Heyer Will Keep Eye on TBS Costs

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A rising star at Turner Broadcasting System Inc., Steven
Heyer, shot even higher last week with a promotion that will have him looking at
programming purchases by the company's networks in terms of their economic return.

The move comes at a time when the Federal Communications
Commission has begun asking questions about how cable operators are passing through
programming costs from networks and whether subscribers are sharing too much of that
burden.

Heyer, an ad-agency veteran and former management
consultant, was named president and chief operating officer of TBS Inc., part of Time
Warner Inc. Heyer will report to Terence McGuirk, chairman and CEO of TBS Inc., who is
relinquishing his title of president. Heyer will relocate to Atlanta, but he will still
spend time in New York.

'His key area is to bring his revenue experience to
bear against future programming purchases ... to understand the bottom-line impact,'
McGuirk said. 'This is a natural evolution of Steve's analytical
abilities.'

In his former role as president of the worldwide sales,
marketing, distribution and international networks group for TBS Inc., Heyer was in charge
of ad sales and affiliate sales, two key revenue streams. Now, he will also be concerned
with costs, which mainly relate to programming.

'It's [Heyer's promotion]
well-deserved,' said Harold Vogel, an analyst at Cowen & Co. 'He's
earned his stripes.'

Heyer, 45, noted that he was 'intimately
involved' in Turner Network Television's decision to pass on the National
Football League cable package this year, which was a prime example of evaluating a
programming investment -- and nixing it -- because of the limited return on investment.

'Regretfully, we walked away from the opportunity to
buy it [the NFL] because the price was bid up and it was not in the best interest of our
company or the cable industry,' Heyer said.

TNT is now devising a programming strategy to fill the NFL
gap, according to Heyer.

Heyer's task is to work with the heads of TBS
Superstation, TNT and Cartoon Network on a strategy that 'combines decision-making
for programming investment and evaluation of its economic return,' according to
McGuirk. The entertainment presidents will continue to report to McGuirk.

Vogel pointed out that trying to control programming
expenses too tightly is problematic. 'It's a very tough job to cut any
costs,' he said.

For example, TNT picked up Babylon 5 this year, and
Vogel said TNT can't cut corners on production values on a show like that, which can
cost $1 million to $1.5 million per episode, and still have a series that can compete with
broadcast.

TNT and TBS have also made huge investments to acquire the
first broadcast windows for theatricals such as The Shawshank Redemption. The goal
is to pump their ratings up to broadcast parity. TNT, even without the NFL, would still be
the highest-rated basic-cable network in primetime, according to Heyer.

TNT's rate had 12 cents per subscriber, per month
built into it to cover the NFL costs. Heyer said that even though TNT will no longer have
that cost burden, that 12 cents will most likely go toward covering the more than $800
million that TNT and TBS will pay for National Basketball Association rights.

Turner has converted TBS to a basic-cable network from a
superstation, and Heyer said several major MSOs have sold out their new local ad inventory
on TBS.

In terms of digital, Turner eventually plans to have an
entree in the digital-network arena, McGuirk said. But the company is not rushing in,
preferring to focus its attention on its core businesses, its analog networks, both Heyer
and McGuirk said.

Heyer joined Turner in 1994 to head its ad-sales arm as
president of Turner Broadcasting Sales Inc. At TBSI, Heyer heavily lobbied Madison Avenue
for cable versus broadcast with his 'Media in the Millennium' report.

Jon Mandel, Grey Advertising's director of national
broadcast, said Heyer made substantial improvements at Turner's ad-sales unit,
although he thinks that it still needs work. 'It is so far superior to where it was
before,' Mandel said. 'But it takes time to turn around a battleship.'

Heyer came to Turner from Young & Rubicam Advertising
Worldwide, where he was president. He also spent 15 years at Booz, Allen & Hamilton
Inc., where he was senior vice president and managing partner.

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