Where Things Stand - Broadcasting & Cable

Where Things Stand

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In times like these, Paul Harvey once reminded us, "it helps to recall there have always been times like these." Of course, Harvey said that before it took five weeks for Americans to find out who the new president would be. He said it before CBS and NBC essentially bought themselves second broadcast networks, or one radio group owned more than 1,000 stations. He said it before professional wrestling was the pivotal content that pointed toward one network's rejuvenation and another another's hasty remodeling. Today, Broadcasting & Cable takes a look at some of the issues that shaped 2000 and whose impact will continue into the new millennium that really begins, apropos the digital age, on 01/01/01.

BUSINESS

Consolidation nation:
The CBS-Viacom melding ($36 billion) became a done deal in 2000. Then Viacom took on UPN and BET, and NBC got together with Pax.

In radio, the $23.8 billion Clear Channel/AMFM deal gave Clear Channel more than a thousand radio stations. To put that into perspective, it was considered a major deregulatory victory in the mid-1980s when the radio station limit was raised to 14.

AT&T-Media One ($69 billion) continued to run the government gauntlet in a dispute over which assets it would have to divest to get under the 30% cap on cable subs. AOL-Time Warner ($180 billion, give or take a B), meanwhile, finally got the OK from the Federal Trade Commission, contingent on opening its wires to Internet competitors. It still has yet to pass FCC muster, but that approval is expected any time.

After the FCC in August 1999 relaxed its ownership rules to allow TV duopolies, everybody expected coupling up would be rampant. But only about 10 companies took advantage of the duopoly opportunity last year, chief among them Univision Communications, which created duopolies in five cities at once by buying Barry Diller's USA Networks stations for $1.1 billion, and the ever-busy News Corp., which in August paid $5.3 billion for Chris-Craft Industries, landing itself duopolies in four major markets.

Bottom line: The big got even bigger, but now it's tougher for mega-giants to find new conquests.

The couch potato clique:
Keeping it in-house took on a new meaning this year in the network TV game. CBS' prime time lineup in fall 2000 featured 16 shows produced by CBS News, CBS Productions, Viacom or Paramount Television.

CBS now airs Nickelodeon children's programming on Saturday morning, MTV is producing CBS Sports' Super Bowl halftime show and UPN is airing reruns of MTV's Celebrity Deathmatch
in prime time.

NBC's miniseries now run on Pax and so do some NBC local news broadcasts, while Mysterious Ways
is making its way back from Pax, where it sort of had spring training, to NBC.

Across the way at ABC, Buena Vista, Touchstone or Disney had a hand in 13 of the shows/films on the Millionaire
network's opening-day lineup. Fox's 20th Century Fox studio or co-owned Regency TV studio produced 14 of the 20 shows on the network's original fall lineup. And The WB had seven shows on its not-so-full-plate from co-owned Warner Bros.

Bottom line:
Even when they make their own, the networks can't always create a hit. At this rate, feisty independent producer Carsey Werner has plenty of upside.

All who say 'Nay':
That would be many broadcast and cable network and industry ad professionals, who saw ad sales turning south right in the fourth quarter but kept saying the first quarter would look better. Maybe yes, maybe no. ABC reported advertisers weren't picking up first-quarter options as briskly as anticipated, but at CBS, buoyed by the Super Bowl and Survivor II
in January, business is "better today than ever before,'' crowed Mel Karmazin at a conference last month, while he literally begged for a recession so critics could see how well his and other networks would perform.

Bottom line:Analysts see a sluggish ad economy. We'd advise Mel to be careful what he wishes for.A cold wind blows on Wall Street:
The collapse of the stock and bond markets clouds all sorts of players. News Corp. is begging players like Microsoft and Liberty for financial support to mount a bid for DirecTV parent Hughes Electronics. A few small cable operators, like Classic Communications, are in financial peril. Cable overbuilders can't raise enough money to build out all their franchises.

The choppy markets will make it tough for companies on the auction block. Sellers always focus on the price they would have fetched at the market's peak. So Hughes parent General Motors sees the $40 billion valuation the market offered last summer and Murdoch's potential partners see the $25 billion market capitalization today.

But even buyers with a long-term view may not be able to finance acceptable bids. Few companies will be willing to use their depressed stock as currency in a deal. And even if the debt markets weren't so stingy, good luck borrowing enough to pay the 17-21 times cash flow a Rainbow Media will demand when even aggressive lenders won't want you running more than 8 times cash flow.

Bottom line:
And good luck to Haim Saban getting enough investment bankers to support his vision of a $2 billion payday for half the equity in Fox Family Channel.

How will Steve Case impress us?:
The America Online chairman has made bold proclamations about his pending takeover of Time Warner, and how it will first generate tremendous financial benefits and then transform both television and the Internet. But, suddenly, revenue prospects are souring for both the old new-media and the new old-media sides of the combined companies. Selling Teen People subscriptions to chat room junkies is swell for a start, but investors and regulators will want to see meatier initiatives.

Despite the regulatory grind that has drawn out the deal's federal review for a year, AOL is widely expected to complete the deal this month. Lord knows, Case won't back out. Without the shelter of Time Warner, AOL stock is likely to follow its 50% drop to the full 90% suffered by even well-heeled Internet giants like Yahoo! and Amazon.

Bottom line:
In the unlikely event they do break up, Time Warner is likely to turn around and become a buyer, not a seller.

JOURNALISM

Westilldidn't hear Clarence Thomas:
It seemed like familiar ground: TV cameras inside a courtroom where an NFL star is on trial for murder. But unlike the sensational murder trial of Hall of Famer O.J. Simpson, the televised trial of Carolina Panther Rae Carruth has not set back the cause of cameras in the court.

The good reviews for that trial coverage as well as the considerable attention paid the myriad election proceedings in the camera-friendly state of Florida could have made 2000 a significant comeback year for televising trials. But the U.S. Supreme Court demonstrated traditional antipathy to both modern technology and the public's interest in a landmark case when twice it rejected the entreaties of news organizations seeking to televise the election arguments live to the nation that would have to live by its outcome. The high court's compromise? Quick-release audiotape.

The bottom line:
Experts are cheered the high court opened the door a little, but no one is predicting the justices are ready for television yet.

We project a buck being passed:
After the election night mess in which all of the news networks predicted Florida for Gore (and that's just for starters), the Voter News Service, funded by all the networks to help call races, is being re-evaluated. Fox News and NBC said they'll exit VNS unless they get good explanations for the snafus. The above networks and ABC also pledged not to "call" a state in the future until all of that state's polls had closed.

Bottom line:
The VNS consortium is cheaper than each network staffing a full blown election analysis operation. They'll find a way to fix it.

Live at 11! Angels dancing on the head of a pin!:
Does a station have the right to use without permission exclusive video from a competitor, obtained either by over-the-air taping or by a news service feed? Are sponsored featured segments ethical? And how far should a news organization go to cooperate with police during a hostage crisis before compromising practice standards? (Not to mention: Should a journalist host a weekly talk show featuring the inmates of Big Brother? CBS' Julie Chen did, to much criticism. And what about altering the background in a news shot to digitally replace a competitor's logo with your own (as CBS did to ring in the new year on Times Square)?

Led by the Radio-Television News Directors Association, news practitioners struggled to keep up in balancing what can be done-in a world driven by technology, consolidation and conglomeration-with what should be done. RTNDA brought two of three tiers of a comprehensive ethics-code rewrite to its annual conference in Minneapolis in September, and continues to work on the practice-oriented third tier.

Bottom line:
No document can make ethical issues go away, or provide all the answers.

Operation Tailwind (continued):
In late August, CNN's domestic chief Rick Kaplan, was shown the door as the cable network was reorganized. Kaplan was imported from ABC in 1997 to spruce up the place (and the ratings) but his new NewsStand
debuted with the controversial (and ultimately retracted) "Operation Tailwind" saga. CNN's journalism probably did improve, but Kaplan's stock didn't (and he wasn't helped by CNN's inevitable slide as Fox News and MSNBC ate into what was once a cable news monopoly). But his ouster seemed to have as much to do with the AOL Time Warner merger as anything else. Eason Jordan, the new chief news executive, is part of a four-person leadership structure.

Bottom line:
You'll see more changes made at CNN, particularly as competitors steal their buzz.

PROGRAMMING

The next big thing? How about dead air?
High-profile 2000 shows like Dr. Laura
and Cybill Shepherd's Men Are From Mars, Women Are From Venus
tanked. Plus, a glut of new court shows spread attention spans thin, which hurt the performances of such veteran syndicated shows as Judge Judy
(her November sweeps 6.8 average was 11% below her marks for the comparable period last year), People's Court
(1.9, down 24%) and Judge Mills Lane
(1.7, down 26%). Overall, most syndicated shows continue to lose ground with audiences-in the case of Dr. Laura, she got more pickets than viewers because of her extreme ideas about homosexuality. (Most notably, CBS shoved her daytime talk show back to 2 a.m., not a good sign.) These days, it's a godsend to just be able to grab a 2.0 household rating.

Bottom line:
Wheel of Fortune and
Jeopardy continue to run circles around everybody else.

Rosie roulette:
The funny thing about Rosie O'Donnell's well-hyped hints that she's ending her talk show in 2002 is that not many seem to care (maybe because she's threatened so often before). This season, Rosie's ratings are faltering-at last count, she was in seventh-place among all talkers, below her hit status when she debuted. O'Donnell recently hopped aboard McCall's
magazine as an editorial director, and signed up to temporarily star in Broadway' Suessical
. She seemed serious when she talked to Katie Couric about leaving to spend more quality time with her kids. That's the same reason she took the job. Rosie distributor Warner Bros. declined to comment on contract negotiations.

Bottom line:
We ought to know by NATPE.

Women of the world! Fragment!:
For the year 2000, Lifetime not only was the most popular women's cable network, it was playing with the um, big boys as cable's fourth most-popular network overall. No wonder then, that Rainbow's Romance Classics is remaking itself into WE: Women's Entertainment. "Martha Stewart will not be on this network," vowed Kate McEnroe, president of AMC Networks. (True. Cindy Crawford is on that network.) Then there was Geraldine Laybourne's Oxygen, still breathing though with only 12 million subscribers, and seemingly that many catty press clippings. Earlier in December, it got $100 million in new financing-and laid off 10% of its staff and whacked its Internet operations.

Bottom line:
May the best women's network win.

Si habla Espanol:
Barry Diller, television-deal making's perpetual bridesmaid, sold his USA television station group to Univision for $1.1 billion, giving the dominant Hispanic broadcaster duopolies in major markets including New York, Chicago, Los Angeles, Miami, Dallas and Houston. Meanwhile, Harry Pappas plans his own jointly owned venture Azteca America, and there's always Telemundo, struggling for a toehold.

Bottom line:
Demographic trends suggest all these players might be right where they ought to be. Television is living la vida local.

The strike plot thickens:
Springtime in Hollywood is usually reserved for production of pilots and new development at the major broadcast networks and studios. But this spring, the TV biz will be in high gear producing shows for the 2001-2002 season in an effort to get programming in before a pair of potentially crippling strikes by the Writer's Guild and Screen Actors Guild.

The people who write and act on Hollywood's major TV series want a bigger piece of the syndication pie, among other things-and the networks/studios, which are facing new economic times say they can't afford to give up their Golden Syndication Goose.

Bottom line:
If the unions don't settle, the hard reality for networks (and viewers) is even more reality television.

NEW MEDIA

Knock, knock. Who's there?
The competition: The issue of whether and how cable operators should be required to open their high-speed networks to competing Internet service providers is being played out on several fronts. Access advocates are looking at the conditions imposed on Time Warner-AOL (one competitor now, two soon after) as a model for the future, while the NCTA says marketplace forces will remake that model for each new and different deal.

On the local front, NCTA says at least 23 states have either tabled or rejected requests for "forced access." The FCC has been reluctant to step into what it sees as a developing market.

Bottom line:
The Time Warner-AOL deal, at least, will provide a blueprint.

"If you buy this hype, press now":
Interactive TV has been more brag than fact. The fact may finally be catching up. At the Western Cable Show in Los Angeles last month, the exhibit floor was filled with people with interactive TV "solutions."

The Federal Trade Commission is concerned enough about the issue that it put special conditions-mandating the free flow of interactive TV-on AOL's purchase of Time Warner. Now the FCC plans to come out with a proceeding, sometime this month, to examine whether the entire cable industry should be required to keep interactive TV applications open.

The cable industry says it's too soon to apply regulations because the market doesn't even exist yet, but the government obviously thinks it needs to get a head start.

Bottom line:
The Clinton administration obviously was concerned about the power of monopolies. If Republican past is prologue, a Bush administration will be less so.

What the dotcom gods giveth:
The dotcom gods taketh away. Last December, Time magazine named Amazon founder Jeff Bezos "Man Of The Year." Both Bezos and Amazon's glorious rise were built despite losses of roughly $140 million a year. But one year later more than 175 dotcoms have dotgone and 36,000 dotcommers have been pink slipped. Streaming media took its share of victims: DEN, Pseudo, StreamSearch, Microcast, iCast. And 2001 isn't promising to be much kinder as plenty of video streamers switch from entertainment-based models to business-to-business sites perfect for that next company conference call.

Bottom line:
Life will continue for those who don't have to worry about finding additional financing before real revenue kicks in. But money is drying up in the technology sector.

Twinkle, twinkle little bird, when, oh when, will you be heard?:
The two major satellite radio players, Sirius and XM, promise to be available to car-buying consumers by August. Sirius is well on its way after launching the last of its three satellites this past Nov. 30. XM plans to launch the first of two satellites next Monday (Jan. 8) and will unveil a new line of radios and specific service/launch plans this Friday (Jan. 5) at the Consumer Electronics Show in Las Vegas. Both companies plan to deliver up to 100 channels (some commercial-free or commercial-lite) for $9.95 per month.

While the marketing hype is flying, investors have cooled to satellite radio's prospects. Since Jan. 1, 2000, XM's and Sirius's stock prices have dropped 61.1% and 35%, respectively.

Bottom line:
Maybe, finally, competiton will make conventional radio better?

DIVERSITY

Black and mostly white TV:
Last year, NAACP President Kweisi Mfume and an alliance of Latino, Asian and native Americans got NBC, ABC, CBS and Fox to sign unprecedented diversity agreements and three of the four networks hired "diversity" executives at a VP level or higher. Once the fall TV season rolled around, the Big Four's prime time lineups looked better but not radically. They pleaded for more time.

While some feasted at the table of TV and radio deregulation last year, minority broadcasters were largely left out again. One big exception was the Clear Channel spin-offs necessitated by that company's merger with AMFM. Minority owned Radio One, Blue Chip, Inner City and Rodriguez Communications all picked up stations, with Radio One buying a whopping $1.37 billion's worth.

An August 1998 survey that showed that while African Americans constituted 12% of the nation's population, they owned just 1.7% of its 11,524 TV and radio stations. A new study is due soon.

Bottom line:
For the first time, minorities seem to be keeping the heat on.

LAW, POLITICS & REGULATION

Cleaning house:
The FCC got new digs two years ago. Look for it to change on the inside as well in 2001, converting the old heirarchy of bureaus and divisions according to service into a structure that reflects a more fluid and less stratified digital age.

Perhaps that will help speed up the merger-review process, which came under fire this year. Commissioner Susan Ness is still around for now, thanks to a recess appointment courtesy of the White House. But that still leaves three potential openings (and four if Bush bumps Ness): Bill Kennard-who would have to take a cut in rank to commissioner to stay on; the quixotic Harold Furchtgott-Roth, and the by-all-accounts FCC-weary Gloria Tristani. Most likely Michael Powell becomes interim chairman and then chairman.

Bottom line:
If we're right, look for a "less is more" regulatory philosophy from a moderate Michael Powell.

Here's digital mud in your eye:
A few sets; some stations; a handful of programs. But so far, it's still the videophone of the 90s and now, the 21st century. Why? The transmission standards battle between COFDM (Europe uses it and it's portable) and 8-VSB (the FCC-approved standard) deadened momentum.

Datacasting services are feeling a ripple-effect delay, as well as facing their own challenges from the broadcast networks.

A number of DTV transmission tests are being wrapped up, with the results expected to show a passing-if just-grade for 8-VSB. Meanwhile, the FCC is trying to figure out what if any new public interest obligations should go along with the new digital services. Public advocates want all kinds of things, from more kids programs to free airtime for politicians.

Also slowing the transition: Scarcity. Cable systems still can't carry broadcasters' DTV signals and the networks still produce only a smidgeon of HDTV (mostly high-profile sports).

Bottom line:
The NAB-MSTV side-by-side transmission test results are due Jan. 25. We predict 8-VSB by a digital nose.

We can't hear you:
A year ago this month, the FCC approved a new class of low-power FMs that Chairman William Kennard pushed as a way to diversify broadcast voices. Established broadcasters raised red flags over interference. Friendly legislators saw the signals.

In its budget bill, the last legislation of the lame duck session last month, Congress passed an NAB-backed provision that dramatically reduces the number of those stations by increasing the channel separation between the new low powers and existing full-power outlets (although it does provide for a limited nine-month test of more closely spaced stations). In signing the bill, President Clinton criticized the LPFM restrictions.

Bottom line:
Expect a few new voices, but not enough to please Kennard or honk off the NAB.

How much is the frequency, Kenneth?:
Having "given" broadcasters some $70 billion worth of spectrum, the government is determined to make some money from wireless corporations for blocks of spectrum currently on the block. The commission has twice postponed the auction of spectrum now used by TV channels 60-69. The government is trying to build a case for the cost of moving broadcasters off the band, to make sure that cost is figured into the bids.

As an incentive to 60-69 broadcasters to clear the band early (before 2006), the commission is allowing them to negotiate buyouts and keep the money. Bud Paxson is hoping to make billions from his UHFs.

Bottom line:
The 60-69 auction is scheduled for March 6.

This chad is your chad, this chad is my chad:
If Al Gore had won the White House, we'd be writing that broadcasters had better polish their armor and sharpen their swords, because a battle over free airtime for politicians was brewing, big-time.

He didn't, and we're not writing anything of the sort.

George W. Bush is going to be the man at 1600 Pennsylvania. Even so, given the tenor of the times, some kind of campaign finance reform is likely to pass Congress. The House has passed reforms before and Sens. John McCain (R-Ariz.) and Russ Feingold (D-Wis.) have vowed to bring them back as soon as Congress is in session. Advocates like Alliance for Better Campaigns' Paul Taylor and American Enterprise Institute's Norm Ornstein will keep pushing for change, but their tough job is to convince Republicans.

Bottom line:
With George W. at the helm, broadcasters can expect to keep charging politicians for ad time.

A House (and Senate) divided:
The 107th Congress returns effectively intact, although the margins of power have been narrowed. The two big questions: Will Rep. Billy Tauzin (R-La.) be chairman of the House Commerce Committee, and how will things get done in the Senate, which is split 50-50? Although no one wants to predict for the record whether Tauzin or Rep. Mike Oxley (R-Ohio) will top Commerce, Washington observers expect House Speaker Dennis Hastert (R-Ill.) to give Commerce to Tauzin and another powerful post to Oxley (the House Banking Committee, for example, with the added plum of the finance subcommittee, which sources say might be moved from Commerce to Banking to appease Oxley.)

In the Senate, Democratic Leader Tom Daschle and former chief Senate fundraiser Robert Torricelli (D-N.J.) say they believe Democrats should get a lot of say this session. Republicans are balking and have VP-elect Dick Cheney to give them a one-vote advantage. Getting anything but the least-controversial legislation through the Senate is going to be tricky.

Bottom line:
Tauzin takes Commerce and, if it's possible, we write even more about the loquacious Lousianan. The Senate becomes a partisan stalemate.


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Chapter 11s



VC's



Powell



Kennard



Product placement



Public interest



Odyssey



Oxygen



Business plans



Stock options



Bill O'Reilly



Larry King



Two sources



Voter News Service



Megamedia



Joel Klein



Amos Hostetter



Dan Somers



8-VSB



COFDM



Bartlett



Clinton



Ananda



Rosie



Temptation Island



Survivor



Univision



Indies



Dating shows



Judge shows



Lynne Cheney



Tipper Gore



VOD



PVR



Satellite radio



Web radio



TV-newspaper combos



Duopolies



EPGs



IP telephony



XFL



NBA



Centralcasting



Stand-alone stations



Niche networks



TNT/TBS/USA/TNN



HDTV



Datacasting



Sen. Lieberman



VP Lieberman



Digital cable



DBS



Copyright is king



Content is king



Larry David



Michael Richards



Reverse compensation



Compensation



Hiring freezes



New media initiatives



Lachlan



Haim



The new



The old

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