Studios Talked Merger of Rival 5th Networks : Television: Cross-ownership concerns reportedly stymied discussions between Paramount and Warner Bros.

Paramount and Warner Bros. recently discussed merging their competing fifth television networks but were unable to come to terms, knowledgeable industry executives said Wednesday.

The discussions, which were held by Paramount Pictures Chairman Jonathan Dolgen and Warner Bros. Executive Vice President Barry Meyer and other senior executives, were said to be complicated by cross-ownership concerns and other problems.

Paramount executives were unavailable for comment. Jamie Kellner, president of Warner’s WB network and an equity partner, said that “there are no ongoing discussions.” Kellner said the talks never reached a “meaningful stage,” adding, “In my opinion, the two entities will not be merged together.”

Both companies have been in a race to sign up affiliates in recent months in the hopes of introducing two nights of prime-time programming by the end of next year. Holding on to those affiliates became a concern in the wake of Fox’s unprecedented raid on CBS affiliates.

Fox last week snatched 12 VHF affiliates from the major networks, eight of them from CBS, in a bold bid to gain parity with ABC, CBS and NBC. The move has set off a domino effect among affiliates as the networks scramble to find new outlets.

While most industry executives think it would be wiser for Paramount and Warner Bros. to combine their competing networks rather than wage a war of attrition, implementing such a strategy may be all but impossible.

In order to win valuable airspace in the biggest cities, both Paramount and Warner Bros. took on as partners some of the largest independent station groups in the country. Paramount’s network is 50%-owned by Chris-Craft Industries, which controls eight TV stations, including KCOP-TV in Los Angeles, through its majority-owned subsidiary, BHC Communications.

The WB network, which is being guided by Kellner and Garth Ancier, is launching a “hybrid” network in conjunction with the cable network WGN-TV and other independent TV stations owned by Tribune Broadcasting.

One major obstacle to combining the two networks is a non-competition agreement between Paramount and Chris-Craft. Under the agreement, Paramount may not invest in another network for three years. In addition, the Tribune TV stations have long-term program contracts with Warner Bros., making it difficult for the studio to sever its ties.

But Fox’s historic raid on established VHF affiliates has left both Paramount and Warner Bros. shaken. As the major networks begin to hunt for replacement affiliates, stations that have committed to either of the fifth networks are targets.

Neither Paramount nor Warner Bros. can afford to lose affiliates, which would make it harder to achieve the 70% level of U.S. TV households needed to attract national advertisers. Indeed, it was in part to get around the shortage of available TV outlets that Warner Bros. partnered with “superstation” WGN-TV to increase its coverage area.

Executives familiar with the talks said that if either studio were to propose a merger, it would need the approval of its respective partners. And right now, the executives said, neither Chris-Craft nor Tribune appears willing.