For a network in first place, CBS has gone into a remarkable tailspin recently.
Jeff Sagansky, the ace programmer credited with turning the network around, plans to leave this summer when his contract expires. The National Football League has already beaten him to the door by defecting to the Fox Network after 38 years. And Fox dealt another blow to CBS’s solar plexus just last week, when it raided eight key affiliates from the rival network.
Those developments will lead to some tough questions being raised by local affiliates from around the country when CBS executives gather for their annual affiliate conference this week at the Century Plaza Hotel.
“We’re going to be looking for (specifics),” said William F. Sullivan, president of WPAX-TV in Missoula, Mont., and head of the affiliate advisory board. “If it looks like they are just treading water, then everyone is going to be disappointed.”
Those specifics include what CBS plans to do to replace the Sunday afternoon National Football Conference games it is losing to Fox. While the football contract is costly for the network, it is a bonanza for stations because the games boost local advertising.
Losing football--the network argues renewing the rights was economically unfeasible since Fox’s bid was $400 million higher--is not the only incident straining the relationship between CBS and its affiliates.
CBS last year led the battle in Washington to get local cable systems to pay affiliates for the right to retransmit broadcast signals, but the ploy backfired after cable operators refused to pay. While ABC, NBC and Fox used the opportunity to launch new cable networks in partnership with affiliates, CBS acted too late and ended up with nothing.
Nothing is more debilitating for CBS, however, than the loss of eight key affiliates to Fox. Characteristically, Fox owner Rupert Murdoch attacked with total surprise, striking a deal with investor Ronald O. Perelman’s New World Communications Group to switch 12 of his TV stations--some yet to be acquired--over to Fox in exchange for an investment of $500 million.
And more surprises are in store. “We’re covering 98% of America now but we want more and better affiliates,” Murdoch told a correspondent of his Weekend Australian newspaper. “I had lunch today with someone who owns two affiliates of another network who’s considering coming,” he was quoted as saying. “We’ll announce another one in a month.”
The CBS affiliates that will join Fox include stations in Dallas, Detroit, Atlanta, Cleveland, Tampa, Phoenix, Milwaukee and Austin, Tex. The changeovers will give Fox valuable VHF outlets covering a total of 8.5% of U.S. TV homes.
“It’s serious, but the quality of CBS’ response is much more important than the severity of the wound itself,” said Jim Saunders, president of CBS affiliate KXTV in Sacramento.
Those setbacks have hammered CBS’ stock--it fell nearly 12% in two days before making a slight recovery last week--and led to renewed speculation that it may be sold. As the only “pure play” left in the network field, the company has reportedly attracted the interest of suitors in the past, but Chairman Laurence A. Tisch has said he’s not interested in selling.
Some speculate that CBS will deflect criticism over recent setbacks by announcing a fortune-reversing deal at the affiliates meeting, although the nature of such a deal is unknown. Others point out that the network still has a lot to crow about.
An aggressive campaign to woo David Letterman away from NBC has paid off even better than imagined. The network is first in prime time, daytime and late night--an unusual confluence unseen since the early 1980s. And thanks to a boost from the Winter Olympics in Lillehammer, CBS Inc.'s first-quarter operating income soared to a record $102.2 million and net income increased 28% to $69.3 million.
Nonetheless, the near-term future for CBS looks a good deal more uncertain.
Although CBS is No. 1 in household ratings, it lags behind ABC in key demographics, enabling ABC to frequently charge more from advertisers. Moreover, a network’s financial performance typically tends to trail about a year behind its ratings performance.
Next season CBS will not have any of the big ratings grabbers it had this past season like the Olympics, Super Bowl and World Series. Moreover, some analysts think that the “ratings momentum” is now behind ABC, NBC and Fox.
Madison Avenue advertising executives were disappointed when CBS unveiled its new prime-time schedule two weeks ago, replacing a total five hours of programming with seven new series. Although CBS said the changes were made to attract the younger audience desired by advertisers, Madison Avenue executives weren’t so sure.
“The one bright spot in all their development is ‘Chicago Hope,’ ” says Bill Croasedale, president of national broadcast at Western Media. “Chicago Hope” is a medical drama from producer David Kelley (“Picket Fences,” “L.A. Law”) scheduled for Thursday at 10 p.m.
CBS will have to move swiftly if it wants to contain the damage from Fox’s affiliate raid. Already CBS executives have been calling and visiting competing affiliates in the markets where they will be losing stations. Among the stations reportedly being courted are KPHO-TV in Phoenix and KTVT-TV in Dallas. Both stations planned to affiliate with the new fifth network to be launched next year by Warner Bros.
Another possibility is that CBS will make minority investments in station groups and then convert those stations to CBS affiliates--similar to what Fox is doing in the New World deal. However, it’s not clear yet whether such maneuvers violate the spirit of Federal Communications Commission rules that limit station ownership to 12 TV stations or 25% coverage of U.S. TV homes.
In any case, finding new affiliates will be costly. After years of trying to cut down on the decades-old practice of paying affiliates to carry network programming--known as “comp” in the broadcasting industry--CBS will now have to ante up once again to lure new affiliates.