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Karmazin, Redstone say approval looks imminent

Exex offer post-merger strategies for cable operations, UPN

Mel Karmazin, president and CEO of CBS, said Tuesday that when the Viacom/CBS merger is completed, the network will fold its cable operations, including TNN: The Nashville Network, into the Viacom-owned MTV Networks.

Read complete
coverage of
Variety/Schroders Big Picture conference.

Responding to a question from David Frost about job losses due to the merger during a Q&A at the Variety/Schroders Big Picture media conference, Karmazin said there would probably be “dislocation in some departments” as the merged company seeks “costs savings and benefits” by reducing “redundant corporate functions.”

Karmazin mentioned the six markets where CBS and Viacom each own TV stations as another area — in addition to cable — where consolidation could shrink the total payroll.

But Karmazin added: “We’ll create jobs as well. We’re looking to hire Internet and sales people.” He said that five years from now, Viacom/CBS could end up with more employees than it has now.

Approval imminent

Sumner Redstone, chairman and CEO of Viacom, who joined Karmazin in the dual interview by Frost, predicted the Dept. of Justice and the Federal Communications Commission would approve the merger “by the end of the month.”

Redstone also said he was optimistic that Viacom/CBS will be able to hang on to the UPN netlet despite the fact that the federal government does not allow one company to own two broadcast networks.

“We’re getting clear signals” out of Washington, Redstone said.

Industry sources say Viacom/CBS has forcefully told federal regulators that if they prohibit the company from keeping it, UPN will cease operations, putting out of work dozens of black TV professionals who work on UPN series geared to urban, ethnic audiences.

UPN has hemorrhaged about $800 million since it started operation five years ago, but if Viacom/CBS takes over its complete operation, “Mel will turn it around tomorrow,” Redstone said. “A year from now UPN won’t be losing any money, and it’ll be worth several hundred million dollars.”

Last month, invoking the buy-sell provision in its contract, Viacom bought the 50% stake in UPN it didn’t own for only $5 million from Chris-Craft and its CEO, Herb Siegel.

Without a partner

Siegel had explored the idea of buying Viacom’s half but couldn’t find a media company to help it run UPN.

In a mischievously nasty dig, Redstone said, “I was confident that Siegel would have a tough time finding a partner because of Siegel’s track record as a partner.”

Redstone is clearly still smarting from Chris-Craft’s lawsuit, which tried to derail the merger. Federal court in New York threw out the Chris-Craft suit last month.

Karmazin echoed Redstone’s optimism while commenting on Frost’s question about Justice’s scrutiny of the merged company’s potentially excessive marketplace power in domestic TV syndication.

The new company will encompass King World and Paramount TV Distribution, which together own many of the biggest hits in firstrun syndication, such as “Wheel of Fortune,” “Jeopardy,” “Oprah,” “Judge Judy,” “Entertainment Tonight” and “Hollywood Squares.”

Minimizing the syndication clout of Viacom/CBS, Karmazin said: “The barriers to entry into syndication are not high. Once the Justice Dept. completes its investigation, it won’t find anything anti-competitive” in the joining together of King World and Paramount.

Setting aside differences

Both Karmazin and Redstone assured the audience that they would not allow any personal disagreements to derail the company’s long-term strategy.

“I respect Sumner’s business opinions,” said Karmazin. “If he doesn’t agree with me on something, I’ll try to convince him. And if he still doesn’t think it’s right, then it may not be right.”

“It’s a rare day that Mel and I are not physically together, or at least talk on the phone,” said Redstone. “We’re both entrepreneurs, we’re very much alike. I can’t visualize a major disagreement between us that won’t be resolved.”

Both men also reinforced the contractual “mechanism” which mandates that when Redstone retires, Karmazin will succeed him. But that may not happen before 2012, Karmazin said.

Both men gently disagreed about who their main competitors are.

Redstone said his rivals consist of Walt Disney, Time Warner and News Corp. But Karmazin said, “The technology is changing so dramatically that you can’t just worry about four or five large entertainment companies. I worry more about small companies that are lean and hungry and can move fast.”

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