News

'Orphan' Networks Say: We're Fine

4/20/2003 8:00 PM Eastern

With about a half-dozen cable networks either up for sale or rumored to be on the block, it would be fair to assume that executives at these respective cable channels may be a little on edge.

But with sale rumors flying practically every week, most are taking a pragmatic approach to the sale rumblings — they're basically ignoring them.

The list is pretty impressive, with AOL Time Warner Inc. expected to sell its 50 percent interests in Court TV and Comedy Central; Liberty Media Corp. exercising its exit rights for its 42.5 percent stake in shopping channel QVC Inc., and debt-laden Vivendi Universal S.A. fielding offers for its Vivendi Universal Entertainment unit, which includes USA Network, Sci Fi Channel, Trio and NewsWorld International.

While speculation as to who will eventually end up with these networks, or even if they will be sold at all, can make for some pretty interesting talk around the water cooler, Sanford Bernstein & Co. media analyst Tom Wolzien said it is a natural progression for the industry.

"There is an evolution going on in the cable programming industry in two ways," Wolzien said. "One is the rationalization of the partnerships. When they're saying they're for sale, that doesn't mean they are broadly for sale on the market, it means that one partner is probably going to take the other partners out."

While these networks may be in a state of limbo as their respective parents figure out their future, most are staying the course.

QVC spokeswoman Bonnie Clark said the shopping channel is proceeding as normal. But QVC is in a different position because the Liberty exit rights will likely mean that either Liberty or Comcast would end up with the entire network, which she said softens the blow for QVC.

Currently, Liberty and Comcast are independently valuing their stakes in QVC, a process that could take several more months.

Comedy Central senior vice president of communications Tony Fox declined to comment.

Court keeps focus

At Court TV, chairman and CEO Henry Schleiff said that keeping focused on the business at hand is really the only way to go.

"If I thought about it, the permutations are incalculable," Schleiff said. "What I finally decided to do is to sit back and try to do the best we can do and let the chips fall where they may."

Schleiff, who contends his network is not for sale, said Court TV is probably in a better position than other networks because it is making money — it recently posted its first profit.

Court TV also plans to spend a record $180 million on programming over the next two years, two-thirds earmarked for original fare —despite co-owner AOL Time Warner's pledge to shave $4 billion in debt by the end of the year. The network has had success with its original slate, averaging 732,000 primetime viewers in 2002, a 40 percent increase.

Schleiff said Court TV keeps a close eye on costs and did so "long before it was fashionable." But he said AOL Time Warner has enjoyed a substantial return on its investment in Court TV — it has quintupled in value since 1998, when the network was estimated to be worth $400 million. It is now estimated to be worth about $2 billion.

"They understand in our case, their investment has paid off in dividends," Schleiff said. "I will say they have been an unbelievably fair parent. I don't want to say they've given us everything we wanted, but they have been fair."

"I would love to have more marketing dollars," Schleiff added. "Do I? No. Do they induce cable operators to put [Court TV] on their systems? No. We're very aware of the proper return on investment we make."

VUE: morale's good

At Universal Television Group, the unit inside VUE that includes USA, Sci Fi, Trio and NewsWorld International, spokesman Steve Webster said that morale isn't perfect, but that it is good considering the circumstances.

"Obviously when there is any possible instability or any thought of instability you're going to have some morale issues," Webster said. "But overall it's fairly positive, because it's business as usual."

Webster said that if there were money problems or the possibility that employees' jobs could change, it would be a different story.

"As long as people come to work every day, go to their same offices, do the same things they're used to doing, not having their budget slashed or having to figure out new ways to do their job, I don't think you're going to see any morale problems," Webster said. "That's what's happening here."

Webster added that all the network heads are focusing on growth, not whether their network will get sold.

"I can guarantee you that [USA president] Doug Herzog, [Sci Fi president] Bonnie Hammer, and [Trio president] Lauren Zalaznick have zero to do with any possible sale," Webster said.

Hammer — whose network has enjoyed large increases to its programming budget — said she, too, rarely thinks about a possible sale.

"I've been here [at USA Network] a long time and lived through change," Hammer said. "I've been treated well in past regimes and in this regime. You embrace whatever comes."

Simon Applebaum contributed to this story.

Networks in Flux
Company Status
Comedy Central, Court TV 50 percent owner AOL Time Warner Inc. has hinted that its interests in both networks could be for sale. No deal pending. Viacom Inc. owns the other 50 percent of Comedy; Liberty Media Corp. is the other 50 percent partner in CourtTV.
Sci-Fi Channel, USA Network, Trio, NewsWorld International Marvin Davis has made the only bona fide offer for VUE (which includes the three networks, Universal Studios and NewsWorld international for $20 billion. Others rumored to be interested in the networks include Liberty Media Corp., Viacom, NBC and former VUE co-CEO Barry Diller. No deal pending.
QVC Inc. 42.5 percent owner Liberty Media Corp. notified Comcast Corp. (57.5 percent) of its intention to exercise its exit rights for QVC. Move sets in motion a process where both stakes are valued by independent third parties. Comcast has the first option to buy out Liberty's stake in the network. If Comcast declines, Liberty could buy out Comcast's stake, or the entire network is sold to a third party. Currently in the evaluation stage.

Want to read more stories like this?
Get our Free Newsletter Here!
September
October

VR 20/20

The Times Center, New York, NY