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Who Will Own Discovery And Who Will Run It?

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 Inks Deal With Amp'd

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

CBS Sags As TV Ads Go Flat

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 To Sell Its Shows on DVD

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

Daryn Kagan Exiting CNN

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

NFL Back On TWC Systems

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

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