Tiptoeing carefully around the potential racial land mines that accompany their $2.9 billion takeover, Viacom executives insisted last week that Black Entertainment Television will remain a separate business unit under the Viacom umbrella rather than being merged into its existing basic-cable network group.
In past deals, Viacom's MTV Networks simply absorbed the target. But, despite the obvious need for efficiencies to pay for the takeover of BET, Viacom President Mel Karmazin said Black Entertainment Television will operate independently.
Robert Johnson, who founded the network, will remain chairman and CEO and will report directly to Karmazin. Debra Lee will continue as BET president and COO. Both have signed five-year contracts with Viacom. BET headquarters will remain in Washington at least for now.
The plan even calls for the network's much-criticized programming, heavy on music videos, to remain in Johnson's hands, although there may be some links with CBS' news division and Viacom's UPN, which has relied on black programming.
"The thing that we bring to the table is enabling the management of BET to invest in the future," Karmazin said. "Programming is something that the management of the channel deals with. That is not something we do here at Viacom."
A central element of the negotiation, Johnson said, was how to make sure that BET continues as a strong voice for the black community, certainly since BET's distribution deals expire in 2002.
A hands-off approach would be a departure for Viacom. In other recent cable-network acquisitions, including TNN, Country Music Television and The Box, Viacom's MTV Networks took charge, wiped out existing management and took firm control of programming and marketing. At TNN, for example, Viacom has erased all traces of Nashville from what was The Nashville Network, transforming it into The National Network in the MTV stable.
Viacom executives are worried, in part, about trampling on any racial sensitivities about the largest black-owned and programmed media company being taken over by a lily-white media giant. "What, a bunch of white guys are going to run in there and fix BET?" said one Viacom executive.
"It's a good thing in a way, because BET seemed to be going in the toilet as far as the programming," said one African-American television executive. "It injects Viacom programming and resources into BET, and it will be a better product. At the same time, it was the first real black-owned television network. Now, the first black-owned television network is going to be owned by a group of white guys. It's real conflicted."
Alvin James, senior managing partner of MBC, a fledgling black network with about 1 million subscribers, said, "The thing that's most exciting about it is there's finally some justice on the value placed on content targeting African-American consumers."
Viacom agreed to pay about $2.3 billion in stock and assume around $570 million in debt for just about everything in the BET portfolio, including the 62.4 million-subscriber cable channel. Not included are the BET theme restaurants, magazines and a pay-movie channel with STARZ!
Johnson founded BET 20 years ago with $15,000 of his own money; it is on track to make $120 million in cash flow this year. He stands to make around $1.5 billion. Lee, who holds about 5% of BET, will receive about $125 million out of the deal. John Malone's Liberty Media has approximately 35% of BET and stands to get a $875 million piece of Viacom. The transaction accounts for about 40 million, or 2.2%, of Viacom's outstanding shares at the current price of about $58.