Fast Track

McHale's exit prompts big changes

As Discovery Communications Inc. (DCI) looks to replace exiting CEO Judith McHale, the company could be facing an even bigger change. McHale's departure could help trigger a breakup of the partnership that owns the programmer, most likely leaving DCI a publicly traded company controlled by Liberty Media Chairman John Malone.

Three inside candidates are in the lead to replace McHale. The best-known is Billy Campbell, president of Discovery's U.S. networks, who arrived four years ago to broaden the programming of Discovery Channel, TLC and their myriad sibling channels. Campbell has had a rocky ride, with ratings surging then plunging. Discovery and TLC have rebounded in recent months.

Lower-profile candidates are Mark Hollinger, senior executive VP, corporate operations (a 15-year veteran, he is also general counsel, a job McHale once held); and Dawn McCall, president of Discovery's international operations.

Headhunter Spencer Stuart is just starting to inquire into outside candidates. Among them are ex-Nickelodeon Networks Chairman Herb Scannell; ex-MTV Networks President Mark Rosenthal, currently on medical leave as CEO of Interpublic Media; and Landmark Communications President and former National Cable & Telecommunications Association President Decker Anstrom.

The hiring process could force the hand of DCI's partners in resolving the ownership issues. DCI's three owners—Malone's Discovery Holding Corp., Cox Communications and Advance Newhouse—have for years had on-again, off-again conversations about shuffling the ownership structure: one or two partners selling out, taking DCI public, or—at one point—selling the company to NBC.

Malone took the extreme step of spinning the half that had been owned by Liberty off to shareholders, creating Discovery Holding Corp., which holds little other than DCI stock. He had hoped Cox and Newhouse would participate.

Cox may be getting ready to cash in. Industry executives familiar with the partnership say that, after taking on $6 billion in debt to go private two years ago, the cable company wants liquidity for its stake in DCI. Cox is interested in trading it for other media assets or rolling it into a publicly traded company.

A Cox spokesman declined to comment. Advance Newhouse President Bob Miron—the partner who has long been the least interested in selling or going public—says only that there is “no pressure” for a change right now: “Everybody's committed to Discovery; it's still a very united board.”

DCI's owners are already prepping for a future as a public company. Before McHale resigned, DCI had already hired a headhunter to replace current CFO Barbara Bennett, who is stepping aside. Industry executives familiar with that search say DCI has a new requirement: a finance background at a publicly traded company.

McHale will remain until Dec. 1 and will be an advisor on Discovery's education initiatives.

Bravo will launch a mobile service on youth-targeting wireless-phone startup Amp'd Mobile on Aug. 9. “Bravo To Go” will feature 1- to 3-minute clips of the network's programming, including Project Runway, Queer Eye for the Straight Guy and Inside the Actors Studio. The initiative is the first mobile-TV deal for an NBC Universal entertainment cable network.

The Bravo To Go content, refreshed weekly, will include episode summaries and excerpts, as well as other extras. Amp'd is a mobile-virtual-network operator, or MVNO; investors include MTV Networks and Universal Music Group. Television networks including CBS and WE have previously made content available to the service. Bravo's previous mobile endeavors include Wireless Access Protocol (WAP) sites and SMS text messaging. —Anne Becker

Caught in a softening ad market, CBS' broadcast network and TV stations generated no growth in advertising during the second quarter.

For the three months ended June, CBS' companywide revenue dropped 5% to $3.4 billion, while operating income dropped 6% to $858 million. Almost half the decline was due to $24 million in expenses tied to the shutdown of TV network UPN, whose hit programs are being combined into new network The CW.

Total revenue at the TV division fell 1% to $2.2 billion, while operating income fell 2% to $535 million. Much of that decline stems from a shift in distribution of DVDs of CBS-owned shows to Viacom's Paramount Pictures, which split off from CBS in January.

The company didn't fully detail ad results but acknowledged that CBS network ad revenues fell 1.5%, partly because the network lacked big sales from the previous season's finale of Everybody Love Raymond. However, CBS CFO Fred Reynolds also acknowledged that the scatter market was fairly soft.—John M. Higgins

Sony Pictures Television (SPT) will alter TV distribution windows under a groundbreaking plan unveiled last week to sell scripted comedy, drama and animated series on DVD directly to consumers.

The studio, which had a strong network development season, intends to remain an active player in the traditional TV business but has launched Culver Entertainment to create and produce programs directly for the DVD and international markets.

The first programming under the plan will be 13 half-hour episodes of a new animated Spider-Man series for 2007.

While the company could later opt to sell the shows to networks, syndication, and broadband and other digital outlets, the shows will not be dependent on them for license revenue.

SPT President Steve Mosko says the plan capitalizes on Sony's independent status by utilizing nontraditional means to distribute new product: “With growing demand for original content here and abroad, it's the perfect time to deliver programs directly to consumers.”

The undertaking, based on the successful direct-to-video market for films, is believed to represent the first step of SPT's broader strategy of taking product directly to the consumer.

Phase two is expected to involve a comprehensive digital-distribution strategy for SPT's library product. —Jim Benson

Anchor Daryn Kagan is leaving CNN Sept. 1 to start an inspirational Website, darynkagan.com. She has been with the news network for 12 years.

Kagan joined CNN as a sports anchor in 1994, after working in local TV in Phoenix. She moved into news reporting in 1998.

In an e-mail to colleagues, Kagan described her new venture as an “online community dedicated to the radical idea that the world is a good place.” She said the site will launch Nov. 13.—Anne Becker

Time Warner Cable (TWC) last week yanked, then restored NFL Network on systems it has just acquired in its joint purchase of bankrupt Adelphia.

The operator, in contentious carriage negotiations with the network over price and placement, had pulled NFL Network Aug. 1 from such football hotbeds as Kansas City, Cleveland and Dallas.

After the NFL sought injunctive relief from the FCC, the commission's Media Bureau ordered Time Warner to restore the systems while it rules on the petition, saying the NFL was likely to prevail on the merits: “We find that the NFL has a reasonable prospect of showing that Time Warner's actions, which affected millions of customers across the nation residing within numerous franchising authorities' jurisdiction, constitute systemic abuses that undermine the statutory objectives.”

The football network argued that Time Warner had not provided the requisite 30-day notice before dropping it. Time Warner said it was in compliance with the notification rule, which has a caveat for changes “beyond your control.”

“The NFL Network made it apparent to us that they would not allow TWC to carry their network in a manner that was in the best interests of our customers and our business,” said TW spokesman Mark Harrad, which he said became apparent only last week.

The FCC didn't appear to be buying that explanation. “Given the current state of the record,” it said, “it appears that Time Warner discontinued carriage of the NFL Network without providing customers with the requisite 30 days' notice.”

Time Warner said the FCC was wrong to order it to restore the network, but it acquiesced, while appealing the order to the full commission and adding a crawl to the NFL Network warning the systems involved that it was getting a 30-day notice that the channel could go dark again.

Time Warner wants to put the network on a sports tier; NFL wants it in the basic package.

The NFL Network is also asking close to a dollar per subscriber—now that it has a package of regular-season games to offer—which is north of the 20¢-50¢ most top-10 cable networks ask. ESPN is the 800-pound linebacker in the room at almost $3 per subscriber.

Additional reporting by Ben Grossman