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Turner's Peacock Talk Ruffles Time Warner's Feathers
Don't underestimate Ted's influence at Time Warner -- or the potential value of a major network
Ted Turner makes even the most tedious trade show just a little more fun. And at the annual Western Cable show, held on Dec. 15 in Los Angeles, the Atlanta media mogul didn't disappoint. The Internet, he mused, was somehow akin to watching other people have sex. But eventually, Turner got deadly serious -- even if he said it with a smile. "I'd like to buy NBC," said the Mouth from the South. The crowd loved it. Gerry Levin probably didn't.
Levin, the Time Warner Inc. chairman and CEO, has the unenviable task of dealing with the fallout every time Ted lets it rip. And the notion that Time Warner ought to buy NBC is not something Turner brings up just to please the crowd. Turner has wanted to buy a TV network for years. Remember his $5.2 billion bid to buy CBS back in 1985? The man is no fool: Today, CBS has a market cap of $43 billion, and it may be worth even more as a vehicle for promoting whatever new service, film, or music a media heavyweight like Time Warner wants to push.
Because he owns more than 112 million Time Warner shares, some 10% of the company's stock, Turner can make the same argument behind closed doors every time the company's directors meet. When fellow media mogul Rupert Murdoch casually mentioned during a recent TV interview that a Time Warner board member was pushing for the company to buy NBC, he was talking about Turner, according to knowledgeable sources. Time Warner quickly denied it, and NBC parent company General Electric Co. says the Peacock network isn't for sale. At least not now.
AGENT FOR CHANGE. But Turner is not a man easily dissuaded, and Time Warner insiders say he has successfully agitated for change ever since selling his Turner Broadcasting Co. to Time Warner in 1996 for $7.5 billion. At the time of the deal, the new Time Warner vice-chairman pushed the media giant to slash its famously lavish lifestyle, selling off jets that had been used to ferry movie stars. Turner retained control over his entire empire including CNN and TNT cable channels, and rejected Levin's suggestions that Turner's New Line Cinema report to the existing Warner Bros. power structure.
It turns out that Turner didn't much like Warner Bros. Co-Chairmen Bob Daly and Terry Semel, whom he thought were overpaid and hadn't delivered. Earlier this year, the two men resigned, not coincidentally perhaps since at the time New Line was enjoying success with the film Austin Powers: The Spy Who Shagged Me, while Warner Bros. was ranked fifth among Hollywood studios and had overspent for the likes of The Deep Blue Sea and Eyes Wide Shut.
Turner says he leaves the heavy decisions to Levin and Richard Parsons, Time Warner's president. But Turner understands the dynamics of the media business better than most. His decision to pay $1.4 billion in 1986 for MGM's film library, which contained such classics as Gone With the Wind and The Wizard of Oz, nearly bankrupt Turner Broadcasting. Today, those films are the foundation for TNT and Turner Movie Classics -- movie channels that generate a staggering $4 billion a year in revenues and more than $700 million annually in operating earnings. He sought out the merger with Time Warner in part to ensure that those channels would always have distribution.
PROMOTION POSSIBILITIES. Buying a TV network is the next logical step for a company that competes for cable TV subscribers, magazine readers, and music listeners. Turner says there would be efficiencies by combining NBC's news and sports operations with those of CNN. But NBC is even more valuable as a tool for promotion. Time Warner has only its six-year-old WB network, which has grown quickly but mostly among teenage girls who are drawn to Dawson's Creek. On most nights, a WB show reaches only about 3% of America's 100 million homes.
Compare that with NBC, which reaches about 15% of American households every night. What's more, NBC hits a mostly upscale audience that has money and isn't afraid to spend it. That's the perfect demographic for promoting Internet services, where Time Warner desperately needs to build a larger presence. NBC has invested in a promising lineup of Internet properties, including video-streaming company Intervu and the Snap! portal, which gets heavy network promotion. By contrast, Time Warner is considered a laggard in the race for cyberspace.
Those are all good reasons for Time Warner to consider buying NBC. For Turner, there's one more that hits closer to home: In July, his personal stake in Time Warner was worth more than $8 billion, but in December it was closer to $7 billion. In between the jabs at the Internet, Turner reminded the cable-TV execs at last week's trade show that most of his net worth was tied up in Time Warner. Gerry Levin no doubt has heard that one before.
Grover covers the media industry from his post as Los Angeles bureau chief
EDITED BY PAUL JUDGE
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