Fox Children’s Network, Saban Agree to Merge, Could Go Public

The Fox Children’s Network and its leading program supplier, Saban Entertainment Inc., have agreed to merge in a bid to better compete against stronger rivals in kids’ programming.

The combined company, which would be half owned by each party, could go public to raise money for worldwide expansion of its cable channels. Terms of the merger were not disclosed.

Fox Broadcasting Co. announced the merger late Friday, putting to rest questions that have been swirling in recent months about the fate of its children’s programming arm. Rumors surfaced several months ago that Fox was preparing to spin off the subsidiary, which provides 19 hours of children’s programming, Monday through Saturday, to its station affiliates.

“Our competition has deep pockets,” said Margaret Loesch, chairman and chief executive of FCN. “This will put us on equal footing.”

Haim Saban, chairman and chief executive of Westwood-based Saban, said competitors like Warner Bros. and Walt Disney Co. have network and cable distribution, animation production and cartoon libraries to exploit. He said merging FCN and Saban, which produces such top-rated shows for Fox as “Mighty Morphin Power Rangers” and “The X-Men,” would provide the same firepower, with a U.S. cable outlet “missing, but not for long.”

The merger would be an extension of a joint venture formed last October between the two companies to distribute children’s channels internationally, with two networks scheduled to start this fall in the Britain and Latin America. The partners would not say when a children’s cable channel would be launched in the United States, but acknowledged that cable operators have little room to offer more channels.

The children’s market has become intensely competitive in the last year, in part because of the relative ease in transporting cartoons abroad. In fact, Fox resorted to the Saban alliance in part because the supplier that jump- started the network six years ago, Warner Bros., took back its best shows for its own WB network, weakening Fox’s lineup.

Though Fox Children’s Network has the widest reach with kids, its ratings have slipped dramatically over the last two years because of the strength of cable rival Nickelodeon and new competitors like the WB network.

Sources say Fox may be motivated to spin off the children’s network because of the broadcaster’s move toward the traditional station model of soap operas, talk shows and news in the early evening, a change that could threaten the children’s network. Many stations now air the children’s network from 3 to 5 p.m., but that is a far less desirable lead-in to news than adult programming.

Loesch, however, insists that Fox affiliates are committed to airing her programming through long-term contracts. “Fox does not have a plan to move into 5 o’clock news,” she said.