CBS, Warner to Shut Down 2 Networks and Form Hybrid

And then there were five.

In a move that suddenly shrinks the television landscape, CBS Corp. and Warner Bros. announced Tuesday that they were shutting down their struggling UPN and WB networks and replacing them with a new network called “the CW.”

The joint venture of two long-time competitors was a clear admission that in today’s cluttered media market, six English-language broadcast networks were one too many. By building a fifth network with their best shows -- among them, the WB’s “Gilmore Girls” and UPN’s “America’s Next Top Model” -- they hope to attract younger viewers and the advertisers that court them.

The new network, which is to be launched in September, will be jointly owned by CBS and Time Warner Inc. It will immediately be available in nearly half of the country, including on Tribune Co.-owned KTLA-TV Channel 5 in Los Angeles.

Wall Street and Madison Avenue applauded the move as a refreshingly frank assessment of both networks’ weaknesses. Especially at a time when the Internet and other new media are making it harder for broadcasters to retain their slice of the advertising pie, analysts said the joint venture made sense.

“Each of the networks only had three or four strong shows and the rest was really just filler,” said Jason Maltby, national TV president at ad-buying firm Mindshare. “For every ‘Top Model,’ there was a show like ‘Cuts.’ For every ‘Gilmore Girls,’ there were two or three turkeys.”

Tribune, which publishes the Los Angeles Times and owns 22% of the WB, will not have an equity stake in the new network. Tribune’s big-market TV stations will be affiliates of the CW, and will pay to air the network’s programming, but will not have to shoulder a portion of its overhead or potential financial losses.

Over the last 12 years, UPN has lost more than $1 billion and the WB has lost about $700 million. Since its launch in 1995, the WB has turned a profit only two times; it was expected to lose about $35 million this year. CBS-owned UPN has never had a profitable year.

“UPN was approaching the point ... where we were hoping to break even,” CBS Chief Executive Leslie Moonves said Tuesday at a news conference announcing the deal in New York. “Looking down the road, this is a much better thing than keeping the UPN alive the way it was.”

Later, in an interview, Moonves boldly proclaimed: “We expect to make a profit in our first year.”

Moonves hammered out the deal with Barry Meyer, chairman of Warner Bros. Entertainment. Moonves once worked for Meyer when Moonves was in charge of Warner Bros. Television.

“We saw coming down the line a challenged landscape for keeping small networks alive,” Meyer said. “That wasn’t for us a prescription for building a long-term successful outfit.”

The new venture probably will result in significant layoffs, including the departure of the top two executives at the WB. Executives involved in the deal said they were not sure how many of the approximately 300 people who work at the two networks would join the CW. Moonves said it would employ fewer than 240 people.

For Hollywood’s writers, actors and producers, meanwhile, the loss of a network means one fewer place to shop a new show. And for dozens of TV stations, including KCOP-TV Channel 13 in Los Angeles, the CW deal will mean that come this fall, they will find themselves without a prime-time lineup.

Tuesday’s announcement came as a surprise to many in Hollywood, including News Corp. President Peter Chernin, whose Fox television stations air UPN programming under a deal that expires in August. Moonves said he called Chernin before the news conference and told him that there would be no need to renegotiate the deal, effectively snatching away a key prime-time block from a cluster of Fox stations.

Moonves and Meyer said the timing couldn’t have been better because the WB’s affiliation agreement with Tribune expires before the new fall season in September, about the same time as UPN’s agreement with Fox.

“It was either come together now or never,” Moonves said.

For its part, Chicago-based Tribune had grown increasingly unhappy with its ownership stake in the WB, and wanted to return to its bread-and-butter business of running newspapers and broadcast stations. The costs of programming have continued to climb, and often even successful shows lose money. For example, the WB’s bedrock show, “7th Heaven,” was hemorrhaging money, losing $16 million for the WB this year.

For Tribune, what clinched the 10-year deal was that it effectively guaranteed that Tribune-owned stations would have access to quality prime-time programming -- a pact that would allow the company to command higher ad rates.

“From Tribune’s perspective, this is the best of all worlds,” said Chairman Dennis J. FitzSimons, who declined to say whether Tribune was getting cash in return for its stake. “Our TV stations will have a stronger prime-time lineup, better lead-ins to their late-night programming and overall will be better positioned to compete for the long term.”

Together with Tribune’s 16 major market stations and 12 CBS-owned stations in such markets as San Francisco and Sacramento, the new network will be available in 48% of the country the moment it launches, executives said. The network’s distribution is expected to eventually reach about 95% of the nation’s TVs through a patchwork of stations owned by other companies.

The WB and UPN will continue to operate separately through August. But Meyer said it was important to announce the deal now, at the beginning of the television industry’s pilot pickup season, to “avoid duplicate development,” and tens of millions of dollars of programming costs.

Nancy Tellem, CBS Paramount television chief, and Bruce Rosenblum, Warner Bros. Television Group president, will have oversight of the new network. UPN President Dawn Ostroff will become entertainment president while John Maatta, chief operating officer of the WB, will assume the same role at the new network. The WB advertising chief Bill Morningstar will become head of sales.

When the two networks launched as fierce competitors in 1995, “it was a different day and age,” said Jay Sures, a partner of United Talent Agency. “No one expected that there would be 250 channels and all of these distribution platforms, everything from cellphones, the Internet, Apple iPods and digital video recorders.”

But especially since Moonves took over the troubled UPN in 2002, the two networks found themselves scrapping for the same core audience: young women from 18 to 34 years old.

Meyer said for movie companies, such as his own Warner Bros. film studio, and other advertisers who target the youth market, the joint venture would be an enticing advertising buy.

“The CW will be able to draw on two great production companies, Warner Bros. Television Production and CBS Paramount Television,” Meyer said. “We’ll have a more valuable platform for marketing to young demographics.”

The deal comes less than a month after Nielsen Media Research began including Spanish-language networks in its rankings. That change allowed Los Angeles-based Univision Communications Inc. to jockey with the WB and UPN in overall ratings, a psychological blow to the two smaller networks that had long competed against one another for fifth place behind CBS, ABC, Fox and NBC.

Existing agreements with major entities, such as Nielsen Media Research, still need to be sorted out. Similarly, the fate of shows not owned by the two companies, such as “Reba,” produced by 20th Century Fox Television studio, is up in the air, as they will have to compete for a spot on the network.

What is not up for discussion, Moonves said, is the network’s new name. Asked why it wasn’t called CWB, he said, “That sounded too much like the WB network or CNBC. And we couldn’t call it the WC for obvious reasons.”