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SPECIAL REPORT

For Studios USA, formerly Universal TV, 1998 was a year of adjustment after the stunning news in October 1997 that Seagram had inked a $4.07 billion deal to sell most of the studio’s domestic TV assets to Barry Diller’s HSN Inc.

Those assets included the Universal TV production-distribution operation and the USA and Sci-Fi cablers. U retained the rights to its TV library, but Studios USA was granted a long-term license to handle domestic sales of the library.

The deal left U with its international TV channels and a 45% stake in Diller’s company, which was renamed USA Networks Inc. The erstwhile Universal Television production-distribution wing was rechristened Studios USA.

The one domestic TV asset that wasn’t sold to Barry Diller was Universal’s 50% ownership stake in Brillstein-Grey Entertaiment.

Former U chair Frank Biondi wanted to buy the other half of Brillstein-Grey and rehire former Universal and Studios USA TV chief Greg Meidel to jumpstart a new domestic TV division at Universal. But Biondi’s vision was nixed shortly before his job met the same fate. Universal is now settling out of the Brillstein-Grey deal and is expected to sell the company back to Brad Grey early this year.

Universal may, however, keep the small TV division it inherited with its $10.2 billion purchase of Polygram.

Created in mid-1997, Polygram Television hit the ground running with two firstrun syndie weeklies, the actioner “The Crow: Stairway to Heaven” and the concert showcase “Motown Live.” “Total Recall 2070,” a spinoff of the 1990 Arnold Schwarzenegger pic, is poised to turn a quick buck under the dual cable/syndie window strategy whereby the show will bow on pay cabler Showtime in March, followed a few months later by its firstrun syndie premiere.

Polygram TV absorbed the sizable ITC Entertainment library when it was formed, but U is expected to sell the ITC film and TV archive to the U.K.’s Carlton Communications for about $130 million.

EXEC SHUFFLE: Studios USA has not faced the same level of executive exodus during the transition as sibling cabler USA Network has over the past year, but it did lose its chief executive. Universal TV topper Greg Meidel initially resigned just a few weeks after the Diller takeover, but he reconsidered and took the chairman and CEO post at Studios USA before stepping down for good last June.

PROGRAMMING STRATEGY: There’s been speculation that Diller would steer Studios USA away from the traditional deficit-financing model of network TV production and focus more on supplying original fare to USA and Sci-Fi. However, the network TV arm, headed by prexy Ken Solomon, did a respectable amount of business with broadcast webs last year, and even managed to buck the trend by retaining full ownership of the shows it landed on ABC and CBS.

“We set out to make changes in the way we approached the network business,” Solomon said. “Our focus is on strategic development and asset creation, and our success proved that you don’t have to be vertically integrated (with a network) to get shows on the air.”

For Solomon, strategic development amounts to being selective about the projects Studios USA commits to, even when a network order is in hand.

In July, Studios USA cited “creative differences” for its decision to pull out as the production company on the rookie sitcom “Movie Stars,” which the WB Network ordered for midseason. “Hollyweird,” an offbeat drama ordered by Fox, fell victim to creative disputes between creator Shaun Cassidy and the web before it ever aired.

The picture was much brighter with the promising ABC comedy “Brother’s Keeper,” which received a full season pickup in October. “Turks,” a cop drama starring William Devane, bows on CBS later this month. Also up for midseason on CBS is “Payne,” a comedy starring John Larroquette and JoBeth Williams.

The Dick Wolf NBC drama “Law & Order,” which will deliver its 200th seg this year, remains the stalwart of Studios USA’s primetime slate. Wolf is developing “DC,” a series about Gen Xers at work in the nation’s capital, for the WB Network.

“Sliders” also has been a consistent performer for the Sci-Fi Channel since it moved over from Fox in 1996.

SYNDIE STORY: On the syndie side, headed by prexy Steve Rosenberg, the story of the year at Studios USA was Springer, Springer, Springer. After six years on the air as a fair-to-middling performer, the “Jerry Springer Show” packed a punch and surged to the top of the Nielsen chart last year.

Syndie biz watchers gasped as “Springer” tied the once untouchable “Oprah Winfrey” in January and then pulled ahead of her in March.

“Springer’s” now-trademark brawling and racy subject matter generated predictable controversy, and considerable hand-wringing within Studios USA, but “Springer” seems to have weathered the storm with its buoyant Nielsen ratings intact.

Talkshow host Maury Povich joined the Studios USA syndie stable last year. The rest of Studios USA’s syndie stars, “Sally Jessy Raphael,” “Hercules: The Legendary Journeys” and “Xena: Warrior Princess,” remained solid performers.

— Cynthia Littleton and Jenny Hontz

CABLE

HIGH POINTS: Barry Diller’s USA Network and Sci-Fi Channel are on a roll.

The Nielsen report card for 1998 crowns USA as the highest-rated cable network in primetime, climbing 15% year to year, from an average 2.0 rating in cable homes in 1997 to a 2.3 this year. The 2.3 rating represents USA’s seventh first-place finish in primetime over the last nine years.

The Sci-Fi Channel’s ratings are shooting up even faster, particularly over the last three months, when the network has jumped 50% in audience delivery over that of the fourth quarter of 1997.

If there’s a downside to the solid Nielsen performances of USA and Sci-Fi, it’s that the bellwether series on each network is a rerun, purchased by the two networks from outside distributors. “Walker, Texas Ranger,” from CTTD (Columbia Tristar TV Distribution), averaged a 2.5 rating in USA’s cable homes in 1998 every weeknight at 8, feeding massive numbers of viewers into the Tuesday-through-Friday primetime movies on USA and the hugely popular “WWF Raw” and “WWF War Zone” wrestling hours on Monday.

Sci-Fi’s weeknight winner is a golden oldie from Paramount TV, “Star Trek: The Original Series,” featuring new wraparounds hosted by Leonard Nimoy and other original cast members, which premiered on the network Sept. 1, and has injected fresh Nielsen adrenaline into the movies that dominate the primetime schedule.

FIRSTRUN COMMITMENT: Diller has announced even greater commitments to firstrun programming than the original shows commissioned by the previous regime under Kay Koplovitz. USA will spend more than $400 million for programming, both original and repeat, in 1998, a figure that’s expected to soar to $460 million next year as the network ramps up its firstrun budget, according to Paul Kagan Associates.

Sci-Fi, although working from a smaller dollar base than its USA parent, will also increase its programming budget from $75 million this year to $85 million in 1999, shifting the emphasis to original shows, led by the interplanetary adventure series “Farscape,” which the Jim Henson Co. will produce with Hallmark Entertainment at a cost of more than $1.5 million an episode. “Farscape” will premiere early next year on Sci-Fi.

USA is one of the five most widely circulated cable networks in the country, reaching 75.1 million subscribers as of December 1998, according to Nielsen. Sci-Fi still has a ways to go, although it added a solid 5.9 million subscribers in 1998, swelling its over-all total to 52.6 million.

Diller’s third cable channel, the 13-year-old HSN (Home Shopping Network), sells well over a $1 billion worth of merchandise every year to some of the 53 million or so cable subscribers and satellite dish owners who have access to it. One of Diller’s goals is to sell more products over HSN tied to the cable programs on USA and Sci-Fi and to syndicated TV shows owned by Studios USA such as “Xena: Warrior Princess” and “Hercules: The Legendary Journeys.”

FUTURE CHALLENGE: The more attention Diller gets for USA, the better the possibility that USA could start challenging the broadcast networks in the Nielsen ratings. Diller would like nothing better than to move USA’s Nielsen numbers closer to the viewership levels of the Big Four broadcast networks — his forced resgination as chairman of Fox Inc. in 1992 has left a permanent scar, and he’s also still rankled by his failed attempt to buy CBS in the summer of 1994.

While USA is still searching for a breakthrough firstrun series, it can point to the stunning 8.1 rating in cable homes racked up by the four-hour adaptation of “Moby Dick,” starring Patrick Stewart, on March 15 and 16, 1998, a figure than translated to more than 6 million households. “Moby Dick” ended up as the highest-rated original cable movie of 1998. USA has commissioned two more four-hour miniseries from the same supplier, Hallmark Entertainment: a new version of “Journey to the Center of the Earth” and a biopic about the seductive World War I spy “Mata Hari.”

USA is also digging into its pockets to buy the broadcast-premiere windows of such theatrical movies as “The Waterboy,” “The Jackal,” “Cop Land” and “Private Parts,” hoping to exceed the 5 million households that tuned in to TBS on Aug. 16, 1998, when that cabler scheduled the TV premiere of “The American President.” More people watched “American President” on that August night than any other theatrical movie on cable in 1998.

-John Dempsey

UNIVERSAL FILMS

OCTOBER FILMS

UNIVERSAL MUSIC

SEAGRAM BOTTOM LINE