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Is Tisch Readying Black Rock For The Block?


The Corporation

IS TISCH READYING BLACK ROCK FOR THE BLOCK?

It's not easy getting Barry Diller and Paramount Chairman Martin S. Davis to show up at the same party. But on Nov. 10, Laurence A. Tisch pulled it off. The two set aside their fierce maneuvering for Paramount Communications Inc. to attend a gala at the Metropolitan Museum of Art celebrating the 25th anniversary of 60 Minutes. David Letterman was on hand as well, to warm up the crowd for remarks by Chairman Tisch.

The 60 Minutes bash says a lot about why Larry Tisch has held on to CBS Inc. long after the pundits said networks had become dinosaurs. With its huge audiences and respected shows such as 60 Minutes, CBS still confers great power and prestige on the man who runs the network and owns 23% of its stock. Diller may embody the future of television, but Tisch clearly revels in its cherished past.

TROPHY ASSET. His loyalty to CBS is far more than a vanity play, though. Media experts say that by sticking with the network while it battled bloated costs, anemic ratings, and the worst business downturn in broadcasting history, Tisch has won a shrewd gamble that leaves CBS a trophy asset. Now the network is No.1 in the ratings, profits are up, and its stock has more than doubled, to a recent 3081 4, since Tisch became chairman in 1986. "He already looks smart," says Michael N. Garin, an investment banker at Furman Selz Inc.

Garin says "already" because the betting on Wall Street is that Tisch will soon engineer an even bigger coup. Bankers and even some CBS insiders expect the billionaire investor to sell the network in the next two years or so. Such rumors aren't new. But Tisch, who declined to comment for this article, now has fresh incentive: Deregulation is freeing up possible suitors, while the current mania over media properties is driving up CBS's value.

Not that Tisch needs a blockbuster deal to make back his original investment. He bought into CBS in 1985 at an average price of about $125 a share, or a total of $706 million. But he recouped much of that in a 1990 stock repurchase in which CBS paid shareholders the proceeds from selling its publishing and music divisions in 1987 and 1988 (table). At this point, what Tisch reaps from a sale of CBS would be almost pure profit. And at the current stock price, his stake is worth a cool $1.1 billion.

Does this make Tisch brilliant or lucky? Probably a bit of both. By slashing its costs and dumping noncore assets, he certainly has turned CBS into an attractive acquisition candidate. The other side of the equation is that the network has a dubious future as an independent media company. In resolutely refusing to broaden his franchise--whether through cable TV or more newfangled interactive ventures--Tisch has left the network ill-equipped for the onslaught of multimedia. Archrivals NBC Inc. and Capital Cities/ABC Inc. are expanding aggressively overseas and taking equity stakes in promising multimedia companies. Not CBS.

MORTIFIED. That single-mindedness cost Tisch dearly in a recent clash with the cable industry. CBS and its rivals had successfully lobbied the government to allow networks to demand payment from cable operators in return for carrying network signals. After most cable companies refused to pay, ABC and NBC cut deals to get distribution for new cable channels instead. But unlike those networks, CBS has no presence in cable. And lacking that fallback position, Tisch ended up with nothing at all.

Sources familiar with CBS say Tisch was so mortified by the defeat that he is easing out Jay L. Kriegel, the CBS senior vice-president and close confidant who guided the negotiations with cable operators. Kriegel, who declined comment, hasn't announced anything. But sources say he will be leaving CBS early in 1994.

Still, what makes the Tiffany Network attractive to potential suitors now has less to do with Tisch than with William S. Paley, CBS's founder. Paley created the familiar eye logo and assembled the network's string of affiliated TV stations. Both have become precious assets in an era of proliferating channels and fragmenting audiences. CBS plans to style itself as a beacon for viewers dazed by 500 channels: "We will be a big compass point in the navigation process," predicts George F. Schweitzer, president of CBS Marketing.

EISNER'S DESIRES. What's more, the network's core broadcasting business should also become more profitable. Thanks to the recent lifting of an antitrust consent decree, CBS can own a financial stake in any of its programming and reap revenues from overseas syndication of those shows. Already, CBS produces Dave's World, a new hit show about columnist Dave Barry. And it has even kicked around the idea of syndicating Letterman's popular Late Show in Europe. Even without the extra revenue, Tisch's austerity is boosting profits. Alan J. Gottesman, a media analyst at PaineWebber Inc., figures CBS's operating income will jump 79%, to $310 million, in 1993, on flat revenues of $3.5 billion.

Another effect of deregulation will be to allow Hollywood studios and other media companies to pursue mergers or acquisitions of networks. Who might buy CBS? Walt Disney Co. is an obvious candidate: It is not foreign-owned, which would prohibit it from owning a network, and it could use CBS's distribution system for its programs. Bankers say Disney CEO Michael D. Eisner has approached Tisch with offers. But the two remain far apart on price. CBS and Disney won't comment.

Takeover talk aside, it's clear that CBS has changed radically under Tisch's tough tutelage. These days, he is projecting a different image, that of a buoyant broadcaster happily ensconced in first place. CBS should win the ratings race again this season, though ABC is gaining fast. Given that and the market's voracious appetite for media properties, Tisch may be ready for one more big role: a satisfied investor cashing out at the top.Mark Landler in New York


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