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One month that shook the world

For the third year in a row, the biggest news in the TV industry is happening off the screen. In 1993, the battle between cable operators and broadcasters took center stage. Last year, station affiliation wars rattled the industry and threw networks into chaos.

But that doesn’t compare to what has happened in the biz over the last four weeks. Both ABC and CBS are being gobbled up. Walt Disney Co. is acquiring Capital Cities/ABC for $19 million and Westinghouse is trying to buy CBS for $5.4 billion.

And on top of that, Ted Turner, looking to get bigger, is in merger talks with his former antagonist and key shareholder Time Warner. The $8 billion-plus merger would create a company that would rival Disney/CapCities.

The merged companies would marry Time Warner’s content businesses – such as Warner Bros., Warner Music Group, HBO, and Time Inc., along with the media giant’s vast cable holdings – with Turner’s collection of cable networks including CNN, TBS, TNT and Turner Classic Movies, as well as studios New Line and Castle Rock.

The unknown is whether Tele-Communications Inc., the nation’s largest cabler and 21% owner of TBS, will sign off on the deal. TCI CEO John Malone is said to be concerned about the deal, and if he goes along, expect the company to try to win huge extractions such as carriage for TCI-backed networks and favorable terms for Turner and Time Warner nets.

Meanwhile the industry is still spinning over Disney’s stunning acquisition of Capital Cities/ABC. With a network, Disney guarantees distribution of syndicated and network product. While no one assumes all Disney programming will get on ABC at the expense of other fare, the company is a force to be reckoned with. The CBS-Westinghouse entity pales in comparison. While Westinghouse chairman Michael Jordan says his goal is to build the strongest broadcasting company in the world, most industry observers are wary.

Still, despite all the negative buzz around the deal, there are many strengths to a CBS-Westinghouse company. For starters, the new CBS will own 15 stations that reach 33% of the country. While that is over the current government limit of 12 stations reaching 25%, Congress is in the process of rewriting the Communications Act and the station ownership limits are expected to be relaxed for at least 35% of the country.

The company also will own one of the strongest radio groups in the industry, and while that does not excite the financial community or Hollywood, it will provide a steady stream of profits to the new CBS.

Indeed, while much of the attention has been focused on changes at ABC, it is CBS that will look the most different this fall. The Eye web, tired of being called the geriatric network for its older-skewing programs, is rolling out 11 new shows this year in a bold effort to capture young viewers.

The network also has experienced major changes at the executive level. Gone are longtime CBS Broadcast Group president Howard Stringer and entertainment chief Peter Tortorici. Stringer bailed on the Eye web to head up a new telco venture with Baby Bells Nynex, PacTel and Bell Atlantic. Tortorici quit last spring when CBS brought in Warner Bros. TV chief Leslie Moonves over him.

Moonves had one of the strongest success records at Warner Bros, and now faces his greatest challenge at CBS. Besides trying to launch 11 shows and put a new face on the Eye web, the network also now has a weak distribution system in key major markets such as Detroit and Milwaukee, which is also eating into its ratings.

With mergers come changes at the top and again it was Disney – with the hiring of Creative Artists Agency chairman Michael Ovitz – that has led the way. Already Ovitz is looking to make major changes at the company and bring in talent.

But Disney is not the only studio everyone is watching. Seagram has acquired MCA for $5.7 billion and is preparing to undo five years under Japan consumer giant Matsushita. While much of the attention has been focused on film, TV will be a major part of the new MCA. Ron Meyer, who gave up the presidency post at CAA to become president of MCA, is also wooing the best and the brightest to shore up the studio’s lackluster TV department.

There is also a new player in town – DreamWorks SKG. The start-up studio run by Jeffery Katzenberg, Steven Spielberg and David Geffen has been making some high-profile TV hires, including Fox’s executive VP Ken Solomon and Dan Mc-Dermoot, VP/current programming, to help bolster the studio’s small-screen team.

Don’t forget NBC and Fox either. Over the last year, NBC has flirted with both TBS and Time Warner, although nothing has come of the talks. Still, the network knows it needs to grow to stay in the race. NBC owner General Electric appears prepared to open up the wallet. Earlier this month, the Peacock web made a stunning preemptive bid of $1.27 billion to lock up the 2000 Summer Olympics and the 2002 Winter Olympics.

Fox, meanwhile, continues to add TV stations and form strategic partnerships, including one with MCI that resulted in a $2 billion investment in the netlet’s parent company News Corp. from the long-distance company. On the programming front, the weblet also continues to view sports as its future. Although it lost out on the Olympics, Fox is expected to go after baseball when its contract is up with ABC and NBC later this year.

Leading the way for much of the change in the telecommunications industry is Washington. Congress is looking to deregulate much of the TV industry including station ownership caps, meaning the networks and large group owners will continue to gobble up TV stations. This will also mean fewer players in the business.

Programming regulations are also going the way of the dinosaurs. The financial interest and syndication rules that for years kept the networks from owning and programming much of their primetime lineups will be history in November. That means the Big Three can start to enter the first-run syndication business as well as distribute reruns in the off-network syndication market.

And earlier this month, the FCC blew out the primetime access rule that prohibited network affiliates in the top 50 markets from airing off-network reruns in the hour before primetime known as prime access.

Now, stations in top markets will be able to bid on rerun rights for popular network shows. While it remains to be seen how many will do so, producers of firstrun programming such as “Entertainment Tonight” and “Inside Edition” are worried that they will have to sell their shows to weaker independent stations at lower prices. That is at least one of the reasons that King World has been looking for a partner/buyer.

But while Washington is deregulating much of the business, it wants to put the clamps down on programming. The House bill includes legislation for the V-chip, a computer chip inside TV sets that would allow parents to block out violent programming. With the V-chip comes a voluntary program rating service. Whether the technology for the V-chip is there remains to be seen but it is clear that the government could end up playing a major role in regulating program content.

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