Is Battle Brewing Between USA Partners?

For years now, USA Network has made a killing off of cheesy whodunits such as “The Cover Girl Murders,” which premieres next month. Now the network is the subject of its own mystery, which might be called a “who-gets-it.”

Industry sources Monday said the pending merger of Paramount Communications and Viacom International could result in an ownership battle for USA, which is jointly held by Paramount and MCA Inc. At issue is whether the mega-merger trips a non-compete clause between the two companies, which have operated the network together for more than a decade.

The fate of USA is no small matter, since it is valued at about $1 billion and returns $35 million to $40 million in annual profit each to Paramount and MCA. The network is seen in more than 60 million homes and is the country’s highest-rated basic cable channel in prime time, consistently outpacing rivals such as CNN, ESPN and TNT.

At a Monday news conference, Paramount Chairman Martin S. Davis said the merger will have no impact on USA. But MCA declined to comment, leading some to speculate that executives there are contemplating a buyout effort.

“MCA will end up owning 100% of that company,” one highly placed source said Monday.

Under scrutiny as a result of the merger is a buy-sell clause that says a change in control at one company gives each the option of buying out the other partner’s interest. Given the premium the market places on cable channels, the acquiring partner might have to pay as much as $600 million.

While analysts note that MCA was sold to Matsushita without triggering the buy-sell option, another clause in the partnership agreement might also trigger an ownership fight: Neither Paramount nor MCA can start another general interest entertainment cable TV network without the other as a partner.

Not everyone sees ownership of USA becoming an issue. Said John Tinker, a media analyst with Furman Selz, “I’m sure everyone will get together and have a serious meeting pretty soon, but I don’t see why either side would want to change” the partnership.

USA Network is important to both Paramount and MCA because it serves as an outlet for shows that cannot be sold into syndication after they’ve finished their network runs.

“It becomes an option for shows of marginal value,” said one TV industry executive.

MCA has steered USA such series as “Murder, She Wrote,” “Miami Vice,” “Major Dad” and “Quantum Leap,” all of which were produced by MCA but couldn’t be sold in syndication. Paramount has also sold “Wings” and “MacGyver” to USA Network.

After extensive promotion, “Wings” and “Major Dad” reruns premiere next Monday.

Despite its financial value, USA is rarely listed among either company’s prized assets, because of its reputation for lowbrow programming.

The network was roundly criticized this summer for airing “Marilyn & Bobby: Her Final Affair,” a conjecture-laden tale about Marilyn Monroe and Robert F. Kennedy. And TV critics laughed openly at a recent summer press tour when USA announced its upcoming lineup, which included titles such as “Praying Mantis” and “Rubdown.”

But while critics decry its menu of murder and mayhem, audiences eat it up. And with ratings success has come financial fortune.

Media analysts at Paul Kagan Associates estimate that USA Network will generate cash flow this year of $90 million on revenue of $410 million. Revenue comes from both advertising and cable operator subscription fees.

Furthermore, USA Network last year launched a promising sister network, the Sci-Fi Channel. At a total investment of $75 million, the Sci-Fi Channel still has a way to go before it turns a profit, since it has attracted only $10 million in ad revenue so far.

Cable re-regulation, however, has helped boost Sci-Fi Channel subscribers to about 13 million because it is cheaper for operators to carry than more established cable networks.

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Beavis and Butt-Head Meet Wayne and Garth: Those mindless MTV metal-heads, Beavis and Butt-head, might be amused to learn they’re among the first spoils of the Paramount-Viacom merger. Viacom Chairman Sumner Redstone on Monday confirmed that a Beavis and Butt-head movie expected to be made at Warner Bros. will now go to Paramount as a result of the merger.

Paramount has some experience molding vacant teens into matinee idols--it struck gold with “Wayne’s World”--and is expected to make Beavis and Butt-head a high priority.

What’s not so certain is whether media mogul David Geffen will remain attached to the project.

Geffen, who confesses to being a major B&B; fan, struck a deal with MTV to cut a Beavis and Butt-head record shortly after the show premiered. The record, due this Christmas, mixes music with humor from the show. Geffen has also spearheaded the B&B; movie. But the Paramount-Viacom merger throws that into doubt, since Geffen is exclusive to Warner Bros. as a movie producer.