.

He hinted that it wasn’t assured that LIN would go after the CW affiliation in the seven markets where the company owns either a UPN or WB affiliate.

“We’ll obviously evaluate [the network’s pitch], but we are exploring the possibility of maybe not becoming CW affiliates,” Mr. Chapman said in an interview, noting that The CW’s success is not guaranteed. “It didn’t work for UPN or Warner Bros. [which owns The WB Network]. That’s why they shut both of them down.”

Mr. Chapman’s sentiments echoed those of several station-group executives who say they, too, haven’t decided whether they will sign up to carry CW programming.

However, some broadcasters said they were surprised at Mr. Chapman’s public candor.

“I was surprised by what he said,” said the head of one station group. “I don’t know if he was sending a message or what.”

One particular bone of contention is the weekday 3-5 p.m. block that The CW plans to program, which will leave many local stations unable to generate significant revenue off this lucrative block.

“It’s a huge barrier because clearly that is a place where local stations make their money,” said one executive.

Another area of concern is the kids’ programming block on Saturday mornings.

But perhaps the biggest worry for some broadcasters is the suggestion that The CW will demand reverse compensation in exchange for the network affiliation, something many broadcasting executives say they are loath to pay.

“We have tough negotiations ahead of us,” said one station group executive who vowed that he would fight not to pay The CW reverse comp. “We’ll have opportunities, but not without a price.”

For his part, LIN’s Mr. Chapman said one factor that might keep him from partnering with The CW was the fact that LIN generates only 1.5 percent of its total revenue from the UPN and WB prime-time lineups. That’s because the station group has the opportunity to sell four minutes of advertising inventory during each prime-time night. Replacing that lineup with syndicated programming and having the ability to sell 16 minutes of inventory during prime time would provide LIN with far more upside-even if ratings didn’t budge.

“We do know that four minutes a night in prime time with a 2 rating is not as good as 16 minutes of inventory with a 1 or 2 rating,” Mr. Chapman said. “I’d rather have 16 minutes than four minutes, especially if you aren’t pretty secure that the network is going to have a heck of a lot larger number than what you might put in there on a syndicated basis. You would be better off having more [inventory].”

A CW spokesman declined to comment on the status of the negotiations.

The CW already has distribution in many of the country’s biggest cities, including New York, Los Angeles and Chicago, thanks to affiliation pacts reached with stations owned by CW co-owner CBS Corp. and by Tribune Co.

Michele Greppi contributed to this report.