Y&R Deal Nets CBS a SoapCity Stake

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CBS Corp. will get a small stake in Sony Corp.'s
24-hour soap-opera cable network, and cable operators may be able to offer the
service's programming on a pay-per-view or "instant-subscription basis,"
officials said last week.

"We are having discussions with MSOs about alternative
ways of them distributing this product," said Michael Fleming, president of
Sony's Game Show Network, which is handling distribution for SoapCity.

"With digital set-top converters, operators will now
have the capacity to sell programming in ways we couldn't dream about in the
past," Fleming added.

Sony's Columbia TriStar Television Group -- which owns
SoapCity and GSN -- closed a deal with CBS for the No. 1 daytime soap, The Young and
the Restless
.

Under that deal, CBS will retain the popular soap for five
years, in exchange for allowing Columbia TriStar to reair its episodes in primetime on
SoapCity on the same day they run on CBS.

In exchange for giving up exclusivity for The Young and
the Restless
, CBS will receive a small, unspecified financial stake in SoapCity, which
it will split with its affiliate TV stations.

SoapCity is set to launch in January, as will its direct
competitor -- another 24-hour soap-opera cable network from Disney/ABC Cable Networks.

Like the CBS stations with SoapCity, ABC's TV-station
affiliates also have a financial stake in Disney's soap channel.

But Fleming said SoapCity is talking with MSOs about using
their digital technology and digital set-tops to possibly offer the Sony soap channel in a
unique manner, and not just as a traditional ad-supported basic network.

"We're positioning this service in a different
way," he said. "A lot of operators are looking for flexibility in how they can
retail it. They may want to sell it on an instant-subscription basis or as
pay-per-view."

Columbia had been offering time-shifted episodes of
NBC's Days of Our Lives to direct-broadcast satellite operator DirecTV
Inc.'s subscribers on a PPV basis. That 13-month experiment ended in late June, and
DirecTV deemed it a "successful run."

Daily episodes of the show retailed at a suggested price of
$1.49 each, or $4.99 for a monthly subscription.

Fleming cited the experiment with DirecTV as the kind of
arrangement SoapCity is discussing with some MSOs. "Quite a bit of time-shifting goes
on in this category," he said, referring to soap-opera viewing.

Columbia TriStar is still in negotiations with cable
operators, and it hasn't announced any carriage deals yet for SoapCity. Some of the
issues on the table are MSOs getting a stake in the channel themselves, as well as upfront
cash launch fees.

"We're talking to the usual suspects about many
kinds of [deal] structures for MSOs and end-users, including them possibly taking equity
positions," Columbia TriStar executive vice president Andy Kaplan said.

Program exclusivity has been a hot button with station
affiliates of the "Big Four" broadcast networks, and that was the case with CBS
and ABC as far as the two planned soap-opera cable networks.

As for CBS and The Young and the Restless, CBS'
affiliates felt they had no choice but to give up exclusivity or lose the hit daytime
serial.

"We were willing to give up exclusivity to keep [the
show]," said Paul Karpowicz, chairman of the CBS Affiliate Advisory Board and an
executive at LIN Television Corp. "And we'll share any upside with CBS on the
soap channel. Whatever CBS gets out of it, we'll get half of that."

In the past, broadcast networks such as ABC, NBC and Fox
has used retransmission consent as a bargaining chip to get carriage for their start-up
cable networks. But Karpowicz said Columbia TriStar won't be able to use the CBS
stations as a retransmission-consent offering to get SoapCity distribution.

"Retransmission consent was never part of this,"
he added. A CBS spokesman said the network doesn't discuss its retransmission-consent
strategy.

Kaplan, however, hinted that retransmission consent could
come into play later. "It was not a formal part of this agreement, but it is in
discussions with CBS," he said.

This summer, The Walt Disney Co.'s ABC reached an
accord with its affiliates that gave them a stake in its soap-opera channel in exchange
for the right to show same-day reruns of ABC soaps in primetime on the new service. ABC
won repurposing rights for shows such as All My Children, General Hospital and
One Life to Live.

Disney hasn't announced any affiliation deals yet for
its soap-opera channel, either. It is currently hunting for a general manager for the
channel.

Several cable operators said last week that neither Disney
nor Sony had pitched them yet on the two soap-opera channels.

"I don't know any cable operator who is crying
for a soap-opera channel," Prime Cable corporate director of marketing and
programming Pam Burton said. "I need to see the programming before deciding if it
should be digital or not. In the digital world, it might work."

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