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IT'S PRIME TIME FOR BARRY

Edgar Bronfman says he came up with the idea five months ago at 4 a.m. The Seagram Co. chief executive saw a door closing for TV shows produced by Seagram's Universal Studios as other studios bought or launched their own networks. His dinner partner that night, HSN Chairman Barry Diller, had a different problem. With a string of TV stations that reached only 30% of the country, he faced a dead end in his ambition to convert his cable-shopping network into a national TV network.

That's why Diller and Bronfman view their Oct. 20 agreement to merge much of Seagram's Universal Studios TV and cable operations with HSN as a match made in heaven. They hope to cobble together a seventh TV network that will be unique: high-end programming to be seen over both cable and broadcast stations. It's ''creating value,'' Bronfman says, sitting in his 14th-floor office on the Universal Studios lot.

Maybe so, but the value of this deal depends on whether Diller, creator of the Fox network, can make the whole greater than its parts. Even he admits that it will be ''no cakewalk.'' The key is the USA network itself, which reaches 74 million homes but is tuned in by only 2% of them each day. Diller aims to get USA's market share up to double digits and link them to HSN's 25 TV stations in a network covering 90% of the country. That will enable USA to boost ad revenues closer to those charged by networks such as ABC and CBS. And with 90-second infomercials between shows, USA could market Home Shopping's wares.

Diller's programming skills will be key. The company must stand out in what Bronfman calls ''a fractionalized world.'' During the day, Diller's stations will focus on slick local programming and news, while Universal will produce network-quality shows for prime time. What shows will the network air? Diller isn't saying, but promises they'll be distinctive. ''Who but Barry Dill-er would you want putting this together for you?'' says Bronfman, a Diller friend for 23 years.

Friendship aside, Bronfman needs Diller to succeed if Universal is to have a guaranteed place to air its TV shows and movies. The TV operation, despite a modest turnaround, is still Universal's weakest unit. And if Diller can work his magic Universal may also have its own network: Under the deal, Seagram can increase its 45% stake in the merged operation, and it can reclaim the asset when the 55-year-old Diller leaves or retires. ''It's structured like a car lease,'' says one TV exec. ''Diller can drive it and pretend he owns it, but in the end he has to give it back.'' When that happens, Bronfman expects a fat residual value.

By Ronald Grover in Los Angeles


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Updated Oct. 23, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.
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