Jury’s Out on Court TV’s Future

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Final deliberations appear to be underway on a deal that could soon give Time Warner Inc. full control of Court TV and place it within its Turner Broadcasting System Inc. unit.

In exchange, Time Warner’s 50% partner in the Courtroom Television Network, Liberty Media Corp., would secure ownership of the Atlanta Braves baseball team.

It’s long been expected that Time Warner, which has been overseeing the cable network’s operations, would assume control of Court TV. In fact, recently retired Liberty Media CEO Robert “Dob” Bennett said at an industry conference in Florida in March 2005 that Liberty would look to monetize its stake in the service in 2006. But until last week, the expectation had been that the investigation channel would remain a standalone entity.

In an interview two weeks ago, Court TV CEO Henry Schleiff said Time Warner would take “full ownership” of the network and its related properties “quite shortly.” Then Turner senior vice president of corporate communications Shirley Powell last Wednesday confirmed reports from inside the network that a Time Warner-Liberty agreement could mean Court TV ends up in Turner’s stable, which includes TBS, Turner Network Television, Cartoon Network and other entertainment services.

Remaining to play out: Where Court TV’s offices and operations might end up, what will happen to its top executives — and the channel’s format — after Time Warner takes over.

Court TV, for instance, is located at Third Avenue and 39th Street in Manhattan, while Turner’s flagship channel, Cable News Network, operates out of the Time Warner Center at Columbus Circle.

Also subject to discovery: What John Malone — the cable pioneer and now chairman of Liberty — wants with a Major League Baseball team.

Time Warner Inc. executive vice president of corporate communications Edward Adler said the company is “speaking to Liberty about the other half of Court TV, but no deal has been struck yet.” Liberty didn’t return phone calls.

Court TV executives declined to comment about the potential ramifications. However, workers at the network, which employs more than 400, were wondering last week if Court TV would even retain an operational presence in New York, since Turner’s headquarters are in Atlanta, and, if there are executive or staff cutbacks, who might wind up with work within Time Warner Inc.

“There hasn’t been any word from management,” said one Court TV staffer. “If we are absorbed by Turner, I can’t imagine there would be any need for marketing and affiliate sales. Or for many of the top executives either.”

One former Court TV employee who spoke with a senior executive at the network last week was told that the layoffs following the Time Warner deal would occur by the end of 2006. “They’ll all be out at the end of the year,” the former Court TV executive said, adding that the main employees expected to keep jobs at the network would be on-air talent and program-production personnel.

THE 'L&O’ CHANNEL?

Also open to question: Whether Court would be reformatted under Turner’s watch, perhaps airing some of the serialized dramas that appear on TNT, such as Law & Order.

“Big programming companies like Turner, MTV [Networks] and NBC Universal often structure deals so series and movies can run across multiple platforms,” said a veteran programming executive not affiliated with Court TV, but with experience in the syndication business. “I know Turner has done that with its movie packages, and they probably went the same way with L&O, unless it was prohibitively expensive.”

TNT officials didn’t return phone calls.

This executive points to erosion of L&O on TNT this year and for expense reasons: “I hear that TNT will go hard after Grey’s Anatomy. They might want to shift some of the Law & Order runs to Court, and offload some of the fees in order to free up funds [to acquire syndication rights for Grey’s Anatomy].”

While starting to show some significant ratings erosion this season, TNT rode the strength its off-network repeats of the flagship L&O series to the top of basic cable in total viewership from 2003 through 2005. This season, though, L&O episodes — while still generating gigantic numbers by cable standards — have sustained more than 20% erosion in households and among adults 18 to 49 viewers in its various time slots.

TNT next season will also be able to slide other syndicated dramas like Without a Trace into different evening timeslots, while Cold Case will be open for multiple runs on the “drama” network in 2007.

In the same vein, a shifting of movies could also benefit Court. “Obviously not all of the films would be the right fit, but Court could run some legal-themed movies and serve as a lead-in to original programming, much like FX does now,” this programming executive said.

As for Court’s own Nielsen performance, the network is enjoying a strong 2006: averaging 903.000 total viewers through April 26 and 391,000 adult 18 to 49 watchers in primetime, the most ever in those measures over the comparable span. That performance has been bolstered by its “Red Zone” action strip in the 8 p.m. hour. Debuting in the first quarter, the block averaged 403,000 adults 18-to-49 watchers, vaulting Court a dozen places to No. 8 against that demo among ad-supported cable networks, according to network officials.

In daytime, Court had ranked second to Fox News Channel among cable news networks for much of 2005, before falling behind CNN, in the wake of coverage of Hurricane Katrina in the last four months of the year.

DEAL STRUCTURE

According to reports published in The Atlanta Journal-Constitution, the deal would be structured as a cash-rich split-off. Under that structure, Liberty would transfer its 50% interest in Court TV, valued at about $650 million to $750 million, to Time Warner in exchange for Time Warner’s interest in the Braves, valued at $400 million, and cash.

In a separate deal, Liberty would exchange about 100 million shares of Time Warner stock, valued at about $1.7 billion, that it owns for cash.

Liberty can avoid a tax hit by exchanging its Court TV interest for an asset of similar value. If Liberty sold its stake outright, the taxes could be huge.

If Liberty’s stake in Court TV originally was worth $100 million and it sold outright for $650 million to $750 million in stock or cash, the tax bill could be between $150 million and $180 million. The catch to the cash-rich split-off tack: Liberty must hold onto the asset for at least two years.

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