COMPANY TOWN: Creating a Media Giant : THE PROGRAMMING : What Effect? Only Prime Time Will Tell : Merger could heighten suspicions of sweetheart deals--corporate interests working at the expense of independent producers and quality of shows.

Only six weeks ago, CBS Television President Leslie Moonves said other networks would be “out of their minds” to expect Walt Disney Co., the studio that owns ABC, to offer rival networks anything but its programming castoffs. So what does that say about CBS rivals that hope to receive top-tier programs from Viacom Inc. or be on equal footing when pitching shows to CBS?

Viacom’s proposed merger with CBS Corp. marks the latest domino to fall as studios swallow up networks, leaving NBC, a unit of General Electric Co., as the only major broadcaster lacking such an alliance. If approved, the merger would further tangle television’s complex web of relationships, under which every programming move is already second-guessed for favoritism toward larger corporate interests--at the expense, some say, of putting on the best shows, or at least those most likely to attract an audience.

Disney’s recent decision to combine management of its television production unit with ABC--in part to ensure that more Disney-produced shows wind up on the network--signaled that the pretense of networks being equally open to all program suppliers is over. Some say the Viacom-CBS deal would merely hasten that process.

“I guess I’m working for CBS now,” said one producer who has an agreement to develop shows through Viacom’s Paramount Television Group.

CBS and Viacom officials stressed Tuesday that Viacom’s TV production wing would continue to do business with other networks. Still, suspicions will always linger that sweetheart deals are taking place; indeed, sources say there is already talk that the next series in Paramount’s lucrative “Star Trek” franchise may be diverted to the CBS-owned TV stations.

What this does to the quality and content of TV programs remains open to debate, but it has significant consequences for Hollywood’s production community--a development anticipated when it was announced in 1993 that the federal rules that in effect blocking networks and studios from merging would be phased out.

“This is a disaster for independent producers,” Warner Bros. Chairman Robert Daly said at the time. “They will be whipsawed in their deals with networks. The networks will end up abusing their power.”

Few would deny such abuses have occurred, though networks maintain they are guided by several motives--some strictly defensive--for wanting to produce more of the programs they broadcast.

Beyond cashing in by selling rerun rights should one of their shows become a hit, a la “Seinfeld” or “The X-Files,” owning a series also helps the networks avoid being held up for exorbitant sums in later negotiations--a situation NBC faced when it came time to renew “ER” and in current discussions to extend “Friends,” both properties of Time Warner’s Warner Bros. Television unit.

If steering programs from a studio to its network is the ultimate goal, however, those plans are complicated at least in the short term by the sprawling nature of these entertainment behemoths, forcing competitors in one sphere into partnerships in another.

Thanks to its absorption of two once-independent production companies, Spelling Television and Rysher Entertainment, Viacom currently produces prime-time series for all six broadcast networks. They include NBC’s “Frasier,” ABC’s “Sabrina the Teenage Witch” and, through Spelling, Fox’s “Beverly Hills, 90210” as well as WB’s “7th Heaven.”

As a result, Viacom--as CBS’ parent--will still control one of the linchpins of NBC’s dominant Thursday lineup, just as News Corp.’s 20th Century Fox Television produces several key ABC series, among them “Dharma & Greg” and “The Practice.”

Viacom currently produces half a dozen CBS series through its various subsidiaries, including the hits “JAG” and “Becker.”

There is also speculation that CBS may turn to Viacom--one of the premier forces in children’s programming thanks to its ownership of the cable network Nickelodeon--for help in that arena. At present, CBS licenses its entire Saturday morning lineup from Nelvana Ltd., a Canadian company that capitalizes on international production subsidies to provide CBS children’s fare at bargain-basement rates.

Inevitably in a deal of this scope, some strange bedfellows have been created--among them two high-profile radio personalities, Howard Stern and Dr. Laura Schlessinger. Citing objections to Stern’s risque antics on CBS’ radio and TV stations, Schlessinger balked at making a deal with CBS for her much-anticipated jump to television; instead, her planned weekday show, due to premiere next year, is being distributed by Paramount.

Similarly, producer Steven Bochco--having finally extricated himself from an exclusive production deal at CBS after a period of strained relations with the network--forged a new agreement with Viacom’s Paramount in July. “Where I’m coming from, which is as a supplier, it doesn’t in any way alter my ability to pitch shows to all interested parties,” Bochco said.

In a business in which leverage means everything, Viacom should have even more clout in areas such as syndication, where, in addition to CBS’ Eyemark Entertainment, the company will inherit King World Productions, the distributor of “Jeopardy!” and “The Oprah Winfrey Show.” CBS is in the process of closing that acquisition.

Looking past such programming considerations, the human toll will be felt in expected layoffs at overlapping divisions such as the three syndication arms: Viacom, Eyemark and King World.

Perhaps the biggest irony, meanwhile, is that the Federal Communications Commission--by eliminating rules that for decades prevented this sort of combination, prohibiting networks from selling reruns of their programs--has helped restore what it rent asunder and paved the way for this merger to take place.

Antitrust laws passed in the 1970s compelled CBS to spin off Viacom, which became the syndicator of its programming library.

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Terms of the Agreement

* CBS shareholders would get 1.085 shares of Viacom Class B stock for each CBS share held.

* At Tuesday’s closing price of $46.94 for Viacom Class B (up $1.88 for the day), the deal values CBS at $50.93 a share. CBS stock rose $1.75 to close at $50.69.

* The deal would be tax-free for CBS shareholders.

* Viacom’s chairman, Sumner Redstone, would continue to control the company via his Class A shares.

The Players

CBS

Tuesday: $50.69, up $1.75

*

Viamcom (Class B):

Tuesday: $46.94, up $1.88

Source: Viacom Inc.

Media Mergers of the ‘90s

* Jan. 10, 1990: Warner Communications Inc. and Time Inc. complete $14.1-billion merger, creating world’s biggest media conglomerate.

* Jan. 3, 1991: Matsushita Electric Industrial Co. buys MCA Inc. for $6.9 billion.

* July 7, 1994: Viacom Inc. buys Paramount Communications Inc. for $10 billion after winning a bidding war against QVC Inc.

* Aug. 29, 1994: Viacom buys video rental chain Blockbuster Entertainment Corp. for $8 billion.

* June 5, 1995: Seagram Co. buys MCA Inc. from Matsushita for $5.7 billion and renames it Universal Studios.

* Nov. 24, 1995: Westinghouse Electric Corp. buys CBS Inc. for $5.4 billion.

* Feb. 9, 1996: Walt Disney Co. buys Capital Cities/ABC Inc. for $19 billion.

* Oct. 11, 1996: Time Warner and Turner Broadcasting System Inc. complete $7.6-billion merger.

* Dec. 31, 1996: Westinghouse Electric’s CBS unit buys Infinity Broadcasting for $4.7 billion.

* Dec. 10, 1998: Seagram Co. buys PolyGram music company for $10.4 billion.

* Sept. 7: Viacom announces deal to buy CBS Corp. (formerly Westinghouse) for $37 billion.

Source: Wire reports