Silver King annexes HSN

Barry Diller’s Silver King Communications will today complete its acquisition of Home Shopping Network Inc., allowing Diller to move to the next stage in his plan to create a new programming service from Silver King’s TV station group.

Shareholders in HSN and Silver King approved the deal in separate meetings Thursday morning. Separately, shareholders in Savoy Pictures Entertainment approved its acquisition by Silver King, and that deal was completed Thursday. The combined company, which will have assets of $2 billion, will take HSN’s name.

“Finally and undimmed, we have one company with a strong balance sheet in interesting businesses and with a great appetite for growth, both in our current business lines and opportunistically through acquisition,” HSN chairman Diller said in a statement.

Wall Street approves

Completion of the long-delayed and amended deals sparked a rally in Silver King stock, which jumped $2.25 Thursday to close at $23.25, helped by a spate of “buy” recommendations from Wall Street analysts in recent days. Montgomery Securities analyst John Tinker said the new company “will represent a play on the creativity of media pioneer Barry Diller” as well as offering shareholders “dramatic upside” if the Federal Communications Commission allows duopoly ownership of stations, making Silver King’s station group much more valuable.

Tinker added that at least until Diller gets Silver King’s new programming service onto the air, most of the combined company’s business comes from HSN, which “has great numbers.” HSN vice chairman James Held said Thursday the company would meet its target of $100 million in annualized cash flow this year “and anticipates strong continued growth in 1997.”

The recovery of HSN is critical to the prospects of the combined company, which would have lost $165 million had it existed in 1995, according to the proxy statement for Thursday’s shareholder meetings. HSN has dramatically improved its earnings since last year, however.

The companies said in the proxy that Silver King’s businesses “will require significant funds” after the mergers, but that Silver King expected to be able to raise money based on HSN’s cash flow.

Must-carry concerns

A potential uncertainty for the company is the Supreme Court’s upcoming ruling on must-carry provisions of the 1992 Cable Act, which require cable operators to carry broadcast signals. If as expected the court strikes down the provisions as unconstitutional, Silver King’s new programming service may find difficulties getting onto cable systems. However, Silver King execs say they are already operating under the assumption that must-carry will soon be history and believe that they will have compelling local programming that operators will want to carry as well as perhaps partner in.

Tinker said this concern was reflected in Silver King’s stock price, which drifted down to $21 this week from a high of $34.50 in June. He added that the cable operators would not drop Silver King’s programming if Diller made it crucial to carry. “If anyone can figure out how to make money with these stations, it’s Diller,” Tinker said.

On the programming front, Diller has been busy staffing Silver King and preparing to create local programming for the individual markets where Silver King owns outlets, including 10 of the 16 largest markets in the country.

At Silver King, former Fox execs Adam Ware and Doug Binzak, who joined the company as executive vice presidents earlier this year, are working on improving the stations as well as developing programming.

New programming moniker

For now, Silver King is expected to change its name to “CityVision” to better explain its programming agenda. Programming will vary by market. In large markets such as New York and Los Angeles, where there are large Hispanic populations, the company is looking to produce English programming for Hispanic viewers, an emerging market not really being addressed by Spanish-language webs Univision or Telemundo.

Silver King will also look to program for teenagers in the afternoon time period. Execs familiar with those plans say the company is looking to compete against the talkers and old reruns that currently dominate the early fringe time period of 4 p.m. to 6 p.m. Other genres the company is looking at include locally produced gameshows. In Honolulu, the SF Broadcasting station runs a locally produced karaoke show that averages a 16 household rating on Sunday nights in primetime.

Studios in the offing

On the real estate front, Silver King is looking at creating studios in all of its markets. In Los Angeles, the company is looking at making its base for KHSC in Westwood or Santa Monica. The concept is to create “living studios.” Each station, Silver King hopes, will become a destination both on and off the air for viewersAn inspiration for Silver King is said to be Canada’s CityTV, which beams highly localized programming from its base in Toronto. Silver King envisions local soap operas, public affairs programming, sports and kidvid.

On the business front, the station group has been meeting with rep firms to discuss selling ad time for the company.

Silver King says it is not fazed by the prospect of must-carry going away. The company said it plans to partner with local cable systems on its stations as an incentive for operators to keep CityVision on their systems.

The duopoly card

While the changes for the stations are on the fast track, any noticeable move away from the home shopping fare they currently carry is at least a year away. In the meantime, one potential regulatory change could alter Silver King’s plans: the FCC’s duopoly rules, which prohibit a broadcaster from owning more than one station in a market. If the commission decides to remove or substantially relax the rules, the Silver King stations could become very attractive to other station operators. Diller has not ruled out selling the stations at the right price.

However, the odds are long that duopoly will vanish entirely. If the rules are relaxed somewhat, the company may look to partner with other broadcasters.

The third element of HSN Inc. is SF Broadcasting, which now owns four Fox affiliates under former Fox exec Steve Carlston and may be looking to expand its holdings in that arena.

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