COMPANY TOWN : CBS to Get 30% Stake in Web Site Operator

CBS Corp., continuing its Internet buying spree, said it will receive a 30% stake in movie Internet-site operator Big Entertainment Inc. in exchange for $105 million in advertising over seven years.

CBS, parent of the No. 1 U.S. television network, had originally agreed in April to swap $100 million in ads for a 35% stake in a venture that would own Big Entertainment’s Hollywood.com Web site. New York-based CBS will also get warrants to purchase an additional 5% stake in the company and will hold three seats on its board.

CBS Chief Executive Mel Karmazin has bought stakes in several Internet businesses this year in exchange for promotions across its TV, radio and outdoor advertising businesses. Karmazin has said he’s considering creating a separate operating company for the Internet assets by year-end.

“We plan on massively promoting Hollywood.com, our Internet site, throughout CBS,” said Mitchell Rubenstein, Big Entertainment’s chief executive and chairman. “Look for the Hollywood.com brand to be on in the fall.”

Hollywood.com features movie news and reviews and lists show times. CBS will run ads for Big Entertainment, which also operates movie-related Web site BigE.com, on its TV and radio stations and outdoor billboards. CBS’ Infinity Broadcasting Corp. unit, the No. 2 radio company, will also get a small stake in the Boca Raton, Fla.-based company.

Shares in CBS, which have gained 75% in the last year, rose 63 cents to close at $47.63 on the New York Stock Exchange. Big Entertainment, whose shares have risen more than fivefold in the same period, rose 75 cents to close at $18.13 on Nasdaq.

CBS’ investment in Big Entertainment, which had $11.1 million in sales last year, will dilute its shares, though the company hasn’t yet determined how many new shares it will issue, Rubenstein said. The company has 13.7 million shares outstanding.

CBS’ investment will also reduce Times Mirror Co.’s and Gannett Co.’s stakes in Big Entertainment, he said.

Times Mirror, which owns the Los Angeles Times, will have about an 11% stake in Big Entertainment after the CBS transaction is completed within three months, down from 16%. Gannett, the top U.S. newspaper publisher and owner of USA Today, will have a 3.5% Big Entertainment stake, down from 5% now.

CBS’ ads will help Big Entertainment attract more visitors, which in turn will let it get more advertisers for its Web sites. Rubenstein said the company plans to start selling compact discs on its Web site, which already sells movie memorabilia such as “Star Wars” T-shirts, and plans to start sites in Portuguese, Spanish and possibly French and German.