Sinclair Group to Switch 5 Stations From UPN to WB

Time Warner Inc. won a significant round in its battle to become the nation’s fifth-most profitable television network with the announcement Monday that Sinclair Broadcast Group will switch the affiliations of five key stations from UPN to WB for $86 million in compensation over 10 years.

Analysts said putting WB into additional households through the Sinclair stations will generate new advertising revenue and help lure other stations away from UPN to shore up weak distribution, a soft spot for the network since its inception in January 1995.

Although the five Sinclair stations reach only a fraction of America’s television households, the switch is regarded within the television industry as a harbinger of serious problems for UPN, which apparently was taken by surprise by Sinclair’s decision.

The two fledgling networks now will be at rough parity in distribution, and analysts believe that UPN is at a disadvantage to WB in programming, branding and management.

“Sinclair is one of the best station operators around, and the fact that they have done this should take away any doubts advertisers and other station groups have about the strength of the WB,” said Jon Mandel, director of national broadcasting for Grey Advertising. “On the low end, it’s worth $300 million in advertising revenues for the WB.”

WB’s victory represents another troublesome setback for Viacom Inc., which paid $160 million in January to exercise its option to buy 50% of UPN from Chris-Craft Industries, the station group that owns the other half.

Viacom, already hurting from write-offs on its Blockbuster video arm, saw its Class A stock fall $1.19 to close at $28.75 on the American Stock Exchange on Monday. Time Warner shares lost 88 cents to close at $45.38 on the New York Stock Exchange.

Locked in a bitter battle for survival since their head-to-head start-ups in early 1995, both WB and UPN have been wading in red ink. UPN start-up losses widened to $146 million last year, compared with WB’s loss of $96 million.

While UPN has enjoyed stronger distribution than WB, its programming has been less appealing to advertisers. Both networks now program three nights of prime time and are expanding their schedules this fall.

“There was something more than money that drew us here,” said Barry Baker, who was named chief executive of Sinclair after agreeing to merge his River City Broadcasting with it. “We liked the branding, we liked the programming.”

In addition to converting stations in Pittsburgh, Baltimore, Cincinnati, San Antonio and Oklahoma City from UPN to WB, Sinclair signed a new 10-year affiliation agreement for its previously independent Greenville, S.C., station and extended from three to 10 years existing agreements with WB for stations in Milwaukee; Birmingham, Ala.; and Tuscaloosa, Ala. (UPN will retain four Sinclair affiliates, but sources say three of them could soon convert to WB.)

Once the Sinclair stations convert in January, WB says, it will reach 87% of the nation’s television households, up from the current 86%. The network says UPN will reach 88% of TV households, down from 90%.