Viacom in Talks to Acquire BET Cable Networks

Viacom Inc., the nation’s second-largest entertainment company, is in active discussions with BET Holdings Inc. to acquire its cable networks, which include Black Entertainment Television, BET on Jazz and BET Gospel, according to people close to the negotiations.

Sources said Tuesday that BET Chairman Robert Johnson is holding out for a $3-billion price tag. But they said Viacom Chief Executive Mel Karmazin is balking at the price.

Industry executives also did not rule out a bidding war. With about 60 million subscribers, BET is one of the last independently owned and widely distributed cable channels available for sale. Cable networks are cash cows for Time Warner Inc., Walt Disney Co., Viacom, NBC and USA Networks Inc.

Viacom spokesman Carl Folta said he would not comment on speculation. Johnson could not be reached. The talks were first reported Monday in Multichannel News Online, an online trade outlet.

But Viacom Chairman Sumner Redstone has made no secret of his desire to own more cable channels to add to a $20-billion-plus empire that includes MTV, Nickelodeon, VH-1, TV Land, Country Music Television and the National Network. A channel targeting senior viewers is on the drawing board. Sources said New York-based Viacom also has had casual discussions with Oxygen Media Inc. about buying the women’s channel.

Such a deal would seriously enrich Johnson, who owns 60% of the privately held, Washington-based company. A cable pioneer who is already a billionaire, Johnson launched BET in 1980 to become the nation’s most successful African American media executive.

Liberty Media Corp., the investment company controlled by media mogul John Malone, was one of BET’s earliest backers and today owns a 35% stake in the company.

Johnson’s cable group is also one of the few free-standing after a media consolidation over the last five years into the hands of a few giants. Analysts say it is logical that Johnson would sell because he lacks the leverage to compete against the likes of Time Warner, News Corp., Disney and Viacom, which increasingly feed their best TV shows and movies to their own cable outlets.

These giants also use their clout to demand more space for new channels, shutting out smaller companies such as BET.

It is unclear whether Johnson’s legal problems are a factor in his decision to sell. The company was sued in August for $21 million in damages by its former chief financial officer, who claims he was wrongfully dismissed and that BET officials conspired to evade federal taxes and used corporate funds and credit cards for personal purchases.

For Viacom, buying BET would give it even more dominance in music programming. Viacom’s recent purchase of CBS added Country Music Television to the company’s unchallenged monopoly over music television with MTV and VH-1. Viacom could use its clout to expand the fledgling BET Gospel and BET on Jazz channels.

In addition, Johnson’s flagship channel, BET, would give Viacom an African American demographic to sell to advertisers that it currently lacks in cable. BET also is half owner in BET Movies, a pay-per-view movie channel, with Starz Encore Media.