Viacom takes laughs to the bank

Renegade Comedy Central in corporate stable

As the bastard child of absentee parents, Comedy Central did a lot with a little.

Having two rivals as 50/50 owners gave the cable net the opportunity to operate on its own, with little interference from above.

But that’s about to change, as Viacom buys out AOL Time Warner’s stake in Comedy Central for $1.22 billion.

Network insiders say they’re eager to inherit the marketing and programming power of being a full-fledged Viacom sibling. But they’re also nervous about losing the autonomy that made Comedy Central a unique stop on the dial.

“We’ve been the kids without parents,” says Comedy Central prexy Larry Divney. “Viacom finally gave us the keys to the car. It will be terrific in terms of the resources we’ll get. But we’ll lose that independent stature of a stand-alone.”

Comedy Central originally launched in 1990 after Time Warner agreed to merge its stuggling Comedy Channel, which had been a part of HBO, with Viacom’s equally struggling MTV Networks outlet Ha!

A joint venture was set up, and Comedy Central (originally known as CTV: The Comedy Network) reported to an eight-member board, four representatives from Viacom and four from AOL Time Warner.

The Comedy Channel/Ha! merger was all the more unusual given an ongoing legal battle at the time between Viacom and Time Warner. Convinced that HBO was making sweetheart deals with theatrical distributors to keep features off rival pay cabler Showtime, Viacom had sued Time Warner.

Meanwhile, Comedy Central rapidly grew throughout most of the 1990s, even though neither conglom was anxious to give much help to the net — lest the other owner/rival benefit in some way.

As a result, the cable net’s budgets weren’t as big as its half-brothers and sisters at MTV Networks or HBO. But rather than suffer from its latch-key network status, Comedy Central took advantage of light parental supervision by roaming free and doing some pretty unconventional things.

A poorly drawn but hilarious cartoon about foul-mouthed fourth graders? Sure! A group of guys drinking beer and showcasing women on trampolines? You’re on!

Shows like “South Park” and “The Man Show” drew a solid audience for Comedy Central in recent years, particularly among young men. Comedy Central performs best among men 18-34 (where it placed fourth among all cable nets for the week ending April 20 with a 0.5 rating) and viewers 12-24 (tied for fourth, 0.4 rating).

That youth skew has remained appealing to both parents — which is why neither had any interest in giving up its stake.

Until AOL Time Warner ran into dire financial straits, of course.

“If it didn’t happen now, it would have never happened,” Divney says of the divorce. “It belongs under one company. The health of the business is better under one.”

Divney expects to see an easy transition to oversight under MTV Networks and topper Tom Freston. Having served on the Comedy Central joint operating board, Freston’s no stranger to the network.

“Being a standalone network is an increasing liability,” Freston says. “Right now Comedy Central would benefit from much more ambitious and aggressive cross promotion. Now that it’s fully in the family, all the other MTV networks can promote it and share a lot of the talent.

“They could have done worse,” he says. “We’re used to giving people a lot of latitude in business and creative decisions, so long as the results are there.”

But once Comedy Central is fully acquired by Viacom, Divney admits the ownership change will likely have an impact on staff, particularly on the sales side.

“Ad sales, affiliate sales, there is probably some redundancy on one or the other,” he says. “As far as impact or fall out, we’ll start dealing with that in the next six to eight weeks.”

Kagan World analyst Derek Baine says Comedy Central’s bottom line should be helped by the move inside Viacom.

“I think if you look at the performance of Comedy Central vs. their other peers, their margins are well below the industry average. I’m sure cutting costs and boosting ad sales will be top priority for them. And over long term, they’ll try to get the license fee up. It’s very low compared to their rivals.”

Otherwise, thanks to its light budget, Comedy Central already operates a fairly lean staff (around 360) — a good chunk of whom, including Divney, have been with the network since its launch.

“We’re not looking at massive layoffs or anything like that,” Freston says. “We’ve frozen positions now, and are looking to see if anyone has a redundant job.”

Long-term, Freston says it’s also likely Viacom will explore digital extensions of the cabler, such as a Comedy Central movie channel. The conglom may also extend Comedy Central’s brand to the big screen, much like it has with Nickelodeon and MTV.

Viewers won’t see much difference on the channel over the next six months, as Comedy Central continues to roll out previously planned new series and takes advantage of an additional $30 million added to this year’s program budget.

Upcoming debuts include “I’m with Busey” (June), “Reno 911” (July) and the animated Robert Evans series (4th quarter).

The network also recently launched “Chappelle’s Show” and “Tough Crowd with Colin Quinn,” which has been paired with signature series “The Daily Show with Jon Stewart.” And although “South Park” is no longer the ratings phenom it once was (leading to some overall ratings erosion for the channel), newer entries like “Crank Yankers” continue to fuel the pop culture fires.

“They’ve done a great job from beginning to end,” Freston says of the network.

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