AOL Time Warner Inc.'s decision last week to name The WB CEO Jamie Keller as Turner Broadcasting System Inc.'s chairman and CEO-removing longtime chief Terence McGuirk from a direct operating role-was met with mixed emotions from Turner executives.
On one hand, "there was a sense of real shock" when McGuirk-who built the Turner empire alongside AOL Time Warner vice chairman Ted Turner-was kicked upstairs to vice chairman, a senior Turner executive said last week. On the other hand, there was some excitement in the halls of Turner's Atlanta headquarters, as AOL Time Warner said one of Kellner's charges would be to launch new cable networks.
"Hearing them say that was like music to our ears," the Turner executive said.
Kellner, who built The WB from scratch in 1995, will run a new TV-networks group at AOL Time Warner that includes The WB and 10 Turner cable networks, including Turner Network Television, TBS Superstation and Cable News Network.
AOL Time Warner said last Tuesday that Turner president and chief operating officer Steve Heyer left the company to "pursue other interests." The next day, Atlanta-based The Coca-Cola Co. named Heyer president of its ventures unit.
Turner chief financial officer and chief administrative officer Wayne Pace was also named vice chairman of the unit.
Heyer was the architect of Turner's "Media at the Millennium" project, in which he sold Madison Avenue on the reach of the cable industry as a whole in an attempt to steer ad spending away from the "Big Four" broadcast networks.
Technology Partners managing director Porter Bibb said Heyer was "ineffective," noting that ad sales are down for all of the Turner networks, excluding TNT.
One Turner insider in Atlanta expressed surprise that the consolidation came much more quickly than anyone had expected, and right before the crucial upfront ad-sales season.
With respect to Heyer, the insider said: "He aspired to much higher levels at AOL Time Warner. But Heyer was hedging his bets [referring to Heyer's talks with Coke]."
'BUFFY' AND WESTERNS
The WB has been part of the Time Warner empire for nearly as long as TBS Inc., but it took the merger with America Online Inc. to group the broadcast and cable networks into one unit. The move came just a few weeks after AOL executives broke the longstanding firewall between Turner and Time Warner Cable, announcing the second-largest MSO would actually give preference to struggling Turner networks such as CNNfn in making programming decisions.
Under Kellner, the networks group plans to share programming, advertising, marketing and Internet resources. For example, the Kids WB and Cartoon Network sales teams will pitch some advertisers together during the upfront season.
"That's an effort to coordinate the buy to give the advertisers the vast efficiency at the most appropriate price," Kellner said last week.
But several cable executives questioned the demographic fit of The WB and the Turner cable networks. Though The WB built its brand through targeting younger adults, services such as CNN and TNT skew older.
"They're looking over their shoulders at Viacom [Inc.]," one cable official said. "The Turner stable of networks and the youth-skewed WB are an odd fit. This has to be approached carefully."
The idea of offering advertisers a wide range of demographics, packaged together, doesn't necessarily have appeal for sponsors.
"Unless you're selling water, what advertiser is a cradle-to-grave advertiser?" one cable official asked.
Some cable ad-sales executives last week also speculated about who ultimately will head up ad sales for the combined WB-Turner group, and whether it would be a staffer from Turner or The WB. Ad sales for Turner have been divided between Joe Uva, head of entertainment sales, and Larry Goodman, who runs CNN ad sales. Bill Morningstar runs ad sales at The WB.
"Cartoon Network has had to pitch against WB Kids," one cable ad-sales official said. "Now, they might see a dilution of their effort because they're selling this whole package. And you have hard-core cable people who built this business who are probably wary that they'll have someone not from the cable fold in charge."
Asked if he'll appoint someone to oversee ad sales for Turner and The WB, Kellner said, "I don't have a plan on that yet."
Kellner wouldn't go into any details about the types of new cable networks Turner will launch, or which genre they'll serve. He also wouldn't comment on whether the company would revisit launching the Women's Network, which it scrapped in 1999.
Some industry executives expect Turner may launch a music service to compete with Viacom's MTV: Music Television. The company's Home Box Office unit launched urban youth Web site volume.com last fall, which could potentially be developed into a music-video programmer.
Multichannel News
reported last summer that HBO registered several Web sites related to the service, including volumenetworks.com and volumevideo.com.
RETRANS CONCERNS
Cable operators last week were already voicing concern about the merger of The WB with the Turner cable stable. The worry is that this broadcast-cable hybrid will use retransmission consent for The WB's TV-station affiliates to drive distribution for the current crop of Turner services, or to launch new ones.
"The question I would ask Jamie Kellner is, do they intend to tie retransmission consent for The WB to carriage of existing or new cable programming down the road?" asked American Cable Association president Matt Polka.
"That is one of the biggest problems independent operators are facing," he said.
The ACA represents 900 smaller, independent operators with 7.5 million subscribers.
Polka said he would like to see The WB and Turner publicly agree not to link retransmission-consent to carriage of Turner cable networks. As part of their merger, America Online Inc. and Time Warner Inc. agreed not to tie carriage of the AOL Internet service with distribution of Turner programming, Polka noted. He asked that The WB and Turner make a similar commitment.
For its part, The WB officials insist that they won't use retransmission consent as a bargaining chip.
"Nothing along those lines has been discussed at this point," The WB spokesman Brad Turell said. "But the fact is, Tribune Broadcasting is the dominant WB affiliate, and it's Tribune's call as to what they're going to do with their retransmission consent."
Operators are also concerned that Kellner could potentially take some Cartoon Network programming-which cable operators pay license fees for-and distribute it for free on The WB. After its merger with CBS Corp., Viacom took some heat for giving the broadcast network a Saturday-morning block of Nickelodeon preschool shows, including the hit Blues Clues.
"I'm not interested in offending the cable industry," said Kellner, who stressed he would carefully consider any move to run Turner cable shows on The WB. "What I am interested in doing is providing better programming, more of it, more original programming, promoting it better and getting higher ratings."
But he also emphasized that such cross-platform programming can be cost effective, and would allow the company to spend more on producing programs and promoting the shows.
"There's a lot more residual value in the shows, even after they've run in their first run. So whether it's on The WB first, or on one of the cable networks first, I don't know the answer," Kellner said. "But I do think we're going to see more of that in the future."
CHIEF DEFENDS CNN
Kellner joins the company as flagship news service CNN is hemorrhaging viewers. Since October, startup Fox News Channel has either beat or tied CNN in both primetime and total-day ratings. And despite the fact that CNN counts 20 million more subscribers than FNC, Fox beat the network two weeks ago in household ratings.
Kellner, a former Fox Broadcasting Co. president, defended CNN. He pointed out that the network "is all about good solid journalism," and still posts strong ratings during breaking news events.
"At the end of the day, CNN is the leader, and always will be," Kellner said.
McGuirk announced the shakeup at Turner last week in an electronic-mail memo to employees, which also included a letter from AOL Time Warner co-chief operating officer Bob Pittman.
"As much as we have accomplished, I believe Turner Broadcasting's best days still lie ahead," McGuirk wrote. "That is why I am now comfortable making a professional decision that will lead to greater balance between my personal interests and those of my family, and my continued interest and involvement in Turner Broadcasting."
Pittman wrote that the company had always planned to combine The WB with the Turner networks, but "it gained fresh momentum after Terry [McGuirk] expressed his desire to step back from a direct operating role in the company."
One announcement that was overshadowed by last week's announcement was the appointment of Robert Friedman to run AOL TV. Bibb said the move to appoint Friedman, president of New Line Television, shows how serious the company is about interactive television.
