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Sunday, May 28, 2023

Fight Over UPN Takes on Trappings of Family Feud

When is a custody battle right for television?

When it’s United Paramount Network, caught between its feuding corporate parents, Viacom Inc. and Chris-Craft Industries Inc.

Enough mud is flying to qualify the embattled parties for a TV court show, like Viacom’s “Judge Joe Brown” or “Judge Judy.”

Ostensibly, the fight is about a money-losing network best known for “WWF Smackdown!” and “Star Trek: Voyager.” But Viacom and Chris-Craft sound like an embittered husband and wife, venting in family court.

Chris-Craft sued Viacom last month in New York State Supreme Court, accusing Viacom of breaching its duties to the UPN partnership when it agreed to merge with rival network owner CBS Corp.

Chris-Craft then asked the court to block the pending Viacom-CBS merger until Jan. 15, 2001, when a non-compete agreement between the UPN partners will expire.

A 10-month delay? It’s a chilling thought to Viacom and CBS, which hope to complete the $46 billion merger in late March or April. “Certainly this gigantic merger should not be enjoined over this dispute,” begged a Viacom attorney in court.

But it’s happened before. Chris-Craft persuaded a different New York state judge to halt Warner Communications’ acquisition of Lorimar Telepictures in 1988 with the argument that the merger violated a pre-existing agreement with Chris-Craft.

In fact, Viacom tried to solve the “non-compete” issue by offering to sell its UPN stake or buy out Chris-Craft for $5 million by March 20. Chris-Craft was offended by the paltry offer and filed its lawsuit instead.

“Viacom either takes control of UPN on the cheap, after (Christ-Craft subsidiary) BHC (Communications Inc.) has sunk over $400 million to help build UPN in reliance on Viacom’s promises, or, now that Viacom has a bigger and better network, dumps a weakened UPN and its losses onto BHC,” Chris-Craft complained in a court filing.

After hearing the arguments, New York State Supreme Justice Herman Cahn agreed to rule by March 20.

Stormy marriage

Viacom and Chris-Craft had solid reasons for their union: they needed original prime-time programming for their independent TV stations, which compete against the local affiliates of older networks like ABC, CBS, NBC and Fox.

The mutual needs persist, but the UPN marriage was rocky from the start, according to sworn testimony now emerging in court. Plus, the two have lost a total of $800 million on the venture.

Chris-Craft refused to approve UPN’s budget for the past two years and has “consistently opposed” its partner’s programming and ideas for the venture, according to an affidavit by Kerry McCluggage, chairman of Viacom’s Paramount Television group.

Chris-Craft has also stonewalled Viacom’s requests to discuss extending their TV stations’ affiliation agreements with UPN beyond Jan. 15, 2001, McCluggage said.

Viacom and Chris-Craft have each raised the specter that UPN could be harmed or shut down if they don’t get their way. The arguments have shifted with time and venue.

In November, Viacom told the Federal Communications Commission that a “hasty” sale of its half-interest in UPN could cause all sorts of problems for Chris-Craft, the network and its affiliated stations. Viacom asked the FCC to allow an extra 24 months to dispose of its network stake or stations that exceed FCC limits.

Niche television

Viacom also urged the FCC to waive its rule prohibiting ownership of two broadcast networks. Describing UPN as a “niche service” which has appealed particularly to African Americans, Viacom argued that common ownership of UPN and CBS wouldn’t hurt competition.

Chris-Craft has also urged the FCC to permit ownership of two TV networks. But in its lawsuit, Chris-Craft now says UPN and CBS are direct competitors and contends that UPN would be disadvantaged if Viacom acquires CBS.

Chris-Craft is hostile to Viacom’s description of UPN as a “niche” network, insisting that UPN was conceived as a general interest network to compete with the likes of CBS.

Chris-Craft appears suspicious of Viacom’s plans for UPN, once the CBS merger is complete and CBS President Mel Karmazin becomes Viacom’s chief executive.

Karmazin has not divulged his plans, but it appears the CBS executive has been courting World Wrestling Federation Entertainment Inc., which already produces UPN’s most successful show, “WWF Smackdown!”

Karmazin has reportedly proposed an investment of $100 million or more in the WWF, to win cable and broadcast TV rights to its wrestling programming and a new football league that WWF is developing.

The idea, apparently, is to put the sports programming on UPN. But if Viacom loses UPN to Chris-Craft, Karmazin may have a contingency plan to sell WWF programs to a syndicate of TV stations nationwide.

More wrestling. More football. A contingency plan. Karmazin appears ready for any outcome of the UPN custody battle, short of a 10-month delay to the Viacom-CBS merger.

Kathryn Harris is a columnist for Bloomberg News.

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