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Stealth club

Exec heads roll and net is born in buddy huddles

Nobody saw it coming.

When Leslie Moonves and Barry Meyer stepped out from a blue velvet curtain at Gotham’s St. Regis Hotel on Jan. 24, the assembled reporters still had no idea that two men were about to announce the end of two networks (UPN and the WB) and the birth of another (the CW). It wouldn’t be the biggest media deal of the year but it was easily the stealth pact of the year.

At Warner Bros., it even had a code name: Project S.

Equally impressive was how quickly everything came together: Just two months passed between the first serious talk of merger and the final announcement. Reps for CBS Corp. and Warner Bros. signed the final contracts 20 minutes before Moonves and Meyer began speaking to the media.

Both companies had reason to alter the status quo. UPN and the WB were bleeding tens of millions, and the long-term prospects of significant profitability weren’t great.

Chalk up the speed and secrecy of the deal to a number of factors.

The WB’s affiliation agreement with Tribune and UPN’s with Fox were set to expire in September. Everyone agreed that the new network would align with Tribune, leaving Fox stations in the lurch. They feared that Fox executives would be furious if they found out, and may even have tried to derail the deal.

There also were more subtle reasons to hammer out an alliance — and to do it quickly. Time Warner brass, under attack from Carl Icahn, has been under pressure to cut costs.

What’s more, Moonves was in the process of birthing CBS Corp. after its split from Viacom, no easy task given Wall Street’s perception that his company was the slower growth sister to the new company run by his Viacom counterpart, Tom Freston. Freston recently captured the spotlight with Paramount’s acquisition of DreamWorks. With the CW deal, Moonves would draw attention and even adulation for shedding UPN in favor of a much sexier vehicle.

There also was the dicey matter of who would stay and who would go. The four execs key to hammering out the agreement — Moonves, Meyer, CBS Par’s Nancy Tellem and WB’s Bruce Rosenblum — are longtime friends and former colleagues, all with roots on the Warner Bros. lot. Just as close were some of the people who would ultimately find themselves without a job, chief among them WB Entertainment prexy David Janollari.

But even as the deal makers made such wrenching decisions, their camaraderie undoubtedly helped move the new pact forward. “It was like negotiating with your family,” Moonves says.

No surprise, then, that the whole thing began over dinner.

Just before Thanksgiving, Moonves and Meyer were at the home of Haim Saban for a dinner party. Dinner conversation at the Saban’s lavish home may range from Washington politics to Middle East intrigues, but Saban — a confirmed deal junkie — does not discourage insider talk about media pacts, either. Moonves and Meyer’s conversation turned to their respective weblets, and the fact that both faced tough renegotiations with their affiliate groups.

“We realized this was a unique moment in time. If we didn’t do something now, we’d regret it,” Meyer recalls.

It wasn’t the first time Warner Bros. had broached the idea of a WB-UPN wedding.

About two years earlier, WB execs wanted to know if CBS might consider a joint venture in which the WB essentially “gobbled up” UPN, but Moonves and Tellem balked, and nothing happened.

And not long before Saban’s dinner, WB execs had talked to Disney about ABC taking on some of the Frog net’s backroom functions, like research or ad sales. The Mouse House wasn’t interested.

But something clicked when Moonves and Meyer came face to face at that dinner. Within days, Rosenblum and Tellem were sitting in Moonves’s office at Television City discussing the broad outlines of what a merger would entail.

WB was now willing to consider an equal partnership with CBS. Both sides also realized that combined they boasted a demo-friendly cluster of skeins targeted at adults 18-34: “Smallville,” “America’s Next Top Model,” “Gilmore Girls,” etc.

The late afternoon meeting lasted for about 90 minutes and ended with CBS telling WB it wanted to do a financial analysis of a merger. WB execs had already run the numbers on their side and liked what they saw.

“I left the meeting and reported back to Barry that I was encouraged,” Rosenblum says. “There was an appetite on both sides to figure out a way to get it done.”

From that point on, Tellem and Rosenblum were in regular communication, usually by telephone or e-mail. The circle of execs in the loop was still tiny, with a few number crunchers added to the mix.

At Warner Bros., Meyer and Rosenblum maintained secrecy by referring to merger talks as Project S. (They had already used Projects A through R for other endeavors .)

CBS execs were accustomed to a cone of silence. Moonves hates leaks, thinking them a sign of disloyalty, even on matters like scheduling.

“Nobody around here talked about it,” one insider says. “Even if you knew the other person knew about it, you didn’t talk to them about it.”

A pivotal moment came in mid-December, when Moonves and Meyer met for a long-planned dinner engagement, their wives in tow.

The two men didn’t spend much time talking about business, but it became clear that the plan was going in the right direction.

Not long after the dinner, Moonves and Meyer would meet again, this time bringing along Tellem and Rosenblum.

“The four of us got together at the Bel Air Hotel for drinks and really said, ‘OK, here are the issues. Let’s make sure we’re on the same page,’ ” Rosenblum says.

Most of the talk centered around three areas: How to make a 50-50 partnership work; who’d run the network; and how either party would exit if it ever came time to divorce.

Balancing the financial interests of both studio units was a potential problem. Nobody wanted one studio to benefit or lose more than the other simply because of how many of its shows made it on to the new network.

Tellem came up with the idea that any show developed by Warner Bros. TV or CBS Par for the new net would be a co-production. The two studios would still compete creatively, but when it came to the new network nobody would ever feel slighted financially.

“We didn’t want Paramount to be in a competitive situation with Warner Bros.,” Tellem says. “We wanted to construct a joint venture where there was a level playing field.”

Having seen what happens when two sides of a partnership can’t agree — UPN’s early growth was stunted by the rocky relationship between parents Par and Chris-Craft — execs on both sides also wanted a mechanism to avoid any stand-offs.

The solution: If the two congloms reached an impasse, they’d submit to binding arbitration. “It’s draconian, but it’s the surest way to ensure we never have to use it,” Meyer says.

After the Bel Air powwow, a more detailed deal memo was drafted as the two sides began flushing out the business plan for the new company.

Then the lawyers got involved.

Many a merger has been stalled or killed by attorneys. Their job, after all, is to think about all the ways something could go wrong and to nitpick every last line-item in a deal.

“This is where the relationship really paid off,” says one of the parties involved.

Nobody will talk details, but as in any negotiation, there were a few hiccups. There wasn’t any yelling, but people got a little snarky, one insider admitted.

“In normal circumstances, some of the issues could have been insurmountable,” this source says. But because the four players all knew each other so well, issues tended to get solved quickly.

As Rosenblum puts it, “Mutual respect cuts through all the bullshit.”

Work slowed a bit during the two-week holiday break at the end of last year, though each side still held some internal meetings.

By the time the new year arrived, a sense of urgency set in.

Each day presented another chance for rivals to find out what WB and CBS were cooking up — and to try to scuttle it. For example, if Fox found
out, and the deal fell apart, Fox could tell UPN to forget about a new affiliation agreement, leaving the network without distribution in many major markets. As it happened, when the announcement was made Fox was caught off guard, and its stations almost immediately started dropping the UPN logo.

Hollywood also was in the thick of pilot season. WB was already cutting back on development, but the brass at UPN would soon have to move forward on deciding which pilot scripts to greenlight.

CBS brass didn’t want UPN execs to make commitments to shows the new network wouldn’t need, thus wasting millions.

Everybody hoped to get the deal done by the Jan. 24 start of NATPE, TV’s annual syndication convention. They knew the dramatic announcement would rock the confab — in fact, they sort of relished the prospect. But the execs also wanted to give stations that would soon be ex-WB or ex-UPN affils a chance to start shopping for new programming.

As CBS and Warner Bros. rushed to complete their deal, the Warners camp had to simultaneously deal with another player: Tribune.

The company was part owner in the WB Network and would be the affiliate backbone for the new CBS-WB network. Because WB had the existing relationship with Tribune, it was up to Meyer and Rosenblum to sell the Chi-based company on Project S.

The pitch began the night of Jan. 5, when Rosenblum called Tribune chief Dennis FitzSimons to tell him what WB and CBS had been up to for the past six weeks.

FitzSimons liked what he heard. The next day Tribune and WB execs held a conference call to formally lay out a proposal for a new affiliate deal. A few days later, the two sides met for dinner at Barsac Brasserie in Studio City to hammer out the outlines of an agreement.

There would still be a couple weeks of contractual back and forth, but the new CBS-WB network had its first major distribution deal.

Meanwhile, Moonves and Meyer — regular social acquaintances — got more face-to-face time in early January when Meyer invited Moonves to his house to screen “King Kong” and talk a little bit about their own monster deal.

On Martin Luther King Day, Moonves, Meyer, Tellem and Rosenblum gathered at Television City to go over some final details. By the end of the meeting, they all knew they had a deal.

As the four players met, the rest of the town was preoccupied with the Golden Globes. And most of the execs at the WB, including Janollari, were meeting reporters in Pasadena for a semiannual press gathering.

Garth Ancier, one the WB’s founders, knew it would be the Frog’s last hurrah: He had even been helping plan the transition. Janollari, however, had no idea, and didn’t find out until the morning of the announcement.

All sides involved say one of the toughest decisions in the two months of dealmaking was deciding who would head up the new entertainment division.

Dawn Ostroff, picked by Moonves to make over UPN a few years earlier, had greenlit shows like “Veronica Mars” and “America’s Next Top Model,” giving UPN something it had never had: critical buzz.

Janollari, meanwhile, had only been on the job for 18 months. Rosenblum had convinced him to give up a successful career as a producer of skeins such as “Six Feet Under” in order to take on the task of getting the troubled Frog back on track.

What’s more, Moonves also had a soft spot for Janollari. Two men had worked together when Moonves ran Warner Bros.; Janollari was key to the team that created “Friends.”

Ostroff ultimately got the nod, with WB vet John Maatta tapped as chief operating officer.

After the MLK Day meeting, there was just a week to go before the planned announcement. A few more people, including some top PR aides, were brought into the loop. But amazingly, even at this late date, only about 50 people knew what was happening.

And yet the two sides still had issues to resolve — including what to call this new entity, referred to as “XYZ” in legal documents.

Marketing execs from both companies were called in, and the new company hired an outside firm to help come up with ideas for names and logos.

Some names were nixed for political reasons. “The CWB,” for example, sounded too much like “The WB.”

Other names on the table were pretty out there: Red. MX. Rev. QUB. Ello (as in, “hello”).

Ideas flew back and forth over Blackberries. The weekend before the announcement, Moonves was at Sundance. He remembers trading numerous phone calls and e-mails with Tellem and Meyer from his suite at the Stein Eriksen Lodge.

It wasn’t until Jan. 20, just 72 hours before the announcement, that the two sides finally agreed on a title that blended the first letters of CBS and Warner Bros.

The CW was born. All that was left to do was tell the world.

CBS hired the PR firm Rubenstein Communications — which, ironically, also reps News Corp. topper Rupert Murdoch — to handle the logistics of the press conference. Nobody told Rubenstein executives what was being announced, however, until Sunday night.

Time Warner and CBS execs asked the firm to secure a neutral location for the announcement, one that would allow the identities of the participants to remain secret.

Rubenstein handlers called and e-mailed the press the morning of the announcement, promising that “three CEOs from major media companies” would unveil a “new broadcast television network” at a penthouse suite at the St. Regis.

Rubenstein employees staffed the event, concealing the fact that both Time Warner and CBS flacks, as well as the executives, were present.

The first moment that most media in the room had any inkling of what was to transpire was when execs from CBS and Warner Bros. entered. Ten seconds later, Moonves walked out , followed by Meyer.

“We greatly appreciate you getting here on such short notice,” Moonves said. “Today we are coming here with a pretty historic announcement. We are here today to announce the creation of a brand-new broadcast network, one that brings together the resources of two great media entities, CBS and Time Warner.”

Moonves and Meyer were beaming. In the audience, Tellem and Rosenblum watched their bosses announce what was at once a wedding, a birth and a family reunion.

They’d pulled it off. Eleven years of brutal (and ultimately fruitless) competition between the WB and UPN was over.

And nobody saw it coming.

Michael Learmonth contributed to this report.

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