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By FRANK SWERTLOW

Staff Reporter

On the surface, ABC's launching of a 24-hour soap opera cable channel might seem like a clever way for the struggling network to pull in some extra cash by showing TV shows it already owns to an audience that can't normally watch them.

But behind the scenes, it's the latest shot in a festering battle.

As broadcast network audiences are eroded by cable channels, the networks have adopted a simple idea: If you can't beat 'em, join 'em. That isn't very good news for network affiliates like the ABC stations, which are outraged by the network's plans for a soap opera channel.

The proposed cable network would air many of the same soaps that ABC presents during the day, but it would show them during prime time. That means ABC affiliates which already must compete for viewers with current cable channels like HBO and A & E; would find themselves up against a new rival created by their own network.

"It doesn't sound good to me," said Sean Bradley, general manager of ABC affiliate WJCL-TV in Savannah, Ga. "Playing soap operas at night can't help but impact our (prime-time) viewership."

ABC's soap opera channel is only the latest wrinkle in an effort by all the networks to exploit the cable audience.

NBC routinely recycles its news programs on cable channels MSNBC and CNBC. Fox recycles prime-time series from its network, like "NYPD Blue" and "The X-Files," on its FX cable channel.

CBS is the only major network that isn't exchanging programming with its owned cable channels The Nashville Network and Country Music Television and a network official said the company has no plans to do so. But when a recent auto race scheduled for CBS was delayed, it was shifted to TNN because CBS was scheduled to broadcast a college basketball playoff game during the time slot.

Cable channels aren't the only source of strife between the networks and their affiliated stations. Fox is involved in a bitter battle with its affiliates over its demand to reclaim more than 20 percent of the commercial time that used to be given to affiliates. Many Fox stations are threatening to jump to The WB.

NBC plans to revamp its affiliate relations department by offering financial buyouts to 20 staffers. The move is seen as the first step in eliminating the more than $200 million a year that NBC pays to its affiliates to air its shows.

So sensitive are these issues between the networks and their affiliates that most executives on both sides refused comment.

Behind all the disputes is the fact that cable has fundamentally altered the economics of television. As network audiences erode, the networks can no longer afford to operate the way they used to.

Last year, ABC lost $100 million, CBS lost $235 million and Fox lost $10 million. NBC was the only major network in the black, to the tune of $560 million, but that is expected to be cut in half this year because of declining ratings. The other networks, meanwhile, are expected to remain in a sea of red ink.

Ironically, outraged affiliates often enjoy profit margins of between 40 percent and 60 percent. These lush profits are used to pay for syndicated shows and high-priced news talent, an arrangement that angers network officials who want to change the rules.

"The current economic model isn't working for the networks," said Steve Cesinger, who specializes in entertainment at investment bank Greif & Co. "The networks are losing money while the affiliates are making money hand over fist. It doesn't make sense to lose $100 million a year or more while the stations are reaping all the benefits."

Dave Davis, an entertainment-industry specialist at Century City-based investment bank Houlihan, Lokey, Howard and Zukin, said the affiliates have to become realistic about the economics of network television.

"The world is going to change, and it is really an issue of making the economics work," he said. "This is going to be an interesting, delicate time over the next few years for the affiliates. Everybody has to be willing to share the risks and the rewards."

Analysts agree that ABC's decision to recycle soap operas makes sense, especially since these shows typically have only one run. "ABC is hoping for a greater return on its investment," said Bill Croasdale, a media buyer for Western Initiative Media.

Anne Sweeney, president of Disney/ABC Cable Networks, said the soap channel is being created because of the changing lifestyles of American viewers, especially women, who now work and can't be home to watch their favorite serial dramas.

"They are a passionate group of viewers, not unlike real sports fans who support their team," she said.

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