When Leslie Moonves was trying to decide whether to accept CBS chairman Laurence Tisch’s offer to become entertainment czar of the beleaguered network, friends cautioned him against leaving his deluxe spot as president of Warner Bros. Television.
“Les was up at (ABC Entertainment president) Teddy Harbert’s 40th birthday in Santa Barbara, and more than one of us told him he would be crazy to go to CBS,” says a longtime associate of the new CBS Entertainment president. “I mean, he doesn’t know who he’s going to be working for in six months – whether it will be Barry Diller, Ted Turner, Edgar Bronfman Jr. or somebody else.”
Despite the reservations of his friends, Moonves last week took the job. Certainly part of the lure was the prestige of the post, plus a lucrative multiyear package that reportedly will pay him between $4 million and $5 million a year.
After all those years as primetime’s most prolific seller, there was also some allure to trying life from the other side, as a buyer. “I’ve always looked at those jobs and said, ‘Yeah, it’s something I want to do,'” Moonves says.
On top of that, Moonves may be working for Tisch longer than the conventional wisdom offered by his pals.
The appointment of Moonves, who had an extremely successful 10-year ran at Warner Bros. (the last five as president), signals to some that Tisch realizes he has to fix the network before he can sell it.
Indeed, Moonves has told associates that over a series of conversations with Tisch, the CBS chairman had at least for the time being removed the “For Sale” sign from in front of Black Rock.
What Diller’s doing
Tisch has given himself no other choice. His favored choice of buyer, Diller, has so far proved unable or unwilling to raise the $5 billion needed for a bid. While people close to Diller deny he has done any recent work on a CBS bid, several sources said the former QVC chairman had been making renewed efforts to raise financing for a bid in the past couple of weeks.
Some sources say those efforts have fallen through, however, although a surprise move by Diller can never be ruled out.
Turner is effectively also out of the game unless someone else makes a bid and puts CBS in play for all bidders. In a meeting with Wall Street analysts this past week, Turner left the strong impression that a deal with CBS is as far off as ever. Turner ran through the three reasons why he still wants a network – synergies with news, TV production and sports – but made clear that he can’t get Tisch into negotiations.
Wall Street sources say Tisch is resolutely opposed to dealing with Turner, if only because of uncertainty about whether Turner could close a deal. With this in mind, Turner told analysts the best chance he has of doing anything is if someone else makes a bid first.
“If that were to happen, it would put CBS into play and we would have a chance to look at it,” Turner told analysts. Turner also still has to deal with Time Warner, the big Turner shareholder that is opposed to a network deal; the rumored sale of the TW stake is a long way from being resolved.
But the biggest obstacle to any CBS deal, Wall Streeters say, is Tisch’s refusal to budge on price. With control of the board and the biggest single block of stock, Tisch has the power to thwart most any takeover bid, which means anyone wanting to make a run at the web has to meet Tisch’s demand for $80 a share.
The $80 question
Buyers like Turner and Diller think $80 is too high, however. And Tisch is not giving in, say those who have come courting.
That’s despite the abysmal performance of the CBS network in the 1994-95 season, the exodus of top execs in recent months, even the decision of CBS’ biggest institutional shareholder, Capital Group, to abstain from voting on CBS’ board re-election at the annual meeting last month. Tisch won’t move off his asking price.
Some observers believe the CBS chairman thinks that if he plays the waiting game he will increase the pool of potential buyers, creating a situation that drives the sale price beyond his current $5 billion price tag.
Other rumored buyers – such as Seagram Co.’s MCA Inc. and Westinghouse’s TV unit – have internal management issues to sort out before they’re in a position to make a play. Potential bidders such as the telcos, or foreign companies like Sony, could be added to the fray should the Republican Congress lift the restrictions keeping them out of the game.
Meanwhile, if Tisch holds tight, he can reap the revenue streaming in from the most bullish network advertising market in years.
“CBS is going to have a banner year; all the networks will,” says an investment banker. “If Tisch holds tight for a year or 18 months, he collects windfall profits, and in the meantime Moonves stabilizes things and the stock price rises. What’s Tisch got to lose by waiting out the bad times?”
Tisch’s strategy is a big gamble, however. Some in the industry believe the network’s problems are so profound that they will only become more pronounced with time, making it clear that the price is too high.
“You can bring in a first-rate studio guy like Les Moonves and you can take advantage of the current bull market,” says one who has done business with Tisch.
“But if you take a look at the damage that’s already been done to the CBS franchise and look a couple of years out to 1997 – when there’s no Olympics and no election money – and anybody taking a good hard look will pass at Tisch’s price.”
Restoring the market position of a network trailing its rivals historically takes three years – a time frame that may have lengthened to as much as five years thanks to the heightened profile of Fox Broadcasting, the emergence of the fledgling WB and UPN networks and the continued growth of cable.
“Everybody knows that CBS is down for the count,” says Paine Webber media analyst Chris Dixon. “Very few buyers are willing to emerge at the prices being talked about today until you have some real bona fide improvement developing with the network lineup.”
Long haul ahead
Sources close to Diller say he believes that the network’s pursuit of the same 18-49 audience that’s the target of ABC, NBC and increasingly Fox has positioned it to be “a No. 4 network” – making the turnaround prospect for CBS a long haul.
Turner also sees the network’s performance as an issue. He told analysts this past week that CBS had eroded its value in recent months.
Another lurking danger is the potential for circumstances to shift for buyers as well. In April, at the Variety/Wertheim Schroeder “Big Picture” conference, Turner said that when Tisch finally decides he might want to sell, TBS’ cable networks could be in 80% of American homes, taking into account direct broadcast satellite transmission and telco distribution.
Turner has been the Eye web’s most ardent suitor for more than a decade. He may not be the only one to decide there are too many cracks in Black Rock to justify the price. If that happens, Tisch may find himself in the network business a lot longer than he expected.