iels - americanradiohistory.com...1989/07/08 · "high-tech" planned but as yet...

Promotion Lessons LearnedCBS Sports Bets Big on Pilson

IAN\IELSJULY/AUGUST THE BUSINESS OF COMMUNICATIONS 1989

CHINETHE TOP 100

OMIPAN1ES

Inside Achievers:0 How They Do It 0 1990 Forecasts0 Profit Leaders 0 Hot Money Managers

THEIS YET T

WARNER BROS.DOMESTIC TELEVISION

Dis-r RI BUTTONor. r t "rm. twicatiork* Company

A tough year forAchievers 24

CHANNELSTHE BUSINESS OF COMMUNICATIONS

NEWS

REPORTSResiduals problems for CNN and ESPN

RATINGS & RESEARCH

AN AGING WATCHDOG 2The Electronic Media Ratings Council can't keepup with all the new research products.BY MICHAEL COUZENS

SALES

PSYCHO -SELLINGAre you ready for VALS 2?BY CHUCK REECE

NEWS CHANNELS

14

19A REAL BAD TRIPWhat's a news director to do when his anchormakes headlines with a substance -abuse problem?BY J. MAX ROBINS

THE CHANNELS ACHIEVERSIntroduction 21Guide, Glossary and New Arrivals 23The Top 100 Companies 24A Look at the Leaders 27The Top 20: How They Do It 30The Meaning of Achievement: Three Opinions. 34Performance of The Channels Achievers .. 38Looking Ahead: Industry Forecasts 49Profiles: Four Top Money Managers 53

NETWORKS

PILSON'S PROGRESS 58CBS Sports chief Neal Pilson is betting the ranch,along with his reputation, that a Big Events sportsstrategy will put the network back in contention.BY ADAM SNYDER

IN FOCUS: PROMOTION LESSONS LEARNEDTurmoil Muting Tabloid TV,BY RICHARD KATZ 66

Righting Cable's Image Wrongs,BY KATHY HALEY 68

Campaigning for Serious Laughs,BY NEAL KOCH 70

LETTERS 4

WHAT'S ON 10A MONTHLYCALENDAR

THE BUSINESSSIDE 20IS LOCAL TVNEWS AT RISK?

Rethinking a given.BY MERRILL BROWN

TECHNOLOGYMANAGEMENT 72MORE SOUND FORLESS MONEYThe era of computer -generated music iswith us.BY FRAZIER MOORE

MEDIA DEALS . 73THE RATTNER YEARSA star player .moves on.BY PAUL NOGLOWS

SOUND BITES ....74From an interviewwith FalconCommunications' CEOMarc Nathanson.

RUNNING THENUMBERS 76ACHIEVING ON THEEXCHANGEStock prices:going up.

Cover illustration: Tim Lewis

2 CHANNELS / JULY/AUGUST 1989

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CHANNELSEditor

MERRILL BROWNExecutive Editors

PETER AINSLIE, JACK LOFTUSManaging Editor

JOHN FLINNSenior Editors

KIRSTEN BECK, J. MAX ROBINSCHUCK REECE

West Coast EditorNEAL KOCH

Assistant EditorsMICHAEL BURG!, RICHARD KATZ

Contributing EditorsJOHN F. BERRY, ALEX BEN BLOCK, DAVID BOLLIER

CECILIA CAPUZZI, L.J. DAVIS, MERYL GORDONWILLIAM A. HENRY III, DAVID LACHENBRUCH

PAUL NOGLOWS, MICHAEL POLLAN, JAY ROSENHARVEY D. SHAPIRO, ADAM SNYDER, JAMES TRAUB

InternsAGNETTE LUNDVIK, DIANE MERCHAN

HALL MORRISON, NORA PLATTNER

Art DirectorSUE NG

Associate Art DirectorAMY JAFFE

Photo ResearchLAURIE WINFREY/CAROUSEL, INC.

PublisherJOEL A. BERGER

Advertising Sales DirectorSARA DAVIS GREENWOODAdvertising Sales Managers

NELDA H. CHAMBERS, MICHELLE C. McGUIRKRICHARD PETRALIA, TRIP SWITZER

Assistant to the PublisherSEAN ROONEY

Advertising Sales CoordinatorMARK MATEROWSKI

Advertising Sales AssistantsJULIE HARRIS, DONNA GIBSON

Promotion ManagerSANDI EZELL

Circulation ManagerJOE SCHILLMOELLER

Production ManagerRACHEL COHEN

Advertising Sales OfficesNew York: 401 Park Avenue South, New York, NY

10016, 212-545-5100; Fax 212-696-4215 West Coast: 1800Century Park East, Suite 200 Los Angeles, CA 90067

213-556-1174; Fax 213-553-3928

ACT III PUBLISHINGPresident

PAUL DAVID SCHAEFFER

Executive Vice PresidentROBERT C. GARDNER

Senior Vice President,Corporate Development and Planning

MARTHA A. LORINIVice President, Finance and Administration

SAM SCHECTERController

JOSEPH PANNULLODirector of Marketing and Communications

JENNIFER WARE

CHANNELS The Business of Communications (ISSN0895-643X) is published monthly except twice in January andcombined July/August by C. C. Publishing L.P., an affiliate ofACT III Publishing, 401 Park Avenue South, New York, NY10016. Second class postage paid New York, NY and additionalmailing offices. Volume 9, Number 8, July/August 1989.Copyright c 1989 by C.C. Publishing Inc. All rights reserved.Subscriptions: $65 per year, all foreign countries add $18. Pleaseaddress all subscription mail to CHANNELS The Business ofCommunications, Subscription Service Dept., P.O. Box 6438,Duluth, MN 55806, or call 218-723-9202. Postmaster. Sendaddress changes to CHANNELS, The Business of Con -mini -cations, Subscription Services Dept, P.O. Box 6438, Duluth, MN55806. Editorial and business offices: 401 Park Avenue South,New York, NY 10016; 212-545-5100. Unsolicited manuscriptscannot be considered or returned unlessaccompanied by a stamped, self-addressedenvelop. No part of this magazine may bereproduced in any form without written consent

Heated Up

your article "When is a Hot NetNot so Hot?," [March, Re-ports] is without a doubt abiased piece of reporting.

Duane Loftus and his "revolutionary"way of buying and selling TV/radiotime can only hurt broadcasters in thelong run. Furthermore, while agenciescurrently perceive this as an easy,cheap way to buy broadcast time, howwill they feel when Mr. Loftus or somesimilar "genius" sells this system di-rectly to advertisers? They shouldn'tkid themselves; it is inevitable.

Computerized time buying is not a"natural evolution" for the business asstated by the Interep representative.It is nothing more than another at-tempt to devalue TV/radio stations bymaking everyone equal on a cost -per -point basis, allowing the marketplaceto be dictated by the lowest commondenominator. Of course, stations withno ratings strength will support thisidea as they have nothing to lose.

Lastly, is the writer of this article,Jack Loftus, in any way related toDuane Loftus? This might explain thefavorable stand taken by the magazineon this "revolutionary" idea.

Kathryn L. WhiteAssoc. Research Director, Katz Radio

New York, N.Y.

Jack Loftus and Duane Loftus are notrelated in any way.-Ed.

Telcos, Anyone?

The Latest Telco Debate,"[March, Business Side] focusedon the essential issues of tele-vision policy. Fundamental

structural and technical changes in tel-evision require that policy issues be ad-dressed. As noted in a report we pub-lished, TV's evolution has been morerapid and far reaching than generallyperceived.

Broadcast television in some sem-blance of its current form is no morethan 30-40 years old. Contemporarycable, independent television and syn-dication are probably no more than tenyears old. From our standpoint, theemergence of cable as the dominantform of television distribution in the

U.S. has been the critical, but still underrated, change. It will be interestingto see if the policy debate does in factfocus on access to and from the tele-vision wire in the home.

Peter A. FalcoV.P., Merrill Lynch Capital Markets

New York, N.Y.

Head Count

am writing about your March "InFocus" section ["Cable's SmarterSell"]. Well done, as usual.

I want to point out for future ref-erence that Cablevision Industries hasnow broken into the top -20 MSO group.In December, we completed the acqui-sition of some 310,000 cable subscribersfrom Wometco Cable TV Inc. Atpresent, we are close to one millionsubscribers.

David L. Testa,V.P., Cablevision Industries

Liberty, N.Y.

your column, "The Latest TelcoDebate," was a winner. I hopeyou were thinking of Opt InAmerica as you wrote it. If

not, I hope you will think of us in thefuture because we hope to put thedebate "over wire to the home" in the"larger public arena."

John M. EgerNational Chair, Opt In America

Washington, D.C.

Up and Running

your April article, "Cable TurnsOn to Tune -In Promotion,"while mentioning several"high-tech" planned but as yet

unlaunched promotion services, failedto note the "high-tech" cable pro-motion service that is operationaltoday: NuStar.

Since mid -January, NuStar has beendelivering and inserting system -specific tune -in spots to cable systemsacross the country. The NuStar Sat-ellite Promotion Service automaticallydelivers and inserts daily time -specificnetwork promos into basic cable net-works' local ad avails. Systems receivethe service through the NuStarswitcher that tags each spot with theindividual cable system's name, logoand corresponding channel number forthe network program being promoted.

NuStar is providing effective andcost-efficient tune -in promotion sosystems are able to easily take "thenext logical step in cable's evolution"today.

Wayne J. BullockPresident, NuStarWest Chester, Pa.


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Demographics.OutperformedTHE JEFFERSONS andM*A*S*H in the sameSaturday 8:30PMNetwork time period.

227...a winner for advertisers.

Columbia Pictures TelevisionA unit of Columbia Pictures Entertainment, Inc.

REPORTS

Residuals

Woes Plague

ESPN, CNNThey've gone international, butwho pays Mr. Goodwrench?

Less than a year after Cable NewsNetwork and cable's sports channelESPN began beaming into Latin

America, it seems their haste to becomeglobal broadcasters has produced an em-barrassing side effect by exposing themto residual payments owed members ofSAG and AFTRA. Both cable servicesclaim the rights to distribute programssouth of the border, but they are notclipping commercials from the feed,which is the same one distributed tocable systems throughout the U.S.

"If they place those commercials onthe satellite, then we are definitely en-titled to payment," says John T.McGuire, associate national director ofSAG. McGuire says he will look into thematter "immediately." A spokesman forAFTRA said that union will followSAG's lead, because most commercialsshot in the U.S. are done on film.

Tracking and collecting foreign re-siduals in this instance is complicated,says McGuire, and involves producers,directors, advertisers, agencies and dis-tributors. McGuire says an audit is re-quired to determine the amount ofmoney owed. Another issue is fromwhom and how to collect the money?Normally, the money flows down theline from advertiser to agency to pro-ducer to director to actor. However, ifthere's no more money in the pipeline,there are major questions about whereit will come from.

"I'm not sure the ad agencies or theadvertisers have any control or sayabout the distribution of these signals,"McGuire continues, "but we are going tohave some discussions about it . . . . Byplacing them on a satellite we are en-titled to a foreign use."

Both ESPN and CNN are distributedunscrambled via Panamsat to cablesystems, hotels and broadcastersthroughout South and Central America.

ESPN beams basketball to Latin America but doesn't cut

The U.S. cable networks pay Panamsatwhile the Latin subscribers pay CNNand ESPN a license fee. Some Latinsystems blip out the U.S. commercialsand substitute their own, but most don'thave that expensive equipment, ac-cording to Panamsat, so the feed flowsright through.

Panamsat aggressively marketsESPN and CNN as part of its servicethroughout Latin America, and hopes tosoon add both to its European feed.

Panamsat was launched June 15, 1988and became operational the followingSeptember. CNN went on the bird inJanuary 1989 and ESPN followed inMarch with 15 hours a day.

"The problem is, we just haven'tfigured out how to get rid of 'em," saysESPN's senior vice president AndrewBrilliant about yanking commercialsfrom the sports network's feed. "It's in-credibly cumbersome . . . We ask ourforeign distributors to cover [the com-mercials], but whether they do or not Idon't know." Another ESPN official la-mented the issue coming to light:"You're just going to mess up a goodthing."

"We do see it as a problem," says SidPike, president of special projects forCNN International. He called CNN'suse of the Panamsat feed "a test,"adding, "if we continue with the do-mestic signal, we'll have to make somearrangements about the commercials."

the ads. Now AFTRA and SAG are crying foul.

Another CNN official says the net-work's commercials are sold "on thebasis of a domestic audience only . . .

These other users do not have the rightsto air these commercials." There may ormay not be a benefit to the U.S. adver-tiser depending on the product's availa-bility in any given Latin region.

Unlike the Panamsat feed, CNN de-letes the U.S. commercials from its sat-ellite services to the Pacific Basin coun-tries and Europe.

Both CNN and ESPN hope to bescrambling their signals on Panamsatwithin the next few months, they say,but that only protects against unautho-rized use and signal spillover. The Latinsubscriber, equipped with a decoderfrom Panamsat, would be in the sameposition of either buying moreequipment to blip out the U.S. com-mercial and inserting his own, or justletting the signal flow.

"We're not getting paid extra forthese commercials," says Brilliant, "sothere's no benefit to the distributor."

But SAG doesn't see it that way. Tothem a use is a use, especially sinceCNN and ESPN are charging cus-tomers for the feed. "This is not justspillover from a domestic feed," saysMcGuire. Whether or not the signal isscrambled, or done with the advertiser'spermission, "we are still entitled topayment."

JACK LOFTUS


44%W18-34

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*Sourze: Nil Feb. '33 vs Feb. 88

JULY / AUGUST

Moonwalking by Richard Katz

JULY 20: Ninety-four percent of allhomes reached by TV tuned into theApollo 11 moon landing 20 years agotoday. Even considering that the monu-mental event was broadcast by all threenetworks, could this happen again intoday's fragmented TV landscape? "It'ssomething we may never see again," saysJo LaVerde, spokesperson for NielsenMedia Research. "If it does happen againit would have to be something as astro-nomical as the moon walk-maybe the firsttrip to Mars."

AUGUST 15-17: Twenty years ago, ahalf -million faithful put up with little food,scarce plumbing and a sea of mud for threedays of continuous rock 'n' roll on a farmin upstate New York. Who at the time en-visioned that on its 20th birthday, Wood-stock would serve as a marketing and pro-gramming inspiration for Viacom's VH-1and MTV networks? All summer long,MTV and VH-1 are airing a series of 50Woodstock vignettes, each two minutes inlength, comprised of never -before -seenfootage from the Warner Bros. film andcurrent interviews with band and audiencemembers who were at the festival. Wood-stock the film will be shown in its entiretyseveral times on both networks, and alsosplit into three one -hour segments, one ofwhich will air on each of the three actualanniversary days of the 1969 concert. Alsoof note, Viacom's pay -per -view arm,Showtime Event Television, will air akind of modern-day Woodstock on August13 with The Moscow Peace Summit, alive concert from Lenin stadium featuringBon Jovi, Motley Crew, Scorpions andGorky Park. A portion of the proceedswill go to the Make a Difference Foun-dation for the prevention of alcohol anddrug abuse.

AUGUST 20-23: The Cable TelevisionAdministration and Marketing Societyannual conference takes place inChicago. John Reardon, president ofMTV Networks and the conference'schairman, says one of this year's majorthemes will be how to increase cable pen-etration. "We have to segment our audi-ences, show them what's on and the price/

value relationship," he says.

AUGUST 27-29: The 31 -year -oldSouthern Cable Television Associationpresents its annual Eastern Cable TV &Trade Show, "the cable industry's largestgathering east of the Mississippi," in At-lanta. According to SCTA spokesman EdDunbar, about 3,700 people attended lastyear's show, and more are expected thisyear. The show includes provocative man-agement sessions, such as "Handling RateIncreases Without Getting Burned,""Who Needs Cable? How to Get ThoseCable -Resistant Customers and How toKeep Them" and "Keeping Cool on theHot Seat-Handling an Adversarial Inter-view." For cost-conscious cable execu-tives, the Eastern Show offers a unique"menu -pricing" registration system. Reg-istrants can choose from "super -premium," "premium" or "basic" plans, orchoose individual sessions for a "pay -per -view" price of $30 for SCTA membersand $50 for non-members. "This is the

most flexible registration plan of any showin the industry," says Dunbar.

AUGUST 29-30: The CabletelevisionAdvertising Bureau presents its SalesOrientation Seminar for New Ad SalesPeople. "It can best be described as abrain -cell immersion in the cable industry,"says Lloyd Trufelman, manager of mediarelations for the CAB. "The cable industryis growing and there are a lot of new salespeople coming in-some from print, somefrom radio and some from broadcast. Wewere hearing from MSOs and networksthat there's a lot of generic informationthey want their people to have before theyget into the specifics of selling any par-ticular network or system." The two-dayseminar costs $250.

Channels welcomes contributions to"What's On." Material must be receivedat least 60 days in advance of the eventin order to meet deadlines; send to theattention of Richard Katz.

CALENDAR

July 14-18: 'television Programming Con-ference '89. 'Ibledo Marriott Portsidehotel, Thledo, Ohio. Contact: DianeAppleyard, (904) 432-8396.

July 17-21: Video Expo Chicago, spon-sored by Knowledge Industry Publi-cations. Expocenter, Chicago. Con-tact: Debbie Rotolo, (914) 328-9157 or(800) 248-KIPI.

July 18-20: Florida Cable Television As-sociation annual convention. NaplesRegistry, Naples, Florida. Contact:Robert Brillante, (904) 681-1990.

July 24: Presentation of first "ViddyAward," sponsored by NationalAcademy of Television Journalists.Omni CNN Center, Atlanta. Contact:Dave Walker, (404) 262-9155.

July 30: Announcement of nominationsfor the 39th Prime Time EmmyAwards, sponsored by NATAS. Pasa-dena Civic Auditorium, Pasadena,Calif. Contact: Murray Weissman,(818) 763-2975.

August 5-7: Georgia Association ofBroadcasters summer convention.

Callaway Gardens, Pine Mountain,Ga. Contact: William Sanders, (404)993-2200.

August 17-19: West Virginia BroadcastAssociation 43rd annual meeting.The Greenbrier, White SulphurSprings. Contact: Marilyn Fletcher,(304) 344-3798.

August 19-20: Utah Broadcasters Associ-ation annual convention. Resort Cen-ter, Park City. Contact: Kirk Bow-den, (801) 359-9521.

August 20-23: Cable Thlevision Adminis-tration and Marketing Society confer-ence. Marriott, Chicago. Contact:Christina Nelson, (703) 549-4200.

August 27-29: Eastern Cable Show, spon-sored by the Southern Cable 'televi-sion Association. Merchandise Mart,Atlanta. Contact: Ed Dunbar, (404)252-2454.

September 13-16: Radio-Thlevision NewsDirectors Association annual conven-tion. Kansas City Convention Center,Kansas City, Mo. Contact: Pat Sea-man, (202) 659-6510.


Finally, a ratings service to

Beef upTV'sbottom line

Traditional definitions of thetelevision audience just aren'tpaying off like they used to.ScanAmerica' gives you anew definition. One thatproves the power of televisionadvertising. We call it Buyer -Graphics' - viewers profiledby the products they buy andthe services they use.

BuyerGraphics gives adver-tisers a convincing measureof television's value: a directmeasure of how televisionincreases their sales.

And when ScanAmericaproves how television works,you'll add to your bottom lineand to your advertisers'.

ScanAmericas'A SERVICE OF

ARBITRGN

RATINGS & RESEARCH

An Agin Watchdog by Michael Couzens

The Electronic Media Rating Council falls behind a wave of new research services.

The Electronic Media RatingCouncil, after 25 years of policingthe ratings industry, is finding

itself poorly equipped to pick out thebad apples from among an ever-growingcrop of research products. As an accred-iting agency, the council sifts sofinely-and slowly-that some of themore established, reputable firms foregoaccreditation of their products. BecauseEMRC membership is voluntary, the or-ganization's power to suspend researchservices applies only to its blue-chipmembers, which are least in need ofrebuke. And as a bully pulpit for railingagainst research distortion, its voice (ex-ecutive director Melvin A. Goldberg,who toils alone with his secretary) isheard faintly above the marketplacechatter.

"I figure it cost Birch Radio $1 millionto secure accreditation," says William P.Livek, Birch/Scarborough ResearchCorp. president and chief operating of-ficer. Having run this gauntlet, BirchRadio is permitted to adorn its ratingsreports with the "double check" logo ofthe Rating Council. Livek's cost es-timate was for the completion of thefirst audit, "with the EMRC fees beingperhaps 10 or 20 percent, the rest in ex-penses and staff manpower." Thereview process spanned more than twoyears, from application in September1986 until the service got the nod afterthe first of this year.

While EMRC puts its stamp of ap-proval on the same half dozen nationalservices it accredited for years, researchtoday is bought and sold by hundreds offirms-excellent companies and char-latans alike. The explosion of researchproducts has left the EMRC irrelevantto all but the top researchers. AGB Tel-evision Research, when it began pro-viding high -quality national peoplemeter data two years ago, did not evenapply for EMRC accreditation. "Theyasked for an application and saw that itwent into every aspect of their oper-ation," says Goldberg-and that was thelast he heard from AGB. ArbitronRatings Co.'s Major Market Scan -America, planned for launch early next

year, could function in the fieldfor two full years, then find itselfdefunct-or thoroughly accepted-whilestill awaiting word from the EMRC.Birch's now -accredited radio ratingsbecame established among radio sta-tions and many ad agencies well beforethe "double check" came through.

Firms with accredited services-Nielsen Media Research, Arbitron,Birch/Scarborough and Statistical Re-search Inc.-are not the ones poisoningthe research well. But the lack of ac-creditation presents no obstacle to localresearch hucksters. "Increasingly thelocal stations are contracting for theirown research," says Goldberg. "In a

This voluminous application is required for EMRC accreditation.

sweep period, and especially a Maysweep where the data will stand for fivemonths, we find distortion. How do youtell it's distortion? I ask the station, 'Ifyour competitor did it, what would youcall it?' " Meanwhile, advertisershaven't developed techniques to weedout bad local numbers.

The Rating Council did counter-attacklocal surveys that were mailed en masseduring sweeps, by having the accreditedsurvey companies ask householdswhether they were solicited by other re-searchers. But the misuse of surveymethods is a broader, intractableproblem that is steadily eroding cooper-ation with survey -takers. Goldberg ob-jects to broadcasters conducting unsci-

entific "polls" with 900 numbers, wherethe respondent pays 50 cents for thecall. Other local surveys are conductedat shopping centers and make no effortto establish a sample in which there isequal probability of being surveyed.EMRC chairman John Sawhill, vicepresident and general manager ofWJAR-TV, Providence, R.I., says thecouncil is "a paper tiger" to those firmsthat do not seek accreditation. "Only acompetitor is effective in bringing an in-cident [of distortion] to the attention ofthe advertiser," he says.

Bill Livek is blunt: "There are a lot ofcompanies now; and a lot of themproduce garbage. We are deluged with

complaints of hy-poing and dis-tortion. It's be-ginning to causeproblems with ad-vertisers. But howdo we come upwith a 'GoodHousekeepingSeal' that's af-fordable?" He saysan expanded ac-crediting agency"had better beshielded," becausepolicing wouldyield lawsuits as re-search firms arechallenged.

The quiz -show scandals of 1961, andthe attention focused on televisionratings thereafter by Congress, led tothe Broadcast Rating Council-now theEMRC-being formed in 1964. The in-dustry again may be skirting the possi-bility of a bad incident, as researchstaffs are laid off by new station -groupowners and by leveraged and leaner ad-vertisers. Station owners and adver-tisers "can get rid of their researchpeople with the least impact on thebottom line in the short run," Livekspeculates, "and perhaps the mostimpact in the long run."

Michael Couzens is a San Franciscowriter and communications attorney.


On July 19,the greatest commitment to

original programming inbasic cable history continues.

Another USA World Premiere Movie,starring Robert Urich.

NETWORKAmerica's Favorite Cable Network

SALES

Psycho -Selling by Chuck Reece

Stations begin marketing with VALS 2, a new typology of American consumers.

Stations that have bravely enteredthe world of psychographic salestools, either through Marshall Mar-

keting & Communications of Pittsburghor Leigh Stowell & Co. of Seattle, todaymust marshal even more.courage-SRIInternational, the Menlo Park, Calif.,company that is a nerve center of psycho -graphic research, has paved a brand newpathway into the consumer's mind. Mar-shall, through its joint venture with SRI,is now working to tearh its client stationsthe intricacies of VALS 2. This, SRI'ssecond typology of American consumers,may prove to be the most valuable inside -the -mind sales tool stations have yet hadaccess to. Not only does VALS 2stereotype consumers by their valuesystems and lifestyles, as did the originalVALS, it also factors in the means con-sumers have to maintain those lifestyles.In short, VALS 2 recognizes that aspira-tions and financial resources do not neces-sarily rise to the same level. VALS 2breaks consumers into eight groups:

Actualizers: "successful, sophisti-cated, active, 'take -charge' people" with"a cultivated taste for the finer thingsin life."

Fullfilleds: "mature, satisfied, com-fortable, reflective people whovalue order, knowledge and re-sponsibility" and "look for func-tionality, value and durability inproducts."

Believers: "conservative,conventional people with con-crete beliefs based on tradi-tional, established codes."These people have "modest butsufficient" education andincome.

Achievers: "successfulcareer and work -orientedpeople" who value "structureover risk, intimacy and self-discovery."

Striven: "Low on economic,social and psychological re-sources," Strivers are peoplewho "seek motivation, self -definition and approval from theworld around them."

Experiencers: "young, vital,

enthusiastic, impulsive and rebellious."They are "avid consumers and spendmuch of their income on clothing, fastfood, music, movies and video."

Makers: "practical people who haveconstructive skills and value self-sufficiency" and who "are unimpressedby material possessions other than thosewith a practical purpose."

Strugglers: "chronically poor, ill -educated, low -skilled, without strongsocial bonds, they are often despairingand passive."

If you found yourself fitting acquaint-ances into the various types, you under-stand the appeal of the research to localmarketers. Despite the complex meth-odology that produces the data, the re-search falls into structures that havehuman faces. VALS research "becomesa real thing" to its users, says Patty M.Comini, director of marketing servicesat Marshall, which is the exclusivevendor of VALS data to broadcasters.Marshall's customized survey of aclient's market results in two researchpieces: Marshall's annual basic mar-keting study, called Target Dollars,shows who buys what, from whom, inthe market's hottest product categories;

THE VALS 2

Principle Oriented

BELIEVERS

Source: SRI International, MarshallMarketing and Communications

ACTUALIZERS

tutus

CATEGORIES

Oriented

STRUGGLERS

Abundant Resources

Oriented

Minimal Resources

the VALS 2 study tells local advertisershow they should approach their targetaudiences.

"The more actionable part is theVALS," says Bruce Baker, generalsales manager at WSB-TV, Cox Enter-prises' ABC affiliate in Atlanta and aMarshall client. "The VALS researchgives you a real good sense of who theadvertiser's customer is, how theythink, what motivates them. It givesyou a sense of how to carry off a com-mercial message to his current or de-sired customer."

Stations have even gone as far as toredo programming to reach certainVALS types. WYFF-TV, PulitzerBroadcasting Co.'s Greenville, S.C.,NBC affiliate, had a solid audience ofconservative Believers for its newsshows. But the station found it wasmissing a new audience, Achievers, thatwas forming as groups of youngerpeople moved into the market. A VALSstudy found this gap, and soon the toneand look of WYFF's news got a littlesnappier.

Finding segments of the audiencethat fit certain advertisers will grow inimportance as TV stations' revenues

get squeezed. Newspapershave offered this sort of help-telling advertisers where localconsumers spend their moneyand how to reach them-foryears, which might explainwhy print gets more than 50percent of every local addollar. Television has givennewspapers precious littlelocal competition.

"When I was back at thestation level, I was trying tobeat the other stations' headsin, of course," says Craig Mar-shall, Marshall Marketing'spresident. "But it's frighteningwhen the stations are trying toclobber the other stations andprint and direct mail are at-tacking television. Everybody'sattacking television, and tele-vision is attacking itself. Isn'tthat kind of crazy?"


RO

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r1989 S

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UP IN

CLEVELANDWKYC

5:00PM

8.1 RTG/18SHR

Achievedthe highestsweeps t.p.

sharesince May '86.

Continuedgrowth sinceFeb. '89-

Up 20% in share.

Builds on People'sCourt lead-in.

Source:Arbitron

zv

UP INPHOENIXKTVK6:30PM

9.0RTG/15SHR

Delivered's highest t.p.

share in 7 years.

Up 25%in share since Feb. '89.

Builds onnews lead-in audience.

Source:Nielsen

UP INCHICAGOWMAQ

6:00pm

6.5RIG/13SHR

DeliveredWMAQ's

highestsweeps t.p.share

since Nov. '86.

Up 18% in share from Feb. '89

Added10% tolead-in rating.

Source:Nielsen

Up 31% overMay '88 t.p. share.

Builds onCosby lead-in rating.

Source:Arbitron yd

1

Deliveredthe highest t.p. share

in 2 years.

Up 42% in share overFeb. '89.

Beats USATodayby 70%

in share.

UP IN

MINNEAPOLISWCCO 4:30PM

8.2 RTG/22SHR

Up 29% in share overMay '88 t.p.

Built38% in share from Feb. '89

Builds on lead-in rating.

Source: Nielsen

UP INATLANTAWAGA4:00PM

8.2 RTG/21SHR

Up 50% in share over

t.p. performance.

Built 11% inshare in t.p.

since Feb. '89.

Adds19% to Guiding

Lig

lead-in rating.

ASource:

Arbitron

1

C.4

UP IN

SACRAMENTOKXTV 7:30PM

12.1 RTGJ21SHR

#1 in tbeating E.T.

Continuedgrowth sinceFeb. '8

UP IN

PHILADELPHIAWCAU 7:30PM

6.8 RTG/12SHR

DeliveredWCAU's

highest sweeps t.p.

share since May '83.

Up 20% Over E.T:i May '88 share.

Up in share from Feb. '89

Beats CurrentAffair by

71% in share

in head to head competition.

UP IN

HARTFORD

36% higher share than E.T. a

year ago.

Deliversnearly 3 times the

CurrentAffair number indirect

competition.

Source: Nielsen

UP IN

MILWAUKEEWITI 6:30PM

10.3 RIG/19SHR

Deliveredthe highest time period

share in 5 years.

A 46% improvementoverE.T's

May '88 share.

Continuedgrowth since Feb. '89.

Builds 27% share from

news lead-in.

UP INST. LOUISKSDK4:00PM

8.2 RTG/22SHR

Tied for#1 in the time period.

BeatsCurrentAffair in house-

hold rating.

Built16% in sharesince Feb. '89.

INSIDE EDITIONEWED THROUGH

1989-90.REN

MARKET

PhiladelphiaSan FranciscoBostonDetroitDallasClevelandHoustonAtlantaTampaMinneapolisSeattleMiamiPittsburghSt. LouisPhoenixSacramentoHartfordSan DiegoPortland, ORCincinnatiMilwaukee

STATION OWNER

WCAU

KRON

WNEV

WDIV

KXAS

WKYC

KHOU

WAGA

WTVT

WCCO

KIRO

WCIX

KDKA

KSDK

KTSP

KXTV

WFSB

KNSD

KATU

WLWT

WITI

CBS

Chronicle BroadcastingNew England TV Corp.Post -NewsweekLin BroadcastingNBC

Belo CorporationGillett GroupWTVT Holdings, Inc.Midwest CommunicationsBonneville InternationalCBS

Westinghouse BroadcastingMultimedia BroadcastingGreat American BroadcastingBelo CorporationPost -NewsweekGillett GroupFisher BroadcastingMultimedia BroadcastingGillett Group

NATIONAL ADVERTISING BY

DAMEL0014-06 LtITERTAITIENT SAI LS -

A KING WORLD COMPANY

MARKET

BuffaloMemphisNorfolkLouisvilleWest Palm BeachJacksonvilleLittle RockRichmondAlbuquerqueOmahaHonoluluCedar RapidsSouth BendEl PasoColorado SpringsFt. MyersCharleston, SCSalinas/MontereyYakimaLubbockAbileneSan Angelo

STATION OWNER

WIVB

WMC

WVEC

WLKY

WPEC

WJXT

KATY

WWBT

KOAT

WOWT

KHON

KCRG

WSBT

KVIA

KKTV

WINK

WCIV

KNTV

KAPP

KCBD

KRBC

KACB

DISTRIBUTED BY

Buffalo BroadcastersScripps Howard BroadcastingBelo CorporationPulitzer BroadcastingPhoto Electronics CorporationPost -NewsweekAllbritton CommunicationsJefferson Pilot CommunicationsPulitzer BroadcastingChronicle BroadcastingBurnham Broadcasting Co.Cedar Rapids GazetteSchurz CommunicationsMarsh MediaAckerley CommunicationsFt. Myers BroadcastingAllbritton CommunicationsLandmark CommunicationsApple Valley BroadcastingHolsum Inc.Abilene Radio & TelevisionAbilene Radio & Television

KINGWORLDNew York Los Angeles Chicago Dallas

West Palm Beach Short Hills, NJ

c 1989 King World. All Rights Reserved.

NEWS CHANNELS

A _Real Bad Trip by J. Max Robins

What happens when newspeople make headlines because of substance abuse.

Wen the rich andfamous havesubstance -abuse

problems it's prime fodderfor broadcast news. If arandy politician is pickedup DWI or a starlet checksinto a chic drug -rehabilitation center, youcan be sure there will beplenty of pictures at 11.

But what happens if theone who falls is one ofbroadcast news' own? Inthis gossip -mad age, it's al-most a career move when acelebrity checks into theBetty Ford Clinic. Thepublic accepts that it's allpart of the wild and sordidworld of entertainment,and nobody gets hurt atthe box office or in the ratings. But fornews talent it's a different story.

"The public holds TV newspeople to ahigher standard than your classic celeb-rity," says Steve Cagle, v.p. and seniorconsultant at Frank Magid Associates, aconsulting firm that has helped morethan one news department with damagecontrol when one of their stars made thewrong kind of headlines. "If a news di-rector hasn't run through what he'd doif one of his high -profile on -air talent gotarrested for one thing or another or de-veloped a substance -abuse problem,they had better think it through now,"he cautions.

Paul Sagan, the news director atWCBS-TV in New York, knows onlytoo well what it's like to be faced withthat problem. His veteran anchor, JimJensen, has been hospitalized twice inthe last two years for depression andsubstance abuse and is still on medicalleave. "Your primary concern is for theperson involved. The best, compassion-ate approach is not to set any deadlinesfor them about when they will be backon the air. You want to give them ade-quate time to get better," says Sagan."And when it's a front-line guy, it'sclearly a PR problem. The public focus-es on your guy's problems, not that you

CNN's Fred Hickman: a bout with cocaine addiction almost ended his career.

have three investigative units and yourcompetition doesn't have any."

When a news anchor makes head-lines for a substance -abuse problem, itusually comes as no surprise to his co-workers. The business is rife with talesof drug- and alcohol -addled news talentwho may wreak havoc in the newsroombut are nevertheless tolerated. Too of-ten, news management looks the otherway when a news star has a drug or al-cohol problem-if the person is deliver-ing the ratings. "When I found out ouranchorman had a drug problem, I saidwe should get him off the air and intotreatment. But I was overruled," saysan ex -general manager of a major -market station. "I knew after that mydays at that station were numbered."

This is not to say that those involvedin the equation are heartless mercenar-ies. Indeed, a lot of news departmentshave stood by their people when prob-lems arise. Fred Hickman, now asportscaster with CNN, praises his oldPost -Newsweek bosses at Detroit'sWDIV. They stuck by him through hisbout with cocaine addiction, and gavehim his old job back after he completeda drug rehabilitation program.

Management at WRC, the NBC O&Oin Washington, remained supportive of

anchorman Jim Vancethrough not one but twostints of rehabilitation forcocaine addiction (althoughthe second time aroundWRC did some extensivepolling to make sure Wash-ington viewers would giveVance another chance). "IfVance had been a marginalreporter, on the second goaround he would have beengone," admits Jim VanMessel, now senior produc-er of Entertainment To-night, who was the news di-rector at WRC when Vancewas having his troubles.

In the cases of Vanceand Hickman, they ap-proached managementwith the problem and

sought treatment. The fact that theycame forward, rather than being ex-posed by the authorities, made theirwoes more palatable to viewers whenthey returned to the air. Managementnow deals with the situation by turningdrug -related stories-even internalones-over to another reporter.

But sometimes the problem is too se-rious, and mea culpa is not enough.Neil Pugh, the general manager of CB-S's Dayton affiliate, WHIO, recentlylet go popular weathercaster BruceAsbury after Asbury was arrested andconvicted on drug charges.

"[Asbury] was great at his job. Hewas a tremendous celebrity in thistown," says Pugh, in a voice first tingedwith remorse then laced with a sense ofbetrayal as he mentions a tell -all inter-view Asbury gave to the local newspa-per. "He opened up to me," says Pugh."But he opened up to the press with alot more about prostitutes and all kindsof other stuff. He was dreadfully sorry,but we had to ask ourselves, was he re-ally going to stay clean?"

Anyone who finds himself in Pugh'ssituation has some hard decisions tomake. "They are always tough calls,"says Magid's Cagle. "But they are becoming increasingly common ones."

CHANNELS / JULY/AUGUST 1989 19

The Business Side by Merrill Brown

Is Local TV News At Risk?As every operating premise about the television in-dustry has come into question in recent years,don't be surprised to see more and more debate

about the long-term positioning, viability and role of localtelevision news operations.

Consider the economic and competitive dynamics cur-rently at work. Stations, often strapped for money withadvertising -revenue growth flat and increased compe-tition from other media forms intensifying, have hugecapital and ongoing investments in news operations. Inmany cases, these local -station news departments canoften be hugely profitable and can fundamentally createthe key sense of identity for a station in a market.

But it is appropriate to also note that as stationbudgets come under pressure, news departments-particularly those that are not market leaders-are asstrapped for resources as any other part of a station's op-erations. If a major -market affiliate isn't getting any -

Changing demographics andeconomics are prompting avital rethinking of the massiveinvestment in local televisionnews operations.

where with its news, there really aren't any strategicincentives-since the Federal Communications Com-mission has no club over license renewals-for stationsto program news if there are syndicated entertainmentalternatives that could draw strong audiences. Inde-pendent stations, of course, regularly counterprogramduring early evening news time slots.

Secondly, it is also important to note that it seems clearthat the make-up and demographics of local televisionnews audiences will shrink and change for the worsebefore improving. As a nation, we're getting up earlierand earlier and therefore going to bed earlier than ever.Certainly, that phenomenon can't bode well for the Eastand West Coast 11 P.M. newscast. Many major marketsare already reporting significant declines in late newsviewing. Meanwhile, commuters are spending increasingamounts of time getting to and from the office, makingit tougher than ever to grow audiences for early eveninglocal newscasts. And, it is also fair to assume that thenumber of two -income households will continue to in-crease as more and more women work and more and

more families feel economic pressures. Those forces arecausing a steady increase in very early morning localnews and information programming to complement theearly A.M. news coming from the networks.

Finally, consider the evolution of metropolitan news -papering. As the number of newspapers plummetted inbig cities, suburban -based dailies and weeklies emergedto fill news and advertising holes in the marketplace.Large dailies, in most cases, do not serve their suburbanaudiences or advertisers particularly well, and that's whyBergen County, New Jersey, Orange County, Californiaand Long Island, New York, to pick just a few examples,support thriving newspapers.

That same model could well evolve in local television.To be sure, television stations can rarely staff and coverroutine suburban news. Just as the News 12 exampledemonstrates in Long Island, the solution to the problemis local cable news operations. Cablevision, in conjunctionwith its partner NBC, the nework's O&Os and poten-tially its affiliates, is moving to build a network of localcable news channels, and TCI is beginning a similareffort, potentially at first with Washington ABC affiliateWJLA. This slow but inevitable development of the localcable news marketplace suggests a potentially significanterosion of major -market affiliate news, and the currentsteady emergence of local cable advertising sales willspeed the process.

It may not necessarily mean the closing down of bigstation, large-scale news operations, but it may wellmean a shrinking of those operations. According to

research compiled by the Radio -Television News Di-rectors Association, TV -station newsrooms are alreadyshrinking, and salaries for the rank and file in TV newshaven't risen in several years.

So, as station profit margins continue to erode, as timeslots and national demographics continue to change andas local cable programming continues its certain devel-opment, station managements are going to be forced toreassess their massive commitments to local news. Anabandonment of local television isn't in the cards anytimesoon. Smart managers won't junk their local identiesovernight and risk the one thing that truly can distin-guish them in their markets. But, on the other hand, astation running a weak number three in news is going tobe hard pressed to continue huge investments in a localnews -gathering infrastructure.

To be sure, cutting back a vital community resourcelike local television news can't be good for the public's in-formation needs. A restructuring of local TV's historicallyvital news to fit in with changing needs and lifestyles isinevitable, and has to be handled with care.


THEHANNELS

o th annual Channe*,Achieverse to the top 10 ies is an undertaking, like other lists,

hat is designed to create order from potential chaos. In a broadcastingand cable business environment that's never been more tumultuous orchallenging, this compilation can help explain the underpinnings of theU.S. media industry, now recognized as an important global resource.What's clear from the extensive forecasts and analysis included inchievers is also what the turbulent '80s have demonstrated-that the TVnd radio businesses are fraught with opportunity and peril. It shows a

media world in transition-a station business redefining itself for the '90s;cable industry maturing into a pervasive distribution outlet and a vitalrogramming medium; a ra:iio field spinning into new configurations; andproduction world searching for ways to minimize risk while capitalizingn new marketplaces for programming.

Performance In...- Media & Communications- Entertainment

$35,000,000Senior Bridge Facility(Phase I)

New World Entertainment, Ltd.

$80,000,000Senior Bridge Facility(Phase II)

New World Entertainment, L

Financing proirlded by

$183,100,000Line of Credo

$15,000,000Preferred Stock

Act HI Cinemas, Inc.ran anmatx or Act iii Commun..lions. me j

has refinanced existing debt in its subsidiary

A3 Theatres of San Antonio, Ltd.(dba Santikos Theatres & Presidio Theatres)

and has acquired

Eastgate Theatre, Inc.(dba Luxury Theatres)

Financing provided by

GE Capital

A Gf f I/1,11 /di HryCompany

GE Capital

A GE FedeeiM Smices Company

$400,000,000Senior Debt

$50,000,000Junior Subordinated Debt

V Cable, Inc.

a wholly owned subsidiary of

Cablevision Systems Corporation

has acquired the Long Island, New York andCleveland. Ohio area cable TV systems of Viacom Inc

$20,000,000Senior Subordinated Debt

$20,000,000Junior Subordinated Debt

Anchor Media Holdings lid.(an affiliate of the Robert M Bass Group, Inc /

has refinanced existing debt and acquired

Sandia Peak Broadcasters, Inc.

GE Capital

GI i inent iel SOMERS Compel".

GE CapitalCorporate Finance GroupMedia & CommunicationsEntertainment212 370-8088

This year's Channels Achievers Top100 has been expanded and revisedfrom the three annual Achievers

reviews that preceded it. The ChannelsAchievers special section is designed tosum up, in the simplest form possible, thefinancial state of the media industry's topcompanies. This year, we've changed thebasic measurement of the Top 100 and ex-panded our analysis to meet the changingneeds of Channels' readers. The Top 100companies are listed this year by a newChannels Achievers Index Rank, whichis a measure combining the companies'1987-1988 revenue growth and net income

GLOSSARYDefinitions of key terms in this section:Compound Annual Growth Rate(CAGR) - Average annual growth.Debt/Equity Ratio (DIE) -Long-term debt divided by total shareholders equity.Net Income - Profits after expenses,interest and taxes.Operating Income - Profits beforeincome and taxes.Revenues - Total sales.Return on Equity (ROE) - Netincome divided by total shareholdersequity.

GUIDE

growth ranking. A more detailed expla-nation of the ranking can be found in abox included in the story about the topAchievers companies, which immediatelyfollows the Top 100 listing.

But the Channels Achievers package ismore than just a compilation of the Top100 companies. Included in the package,following our story about the Achieversleaders, is the unique "How They Do It"survey, which explains in detail how theTop 20 revenue leaders are growing orshrinking. This chart also measures fiveyear financial progress.

In a Channels Achievers section intro-duced in this issue, three top medialeaders share their definition of media in-dustry achievement. Then, we highlightthe financial results of companies withinfive industry segments-television broad-casting, radio, cable, diversified media in-terests and production-in return -on -equity listings, ranked within industrysegment.

Also in Achievers, Channels editorsoffer forecasts of what to expect from theeconomy and each media segment in thecoming year. The final piece of theAchievers package profiles the industry'stop money managers, rarely discussedbut fascinating investors who bring hun-dreds of millions of dollars to media

companies-individuals who are capableof making or breaking individual mediastocks. The last page of this issue ofChannels offers a 12 month guide tomedia industry stock prices.

Special thanks must be given toChannels assistant editor Michael Burgi,who assembled the data for the Achieversreview. This year's Channels Achieversspecial section was produced by staffmembers Peter Ainslie, Kirsten Beck,Rachel Cohen, John Flinn, Richard Katz,Neal Koch, Jack Loftus, Sue Ng, ChuckReece, J. Max Robins and researcher HallMorrison. MERRILL BROWN

23 Guide, Glossary, New Company List

24 Channels Achievers Top 100

27 A Look at The Top Companies

30 20 Revenue Leaders

34 Essays on Achievement

38 Performance Charts

49 Industry Forecasts

53 Top Money Managers

ARRIVALS & DEPARTURESWhile the pace of consolidation inthe broadcasting, cable and pro-duction business has surely

slowed over the past several years, newventures and new amalgamations of com-panies inevitably force changes each yearin the Channels Achievers listing. In the1989 Achievers review, nine companieswere dropped from the survey and nineadded to the list, keeping our total of 100.A combination of factors-companiesbeing bought out, merging, going privateor leaving the media industry-resulted inthe deletions. Meanwhile, spinoffs, suc-cessful new ventures and the implemen-tation of significant corporate growthstrategies made it relatively easy to addadditional companies to this year'sAchievers.

Some of the changes: AmericanCablesystems was bought by ContinentalCablevision, the privately held cable

Off the List:American CablesystemsEmmis Broadcasting

Essex Comm.Gencorp

Hal RoachInfinity Broadcasting

Robert HalmiSelkirk Comm.

Tempo Enterprises

New Achievers:CABLE

Nostalgia NetworkQVC Network

Video Jukebox NetworkDIVERSIFIED

Heritage MediaPRODUCTION

All American TVNelson Holdings

Qintex EntertainmentWesternWorld-Samuel Comm.

RADIOSouthern Starr Broadcasting

giant, and removed from our list, whilecable companies Essex Communicationsand Tempo Enterprises were droppedafter being bought by larger concerns.Hal Roach and Robert Halmi werebought by new Achiever Qintex, thegrowing Hollywood concern from DownUnder that recently announced plans toacquire United Artists.

Meanwhile, emerging syndicators AllAmerican TV and Western World -Samuelwere added. Dallas -based Heritage Mediawas spun off from its Des Moines formerparent and joined the listing, whileNelson Holdings expanded in the videomarket. Three cable services-NostalgiaNetwork, Video Jukebox Network andshopping channel QVC-were added, a re-flection of the continuing emergence ofnew network offerings. Radio broadcasterSouthern Starr was also added to the1989 Achievers.


ACHIEVERSINDEXRANK

THE TOP 100COMPANY

'87-88REVENUE GROWTH 1986GROWTH RANK REVENUE RAN,

1988NET

INCOME RANK HEADQUARTERS

1 CAROLCO 58.7% 13 164.6 (53) 35.5 (29) LOS ANGELES, CA2 CVN COMPANIES' 85.0% 8 587.7 (33) 11.4 (42) PLYMOUTH, MN3 JONES INTERCABLE 42.1% 20 47.9 (76) 29.3 (30) ENGLEWOOD, CO4 TELE-COMMUNICATIONS INC 33.5% 23 2282.0 (15) 56.0 (26) ENGLEWOOD, CO5 REEVES COMM. 49.4% 16 105.5 (65) 8.3 (48) NEW YORK, NY

6 NEW LINE CINEMA 44.7% 19 61.8 (73) 4.7 (52) NEW YORK, NY

7 ORION PICTURES 30.3% 26 426.9 (37) 12.2 (41) NEW YORK, NY

8 WARNER COMM. 23.6% 37 4206.1 (7) 423.2 (5) NEW YORK, NY9 REPUBLIC PICTURES 85.1% 7 52.0 (74) 0.3 (62) LOS ANGELES, CA10 KING WORLD PRODS. 16.0% 51 279.8 (45) 60.7 (25) NEW YORK, NY11 TCA CABLE 14.1% 54 68.9 (72) 9.6 (45) TYLER, TX

12 DURHAM CORP. 31.0% 24 392.6 (39) 14.2 (40) RALEIGH, NC

13 AMERICAN FAMILY 23.9% 34 2324.6 (14) 108.9 (19) COLUMBUS, GA14 ACTON CORP. 367.4% 2 142.1 (58) -0.7 (67) WOBURN, MA15 WALT DISNEY 19.5% 43 3438.2 (8) 522.0 (4) BURBANK, CA

16 STAUFFER COMM. 9.1% 60 136.2 (59) 5.2 (51) TOPEKA, KS17 AMERICAN TELEVISION & COMM. 13.6% 56 811.9 (26) 70.4 (24) STAMFORD, CT

18 ALL-AMERICAN TV 115.4% 5 8.4 (92) 0.2 (63) NEW YORK, NY19 MCA 16.8% 48 3023.6 (11) 164.9 (16) UNIVERSAL CITY, CA

20 QVC NET. 72.0% 10 193.2 (52) 9.0 (46) WEST CHESTER, PA

21 MEREDITH 12.8% 58 678.5 (30) 47.4 (27) DES MOINES, IA22 TRIBUNE 8.6% 63 2334.8 (13) 210.4 (13) CHICAGO, IL23 MULTIMEDIA 7.0% 70 439.6 (36) 26.9 (31) GREENVILLE, SC

24 GREAT AMERICAN COMM. 218.8% 3 381.9 (42) -72.4 (93) CINCINNATI, OH25 UNITED ARTISTS COMM.' 28.9% 28 842.1 (25) 2.3 (57) ENGLEWOOD, CO26 VESTRON 54.0% 15 334.9 (44) 20.6 (34) STAMFORD, CT

27 HOME SHOPPING NET. 25.4% 31 730.1 (29) 18.0 (38) ST. PETERSBURG, FL

28 NEWS CORP.' 24.3% 33 4354.5 (6) 341.3 (9) SYDNEY, AUS.29 ROGERS COMM.° 31.0% 25 358.4 (43) 84.8 (22) TORONTO, ONT.30 NOSTALGIA NET. 100.0% 6 2.8 (98) -2.8 (74) NEW YORK, NY31 CAPITAL CITIES/ABC 7.5% 68 4773.5 (4) 387.1 (6) NEW YORK, NY32 WESTWOOD ONE 26.1% 30 110.0 (64) 1.6 (58) CULVER CITY, CA

33 CHRIS -CRAFT 3.9% 82 250.8 (50) 21.4 (33) NEW YORK, NY34 FINANCIAL NEWS NET.' 14.1% 53 42.0 (81) 4.7 (53) LOS ANGELES, CA35 SATELLITE MUSIC NET. 28.9% 29 19.2 (87) 1.5 (59) DALLAS, TX

36 HERITAGE ENT. 37.8% 22 6.2 (94) -0.1 (65) LOS ANGELES, CA37 MGM/UA COMM. 57.8% 14 674.9 (32) -48.7 (92) BEVERLY HILLS, CA

38 CBS 0.6% 87 2777.7 (12) 1149.9 (2) NEW YORK, NY39 PULITZER PUBLISHING 6.5% 71 391.0 (40) 19.6 (35) ST. LOUIS, MO40 SCRIPPS HOWARD BROADCASTING 17.3% 46 274.7 (47) 16.5 (39) CINCINNATI, OH41 WASHINGTON POST 4.0% 81 1367.6 (20) 269.1 (12) WASHINGTON, DC42 VIDEO JUKEBOX NET. 1000.0% 1 1.1 (100) -1.0 (68) MIAMI, FL43 TIMES MIRROR 6.1% 74 3332.6 (9) 331.9 (10) LOS ANGELES, CA44 GULF + WESTERN 8.7% 62 5107.8 (3) 384.7 (7) NEW YORK, NY45 GANNETT 7.6% 67 3314.1 (10) 364.5 (8) ARLINGTON, VA46 TIME 7.5% 69 4507.0 (5) 289.0 (11) NEW YORK, NY

24 CHANNELS / JULY/AUGUST1989

ACHIEVERSINDEXRANK COMPANY

'87-88REVENUEGROWTH

GROWTHRANK

1988REVENUE P

1988NET

INCOME RANK HEADQUARTERS

47 PARK COMM. 7 8°0 66 149.6 19.1 (37) ITHACA, NY

48 CLEAR CHANNEL COMM. 8.0% 65 35.1 (82) 2.4 (56) SAN ANTONIO, TX

49 OLYMPIA BROADCASTING 23.6% 35 13.6 (89) 10.3 (43) SEATTLE, WA

50 MACLEAN HUNTER° 15.7% 52 1302.1 (21) 97.3 (21) TORONTO, ONT.

51 OSBORN COMM. 23.0% 39 21.9 (84) 7.0 (50) NEW YORK, NY

52 WESTINGHOUSE 10.3% 59 12499.5 (2) 822.8 (3) PITTSBURGH, PA

53 COLUMBIA PICTURES ENT.° 30.1% 27 1387.2 (19) -84.7 (96) NEW YORK, NY

54 HERITAGE MEDIA' 167.4% 4 46.0 (77) - 8.1 (82) DALLAS, TX

55 UNITED TELEVISION 4.9% 77 101.2 (68) 7.9 (49) BEVERLY HILLS, CA

56 LIN BROADCASTING 8.0% 64 225.5 (51) 82.1 (23) NEW YORK, NY

57 JACOR COMM. 58.9% 12 69.9 (71) -6.2 (81) CINCINNATI, OH

58 CABLEVISION SYSTEMS 64.8% 11 493.5 (34) -159.4 (100) WOODBURY, NY

59 ADELPHIA COMM. 80.2% 9 131.4 (61) -76.8 (94) COUDERSPORT, PA

60 GRAY COMM. -0.2% 88 43.9 (79) 2.7 (54) ALBANY, GA

61 GENERAL ELECTRIC 4.0% 80 50089.0 (1) 3386.0 (1) FAIRFIELD, CT

62 FRIES ENT. 19.3% 44 44.5 (78) 0.1 (64) LOS ANGELES, CA

63 BURNHAM BROADCASTING 41.6% 21 48.3 (75) -15.4 (88) CHICAGO, IL

64 LEE ENTERPRISES 6.3% 72 252.5 (49) 40.9 (28) DAVENPORT, IA

65 KNIGHT-RIDDER 5.8% 75 2083.3 (16) 156.4 (17) MIAMI, FL

66 FALCON CABLE SYSTEMS 20.7% 42 24.5 (83) -1.2 (69) LOS ANGELES, CA

67 McGRAW-HILL 3.8% 83 1818.0 (17) 185.5 (14) NEW YORK, NY

68 VIACOM 24.5% 32 1258.5 (22) -123.1 (99) DEDHAM, MA

69 TURNER BROADCASTING SYSTEM 23.6% 36 806.6 (27) -94.5 (98) ATLANTA, GA

70 CENTURY COMM. 48.6% 17 163.3 (54) -4.5 (76) NEW CANAAN, CT

71 LIBERTY CORP. 6.1% 73 401.0 (38) 24.5 (32) GREENVILLE, SC

72 COMCAST 45.5% 18 449.9 (35) -47.6 (91) BALA CYNWYD, PA

73 NEW YORK TIMES 3.5% 84 1700.0 (18) 167.7 (15) NEW YORK, NY

74 TELEMUNDO GROUP 21.4% 40 102.1 (67) -34.2 (90) NEW YORK, NY

75 WESTMARC 16.4% 49 118.4 (63) -11.9 (85) DENVER, CO

76 SUN GROUP 20.8% 41 9.3 (91) -2.5 (73) NASHVILLE, TN

77 OUTLET COMM. 23.1% 38 104.3 (66) -21.8 (89) PROVIDENCE, RI

78 JEFFERSON -PILOT 4.3% 79 1223.5 (23) 101.2 (20) GREENSBORO, NC

79 CENTEL CORP. 2.4% 85 1094.9 (24) 135.1 (18) CHICAGO, IL

80 MEDIA GENERAL 5.6% 76 755.7 (28) 8.8 (47) RICHMOND, VA

81 WESTERNWORLD-SAMUEL COMM. 16.0% 50 12.3 (90) -4.6 (77) N. HOLLYWOOD, CA

82 LORIMAR TELEPICTURES 18.3% 45 677.7 (31) -86.8 (97) CULVER CITY, CA

83 AARON SPELLING PRODS. -20.1% 96 119.5 (62) 19.3 (36) LOS ANGELES, CA

84 A.H. BELO 0.9% 86 385.4 (41) 10.1 (44) DALLAS, TX

85 PLAYBOY -1.2% 89 159.8 (55) 2.6 (55) CHICAGO, IL

86 MALRITE COMM. 14.0% 55 133.3 (60) -9.0 (83) CLEVELAND, OH

87 UNITED CABLE 17.2% 47 260.9 (48) -15.3 (87) DENVER, CO

88 TVX BROADCASTING 13.0% 57 150.8 (56) -82.0 (95) VIRGINIA BEACH, VA

89 QINTEX ENT. 8.8% 61 14.9 (88) -4.3 (75) BEVERLY HILLS, CA

90 PRISM ENT. -10.9% 93 19.7 (86) 0.5 (61) LOS ANGELES, CA

91 BARRIS -32.8% 100 42.6 (80) 1.0 (60) LOS ANGELES, CA

92 NELSON HOLDINGS -3.0% 90 100.6 (69) -9.4 (84) VANCOUVER, B.C.

93 LAUREL ENT. -28.6% 99 5.5 (95) -0.2 (66) NEW YORK, NY

94 DICK CLARK PRODS. -26.6% 98 21.2 (85) -2.4 (72) BURBANK, CA

95 NEW WORLD ENT. -12.9% 94 279.4 (46) -4.7 (78) LOS ANGELES, CA

96 PRICE COMM. -4.5% 91 91.3 (70) -12.5 (86) NEW YORK, NY

97 AMERICAN COMM. AND TV -7.7% 92 2.4 (99) -2.2 (71) SARASOTA, FL

98 SOUTHERN STARR BROADCASTING 4.5% 78 7.0 (93) -1.8 (70) ORLANDO, FL

99 FAIRCOM - 14.8% 95 4.6 (97) -5.0 (80) OLD BROOKVILLE, NY

100 PEREGRINE ENT.' -23.2% 97 5.3 (96) -4.7 (79) LOS ANGELES, CA

CVN Co 's 1987 revenues were restated pro -forma by the company to reflect 12 months operction but1987 net income is a Channels estimate to correspond.

'United Artists changed fiscal years in 1987. Figures reflect year ended August 31. Figures for 988 reflect12 months ended December 31

'News Corp figures are converted from Australian to U.S.dollars using the following exchange rates:1988,.7235; 1987, .6.588 (SAus. per $U.S 1.00).

'Figures are in Canoc ian dollars.'FNN's 1988 figures reflect 10 months ended June 30°Columbia's 1988 figures reflect the fiscal period from December 18, 1987 to November 30, 1988.'Heritage Media's 1987 figures reflect 10 months from the company's inception on March 27 throughDecember 31.Peregrine figures reflect nine months to Sept. 30 for bo-h years. Peregrine filed for Chapter 11 in January1989, and did not issue full -year statements.

CHANNELS / JULY/AUGUST 1989 2a

The Communications and EntertainmentGroup is dedicated to servingthe investment banking needs

of the cable industry.

$500,000,000

V Viacom International Inc.

$300,000,000 114/5% Senior Subordinated Notes due 1998(Interest payable January 15 and July 15)

Price 100%

$200,000,000 111/2% Senior Subordinated Extendible Reset Notes(Interest payable January 15 and July 15)

Price 100%

$200,000,000

Cablevision Systems Corporation

121/4% Senior Subordinated Reset Debentures due 2003

We acted as agent in the private placement of these securities.

Michael E. Garstin Barbara M. Ginader(212) 272-3735 (212) 272-3895

BEAR STMRNSSharing Opportunities

Bear, Stearns & Co. Inc., 245 Park Avenue, New York, NY 10167Atlanta/Boston/Chicago/Dallas/Los Angeles/San Francisco/Amsterdam/Geneva/Hong Kong/London/Paris/Tokyo

LEADERS

BLASTING TO THE TOP:THE LEADING 100 COMPANIES

Carolco's smokin' with shoot 'em ups; Leaders load up for '89.

The movers and shakers among the1989 Channels Achievers Top 100companies are spreading their

wings, hoping that the growth andsynergy from building related businesseswill lead to increased profitability. Mostof the time, these new synergies havecome about through acquisitions. The toptwo Achievers-Carolco Pictures andCVN Companies-started out small, keptit simple and suddenly found themselvesbehaving like heavy hitters.

The top 10 achievers have averagerevenue growth of almost 47 percent,with Republic Pictures leading the waywith an 85 percent upswing (though itsnet income declined 70 percent). TCI rec-orded a whopping 900 percent increase innet income, and Jones Intercable posteda 397 percent net increase, figures whichdemonstrate cable's continuing growthpotential.

Our number one ranked achiever-Carolco-had the best combination ofrevenue growth (up 58.7 percent over1987, to $164.6 million) and net income (up148.3 percent, to $35.5 million). The Hol-lywood independent, which began opera-tions in 1986 as a film financier, has sincediversified into film and televisionproduction/distribution, home video,music and character licensing. Carolcotook two theatrical films to the bank lastyear-Rambo III starring SylvesterStallone and Red Heat with ArnoldSchwarzenegger-which together havegrossed approximately $230 million inworldwide box office receipts. Videorentals also boosted revenues.

Founded by Mario F. Kassar andAndrew G. Vajna, Carolco has stuck to itsgoal of producing or financing three tofive exploitable films a year, each bud-geted in the neighborhood of $20 million.Within a year of formation, however,Carolco began to diversify, first with theacquisition of Orbis Communications in1987. Orbis, a production, distribution andbarter sales company, posted nearly $43million in revenues in '87, but that figureplummeted to just under $20 million last

year. Meanwhile, Carolco's feature filmrevenues soared from $54.5 million in '87to almost $140 million last year. Also,more than half of the company's revenuescame from foreign sales (mostly film li-censing from theatrical and video), to-taling nearly $93 million, proving there'sa global audience for exploitable, actionfilms.

Carolco's Orbis unit had a problemgetting out of the starting gate last yearwhen the introduction of its Carolco 1 filmpackage was delayed due to protractednegotiations to acquire domestic syndi-cation rights to 40 feature films controlledby Hemdale Communications (The LastEmperor, Platoon, Terminator and Hoo-siers). The delay, plus a soft barter syndi-cation market, led to a TV revenue de-cline. But the film package is doing wellin 1989.

Actually, Carolco is just warming up totelevision. Following the Orbis deal, thecompany last year cranked up a made -for -TV production unit calledCarolcoGimbel, headed by director RogerGimbel (The Biography of Miss Jane

Pittman, A War of Children and ABrand New Life). Then Carolco broughtin Bruce J. Sallan to head the newlyformed IndieProd Television unit in part-nership with Walt Disney Television. TheIndieProd venture covers all series de-veloped for network and cable. Disneyprovides overhead, exclusive distributionand deficit financing. The first productionout of IndieProd was a two-hour moviespecial for ABC-TV, Get Smart, reunitingDon Adams and Barbara Feldon.

Not included in Carolco's year-end rev-enues is money from its new home videosubsidiary, LIVE Entertainment, whichreported sales of $352.1 million and profitsof $17.5 million. Carolco, which owns 56percent of LIVE's equity and 49.9percent of its voting stock, did recognize$11.1 million in revenues from the unit.LIVE was created in 1988 by joiningLieberman Enterprises (a rackjobber)and Video Entertainment (video rentals).

Looking over this year's Top 10, it'seasy to see that the giants of cable tele-vision, while continuing to face politicaldifficulties at both the local and federal


levels, remain strong business leaders.Jones Intercable, TCI and Warner Com-munications (the latter highly diversified)would be expected among the Top 10companies. But CVN Companies' positionas the number two Achiever may seem abit out of the ordinary. Yet it showsthere's plenty of room for innovators in amature business. After Home ShoppingNetwork launched the business, CVNdemonstrated the breadth of opportunityand the fact that there's room for multipleplayers. A few years ago, some dismissedthe home shopping concept as a passingfancy. Today it is a booming business.

CVN started out in 1974 as adistressed -merchandising hustler, buyingprint space to hype liquidation sales. Itwent retail in 1978 by opening a store inMinneapolis and began mailing bulletinswith merchandise offerings to its cus-tomer list. But it was cable TV that intro-duced CVN to the big time. In two years,revenues from its 24 -hour Cable ValueNetwork went from $30 million to $345million, and CVN now claims to be thelargest "cable exclusive" TV shoppingnetwork, serving over 20 million cablehomes through more than 500 systems.For 1988, the parent company posted a46.2 percent increase in profits (to $11.4million) on an 85 percent sales upswing($587.7 million).

To lure affiliates, CVN pays eachsystem a 5 percent commission on netsales of merchandise sold on the networkto subscribers served by that affiliate.Ted Deikel, one-time executive vice pres-ident of American Can Co., has been a di-rector of CVN since 1983 and in 1985 waselected chairman and chief executive.Deikel took CVN into cable.

In August '88, CVN went on the acqui-sition trail by taking over The FashionChannel Network, then in Chapter 11bankruptcy proceedings. A few monthslater, CVN was approached by TCI,seeking to purchase the company outrightthrough an investor group of approxi-mately 19 of the cable operators that com-prise the bulk of CVN's cable affiliates.

Meanwhile, two of cable's most estab-lished operators-Jones Intercable andTCI-kept on buying and selling systemsin 1988. While TCI has begun to broadenits base into other areas, Jones is princi-pally sticking to cable system ownershipand management. Jones' $47.9 million in1988 revenues was 42 percent better thanthe previous year, while its $29.3 millionnet income represented a boost of almost397 percent. In addition to buying, sellingand running its own systems, Jones pro-vides management services for systems,usually charging five percent of gross rev-enues, good for just over $11 million inrevenues for 1988 (up 36 percent). Sub-scriber revenues were off 10 percent toalmost $21 million, though that figurecould turn around this year because of thecompany's acquisition of systems serving

About theTop 100

In previous years, annual revenuegrowth and annual cash flowgrowth have been used to compile

the Channels Achievers Top 100. Inan effort to build an even more usefullisting, 1989's Top 100 was compiledusing a unique ranking, labeled here asthe Achievers Index Rank. Thissystem uses the comparative rankingof the top 100 companies by two mea-sures: annual growth in revenue andnet income. The Top 100 were rankedby 1987-88 revenue and net incomegrowth. Those two rankings-based ona list from 1 to 100-were added to-gether, and the company with thelowest number, in this case Holly-wood's Carolco, was labeled thenumber one company in the field.

Questions will be raised about theranking and the decisions behind thecreation of the index. But that's whatsuch rankings are all about. They'redesigned to stimulate debate aboutcorporate performance and provide aset of barometers-like the return -on -equity and debt/equity ratios that arepublished later in this Achieverssurvey-that corporate managers, in-vestors, employees and observers canuse in evaluating companies and seg-ments. The combined use of revenueand net income growth is designed toavoid some pratfalls of othermethodologies, an effort to avoid pe-nalizing larger companies that growslowly. The presence of both large andsmall companies near the top of the listis evidence that the creation of thisindex could make it a particularlyuseful measuring device, albeit justone of a set of indicators that measuremedia industry performance.

MERRILL BROWN

almost 97,000 households.TCI is the largest MSO, finishing 1988

with 6.2 million basic subs and 4.6 millionpay-cable subs. (Add another 3 millionbasic and 2.7 million pay-cable substhrough subsidiary systems.) TCI posteda 33.5 percent gain in revenues to nearly$2.3 billion in '88, while net income surgeda whopping 900 percent, to $56 million.Sales and acquisitions accounted for thedramatic swing. In addition to putting up$772.1 million as part of the group buyoutof Storer Cable, TCI expanded into themovie theater business with the acqui-sition of UA Communications Inc. TCIalso is involved in numerous cable pro-gramming ventures.

Rounding out the top 10 achievers areReeves, New Line Cinema, Orion Pic-tures, Warners, Republic Pictures and

King World-all primarily production anddistribution companies. Reeves, whichjust began to syndicate the CBS seriesKate and Allie, got clipped in the fourthquarter of its fiscal year by the WritersGuild strike.

New Line Cinema has been living offthe theatrical sequels to Nightmare onElm Street for years. It moved into thefirst -run syndication business via an al-liance with Lorimar (now Warner) for ANightmare on Elm Street: Freddy'sNightmares. Orion released 12 films in1988 (including Bull Durham, Colors andMarried to the Mob), then hit the homevideo business big with the introductionof RoboCop and Malone. In pay cable,Orion posted revenues in excess of $12.8million from the release of Back to School.In first -run syndication, the company re-ported what it called "dramatic" sales in-creases from The New HollywoodSquares and the release of the first 103episodes of Cagney & Lacey to theLifetime cable network.

Warner Communications, with $4.2billion in revenues (up 23.6 percent) and$423.2 million in net income (up 29percent), accounts for the most cashtonnage among the Top 10. It will ofcourse grow further after its proposedmerger with Time Inc. The bulk ofWarner revenues flow from film, recordand home video businesses. But television(broadaast and cable) is an important com-ponent of WCI as well. Warner Bros. Tel-evision Distribution posted $294 million inrevenues last year, up 38 percent.

Republic Pictures, ranked number nine,has made a strategic decision to get backinto the production business. That de-cision led to four made -for -TV movies in'88 to go with Beauty and the Beast (nowcanceled) on CBS. But first -run syndi-cation is another matter. Here, Republiclost $2.2 million on On Trial, the mainreason why the company's net incomewas off 70 percent for the year. As 1989began, Republic entered into a newventure with United Artists Communica-tions to develop and produce TV pro-gramming. The companies are putting up$60 million to get the venture rolling.

Rounding out the Top 10 is King World,for years a two -show company: Jeopardyand Wheel of Fortune. King World haslong since added The Oprah WinfreyShow to its distribution lineup, and lastseason brought Inside Edition into thefirst -run mix. Further bolstering its pro-duction base, King World and six TVstation groups created the Research &Development Network to test first -runprograms. Also last year, King Worldformed a joint venture with MCA to de-velop programs for network, syndicationand cable. Most recently, the companybecame a broadcaster, putting up $100million for a CBS affiliate of its veryown-WIVB-TV in Buffalo, N.Y.

JACK LOFTUS


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THEHANNELS

11

HOW THEY DO IT

REVENUE LEADERSEven with the TV industry in a state of tumult,

over half the leaders still show profit growth.

COMPANY 1987-88 GROWTH (°o) 1988 ($ MIL) 5 -YEAR CAGR (%)

DIVISION PROFIT* RF. PROFIT- REV. PROFIT* REV.

COMMENTS

CBS INC.BROADCAST GROUP

CABLEVISION SYSTEMS CORP.armintim CABLE TELEVISION

PROGRAMMING

CAPITAL CITIES/ABC INC.BROADCASTINGPUBLISHING

COLUMBIA PICTURESENTERTAINMENT INC.'

THEATRICALTELEVISION

.mmIt.olumbia FFFFFF Television

EXHIBITION

COMCAST

x.11.1.A411

GANNETT

COMCAST CORP.CABLECORPORATE, CELLULAR & OTHER

GANNETT CO. INC.NEWSPAPER PUBLISHINGBROADCASTINGOUTDOOR ADVERTISING

GENERAL ELECTRIC CO.'BROADCASTING

GREAT AMERICAN* COMMUNICATIONS CO.'BROADCAST GROUP

Great American ENTERTAINMENT GROUP- Film Distribution- Film Production & Other

154.1% 0.6% $1,149.9 $ 2,777.7 43.8% 3.0%- 0.2 0.5 232.4 2,776.8 - 4.4 3.1

Loss 64.8 159.4 493.5 Loss 37.113.7 50.8 23.3 390.5 9.2 30.9Loss 160.6 - 34.9 NA

38.7 7.5 387.1 4,773.5 27.5 44.314.1 9.2 722.2 3,749.6 42.1 65.4

- 11.6 1.7 129.7 1,023.9 4.5 17.4

Loss 30.1 -- 84.7 1,387.2 NA 11.955.3 51.7 12.3 652.3 NA NA34.7 10.3 100.7 532.7 NA NA

NA NA 25.9 194.6 NA NA

Loss 45.5 47.6 449.9 Loss 39.836.8 40.9 74.0 404.1 31.0 42.8Loss 104.5 8.6 45.8 Loss 22.8

14.1 7.6 364.5 3,314.5 13.7 14.24.0 7.0 608.1 2,697.9 15.4 15.27.4 9.4 117.9 390.5 14.1 15.14.9 12.2 38.9 226.5 - 5.0 4.1

16.2 4.0 3,386.0 50,089.0 11.1 12.68.0 11.6 540.0 3,638.0 28.2 11.7

Loss262.1

218.8287.6

72.482.2

381.9200.4

NA10.4

07.3

366.2 175.3 34.5 118.4 9.4 2.5233.8 276.6 24.7 40.3 NA NA980.0 141.8 9.8 78.1 NA NA

The $2 billion sale of CBS Records to Sony in Januaryprovided dramatic boost to net income. BroadcastGroup, however, experienced slight downturn due tosteep decline in network profits. Both TV stations andradio divisions increased profits.

Cablevision leads the industry in cash flow and revenueper subscriber. The dramatic revenue growth is attrib-utable to speedy acquisition of systems large andsmall, and to increased programming revenues as thecompany's regional sports networks expanded.

Cap Cities/ ABC's dip in network profits was offset byO&O and ESPN revenue increases. Publishing, exceptfor newspapers, is still a drag. The big profit gain of39 percent in 1988 come from a reduced federal taxrate and lower net financing expense.

Performance has been hurt by weak motion -pictureresults and conservative amortization of film invento-ries, which puts pressure on reported earnings. Thelack of large, new TV syndication offering also hurt,as did high overhead costs in theatrical distribution.

Comcast again set revenue record thanks to resultsfrom recently acquired cable systems, as sub total roseby 69 percent. The $47.6 million net loss was duelargely to acquisition debt. Substantial revenue gainsand net losses are expected for forseeable future.

Gannett posted record revenues and dividends and,for 21st consecutive year, earnings increases. USAToday ad gains pushed newspaper revenues up 7 per -cent. Although radio showed dramatic improvement,TV -station revenues rose only 1 percent, and firm's40 percent investment in GTG posted a loss.

Prime time leader NBC benefited from Olympics,World Series and Super Bowl in one season, yet net-work profits dropped in '88 because of political con-ventions (cost of coverage and lost ad revenues). O&Operformance improved enough to give NBC an 8 per-cent overall increase in operating profits.

Great American's growth is misleading -the compa-ny's Taft Broadcasting figures were included only forfourth-quarter '87 and then full -year '88. In fact, rove -nues were flat when compared pro -forma with Taft in'87. The company suffered heavy net losses becauseof debt interest and charges on amortization, whichit expects to incur for next few years.

Company -wide ,otal IS Nei Income. Division 'orals ore Operating Prof it. CAGR r. Compound Annual Growth Rate. All fig-ures reflect I isco! years NA= Nor Applicable or Not Available 'Revenues and profit reflect the period I roar December 18,

987 to November 30, 1988 Revenue for 1983 is from the Coco -Colo Co 's entertainment division 'Broadcasting segmentfigures for 1983 ore RCA's 'All figures for 1983 are Iron) Taft Broadcasting Co -Music Entertainment revenues include


fees for domes,...: .-ibution of home video, which ore not included in Horne Video 8 Poy TV division. Broadcasting 8 Cobledivision includes AC/Rand USA Network in 1988. 'Division figures converted from Australian to U.S. Dollars using thefollowing exchange rotes. 1988, .7235 1987, 6588, 1983..9387 (SU.S per Skis 1.001.

COMPANY 1987-88 GROWTH (%) 1988 ($ MIL) 5 -YEAR CAGR (%)

DIVISION PROFIT' REV. PROFIT* REV PROFIT* REV.

GULF + WESTERN INC. 8.0 8.7 384.7 5,107.8 NA 32.0ENTERTAINMENT 15.3 0.7 251.8 1,862.2 31.8 11.8- Motion Pictures NA -11.8 NA 489.0 NA NA- TV & Home Video NA 4.3 NA 1,069.7 NA NA- Theaters, Sports Etc. NA 16.0 NA 291.0 NA 5.7

PUBLISHING /INFORMATION 11.5 11.1 180.0 1,193.7 60.9 41.3CONSUMER /COMMERCIAL

FINANCE 14.9 15.4 372.4 2,051.9 21.4 13.9

HOME SHOPPINGNETWORK INC. - 39.0 25.4 18.0 730.1 126.8 189.3

MCA INC.° 20.1 16.8 164.9 3,023.7 2.3 13.8FILMED ENTERTAINMENT 44.9 12.5 236.0 1,497.0 7.7 10.5- Theatrical NA 27.6 NA 248.6 NA - 6.5- Television NA 16.9 NA 591.8 NA 13.0- Home Video & Pay TV NA 74.8 NA 530.6 NA 34.9

BROADCASTING & CABLE 251.4 48.9 13.0 131.5 NA NAMUSIC ENTERTAINMENT 47.9 38.4 60.5 661.0 NA 26.3

NEWS CORP. LTD.' - 37.3 24.3 341.3 4,354.5 52.4 25.3NEWSPAPERS 46.0 39.7 346.7 1,858.5 36.7 14.1MAGAZINES 13.9 17.3 77.0 441.1 22.2 19.4TELEVISION - 21.0 9.9 60.1 407.8 57.5 40.9FILMED ENTERTAINMENT - 22.3 - 6.3 87.8 857.0 NA NA

TELE-COMMUNICATIONS INC. 900.0 33.5 56.0 2,282.0 22.3 45.7CABLE 41.6 39.2 439.1 1,705.1 39.0 37.5THEATERS 7.3 19.1 51.4 576.9 NA NA

TIME INC. 15.6 7.5 289.0 4,507.0 11.3 10.7MAGAZINES 1.4 8.1 287.0 1,752.0 22.0 9.1BOOKS 18.2 6.6 104.0 891.0 37.7 12.0PROGRAMMING - 7.2 15.6 116.0 1,122.0 3.1 9.6CABLE TV 17.3 13.7 176.0 812.0 20.6 13.4

TIMES MIRROR CO. 24.5 6.1 331.9 3,332.6 10.7 6.0NEWSPAPER PUBLISHING - 17.3 0.1 312.4 1,997.7 7.0 9.3BOOK, MAGAZINE & OTHER

PUBLISHING 11.6 32.3 133.4 857.9 9.8 12.0BROADCAST TELEVISION 27.7 10.1 42.2 99.0 -7.3 -3.1CABLE TELEVISION 51.4 17.8 43.5 282.7 23.3 12.9

TRIBUNE CO. 48.7 8.6 210.4 2,334.8 24.9 8.1NEWSPAPER PUBLISHING 37.3 6.6 263.7 1,561.7 13.5 6.5BROADCASTING & ENTERTAINMENT 23.7 4.2 77.8 505.7 11.4 17.2NEWSPRINT OPERATIONS 35.9 20.2 99.2 462.6 NA 6.2

TURNER BROADCASTINGSYSTEM INC. Loss 23.6 - 94.5 806.6 NA 29.1

ENTERTAINMENT 13.6 19.7 53.4 266.1 4.3 14.3NEWS 54.6 28.0 85.5 267.1 NA 32.6SYNDICATION & LICENSING NA 28.5 1.6 204.3 NA NASPORTS Loss 3.5 9.2 23.6 NA 2.0REAL ESTATE 37.5 13.9 2.2 43.3 NA NA

VIACOM INC. Loss 24.5 - 123.1 1,258.5 NA 31.9CABLE TELEVISION 81.6 16.7 58.1 330.0 21.2 16.8BROADCASTING 4.4 6.9 35.5 141.2 14.0 3.3NETWORKS 27.7 22.7 50.3 642.6 NA NAENTERTAINMENT 226.1 97.4 61.3 161.1 28.6 27.6

WALT DISNEY CO. 17.4 19.5 522.0 3,438.2 41.1 21.3THEME PARKS & RESORTS 2.9 11.3 564.8 2,042.0 23.5 14.6FILMED ENTERTAINMENT 42.6 31.2 186.3 1,149.2 NA 47.3CONSUMER PRODUCTS 37.4 47.9 133.7 247.0 18.6 17.4

WARNER COMMUNICATIONS INC. 29.0 23.6 423.2 4,206.1 NA 19.5FILMED ENTERTAINMENT 15.1 15.9 203.0 1,571.0 13.2 13.1RECORDED MUSIC & MUSIC

PUBLISHING 49.1 33.3 319.0 2,040.0 39.4 21.6CABLE & BROADCASTING 62.7 17.9 75.0 456.4 NA NAPUBLISHING & RELATED

DISTRIBUTION 9.5 6.4 10.5 138.7 - 6.0 5.0

COMMENTS

HOMESHOPPING

GLIM

MCA

Time Inc.

WV Times Mirror

TRIBUNECOMPANY

rn,$Ad

Entertainment growth was held back by Paramount'sfall to second place in motion -picture market share. TVand home -video revenues were relatively flat with syn-dication alone accounting for about half of all studiooperating income. Financial-services earnings growthdecreased due to lower interest margins.

HSN chairman/CEO Roy Speer attributes the compa-ny's decline in net earnings to heavy investments in plonl(including a new $95 million telecommunications centerand acquisition of TV stations. Operating expensesrose 43 percent, pegged primarily to increases inmarketing costs and in sales commissions paid tocable operators.

Filmed entertainment reported record results due pri-marily to last-minute videocassette release of ET infourth quarter. Broadcasting and cable operatingincome grew 251 percent due to both reclassificationof USA Network earnings and improved programmingon WWOR-TV.

Fox Network's continuing losses in the millions had anegative impact on profit growth in TV division. FilmedEntertainment prof its continue strong but dropped from'87's record. The real impact on bottom line came fro,newspapers, which provided lion's share of the compa-ny's profits.

TCI's 33 percent revenue jump over '87 was result ofsubscriber growth and strong box office in the firm'stheater division. In addition, '88 included first full 12months of Heritage results and 7 months of recentlyacquired WestMarc. Dramatic profit increase cameprimarily from sale of Memphis cable system.

Time Inc.'s second consecutive record performancewas aided by record revenues and earnings at ATC,thanks to rate and subscriber increases. Ad -volume andsubscriber jumps pushed magazine revenues up 8 per -cent while books profits topped $100 million. Despitegrowth, HBO profits slid as Time reduced carryingvalue of its Ku satellite investment.

A soft advertising market is reflected in the drop in re,enues for broadcast -TV and newspaper -publishingdivisions. Less dependent on advertising, cable -TV -division profits jumped 51.4 percent, now matchingbroadcast TV as profit center for company.

Excluding the 1987 New York Daily News labor -settle -meet costs ($40.1 million), Tribune's 1987-88 netincome increased not 48.7 percent but 29 percent.Higher revenues and lower non -programming costsraised broadcasting and entertainment operatingprofits, while classified -ad growth hiked newspaperprof its.

TBS finished the year with a net loss despite a 23.6percent increase in revenue. News and the syndicationand licensing division net incomes showed healthygrowth. Entertainment dropped due to a 45 percentincrease in costs, the largest being $10.7 million instart-up expenditures for TNT.

Company attributes net loss to $275 million in interestexpenses and payment of preferred stock dividends.Network -segment profits grew via increases in ad salesand license fees, while entertainment segment's whop -ping 226 percent increase came thanks to Cosby syndi-cation and sale of retained Cosby ad time.

The studio topped box-office rankings for first timeever in '88, spurred by Three Men and a Baby ($167million domestic gross) and Who Framed Roger Rabbit$150 million). Disney's Empty Nest did well on NBC

and DuckTales is syndicated hit. Consumer Productsopened ten new Disney stores and had best year ever.

The fourth consecutive record year for WCI's threeprimary divisions -records, movies and cable andbroadcast TV -brought record corporate profits aswell as a 36 percent boost to operating income. Cableand broadcasting profits jumped from 1987's $46 mil-l -on to $75 million. And then along came Time.


The most valuable resource First Boston canbring to our clients is an idea. Innovative ideasdeveloped and executed by a dedicated team of

iaansedgemergers,

eas approxismtprivate

corporatefinance.

La

market financings for its media

F$4irsbtilBlioonstoinn phuabnldicleadnd

Industry clients, and advised them onmerger and acquisitions valued at over

1$10 billion. So we know firsthand which

ideas will work0 Another important First Boston re-

source is capital - and the willingness to commitit for our clients.

Whether you're a privately owned companyoperating in a single industry, or a publiclyowned corporation operating globally, we offerthe same benefit: innovative ideas that canbe turned into successful results.

In Med1989 Year-to-date

Affiliated Publications, Inc.has restructured its 58,522,638 shares of

Class A Common Stock ownership interest in

McCaw CellularCommunications, Inc.

(Pending)

The undersigned acted as financial advisor toAffiliated Publications, Inc.

The First Boston Corporation

Camellia City Telecasters, Inc.a wholly owned subsidiary of

BMA Corporationhas sold the assets of

KTXL-TV(Sacramento -Stockton, California)

to

Renaissance Communications Corp.The undersigned acted as financial advisor to

BMA Corporation and its affiliates.


BMA Corporationhas sold

Centennial Broadcasting CorporationKDVR-TV

(Denver, Colorado)to

Chase Communications Inc.(Pending)

The undersigned acted as financial advisor toBMA Corporation and its affiliates.


GP Group Acquisition Corporationa venture between

Macfadden Holdings, Inc.and

Boston Ventures Management, Inc.has merged with

GP Group, Inc.(Owner of the National Enquirer)

(Pending)The undersigned acted as financial advisor to

GP Group Acquisition Corporation.


$150,000,000Cablevision Industries, Inc.

a wholly owned subsidiary of

Cablevision Industries CorporationSenior Notes Due 1999

(Pending)

Direct placement of the above Notes wasarranged by the undersigned.


$130,000,000

GP Group Acquisition Corporation

Bridge Facility

The undersigned committed to purchase funding notesunder the above facility.


$540,000,000KBL Cable, Inc.

an indirect subsidiary of

Houston Industries Incorporated

Revolving Credit andLetter of Credit Facility

The undersigned acted as financial advisor in the arrangingof the Revolving Credit and Letter of Credit Facility.

Ak The First Boston Corporation

King Videocable Companyhas acquired the assets of

Suburban Cablevision Company,Limited Partnership

from

Hauser Communications, Inc.(Pending)

The undersigned acted as financial advisor toKing Vifeaable Company.


£150,000,000A subsidiary of

The News Corporation Limitedhas issued

7X470 Guaranteed Sterling ExchangeablePreference Shares due 1999

Exchangeable for Ordinary Shares ofPearson plc

The undersigned acted as Lead Managerof the above fringe

Credit Suisse First Boston Limited

The New York Times Companyhas sold

NYT Cable TVto a venture between

J. Bruce Llewellyn,Comcast Corporation and

Lenfest Communications, Inc.(Pending)

The undersigned acted as financial advisor toThe New York Times Company.


$225,000,000KBL Cable, Inc.

an indirect subsidiary of

Houston Industries Incorporated$100,000,000 Senior Notes Due 1999

$125,000,000 Senior SubordinatedNotes Due 1999

Direct placement of the above Notes wasarranged by the undersigned


$107,000,000

King Videocable Company

$82,000,000 Series A Senior Notes Due 2001

$25,000,000 Series B Senior Notes Due 2001(Pending)

Direct placement of the above Notes wasarranged by the undersigned


DM175,000,000A subsidiary of


5% Exchangeable Bonds 1989/1999Exchangeable for Ordinary Shares of

Pearson plcThe undersigned acted as Lead Manager

of the above offering.


Pegasus Broadcasting, Inc.has sold

WTVM-TV(Columbus, Georgia)

to

American Family Broadcast Group

The undersigned acted as financial advisor toPegasus Broadcasting, Inc.


$300,000,000KBLCOM Incorporated

a subsidiary of

Houston Industries Incorporated

Letter of Credit and Term Loan Facility

The above Jacobi was arrangedby the undersigned.


$75,000,000

Lenfest Communications, Inc.

Eurodollar Revolving Credit Facility

The above facility was wrongedby the undersigned


Dfl.100,000,000A subsidiary of


5(4% Guaranteed Guilder Exchangeable Non -Voting Preferred Shares 1989 Due 1999

Exchangeable for Ordinary Shares ofPearson plc

The undersigned acted as Lead Managertithe above offering.


The E.W. Scripps Companyhas sold

The Sun Tattlerto

DTH Media Inc.

The undersigned acted as financial advisor toThe E.W. Scripps Company.


First Ideas,Then Results.

first Bostont1.1 it 301, ( jp

DEFINING ACHIEVEMENT

THE MEANING OF ACHIEVEMENTIt's not always found in the bottom line.

Or is it? Three industry experts offer their opinions.

JOSEPH J. COLLINS

Chairman and CEO, American Television &Communications Corp.

C(table television has always been an ex-tremely complex business. That has

never been more true than at the end ofthe 1980s. It follows, then, that measuringachievement in our industry requires avariety of yardsticks.

This is not to say that such traditionalbenchmarks as cash flow and cash -flowmargin have lost their relevance. In abusiness where the need for capital willremain significant for the foreseeablefuture, we must continue to meet the ex-pectations both of our shareholders andthe financial community in general. Forwithout adequate financial resources, wewill be unable to meet successfully themany challenges we face.

But the quality of the service weprovide, and our freedom to manage ourbusiness appropriately, requires a newawareness. It demands sensitivity toissues that, while not directly related tothe bottom line in the short run, will ulti-mately affect it if we are not attentive.

Competition from emerging technol-ogies, for example, requires investment toensure our cable systems remain the bestavailable provider of information and en-tertainment. In this case, "best" meansboth technologically and from the stand-

point of price and value.There is no question that from these

perspectives, cable television today oc-cupies the premier position. To retain itrequires investing in upgrades-includingfiber optics-to provide more and betterservices, greater reliability and betterpicture quality.

Continually improving the service weprovide has never been more important.And "service" should be defined in thebroadest possible sense: not simply thetechnical aspects but the many ways wedeal with our customers.

We must never forget that they are oneof our most important potential bulwarks.If they are dissatisfied with the quality ofour service or feel it is abusively priced,we risk losing them; losing them not onlyas paying customers but as supporterswhen we face potential adverse regu-latory activity at the local, state and na-tional levels.

Today there seems to be a regulardrumbeat for more regulation at alllevels. Cable -bashing is apparently thisyear's subject for legislators seeking anissue to ride into the public's con-sciousness. In most cases, the rumblingsare based on a severe misunderstanding-sometimes almost willful-of the historyof pricing before and since the Cable Actof 1984.

Nevertheless, these misperceptionsmust be vigorously addressed. Beyond di-rectly refuting them at every oppor-tunity, perhaps the best way to defeat theexponents of re -regulation is to make sureour customers receive the service theyexpect. If we do that, the cable -basherswill quickly find they are lecturing in anempty hall and will turn to another issue.

So improved customer service, in all itsaspects, should be considered another gutissue as cable television enters the 1990s.Investing in everything from betterphone systems and traps to bettertraining for our people should be just asimportant as sinking more into fiberoptics.

It may never be possible to quantify our

achievements in improving customerservice and making acommitment to thebest technology. But there should be nodoubt that for the cable industry they are,quite literally, bottom -line issues.

FRANK J. BIONDI JR.

President and CEO, Viacom International Inc.

Ihebusiness community uses techniques

to quantify performance that are soprecise and exhaustive that identifyingachievement has become too easy. We canmeasure ourselves, for example, by cashflow, by P/E ratios or by public or privatevaluations. There is even the presentvalue of future cash flow discounted to thepresent at the weighted cost of capital. Inthe entertainment business, we also usenon -financial barometers such as ratings,reviews and customer surveys. Our per-formance "scoreboard" is packed withstatistical and qualitative measurements,and it exposes the winners and losers asclearly as the scoreboard on the field.

These measurements of performance-the "snap -shot" approach-may be aninadequate gauge of long-term excellence.Achievement is fleeting, and by the timeit's measured, we are on to a newventure, a new idea. Evaluating these on-going efforts is a far tougher assignment.Knowing which projects have the po-tential to succeed-and how to nurturethem-is still a subjective and difficult


task for evaluators and management, par-ticularly when the short-term impact ofthese nascent efforts may "penalize" sta-tistical performance. To achieve successconsistently, an entertainment enterprisemust use its people, their skill and crea-tivity. It must take sound risks, makegood deals and know its customers. Thekey to sustained excellence is improvingperformance in each area daily, with ex-cellence itself being a goal.

I'll illustrate this process in action, withexamples of Viacom programs not yetmeasurable by statistics.

Skill: The most fundamental componentof achievement is skill. In business, theword conveys intellectual dexterity andexperience. In a diversified enter-tainment firm like Viacom, the array ofskills embodied by its employees is vast,ranging from program execution and mar-keting to finance and accounting. Whilethe overall success of any organizationrelies largely on its accumulated body ofskill, it is often the skills of a few indi-viduals that make or break a given effort.

At Viacom Enterprises, the skill of thesales force stands out. The team isprobably best known for its record -breaking distribution of The Cosby Show,but the real proof of its skill has been pro-ducing consistently outstanding resultswith a diversity of off -network pro-gramming. Recently, the group made amajor play into the first -run market. Byapplying its expertise to such programsas Superboy, Remote Control, Trial byJury and The Super Mario BrothersSuper Show, the team is making Viacoma force in first run as well.

Creativity: Perhaps more than anyother industry, entertainment is abusiness of ideas. Our products are ideas,given form by writers, directors, com-posers and actors. Their success alsorelies on the fertile minds of those whomarket, distribute and finance them.MTV Networks is known for its pro-duction ingenuity, but its creativityabounds in other areas as well. A newpromotional effort, MTV -To -Go, is amonthly publication that offers readersrecord and video discounts along withstories about the music industry. By re-creating the attitude of the network,MTV -To -Go will capture its target au-dience.

Risk -taking: Achievement in enter-tainment requires the willingness to backup your projects with your capital andyour name. At Viacom, we attempt tocreate the climate in which employees areencouraged to take intelligent risks. Ef-fective risk management demands a fullunderstanding of your business as well asan adventurous spirit. You must knowwhat's at risk before you can make intel-ligent judgments. After scrutinizing pay -per -view opportunities, Showtime Net-works Inc. concluded that the greatestpotential in this flourishing business is

supplying special -event programming, andbacked up its conclusions by formingShowtime Event Television and byfeeding it with substantial programmingdollars and promotional support.

Making the deal: Every program,every movie, every song is a new product,which makes entertainment a world ofdeals. A smart deal takes more than ne-gotiating skill; it requires structuring anarrangement that works for all involved.To provide locally oriented programmingto its subscribers, Viacom Cable hasjoined with TCI to produce, acquire,market and distribute sports events onnewly created networks in the San Fran-cisco Bay area and the Pacific Northwest.The deal works for TCI, Viacom, the

teams and subscribers.Knowing your customers: Insight into

your customer is an essential componentof achievement. The most successful en-tertainment companies view the customeras a pervasive influence and relentlesslyresearch his desires, attitudes and way oflife. Viacom Radio, for example, uses per-ceptual studies, focus groups and music -testing to develop a personality, or"stationality," for each of its properties.At KBSG in Seattle, we launched an"oldies" format that has catapulted thestation in one year from 22nd to third inthe 19 -to -45 -year age group. This local ori-entation approach is also in place atWLTI in Detroit. Viacom replacedWLTI's soft -rock format with a "lite"

This notice appears as a matter of record only.April 1989

Sold:

Coastside Cable TV Inc.Serving Half Moon Bay and Fort Ord, California.

Sale represents 13,000 basic subscribers.

Dan Forey represented the seller.

DAN I ELS&ASSOCIATES

3200 Cherry Creek South Drive, Suite 500, Denver, CO 80209 303/778-5555299 Park Avenue, New York, NY 10171 212/935-5900

Financial Services to the Cable Communications Industry.

RAPPORT. In a cable transaction, everyone talks about the bottom line. We at Daniels would

like to talk about what's above that line. We believe that trust is essential. Knowing that your

best interests are being looked after by those you have retained to assist you in your negotiations.

Unparalleled experience and market knowledge. Professionalism and integrity. All are of the

utmost importance. At Daniels, we pioneered the cable brokerage business and have maintained

a tradition of leadership for the last 30 years. Put our knowledge, comprehensive service and

professionalism to work for you. Daniels has the experience of the past, the vision of the future.

3200 Cherry Creek South Once. Suite 500. Denver. Colorado 80209.303,778-5555299 Park Avenue. New York. New York 10171.2121935-5900 DAN IELs

Daniels & Associates is a member of the National Association of SecuritiesDealers. Inc and all its professional personnel are licensed with the NASD &ASSOCIATES

format-'50s to '80s music-that we thinkwill attract new listeners and advertisers.

Achievement in the entertainmentbusiness is attained by those companieswhose people are talented, creative, ad-venturous and smart-about theircompany, their partners and their public.A successful company must provide afertile climate that cultivates these qual-ities and recognizes that ultimatelyachievement is attained by individuals.

RICHARD J. MACDONALD

As' a stock analyst what definesachievement is a lot like asking an in-

corrigible gambler which jockey made thebest ride. You're simply not talking to anobjective observer. His answer dependson what the stock has done, whether ithas risen or fallen and perhaps even moreimportantly on whether he had his cus-tomers invested to the proper degree. Inshort, success for the analyst or investoris the success of the investmentadvice-or the payoff.

Presumably the share price of publicly

Director-Equity Research, First Boston Corp.

traded media companies is created by thedynamic interaction of many investors.Yet Wall Street investors are a greedy,fearful lot. They are quick to gatheraround and cheer on those managementswhose stock prices are rising at a rapidclip and equally quick to shun harshly andthen abandon managements whose shareprices fall.

In the era of the LBOs and recapitaliza-tions, managements can easily maneuverstock prices higher with financial manip-ulation. Traders and arbitrageurs cheerand the business press writes of manage-ments, vision, entrepreneurship andanimal spirits. Generally, the "entre-preneur" in question is also a major con-tributor to numerous charities-thusadding luster as well as lucre to his name.

But stock price does not of itself ade-quately measure the achievement of anenterprise. Let's go back to basics. Busi-nesses sell products and services to cus-tomers who pay for them because theyneed them. Employees of the enterprise

provide the services and produce thegoods to the best of their abilities.Owners benefit from organizing and oper-ating the enterprise.

Enterprises that can carry out thismission consistently to a widening groupof customers have achieved success. Thisdefinition of achievement may seemoverly simplistic. But in an uncertainworld, where change is powerforand con-tinuous, the provision of consistentlyuseful services and products while cre-ating a profit for owners without re-sorting to unethical practices is a largechallenge.

In the media industry, owners, share-holders and managements start withmany advantages. Government regulation

often protects enterprises from stormycompetitive weather. Making money insuch an environment is easier thanmaking money in many other industries.

Easier than most, yes, but excellenceamong one's peers is won with greateffort. Often, financial achievement overthe long term is matched by achievementin other dimensions, such as quality pro-gramming and strong community rela-tionships. Equally often, the illusion of fi-nancial success while seeming cynically toexploit the community or to diminish thequality of the product fades with quick in-spection. Is a 50 percent margin anachievement? You bet-but without a Pul-itzer Prize, perhaps a hollow and, maybe,short-lived one.

This notice appears as a matter of record only.April 1989

Culdesac Cable T.V.Serving Culdesac, Idaho

Has been acquired by

Weststar Communications

Jeff Eden represented the sellers.

DANIELS&ASSOCIATES

3200 Cherry Creek South Drive. Suite 500, Denver, CO 80209 303/778-5555299 Park Avenue, New York, NY 10171 212/935-5900

Financial Services to the Cable Communications Industry.


PERFORMANCE

BROADCASTSolid growth is scarce in broadcast TV.

Companies with broadcast TV attheir core were hard-pressed tofind solid growth in 1988. A. H.

Belo, in its annual report, cites thestandard litany of problems: a soft re-gional economy, the delay of fall's newnetwork programming (due to thewriters' strike), increased syndicated -programming costs and weakenednational -advertising demand. It alsopegged the summer Olympics, which ranon competing stations in Belo's fivemarkets and lured away viewers.

Even our leaders in return on equity

had little success in broadcast TV. Top -ranked CBS increased network sales only1 percent in '88, yet income from con-tinuing operations exceeded 1987 by 108percent, due largely to interest incomefrom the sale of non -broadcasting assetssuch as the CBS/Records Group. Numbertwo Lee Enterprises logged an 8 percentincrease in TV revenues over '87, but thatwas due entirely to the acquisition of acommercial production company and sta-tions in Omaha and Tucson. Third -rankedChris-Craft heralds 1988's "outstandingoperating results" in its annual report but

adds that the results are "in large part"due to the company's substantial in-vestment in Warner Communications Inc.and that company's thriving studio andcable -TV operations. Chris -Craft's TV di-vision saw operating revenues rise 6percent in '88 but operating income de-cline 10 percent.

Broadcast averages for ROE and debt -to -equity, however, look better in '88 thanthey did in '87, which may indicate thatbroadcasters have begun scaling backcosts and expenditures to reflect the newrealities of their business.

RANK COMPANY

1988 1987RETURN ON RETURN ON

EQUITY EQUITY1988

DEBT/EQUITY

1988DEBT/EQUITY

RANK1987

DEBT/EQUITY

AVERAGE

1 CBS

2 LEE ENTERPRISES

0.11' 0.08' 0.17' 1.02°

0.52 0.38 0.39 5 0.80

0.24 0.29 0.44 6 0.50

3 CHRIS -CRAFT 0.20 0.13 1.99 10 2.83

4 McGRAW-HILL 0.20 0.20 0.00 1 0.00

5 UN BROADCASTING 0.19 0.23 0.01 3 0.07

6 AMERICAN FAMILY 0.17 0.19 0.27 4 0.15

7 UNITED TELEVISION 0.13 0.12 0.84 8 0.94

8 GRAY COMM. 0.10 0.08 0.00 2 0.00

9 LIBERTY CORP. 0.09 0.11 0.80 7 0.86

10 A.H. BELO 0.04 0.09 1.39 9 1.45

11 BURNHAAA BROADCASTING -0.72 -2.39 -5.66 14 -25.76

12 TVX BROADCASTING -0.73 -1.04 -0.85 12 -0.19

13 TELEMUNDO GROUP -0.83 -0.92 6.50 11 4.79

14 AMERICAN COMM. AND TV -1.57 -3.33 -2.07 13 -5.83

Excludes TVX, Telemundo and American Comm & TV. Excludes Burnham, TVX and American Comm & TV ' Excludes Burnham, A.H. Belo, and Telemundo. 'Excludes American Comm & TV and Burnham


May, 1989

This notice appears as a matter of record only

TV3 Inc.of Jackson, Mississippi

has acquiredTelevision Stations

KLTV, Tyler, Texasand

KTRE-TV, Lufkin, Texas

The undersigned initiated this transaction

SANDLERCAPITAL

MANAGEMENT

Harvey Sandler Barry Lewis John KornreichGeneral Partners

1114 AVENUE OF THE AMERICAS 38TH FLOOR NEW YORK NY 10036 (212) 391-8200

PERFORMANCE

CABLEOperators' good fortunes and high profits endure.

The profits of cable operators con-tinued to rise in 1988, as return -on -equity measures reflected the en-

during good fortune of large MSOs.Although the average ROE for the25 -company group fell from 1987 to 1988,that fact reflects increased investment byoperators and programmers in bothsystems and software. Moreover, ROE isa secondary measure of success in cable,a field more concerned with revenue andcash flow than with net income.

The ROE chart is led by Denver'sJones Intercable, the complex, diverse

company built on a variety of partner-ships and holdings. In 1988, Jones' rev-enues grew 42 percent to nearly $48million, while profits grew almost 400percent to $29.3 million. Other operatorsalso performed well in the ROE calcula-tions. TCA Cable and industry leaderTele-Communications Inc. showed sharpgains in ROE. Several cable networks, in-creasingly healthy as basic -cable adver-tising revenues soar, also performed well.QVC Networks showed a strong 0.27return as the West Chester, Pa., companyreported revenues up 70 percent to $193

million, while profits jumped to $9 million.The company had a 1987 loss of $6.2million. QVC competitors Home ShoppingNetwork and CVN also reported strongprofits, although HSN's ROE fell whileCVN's doubled.

Reflecting cable's prosperity, the in-dustry's average debt -to -equity ratio fellsharply in 1988, from 1.59 to 1.35. Jonesand TCI both saw their debt -to -equitymeasures drop. But only the equallyacquisition -minded radio business re-ported a higher average debt -equity ratiothan the cable field.

RANK COMPANY

1988RETURN ON

EQUITY

1987RETURN ON

EQUITY

19881988 DEBT/EQUITY 1987

DEBT/EQUITY RANK DEBT/EQUITY

AVERAGE 0.071 0.08' 1.35' 1.59°

1 JONES INTERCABLE 0.34 0.09 2.03 12 2.53

2 QVC NET. 0.27 -0.27 0.38 6 0.28

3 AMERICAN TELEVISION & COMM. 0.27 0.26 2.79 14 2.66

4 TIME 0.21 0.20 1.09 9 0.90

5 MACLEAN HUNTER 0.17 0.28 1.36 10 0.19

6 TCA CABLE 0.16 0.09 0.81 8 1.08

7 FINANCIAL NEWS NET. 0.16 0.41 0.00 1 0.00

8 CENTEL CORP. 0.15 0.15 1.74 11 0.83

9 HOME SHOPPING NET. 0.13 0.25 2.32 13 2.84

10 PLAYBOY 0.08 0.35 0.09 4 0.04

11 CVN COMPANIES 0.08 0.04 0.19 5 0.08

12 TELE-COMMUNICATIONS INC. 0.05 0.01 4.51 18 6.24

13 UNITED ARTISTS COMM. 0.02 0.04 9.71 20 8.24

14 ACTON CORP. -0.01 4.58 0.53 7 0.00

15 FALCON CABLE SYSTEMS - 0.09 0.03 3.81 15 1.20

16 WESTMARC -0.10 0.36 3.90 16 9.33

17 UNITED CABLE -0.13 -0.06 4.30 17 7.98

18 COMCAST - 0.23 - 0.04 6.49 19 2.38

19 TURNER BROADCASTING SYSTEM -0.25 -0.49 -3.36 22 -5.2520 CABLEVISION SYSTEMS -0.58 -0.65 -4.65 23 -6.2221 ADELPH1A COMM. -0.64 -0.73 -6.87 24 -11.6822 CENTURY COMM. -0.70 -0.09 70.64 21 41.11

23 VIDEO JUKEBOX NET. -0.77 -0.33 0.00 2 0.00

24 NOSTALGIA NET. -1.27 -0.78 0.00 3 0.00

25 ROGERS COMM. NM -0.10 -70.41 25 1.32' Excludes Cablevision, Adelpho, Century, Video Jukebox, Nostalgia and Rogers 'Excludes Acton, Turner, Cablevision, Adelphia and Nostalgia.NM = Not Meaningful

'Excludes Century and Rogers. 'Excludes Adelphia and Century.


Central Florida Groupby American Television and Communications Corp.

Southeastern Florida Groupby Adelphia Communications Corp.

Illinois Groupby Janes Intercable, Inc.

Kentucky Groupby Simmons Communications

Michigan Groupby C-TEC Corporation

Ohio Groupby Warner Cable Communications Inc.

The undersigned is acting as financial advisor toCentel Cable Television Company.

Rifkin AcquisitionPartners, L.P.

Financing for the acquisitionof cable television systems

in Georgia, Illinois,Michigan and Tennessee.

The undersigned acted as agent in theprivate placement of this financing.

PERFORMANCE

DIVERSIFIEDThe prudent path to travel in troubled times.

Media companies traditionallyhave hedged their bets throughdiversification. In this era of

shrinking margins and brutal competitionfor advertising dollars, owning a mix ofbusinesses appears to be a strategy forstability.

By and large, represented below aremedia behemoths which lumber reliablyon year to year. A perusal of this list isstriking for how little change there hasbeen in most of the companies' return -on -

equity figures. Indeed, the companiesholding down the top ten spots show little

or no movement in that area.This might suggest the diversification

path is providing little opportunity forrapid expansion. Expectations tend to runhigh for the most visible players, such asWalt Disney and Gannett. But that is toofacile an analysis. In these tumultuoustimes, it is no mean feat just to hold thecourse.

Conventional wisdom was that lastyear's Olympics and Presidential electionwould produce an advertising bonanza onall media fronts, but it never materialized.Few of the companies on the list below

with major television -station and news-paper holdings got the boosts they ex-pected. Fortunately for several of them,their diversification strategies includedcable -television investments. TimesMirror and the Washington Post Co.,among others, got relief from thatsegment, which in many cases picked upthe slack from businesses that did notmeet expectations.

Does that mean cable is the way to go?Not necessarily. Diversified companiesstill lead all media -industry segments forreturn on equity.

RANK COMPANY

1988RETURN ON

EQUITY

1987RETURN ON 1988

EQUITY DEBT/EQUITY

1988DEBT/EQUITY

RANK1987

DEBT/EQUITY

AVERAGE 0.121 0.14' 1.14 1.131 PULITZER PUBLISHING 0.58 0.81 3.64 22 7.752 WARNER COMM. 0.24 0.22 0.40 9 0.293 WALT DISNEY 0.22 0.24 0.18 4 0.324 WESTINGHOUSE 0.22 0.28 0.69 15 0.785 GANNETT 0.20 0.20 0.64 14 0.686 TIMES MIRROR 0.20 0.18 0.52 10 0.607 NEW YORK TIMES 0.19 0.19 0.37 8 0.418 WASHINGTON POST 0.19 0.30 0.18 5 0.259 KNIGHT-RIDDER 0.19 0.17 0.88 17 0.56

10 GENERAL ELECTRIC 0.18 0.18 0.82 16 0.761 1 NEWS CORP. 0.18 0.30 2.10 19 1.4512 TRIBUNE 0.18 0.13 0.55 11 0.5013 GULF + WESTERN 0.17 0.17 0.61 13 0.6314 MEREDITH 0.13 0.10 0.05 3 0.1415 CAPITAL CITIES /ABC 0.13 0.13 0.56 12 0.7616 PARK COMM. 0.11 0.11 0.36 7 0.4217 SCRIPPS HOWARD BROADCASTING 0.11 0.16 0.01 2 1.6718 STAUFFER COMM. 0.08 0.05 0.25 6 0.2319 JEFFERSON -PILOT 0.08 0.12 0.00 1 0.0020 MEDIA GENERAL 0.03 0.12 1.10 18 0.6821 MULTIMEDIA NM NM -1.48 26 -1.4822 PRICE COMM. -0.10 -0.12 3.00 20 -3.7623 HERITAGE MEDIA -0.18 -0.06 3.45 21 2.8424 MALRITE COMM. -0.30 -0.17 4.19 23 3.5025 GREAT AMERICAN COMM. -0.34 0.02 6.26 24 5.3926 VIACOM -0.36 -0.23 6.39 25 4.1027 OUTLET COMM.' -1.82 -1.69 - 19.74 27 21.92Excludes Multimedia Great American Viacom and Outlet Excluaes Multimedia and Outlet Outlet is excluded from all averages. NM - Not Meaningful


Where communications companiesmake news of their own.

Merger, acquisition and financing storiesset in the communications industry oftencarry the same byline ...

Donaldson, Lufkin & Jenrette.Before we give advice or opinions, we're

known for giving transactions careful thought.Our investment banking exper-

tise, experience, and superlativeresearch, combined with our knowl-edge of media and communications

companies, lead to some interesting ideas:ideas that some of the best known names incable, cellular, broadcasting and entertain-ment have followed to reach their strategic goals.

So when you're thinking about a futurefinancing, a merger or an acquisition, please

call. Ask for Robert K. Johnsonat (212) 504-3508.

We want to be a part of yoursuccess story.

Investment Banking for the Communications IndustryDonaldson, Lufkin & Jenrette Securities Corporation, 140 Broadway, New York, NY 10005

PERFORMANCE

PRODUCTIONRestructuring debt in the new TV era.

King World's precipitous drop tolast place in 1988 from first theyear before shouldn't be miscon-

strued. The powerhouse syndicator ofWheel of Fortune, Jeopardy and TheOprah Winfrey Show actually netted $61million. But it borrowed about $90 millionto repurchase approximately 20 percentof its stock, producing a negative networth on the books. So instead, Carolco,owner of TV syndicator Orbis Communi-cations, tops 1988's list with a return onequity of 30 percent, up 67 percent over1987. Sharply higher motion -picture

earnings offset a drop in TV syndicationprofits.

Overall, slightly more than half thecompanies in this segment improved theirperformances in 1988, for an adjusted in-dustry average ROE of 6 percent, littlechanged from 1987's 7 percent.

Regarding leverage, New Worldboasted the biggest improvement. It re-structured debt, largely through a $110million lifeline late in 1988 from GECapital, which took a 15 percent equity in-terest in the producer/distributor. Thehighest debt -to -equity ratios were posted

by Qintex, MGM/UA Communicationsand Aaron Spelling Productions, followingrestructurings, mergers and acquisitions.Spelling dealt with the real world -afterthe end of a long-term exclusiveagreement with ABC that protected himagainst expenses and productiondeficits -by merging with distributorWorldvision Enterprises in a deal thatgave half ownership to Carl Lindner'sGreat American Communications.

Overall, though, leverage changedlittle, with the industry's average debt -to -equity ratio falling 7 percent.

RANK COMPANY

1988RETURN ON

EQUITY

1987RETURN ON

EQUITY1988

DEBT/EQUITY

1988DEBT/EQUITY

RANK1987

DEBT/EQUITY

AVERAGE 0.06' 0.07' 0.79 0.85

1 CAROLCO 0.30 0.18 0.70 11 0.89

2 VESTRON 0.28 -0.63 2.16 21 2.26

3 AARON SPELLING PRODS. 0.28 0.41 0.28 7 0.44

4 NEW LINE CINEMA 0.21 0.23 0.44 9 0.70

5 REEVES COMM. 0.13 0.12 0.51 10 0.65

6 MCA 0.10 0.09 0.73 12 0.65

7 ORION PICTURES 0.08 0.07 2.07 20 1.56

8 PRISM ENT. 0.06 -0.02 0.00 1 0.07

9 ALL-AMERICAN TV 0.04 -0.19 0.00 2 0.00

10 REPUBLIC PICTURES 0.02 0.06 0.36 8 0.12

11 BARRIS 0.02 0.34 1.04 13 1.31

12 FRIES ENT. 0.00 -0.01 1.32 16 1.28

13 HERITAGE ENT. 0.00 0.01 0.12 5 0.00

14 LAUREL ENT. -0.04 0.27 0.25 6 0.00

15 NEW WORLD ENT. -0.06 -0.41 1.79 17 6.59

16 COLUMBIA PICTURES ENT. -0.08 0.05 1.09 15 0.35

17 DICK CLARK PRODS. -0.16 0.15 0.00 3 0.00

18 NELSON HOLDINGS -0.17 -0.70 1.04 14 1.89

19 QINTEX ENT. -0.19 -0.17 2.67 23 0.69

20 MGM/UA COMM. - 0.22 - 0.33 2.49 22 1.72

21 LORIMAR TELEPICTURES -0.29 -0.15 1.92 18 1.01

22 WESTERNWORLD-SAMUEL COMM. - 1.39 -1.67 0.09 4 - 3.04

23 PEREGRINE ENT. -1.96 -0.15 2.04 19 0.88

24 KING WORLD PRODS. NM 0.87 -4.17 24 0.51'Excludes Qintex, MGM/UA, Lorimar, WesternWorld, Peregrine and King World. 'Excludes Vestron, Nelson and WesternWorld NM = Not Meaningful


Our Commitment To TheCommunications Industry.

Financings

At Drexel Burnham, weunderstand the communi-cations industry, whatdrives it, and what ittakes to develop creativefinancial strategies. Thatmay be why more com-munications companiestalk to Drexel Burnhamthan any other firmon Wall Street. Since1985, we've raised over$10 billion in public and

private financings, morethan five times the amountas the next firm on thestreet.If you think this commit-ment can benefit yourcompany, call Jack Langer,Managing Director, ArthurPhillips, Managing Direc-tor, or Stephen Winningham,Managing Director, at(212) 232-5000.

$150,125,000 $153,955,910 $200,000,000 $200,000,000Adelphia Cable News Cablevision CenturyCommunications Network, Inc. Systems CommunicationsCorporation 2,150,000 Shares Corporation Corp.16.50% 10 -year SeniorDiscount Notes

Cumulative ExchangeablePreferred Stock Senior Subordinated

Reset Debentures12.75% 12 -yearSenior Subordinated

December 19, 1988 July 1988 November 1988 Reset DebenturesNovember 11, 1988

$85,000,000 $200,000,000 US Dollar Equivalent of $800,765,000Contel Cellular Inc. Harte-Hanks A $450,000,000 McCaw Cellular5,000,000 Shares Communications, John Fairfax Communications,Class A Common Stock Inc. Group (U.S.A.), Inc. Inc.April 21, 1988 11.875% 12 -year A $300,000,000 $400,000,000

Subordinated Debentures Senior Subordinated 14.00% 10 -year SeniorJuly 28, 1988 Debentures with Foreign

Exchange AppreciationRights

Subordinated Debentures$285,765,00020 -year Convertible Senior

A $150,000,000 Subordinated DiscountSubordinated Debentureswith Foreign ExchangeAppreciation Rights

Debentures$115,000,0008.00% 20 -year Convertible

February 1989 Senior SubordinatedDebenturesJune 10, 1988

$200,000,000Orion PicturesCorporation

$270,000,000UnivisionHoldings, Inc.

$64,923,873Vanguard CellularSystems, Inc.

$500,000,000ViacomInternational, Inc.

12.50% 10 -year Senior $165,000,000 3,606,822 Shares $300,000,000Subordinated Reset Notes 10 -year Senior Common Stock 11.80% 10 -year SeniorAugust 18, 1988 Subordinated Discount March 3, 1988 Subordinated Notes

Notes $200,000,000$105,000,000 11.50% 10 -year Senior13.375% 11 -year Subordinated ExtendibleSubordinated Debentures Reset NotesJuly 28, 1988 July 22, 1988

Private placement announcements appear as a matter of record only. For publicofferings, this is neither an offer to sell nor a solicitation of an offer to buy thesecurities. The offer is made only by Prospectus or other offering document, a copy ofwhich may be obtained from Drexel Burnham in states in which it may be legallydistributed.

Member SIPC. C 1989 Drexel Burnham Lambert Incorporated.

Drexel BurnhamFinancing America's Future.

A leader in Media & Entertainment financingwith more than $3.5 billion committed to:

Theatrical Exhibition TV & Film Production

Television Outdoor Advertising

Radio Publishing

Cable Music

Mobile Communications

Let us put our strength to work for you

Media & Entertainment Division

BANK OF BOSTON

(617) 434-5155

PERFORMANCE

RADIOWall Street likes the cash flow.

Radio continues to appeal to WallStreet, though the frantic pace oftation acquisitions can make for

an unimpressive financial report card, atleast in the net -profit and return -on -equity categories. Yet most of theseyoung, highly leveraged companies aregenerating positive cash flows, a trendthat should eventually pay profits. Asthese companies grow, so increases theirflexibility in the financial markets, thoughthey also become more vulnerable tooverall industry trends.

Westwood One, for example, became

the second largest radio network in theU.S. with the acquisitions of Mutual andNBC. As a small player, its growth ratefrom 1983 to '87 was 75 percent. Thenalong came 1988 and a sharp downturn inthe network economy. After three yearsof double-digit advertising growth,network radio stalled at 3 percent in '88.The shortfall in Olympic and politicalspending, which hurt television, smackedradio, too. Instead of ducking, WestwoodOne bought two radio outlets in NewYork and one in Los Angeles. Theyear-end result was an 82 percent decline

in net income but a good reputation onWall Street.

Faircom, a station operator, lost $4.9million in '88 and $3.8 million in '87 due tostation acquisitions. But it had a positivecash flow. Jacor, in a similar position,posted a 47 percent increase in cash flowto $17.8 million.

Osborn Communications recorded a$3.4 million net loss in '87, but ended '88with a net profit of $7 million, having re-tired $16 million in debt. So Osborn's neg-ative 52 percent ROE in '87 became a pos-itive 52 percent in 1988.

RANK COMPANY

1988RETURN ON

EQUITY

1987RETURN ON 1988

EQUITY DEBT/EQUITY

1988DEBT/EQUITY

RANK1987

DEBT/ EQUITY

AVERAGE 0.07' -0.02' 2.04' 1.83'

1 OSBORN COMM. 0.52 - 0.52 3.07 5 7.80

2 CLEAR CHANNEL COMM. 0.16 0.17 2.94 4 2.90

3 SATELLITE MUSIC NET. 0.12 -0.15 0.00 1 0.13

4 DURHAM CORP. 0.06 0.08 0.18 2 0.02

5 WESTWOOD ONE 0.01 0.11 6.00 7 1.19

6 JACOR COMM. - 0.48 - 0.25 1.09 3 0.54

7 FAIRCOM - 0.60 - 1.12 -1.29 9 - 2.03

8 SOUTHERN STARR BROADCASTING -0.90 -0.09 4.35 6 4.09

9 OLYMPIA BROADCASTING NM -0.71 -7.02 10 -2.54

10 SUN GROUP -3.57 -1.88 27.43 8 -10.81

Excludes Foircorn, Southern Starr, Olympia and Sun Group 'Excludes Osborn, Faircom, Olympia and Sun Group. Excludes Olympia and Sun Group. NM = Not Meaningful.

CHANNELS / JULY/AUGUST is 47

New

London

ACT III COMMUNICATIONSHOLDINGS, L.P.

has sold

$30,000,000 of its equity securities to

MEDIAFIN, INC.a wholly -owned subsidiary of

TRACTEBELarranged(a Belgium Company)

The undersigned acted as financial advisor toAct III Communications Holdings, L.P.

ACT III THEATRES

has raised$230,000,000 in a series ofdebt and equity securities

This private placement has beenwith institutional investors.

The undersigned acted as financial advisorto Act III Theatres.

ACT III

has

LUXURY(Portland,

The undersignedto Act

THEATRES

acquired

financial advisor

ACT III PUBLISHING, INC.

has acquired

MIX PUBLICATIONS, INC.(Which includes Mix Magazine and Electronic Musician)

The undersigned acted as financial advisorto Act III Publishing, Inc.

THEATRESOregon)

acted asIII Theatres.

MMG

New York

545

Patricof

Madison Avenue,

Palo Alto

& Co.,

York, NY 10022

Paris

Inc.

Zurich

FORECASTS'

THE TELEVISION OUTLOOKUncertainty will dog all but the hardiest businesses.

ECONOMYBack to the Drawing Board

The recession of 1988, heralded by econ-I omists in wake of the October 1987stock market crash, failed to live up to itsbilling. Instead, the GNP turned in a re-markably strong performance by growing(adjusting for inflation) 3.9 percent in1988; the stock market finished on anuptick; unemployment was down to 5.5percent; consumer spending rose; and in-flation ran at a modest 4.1 percent.

Economic forecasters needed a newtheory for 1989. Well, if too -cold didn'twash, what about too hot? Presto: In-flation, expected to grow to 5 percent thisyear, became the buzzword. The combi-nation of too much consumer spendingand too big a federal deficit led econo-mists to fear the economy wouldoverheat, and as 1989 began, the FederalReserve stepped in and up went interestrates. With the Fed leaning against thewind, the economy could come full circle:if the brakes stay on too long, consumerspending may plunge and the Grand Re-cession could finally make its debut in1990. But will it? Who knows?

Forecasting the television economy isno less exact, as those who predictedrobust increases for broadcast sales dis-covered in 1988. Olympic and political ad-vertising failed to rev up the broadcasteconomy, and 1988 ended, as it began, ona sour note.

While cable continues to chip away atbroadcasting, the $1.5 billion advertisersspent on cable in 1988 is a small per-centage of the total pie. Broadcast TVtook in just under $25 billion in ad rev-enues last year-$7.3 billion in local, $7.1billion in spot, $9.6 billion in network and$900 million in barter syndication.

While the rate of growth for network,spot and local advertising has slowed,second-quarter indicators show an uptick,so 1989 may see healthier single -digitrevenue increases than forecast.

As an ad medium, TV has run againstthe prevailing economic currents about asoften as it has drifted along with them.

Viewed in its totality, including cable, tel-evision generated $26.5 billion in ad rev-enues in '88, and should do $1 billionbetter in '89. Whatever the forecast,those are impressive numbers.

JACK LOFTUS

NETWORKSBeyond the Core

Second verse, same as the first. The fi-nancial community today sees a

snapshot of the networks' future thatlooks precisely like last year's picture.For the short term, NBC will still rule theairwaves, owing to its unprecedented con-tinuing lead in the ratings race. And forthe long term, the future is in cable ven-tures, technology and international in-vestment. Last year, Capital Cities/ABCand General Electric's NBC were busilyestablishing themselves in new videobusinesses. Today, NBC has its CNBCcable channel up and running, and theCap Cities/ABC Video Enterprises di-vision is expanding its interests domesti-cally and overseas. So why is CBS, aftermonths of watching its competitors chartthe network TV future, maintaining itsbroadcast -only strategy?

Wall Street is baffled. "CBS underLarry Tisch has been badly run," saysone analyst. "In fact, what he's done sincehe's bought the company is strip it, withvery little tangible proof of reinvestmentanywhere. What I think it's amounting tois the undoing of CBS."

Kinder observers cite CBS's "beliefthat the broadcast business is inherentlythe strongest [in the media]," as MabonNugent analyst Raymond Katz puts it.Indeed, although one cable net, ESPN,now makes more profit than ABC orCBS, cabled viewers still spend most oftheir time watching Big Three pro-gramming. "But you don't have to beswallowed by a shark to be eaten alive,"Katz says. "You can be nibbled to deathby piranhas. That's what CBS may beoverlooking." While the piranhas munch,the short-term outlook for the nets is stilldetermined by their relative positions in

the ratings race. That will profit the Foxnetwork, which last season posted its firstnetwork -size hit in Married . . . WithChildren, and may also play to ABC's ad-vantage next season, says WertheimSchroeder's Francine Blum. "ABC andCBS have for the last couple of yearshovered around break-even," she says."That could change if ABC really solid-ifies its lead over CBS. If ABC moves upone ratings point, it could have a signif-icant impact on earnings." CHUCK REECE

STATIONSThe Local Focus

While Congress, the FCC and broad-casters head for a showdown over re-

defining the television station's role as apublic trustee, economics may one day dowhat Washington can't. Shifting trends inaudience, advertising and programmingare forcing stations to re -embrace lo-calism in order to survive.

Reality hit home in 1988. Audiences andadvertisers have been shopping aroundfor years, but when the "quadrennialwindfall" expected from Olympic and po-litical dollars turned into a shortfall, a dis-tinct chill was felt. Things turned evencolder when the networks took down the"free ride" sign by threatening cuts incompensation.

The days of double-digit revenuegrowth are mostly over, profit marginscan be low single digits, national spotdollars are heading south and "mediamix" is stretching ad dollars. A shoppinglist of network, local and spot now in-cludes cable, barter syndication, unwirednetworks and a new network-Fox. Radioand print mixtures also are part of thebuy-yellow pages, direct marketing,newspaper classifieds and inserts.

The Television Bureau of Advertisingcalls 1988 "a disappointment," under-standable since it predicted spot wouldgrow 10-12 percent, local 12-14 percentand network 10-12 percent. Yet spot roseonly 4.4 percent, local did a little better at6.4 percent and network rose 8.7 percent.TvB went back to the drawing board for


"a more realistic view" of '89, and cameup with 3-5 percent growth for spot, 5-7percent for local and a flat 1-3 percent fornetwork.

The reality and the revise have led toa reassessment of the future of localbroadcast TV. Affiliates no longer cancount on the network for money or au-dience, so they have to behave more likeindependents, scratching and clawing forevery dollar. In 1988, for the first timeever, local ($7.3 billion) exceeded nationalspot ($7.1 billion) as the largest categoryof revenue for TV stations. And with spotexpected to continue to experience whatTvB calls "serious stress" well into the'90s, stations are being forced to thinklocal, sell local and program local in orderto survive. JACK LOFTUS

PRODUCTIONConsolidation's Aftershocks

perhaps more than any other segment11" of the industry, Hollywood willstruggle with its footing in the monthsahead, as the tremors of television's re-structuring continue to shake the pro-duction community. The mood of uncer-tainty permeating the town will likelygrow as the industry's rush toconsolidate-with big companies swal-lowing smaller ones, and foreign ownerssnapping up Hollywood assets-continuesto fuel fears of job losses and to perplexcreative executives who must makeshows to appeal to both domestic andforeign audiences.

Topic A, though, will continue to be thenetworks' push to abolish or reach a com-promise on governmental restrictions onthe networks' ability to own and syn-dicate the shows they air. Despite somelingering denials, the Big Three clearlyare all prepping to push further into in-house production should the studios losetheir battle to maintain the restrictions,which begin lapsing in 1990. Any signif-icant compromise could, in turn, breedfurther consolidation, with some ob-servers forecasting a resulting rea-lignment of the Big Three withstudios-CBS a likely seller, ABC andNBC likely buyers.

In the meantime, the studios will con-tinue to acclimate themselves to a worldview that stretches far beyond Americanshores, for reasons other than the homecountries of some of their newowners-the cost squeeze. For instance,costs of pilots for this coming fall roseabout 10 percent, while network licensefees grew less than 5 percent. So thesearch for coproduction partners willlikely continue, as will the efforts to ex-ploit increasing foreign demand for purelyAmerican shows, with Security PacificMerchant Bank predicting 77 percentgrowth in foreign program sales nextyear, to $2.3 billion. Some studios are

even treating Europe as a primarymarket. Disney already produces threeshows a week for France's TF1 channel,with another program planned for theUK's ITV this fall.

At home, cable's profile will continue togrow, especially among independent pro-ducers, as increasing subscriber countsresult in more production dollars be-coming available to cable. NEAL KOCH

CABLE OPERATORSPartly Clouded Optimism

Even as regulatory clouds gather on theLhorizon, cable operators continue to

bask in a basically sunny environment.How long it will last, however, is open toquestion, as Congress-now hearinghowls of constituent complaints over basicprice hikes and loss of sports pro-gramming to pay cable-examines thepossibility of some kind of cable re -regulation. "The industry is now at apoint, particularly with regard to sportsprograms, where its alienation of the cus-tomer has attracted a lot of attention inCongress," warns Merrill Lynch analystEdward Hatch. Broadcasters' plans for a"Save Free TV " campaign, too, arehardly helping to cool the heat.

Industry consolidation continues, withsystem prices inching up near the $3,000per sub mark for particularly desirableproperties. Stock values, hit hard lastyear as nervous buyers read of the telcoand fiber threats to cable's well-being,have recovered nicely, many experiencingdouble digit growth in the first quarter of1989, according to Merrill Lynch's Hatch."Cable is obviously maturing, and itsgrowth is not as exciting as it used to be,"says John Tinker, Morgan Stanley an-alyst, "but that doesn't mean there isn'tan upside."

Furthermore, the decision of California -based regional Bell operating companyPacTel to enter U.S. cable via purchase ofpart of Group W's Chicago system (as-suming necessary approvals are granted)will tend to push system values evenhigher, Tinker says. "This marks theemergence of a new buyer who's madethe buy -versus -overbuild calculation andconcluded that buying yields a betterreturn, further cementing cable franchisevalue," he says. Many analysts agree thatcable's only serious non -regulatory threattoday is possible skyrocketing interestrates.

As many cable operators hedge againstreregulation by curbing the urge to raiseper -sub rates, they are investing more indevelopment of local advertising rev-enues, their second revenue stream. TheCabletelevision Advertising Bureau pre-dicts 1989 local and spot revenues will ap-proach the $500 million mark, a $100million rise over 1988's level.

KIRSTEN BECK

CABLE PROGRAMMINGShowing Original Promise

Cable-often castigated in the past as ahaven for off -network reruns and re-

lentless repeat cycles-continues itsmarch toward programming respecta-bility. After much talk, basic cable hasbegun to deliver on its promise of originalprogramming. In April, when TNT's pre-miere showing of its made -for -cable movieMargaret Bourke -White scored a 5.1rating and USA's The Forgotten cappeda 3.8, basic cable's first wave of originalmovies arrived with a bang. Fur-thermore, increased original programspending, along with continuing foreigncoproduction and acquisition, is helpingcreate distinctive basic cable network pro-files, considered by many analysts a ne-cessity for upping penetration levels.

Paul Kagan Associates predicts basiccable subscribers will increase from1989's 46 million to 48.2 million in 1990,with pay units growing from 37.4 to 39.4million. Basic cable is developing pro-grams in the midst of prosperity, saysKagan analyst Larry Gerbrandt, who es-timates the private market value of thebasic networks at close to $7 billion andpredicts their cash -flow margins mayexceed 30 percent in 1989. Kagan expectsadvertising's $1.2 billion contribution tocable nets will rise to $1.4 billion in 1990.Drexel Burnham Lambert v.p. AndrewWallach says cable will be the fastestgrowing segment in TV advertising overthe coming year.

On the other hand, tight channel ca-pacity and increased MSO ownership ofprogram services have increased thepower of major MSOs over programmers.New services will need some degree ofMSO ownership for successful launches.CNBC's struggle to win clearances willbe a cautionary example for those consid-ering an early '90s launch.

"Unbundling" may be the new buz-zword for basic networks, spurred by thisyear's Cablevision Systems -MSGNetwork donnybrook in New York,which has become symbolic of operatorconcern that competitive bidding for at-tractive programming may drive up basicnetwork fees. MSG insists on its basicstatus in spite of a high per -sub price(caused in part by a bidding war withCablevision for Yankee baseball games).Unbundling will allow operators to sell in-dividually certain services popular withonly a small percentage of subscribers.Merrill Lynch analyst Edward Hatch pre-dicts that operators will begin experi-menting with unbundling within the year.

Another trial balloon expected in thecoming year is original regional pro-gramming, partly in preparation for theimplementation of the syndicated exclu-sivity rules and partly an opportunity tocreate new alliances. KIRSTEN BECK


Chase knowsit takes more

than airto make waves

in thebroadcasting

industry.

In an industry as com-petitive as broadcasting ittakes a lot to get high rat-ings. It means long hours,state-of-the-art equipmentand hiring the most quali-fied people. Plus one ele-ment essential in bringingit all together. Financing.

That's why Chase has

had a group of profession-als dedicated to servingthe specialized needs ofthe media industry for over10 years. With the entirerange of Chase resourcesat their disposal - includ-ing expertise in M&A,ESOP financing, leasingand leveraged acquisitions

-our 30 Media and Com-munications professionals'sole task is to create inno-vative financing solutionsto fit the needs of com-panies like yours.

If you'd like to knowmore, call:Tom Reifenheiser, SVP, at(212) 552-2491.

0 The Chase Manhattan Bank, N.A. Member FDIC ill\ CHASE.110

This Announcement AppearsAs a Matter of Record Only.

April 1989

IngersollIndustries, Inc.

MI=

$23,000,000Senior Secured,Revolving andTerm Credit

The Undersigned Arranged forPlacement of this Debt withBankers Trust Company.

CableInvestriwnts8400 East Prentice AvenueSuite 1115Englewood, Colorado 80111(303) 793-3344

This Announcement AppearsAs a Matter of Record Only.

April 1989

SOLDTriangle EastCommunications, Inc.4,200 Basic Subscribersin Eastern North Carolina

Has Been Acquired By

C4 MediaCable South, L.P.The Undersigned Representedthe Seller.

Ca blelnvesh nents, Inc.8400 East Prentice AvenueSuite 1115Englewood, Colorado 80111(303) 793-3344

WANT ADDITIONAL COPIES?

If you'd like to order additional copies of the CHANNELS1989 Field Guide To The Electronic Environment, pleasewrite us at

CHANNELS 1989 Field Guide401 Park Avenue SouthNew York, New York 10016Attention: Bulk Order Department

Single copies are available at $12.50. Bulk orders of 20 or more copiesreceive a 35% discount. That's only $8.15 per copy.Check or purchase order must accompany all orders. Please allow 3-4weeks for delivery.

CHANNELS The Business Magazine for Television Professionals

TOP MONEY MANAGERS

MAKING MILLIONS ON MEDIAThese top money managers, former analysts all, have used their

research acumen to mine a mother lode in media stocks.

MARIO GABELLIThe Gabelli Group Inc.

Inario Gabelli likens money managementto a game of baseball in which the ul-

timate outcome hangs in the balance ofevery pitch. "It's the competition of con-ceptualizing an idea, executing it bybuying the shares, and counting the scorein an open-ended game," he says. "Butit's not a game. It's an awesome respon-sibility. I manage money for 850 clientsranging from the University of Texas tothe Sisters of St. Joseph. It keeps yougoing, because you're like a doctor in thatif you make the wrong incision, you canhurt someone. Not physically, but finan-cially."

Gabelli's investors don't seem to befeeling any pain. Gamco Investors,Gabelli's money -management affiliate, hasoffered investors a 28 percent compoundrate of return on their investment sinceits inception in 1977. Gabelli's intensity,dedication and smarts have resulted in afive-year record (through year-end 1988)that makes him number one among equityadvisers tracked by CDA InvestmentTechnologies.

Gabelli credits his stock -picking savvyin no small part to his ten years as amedia analyst. "When you have ahands-on understanding of the funda-mentals of an industry, you can anticipatecertain trends that others who are comingin fresh just don't see."

Likewise, media stocks have been keyto Gabelli's phenomenal success. Via thevarious investment vehicles that hemanages, Gabelli is currently among thelargest shareholders in United CableTelevision, United Artists Communica-tions, Chris-Craft, United Television,Warner Communications, MCA, Gulf+ Western and Viacom. These companiessimply fit Gabelli's clear-cut investmentrequirements: They are domestic com-panies that are throwing off a lot of cash

Gabelli sees media stocks as key to his success.

and are selling at what he sees to be a dis-count to their fair market price.

Looking toward the future, Gabelli sayshe likes the growth potential of companiesinvolved in programming software distri-bution, independent TV and plain old tele-phone service. Gabelli also says cable hasbeen a "terrific" business and will remainso regardless of the outcome of the telcoissue.

As for himself and his company, the47 -year -old says he would be happy withsimply more of the same. "What else amI good at? I can't play golf -22 handicap.I can't jog-I have a bad knee. Fishing isokay for a day. I've got nothing else. Ibasically enjoy reading annual reports,visiting companies and watching guys likeSumner Redstone make tons of money.I'm going to do this for another 40 years."

PAUL NOGLOWS

GORDON CRAWFORDCapital Group Inc.

in the midst of the financial world's herdI mentality, predilection for quick profitsand rampantly competing loyalties,Gordon Crawford has built a reputationfor independence and integrity. He hasalso been a key player in the development

of Los Angeles -based Capital Group Inc.into one of the country's most importantmedia investors.

Under the influence of Crawford-amedia analyst, senior vice president anddirector of the low -profile, employee -owned money management concern-Capital Group, with more than $35 billionunder management, has become a majorplayer in media. Crawford says it ownsbetween 8 and 10 percent of every pub-licly traded cable company, and has

the largest institutional owner ofjust about every major Hollywood studiooutside of Disney.

Crawford is not afraid to buy, knowinghe may have to hold for the long term.Take the investments he has overseeninto cable. He says he is prepared to staywith them for years, if necessary, untilthe stocks reflect what he thinks are thecompanies' true underlying values.

Crawford claims to be undaunted by po-tential telephone company competitionbecause he expects no major regulatorychanges for at least two years. And evenif a recession hits-which he gives an evenchance of happening before the year isout-he expects cable to do well. Morethan 95 percent of cable's revenues stillcome from subscriber fees, Crawfordargues, and people tend to watch more

Crawford believes in cable for the long term.


0

TV during recessions, not less.Given his bullish take on cable, it's not

surprising that Crawford is bearish onbroadcasters. It is one group, he posits,that never before had to face a recession(which can drastically hurt ad revenues)and, moreover, cope with an era of consid-erable audience fragmentation.

One of the reasons Crawford is so well -liked may be that, despite the size of Cap-ital's holding, he never demands cor-porate directorships. He says it's to avoiddivided loyalties. Nevertheless, cautionsRoy Furman, president of investmentbanker Furman, Selz, "Woe to somebody[Crawford] finds is not being above boardwith him," even if the company's stock isdoing well.

Case in point: Earlier this year,Crawford had few qualms about dumpinghis 10 percent position in one high -profilecompany after its management took amajor step contrary to plans they hadpreviously presented to him.

"As soon as I questioned the veracity ofmanagement," Crawford says matter-of-factly, "I didn't want to own it anymore.Period. If I don't have faith in the peoplewho run a company, it's hard to trust thenumbers they give out." NEAL KOCH

HARVEY SANDLERSandler Capital Management

Harvey Sandler isn't afraid to put all ofhis eggs in one or two carefully chosen

baskets. "I am not a believer in diversifi-cation," says the self-assured, 47 -year -oldSandler. "Nobody amasses wealth bydiversifying."

That strategy, considered risky bysome, has paid off handsomely for Sandlerand his investors. His main investmentpartnership, Sandler Associates, has inthe nine years since its inception grownin value 2,524 percent, from $4 million to$290 million, while providing investorswith a compounded rate of return of 34percent. More than 90 percent of the fundis invested in cable TV and cellular com-munications issues. Thirty-nine percent ofall Sandler's funds are spread acrossthree companies: Multimedia, TCI andLIN Broadcasting. "We don't mind fo-cusing in on specific parts of the mediabusiness that are attractive over the in-termediate term," Sandler says. "Wedon't have to be in TV, radio and maga-zines. We simply view cable and cellularas businesses that we want to be in."

Sandler's other investment vehicles-Sandler Capital Management, which rep-resents $225 million spread over 40 -oddaccounts, and SCM Limited Partners, anew, $28 million fund invested in justthree unnamed stocks that Sandler be-lieves are ripe for restructuring, lev-eraged buyout or sale-are likewisemedia -based.

Sandler remains bullish on cable and cellular

Sandler, personable and well -liked onWall St., shrinks from the label of moneymanager. "I don't view myself as being inthe stock market, or being a moneymanager," he says. "I'm in the mediabusiness." He elaborates: "We're notdoing anything a whole lot different thanwhat Bass or KKR were doing when theybought Wometco and Storer. We're doingit in the public arena whereas they did itprivately. They used a lot of leverage andwe're using a little bit of margin, butreally it's the same thing."

In addition to his public investmentpartnerships, Sandler has been involvedin a number of private deals. In 1985, hebacked C4 Media and helped grow thecompany from 8,000 cable subscribers to74,000 before selling out to M.L. MediaPartners in the fall of 1987. He saysventure funding and private investmentare areas in which he would like to see hiscompany play a more active role in thefuture.

Sandler attributes his success to thestrength of media stocks and to the 13years he spent as a Wall Street media an-alyst. "It's hard to be wrong in mediaover the long run," he says. "Analystsknow how to listen to what companies aretelling them," he says. "If you listen hardenough, it's not difficult to make wise in-vestment decisions." -P.N.

RICHARD REISSCumberland Associates

when picking a media stock, RichardWhen managing partner of Cum-berland Associates, asks himself two basicquestions: "Would you in fact pay the pre-vailing stock -market price to own theentire company? And if you did and youfinanced it prudently, would you earn thekind of returns that would justify yourowning that business at that price, orwould you be better off putting yourmoney elsewhere?" If the answer to thosequestions is yes, there's a good chance thestock will make it into Cumberland's in-vestment portfolio.

Reiss is, among other things, respon-

sible for his firm's high profile in mediastocks. Of Cumberland's $600 million ofassets under management, $120 million to$150 million is currently invested inmedia. And half of that is in cable. Butwhile the former media analyst's bailiwickhas remained media since joining Cum-berland in 1977, he shares investment re-sponsibilities with five other partnerswho manage investments in a multitudeof other industries.

Diversification is the cornerstone ofCumberland's strategy. "We're not bigleverage players here," Reiss says. "Wearen't looking for the maximum resultfrom every investment. We like diversi-fying within a group-owning ten or 11cable companies as opposed to just two orthree. We like owning not only cable, cel-lular and newspaper but also some air-lines and some banks. We're not smartenough to know when the music is goingto stop in terms of any one business.We're trying to maximize results whilereducing risks."

Reiss likes his media portfolio diversified.

Even so, media remains integral toCumberland's success. Its $80 millionLong View Partners is the most heavilymedia -based of its investments, withabout 45 percent of its assets in media -related business. Since inception, thepartnership has earned investors cumu-lative appreciation of 19.8 percent.

Reiss's current favorite stock is ATC,Time Inc.'s 82 percent -owned cable sub-sidiary. "I'm buying ATC at what mayrepresent a little bit of a premium to theother cable companies," admits Reiss."But the Time -Warner merger is the cat-alyst that is going to ultimately cause thereacquisition of the minority interest at afair market price."

As for the future, Reiss' contrarianstreak shines through: "It's difficult tosay where we'll be six months to a yearfrom now. If the market takes cable com-panies and gets very excited about themand values them at 90 percent of theirprivate -market value, we'll probably owna lot less. If the market gets very disap-pointed about phone companies orreregulation on the part of Congress,we'll probably own more." -P.N.


United Artists Communications, Inc.

has merged with

United Cable Television Corporation

to form

United Artists Entertainment Company

We acted as financial advisors toUnited Artists Communications, Inc. in this transaction.

Bear, Stearns & Co. Inc. Daniels & Associates

June 1989

The standard of excellence from the company that sets the standards.

© 198,+ Tw 11, Bm,adcasong SystemInc

Poised For The Future.

Listed on the American stock exchange.

HOW AMERICANSWATCH TV:

A Nation of GrazersThe remote -control device has permanently altered the way Americans watch TV.Now, viewer loyalties are made obsolete by a gadget allowing viewers to tune out asquickly as they tune in. Last fall, this phenomenon was coined "grazing" in CHANNELS'unprecedented published study of the nation's television viewing habits.

Now this nationally acclaimed report, How Americans Watch TV: A Nation ofGrazers," has been extensively expanded to give you the most complete and comprehensivelook at how grazing is affecting the television industry. And it gives you answers toquestions like these:

Why are people grazing and where do grazers go when they leave a channel? How can programmers, advertisers and the creative community better serve the

active viewer? What is the value and meaning of traditional ratings in such a highly mobile

viewer environment?

This extraordinary in-depth study combines the expertise of Dr. Richard R. Gilbert,television's leading researcher and consultant with NBC; CHANNELS' Executive EditorPeter Ainslie; research professionals at Frank N. Magid Associates Inc.; and a talentedteam of additional television professionals.

"How Americans Watch TV: A Nation of Grazers" is now available to you at $75.00plus $5.00 postage (NY, CA, & IL orders add applicable sales tax).* To order yourcopy, please call or write:

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NETWORKS

PilsoiisProgress

The CBS Sports boss has been waiting yearsto test a "Big Events" strategy. Now Larry Tisch is counting on it.

For the past seven years,every time producer BobDekas ran into CBS Sportspresident Neal Pilson-inthe halls, at the waterfountain, in the men's

room-he'd badger his boss aboutbaseball. "Can't we get something," he'dplead, "the Hall of Fame Game, theCollege World Series, anything?"

To Dekas, who played for the Mets' Class A farm team and hasproduced baseball for both ABC and ESPN, it seemed a crueltwist of fate that he now worked for the one major televisionnetwork shut out of America's favorite pastime. "Baseball is inmy soul," he lamented, "and CBS didn't have it."

For a long while it didn't seem likely that it ever would. Afterall, NBC had been televising baseball for more than 40 years, andfor the previous 14 had been sharing post -season games withABC. It would take a mammoth effort, to say nothing of a hugechunk of cash, to wrest away even part of the action, and CBS'srecent history offered little ground for optimism. Since takingover CBS, Laurence Tisch had, at times, appeared more inter-ested in building the CBS bank account through asset sales thanin buying expensive programming. Last year, CBS's pre-tax in-vestment income ($185 million) was almost as much as its oper-ating profit ($232 million).

But a fan's hope defies logic. "Whenever I'd bother Neal aboutbaseball he'd always give me a smile or a wink, which in my mindmeant to hang in there, that one of these days it was going tohappen," says Dekas.

Last December 14 it did happen, and in a big way. In a movethat shocked the TV industry but brought smiles to the ownersof sports teams everywhere, CBS agreed to pay $1.06 billion fora four-year package beginning in 1990 that includes the All StarGame, twelve regular season games a year, the two League

The CBS Series: Boffo or Bust?

by Adam Snyder

Championship Series (LCS) and theWorld Series.

In fact, there was nothing sudden aboutCBS's coup. Since taking charge of CBSSports eight years ago, Neal Pilson hasbeen laying the groundwork for what hecalls a "Major Events Strategy," an effortto acquire rights for championships inevery major sport. "We wanted to takethe glut of events during the regular

season and use it to our advantage," says Pilson. "Ratings pergame in various sports may have declined, but totals have risenbecause more people are watching more sports on more channels.When you get to the post -season in each of these sports, if you'rethe only carrier, you get everyone."

For the 49 -year -old Pilson, today the dean of Big Threenetwork sports chiefs, baseball has been the centerpiece of thelong-range strategy. "Right away Neal defined baseball as an im-portant property," remembers Jim Rosenfield, chairman andCEO of John Blair Communications Inc., who has known Pilsonfor more than 25 years and who as a CBS senior v.p. in the early'80s was Pilson's boss. "Even if he didn't get the contract at thetime, he began building relationships with Major LeagueBaseball by participating in negotiations. He established that hewas a man of his word who recognized baseball's value and wouldalways be a player when it came time to renew the contract."

Pilson's tenacity finally paid off. Unlike in 1980 and 1984, whenCBS was a prime time ratings leader, this time when the baseballcontract came up for renewal, Pilson had the advantage ofworking for a network that was trailing leader NBC in ratingsand profits by a wide margin. A blockbuster like baseball wouldhave added value to CBS. The LCS, for example, can be countedon for an average prime time rating of about 17. To a first placenetwork, which can easily capture that kind of rating with itsregular programming, it's much more difficult to justify the huge


z8

Pilson in Yankee Stadium: Will his strategy bring CBS back to life or cost it $15 million?

expense. But CBS, with an average prime time rating of lessthan 13, has more to gain.

Pilson says that in addition to the potential turnaround inCBS's position, equally important was the fact that baseballchanged the nature of the proposed deal. "In 1984 we didn't havethe opportunity to bid on the entire package," he says. "This timethere was a clear opportunity to become the only baseballnetwork. All of us recognized early on the kind of number itwould take and felt it was worth it."

Whether it was worth it remains to be seen. The consensus isthat CBS could lose as much as $75 million a year on the deal-ahuge sum, equal to almost a third of CBS's 1988 profits. CBSdenies that its losses could be that high, and Pilson succeededin convincing the man at the top, Laurence Tisch, that the pactwould be a pivotal step in a CBS turnaround. "There was a timewhen we weren't even in the running," recalls Rosenfield of thepre -Tisch era, "when it was obvious we didn't have the com-mitment to really get in there and fight for events. Now Nealhas the commitment, and he certainly has the desire."

The day before the winning bid was announced, each of thethree networks were given a document on which to write downany or all of four different bids: for the entire package; for apackage that would, like the current pact, alternate between twonetworks; for the entire package minus the LCS, which wouldthen be sold to cable; and an a la carte option in which bidders

could pick and choose any individual season or postseason com-ponent. Pilson eagerly wrote "$1.06 billion" on the first option,and the entire package was his.

By all accounts, Pilson worked tirelessly to synthesize the milesof research and number crunching that led to the baseball dealand to present it to Tisch and CBS Broadcast Group presidentHoward Stringer persuasively It is thus likely that, ultimately,Pilson's reputation will be judged on its success or failure. Whatis not in doubt, however, is that with this contract, Pilson hassucceeded in implementing his strategy. In 1990, CBS will tele-vise both baseball League Championship Series, the WorldSeries, the Super Bowl and the NBA and NCAA basketballchampionships, along with college and pro football and events in-cluding U.S. Open Tennis, the Masters and the Daytona 500.NBC and ABC are left with what remains-ABC with MondayNight Football and other events such as golf tournaments, andNBC with its package of American Conference NFL games,Wimbledon, boxing, the SportsWorld anthology and specials suchas the Tour de Trump bicycle race.

With all its programming, CBS Sports will soon have to openits purse wider and hire additional big -name sportscasters. Forbaseball, CBS's Brent Musburger is going to be paired withABC's Tim McCarver, but two additional teams of announcers,for a backup game and the pregame show, must be assembled.Without a baseball analyst, Pilson acknowledges, "we'll have to


go outside for some talent." But personnel is actually the leastof Pilson's concerns. New contract talks begin this fall for theNCAA, the NBA and the NFL, all of which expire in 1990. WillNBC and ABC really allow CBS to monopolize network sportsprogramming into the '90s? Few think so. "Now the shoe is onthe other foot," says Peter Lund, president of Multimedia En-tertainment, who was president of CBS Sports in 1985 and 1986under Pilson when Pilson was Broadcast Group executive v.p."The other two networks very much need sports programming.I'd almost guarantee you that when the smoke clears either ABCor NBC will own the NBA."

Seth Abraham, HBO's senior v.p./programming, operationsand sports, agrees. "I'd say NBC and CBS will be in a real dog-fight for either the NBA or the NCAA or both," he says. "Nealreally knocked the wind out of NBC. Still smarting, they needprogramming."

"It will be interesting," says Arthur Watson, who has steppeddown as president of NBC Sports to spend a final year beforeretirement in charge of upcoming bidding for college and profootball and basketball and the 1994 Winter Olympics. "We'venever bid on the NBA or college football because of schedulingconflicts [with baseball]. We'll now look at these properties verydifferently." But don't ignore Pilson either. Although he is almostalways described as a gentleman and a man of integrity, he is alsointensely competitive. "A very competitive person like Nealnever enjoyed seeing ABC trumpet themselves as the sports

n 1990-91, for thefirst time, one

network-CBS-will a

fiirThe World

Series, Super Bowl and NBA Finals, pro

sports blockbusterevents. Like ABCle

I

the '70s. CBS is bettingthat it can

erage strongsports franchises

into a

prime time ratings recovery.

leader worldwide," says Stringer, Pilson's boss. "Neal has madeit so we can do a little boasting of our own. He won't like it ifwe backtrack."

Stringer also describes Pilson as a "Rock of Gibraltar in a seaof troubles," referring to recent CBS turmoil. Pilson is one ofonly a few holdovers from the pre -Tisch era to have earned theear of the chairman, and Pilson clearly took advantage of thataccess in pursuing his sports strategy. "Neal has just the rightpersonality and temperament to survive and prosper at CBS,"notes HBO's Abraham. "Someone like Roone Arledge, with moreflare and showmanship, might not have done as well. With hisFrench shirts and cuff links, which seem to be de rigueur withthe Tisch crowd, Neal fits right in."

"Neal has earned respect at CBS," says Barry Frank, anotherformer CBS Sports chief, now senior corporate v.p. of Interna-tional Management Group, the largest sports marketing companyin the world. "He anticipates questions. He's not a hip -shooter."And, earlier this year, when the presidency of the CBS BroadcastGroup was up for grabs, Pilson was considered a top contender,although the decision to use sports as a means to move CBS upfrom the ratings basement may have hurt his chances. "If you'regoing to rebuild a network through sports," notes Abraham, "thelast thing you want to do is change your sports division head inthe middle of that strategy." But that doesn't mean Pilson hasreached the apex of his career. "He's a cool, analytical manager,"says Roger Werner, president of ESPN, which spent $400 million

for its own annual package of 175 baseball games. "He's an ex-ecutive first and a sports person second."

Filson is a no-nonsense businessman/lawyer who eschews hob-nobbing with the on -air stars of CBS Sports in favor of gettingthe job done. "There may not be a lot of laughs with Neal," saysformer CBS president Bob Wussler, now Turner Broadcastingexecutive v.p., "but he knows how the company works and he'sbeen very successful in turning CBS Sports around." Thesix-foot, 190 pound Pilson may be all business, but he's also a fan.When asked about his college days as a basketball player, hebreaks into a rare grin, takes off his glasses as if to prove thereis an athlete behind his sartorial exterior, and says simply, "Ilove sports."

When Pilson joined CBS Sports 13 years ago the division wasfloundering. It was just coming off a scandal in its supposed"Winner Take All" tennis tournament and was an acknowledgedsports midget. Enter Pilson, with extensive negotiating expe-rience. After receiving a law degree from Yale in 1963, Pilsonworked in private practice until 1968, when he began a six -yearstint at Metromedia negotiating contracts. He then headed theWilliam Morris Agency's New York law department for 18months before joining CBS Sports as director of business affairs."I've always been a sports fan," Pilson says, "and when the op-portunity came to combine sports with the law, I took it." Even

then he had an idea of where he wanted to take the sports di-vision if given the chance.

But of late, Pilson has had to defend his prodigality againstcritics alarmed that he is responsible for a new round of esca-lation in the fees for sports' TV rights. Pilson has been atop CBSSports since 1981, the year CS pilfered the NCAA Basketball(3Tournament away from NB for $48 million over three years,a 78 percent increase. In 198 , CBS retained the NBA contractby doubling its payment under a new four-year contract, and lastyear Filson agreed to pay $243 million for the right to air the 1992Winter Olympics in France, a bid $68 million more than NBC of-fered and $43 million more than what the International OlympicCommittee later said it would have accepted.

Although NBC Sports' Arthur Watson has now called a haltto his sniping, he has been Pilson's biggest critic. At the time ofCBS's Olympic bid he was quoted as saying, "They gotta be outof their minds," and now he simply calls the baseball bid "unbe-lievable." To Watson and others, Pilson's recent actions seem notonly irresponsible but even a trifle duplicitous, given that it wasjust five years ago that Pilson, in a major speech, warned thatsports rights -fee escalation was suicidal for the networks."Clearly, we are back in a time of escalating fees, and Neal hasto take some responsibility for that," says Multimedia's Lund.Meanwhile, those on the other side of the table can barely re-strain their glee. "Sure, baseball will help escalate fees overall,"says Dick Schultz, NCAA executive director, whose contractwith CBS runs out next year. "We're expecting a substantial in-crease."

Pilson denies that costs are escalating like they were in the late


Sports Bill of RightsEVENTS NETWORK DESCRIPTION CONTRACT

EXPIRATION

EVENTS NETWORK DESCRIPTION CONTRACT

EXPIRATION

Olympics CBS 1992 Winter Olympics Major LeagueBaseball

ESPN 6 games per week on Sunday, Tuesday,Wednesday and Friday nights

1990-1993

NBC 1992 Summer Olympics

SportsChannel 1992 Summer Olympics NBA CBS 16 regular season games, at least 20playoff games and championship

1990

NFL Football ABC 16 Monday night games and 1990Super Bowl

All contractsexpire after

series

TBS 50 regular season games and at least 19901989 season.26 playoff games

CBS 16 Sunday afternoons and NFC playoffs NHL SportsChannel Over 200 national and regionaltelecasts and Stanley Cup playoffs

1992

NBC 16 Sunday afternoons and AFC playoffs

ESPN 8 Sunday nights and Pro Bowl NCAA Basketball CBS At least 20 playoff games 1990

Major League NBC 26 regular season games, 1989 All - 1989Tournament ESPN 20 first -round games 1990

Baseball Star Game and both League Horse Racing ABC Triple Crown 1992

Championship Series NBC Breeders' Cup 1994

ABC 8 regular season games and 1989 1989 Auto Racing ABC Indianapolis 500 NAWorld Series

CBS Daytona 500 j 1993CBS 12 regular season games, All -Star 1990-1993

Note: Rights for regular season college football and basketball are split between many networks,Game, both League ChampionshipSeries and World Series syndicators and cable systems. This is a sampling of rights holdings of major events.

1970s, pointing out that Olympics con-tracts have leveled off and that the CBScontract with the NFL renewed twoyears ago actually represented a de-crease. Even more disturbing to many inthe industry, however, are the huge def-icits competitors say CBS is willing toring up. Both NBC and ABC admit thateven with significantly lower per -gamecosts, they'll lose money on baseball thisyear. And should the unthinkable occurand the LCS and World Series befour -game sweeps, CBS's losses could hitnine figures. "My one concern for the restof this year is that the World Series willgo only four games," says DennisSwanson, president of ABC Sports, whichwill air the 1989 World Series.

Yet despite the initial shock at such animposing deficit, the consensus nowseems to be that CBS did what it had todo. "They'll lose money," says Paul Bortz,a Denver -based consultant whose clientsinclude the NBA, Major League Baseballand Capital Cities/ABC. "But what is thevalue of having a huge audience every fallto promote the new season? That's some-thing no one has put a dollar figure on."

"It's an expensive gamble, no questionabout it," says John Tinker, MorganStanley media analyst. "It's not the sameas signing a star like Dolly Parton, whereyou can pull out and take your losses aftera year if it doesn't work. But CBS has togamble. All they are is a network, and ifthey're not willing to gamble on pro-gramming they may as well give up."

Even Pilson is unable to say with astraight face that baseball will actually beprofitable for CBS, and Stringer admitsthat the best they could do when they ranthe numbers was break even. The CBSbrass likes to talk about what Stringercalls "the invisible elements of promotionand prestige." Undoubtedly, CBS willbenefit from having access to between 40and 50 percent of the TV audience-themasses that watch the World Series andwill watch the accompanying promotionalspots for the fall season. "For 40 yearsCBS has had to start the season againstthe World Series," says Pilson. "Now letthe others chase us for awhile."

"You don't have to be a Phi Beta Kappa

XEROX

Once a trademark,not always a trademark.They were once proud trademarks, nowthey're just names. They failed to takeprecautions that would have helped themhave a long and prosperous life.

We need your help to stay out of there.Whenever you use our name, please use itas a proper adjective in conjunction withour products and services: e.g., Xerox

copiers or Xerox financial services. Andnever as a verb: "to Xerox" in place of "tocopy;' or as a noun: "Xeroxes" in place of"copies"

With your help and a precaution or two onour part, it's "Once the Xerox trademark,always the Xerox trademark?'

Team Xerox. We document the world.


P.ights fees are also rising for a host

of important events, like the Masters,

U.S. Open Tennis and major auto races.

With these attractions as well as its top

tier of major professional events, CBS

could soon market itself as America's

Sports Network.

1111111Malli -

to understand that baseball will be valuable to CBS," notesChuck Howard, who used to be ABC's top sports producer andis now executive producer for sports programmer Trans WorldInternational. "The consensus is that there's no way the baseballdeal will be profitable. But what's the rub -off value for theirprime time lineup? Only time will tell." Moreover, Pilson arguesthat the value of post -season baseball in its entirety is greaterthan its individual parts. Since the LCS and World Series haveaired on different networks, this will be the first time that theWorld Series will be promoted during the LCS, something CBShopes will boost ratings. Pilson also thinks that ad revenue willbe enhanced by CBS having the only game in town when it comesto October baseball. "The exclusivity that we acquired more thancovers the increases we're paying," he says.

That remains to be seen. Steve Grubbs, senior v.p. for nationalbroadcast buys at BBDO, doesn't anticipate that his clients, in-cluding sporting -event perennials Gillette and Chrysler, will nec-essarily pay more just because both events are on CBS. "On thesurface, it doesn't seem to me that there is a big advantage toour clients to have one network televise the entire post season,"he says. But others believe CBS is trying to emulate the ABCof the '70s, when it used a virtual Olympics monopoly andMonday Night Football to vault from the network basement.CBS brass scoff at this comparison, insisting that their sportsstrategy is only one component of a broader plan to regain theratings lead. "We believe sports will be important, but we'replacing equal emphasis on news and entertainment," saysLaurence Tisch.

This lends further credence to the theory that CBS cannotmake money on some of its blockbuster sports acquisitions, par-ticularly baseball, and that their ultimate value will depend onthe quality of the entertainment programming CBS is able topromote during these popular events. "Neal has more than suc-cessfully run his leg of the relay race," says HBO's Abraham."Now, as he passes the baton on to [CBS programming headKim] LeMasters, it is up to LeMasters to win the race."

There's a body of opinion, however, that believes CBS hasoverestimated baseball's promotional value. "The World Seriesmay get a 40 percent share," says ABC's Swanson, "but thatmeans 60 percent are watching the rollout of someone else's falllineup. Who makes or break prime time anyway? Women, thevery opposite of baseball's audience. Promotional value can bean excuse for pissing away a lot of money."

Swanson has acted on those convictions, eschewing money -losing big events like baseball in favor of less spectacular butmore profitable programming like the Indianapolis 500, the Tourde France and bowling, plus the long -running Wide World ofSports and The American Sportsman. Swanson has alreadybowed out of the bidding for the 1994 Winter Games. "We're notthe government," he says, referring to deficit spending. "CBShas its own strategy, and for them baseball and the Olympicsmade sense. But we have our own shareholders to answer to andwe can't justify losing money week after week on anything."

As for NBC, although it is true that a major sporting event isless valuable to a network leader, it is not about to allow CBSto dominate network sports into the 1990s. "It's no secret we

need programming," admits Watson, who few think intends toretire without eliminating the rancid taste left in his mouth bybaseball's loss. Only by making off with one of CBS's importantsports properties would he accomplish that.

With the success of cable and independent stations at erodingthe three networks' share (according to A.C. Nielsen, down from80 percent in January 1982 to 69 percent in January 1989), asporting event that can virtually guarantee a 30, 40 or, in the caseof the Super Bowl, almost a 70 percent share of the TV -watchingpublic has become increasingly valuable to the Big Three. Inrecent months NBC took the World Figure Skating Champi-onship away from CBS with a bid of $5.5 million, more than twicewhat CBS was paying, and ABC agreed to pay $9 million for the1991 Pan Am Games, up from the approximately $3 million CBSpaid for the 1987 Games. And last November NBC outbid CBSfor the 1992 Summer Olympics by at least $40 million with awhopping $401 million offer, even though sentiment then gaveCBS an advantage since it would already be in Europe for theWinter Games. Some people feel that Watson snookered CBSinto a low bid with his public outrage at CBS for its $268 millionWinter Games bid. "CBS should have had the Summer Gamestoo," says Blair's Rosenfield. "They didn't think it was going totake that kind of money."

According to Barry Frank, CBS also miscalculatedthe number of hours NBC would televise in primetime and therefore came up with a lowerbreak-even number. "Just because CBS was fig-uring three hours per evening, that doesn't mean

the others were," he says. Pilson confirms that the difference be-tween three and four prime time hours may have given NBC abidding advantage, but argues that ratings fall after 11 P.M. andinsists that CBS would not want the Summer Games today evenif they could be had for what NBC paid for them. Another chinkin CBS's armor may be that it is the only one of the three majornetworks without a cable partner. ABC owns 80 percent ofESPN, and NBC has entered into partnership with CablevisionSystems, owner of SportsChannel America. Pilson claims thatthis is actually an advantage because, while ABC and NBC mustgo to their cable outlets when they want to lay off a sportspackage to cable, CBS, which will surely sell Olympic pro-gramming to cable, can sell to the highest bidder. Others dis-agree. "Where can he go?" asks HBO's Abraham. "Do you thinkBob Wright or Tom Murphy would allow SportsChannel orESPN to provide CBS with a chunk of money? As we enter the'90s, this will become an increasingly important liability to CBS."

But for the moment, the CBS brass seem pleased with the com-petitive position Neal Pilson has provided with his sportsstrategy. For a network that late last year experienced the worstratings period in its history, the baseball and Olympics acquisi-tions have clearly done wonders for morale. "The only good thingabout being in third place is that you can take risks," notesHoward Stringer. Only time will tell whether Neal Pilson's billiondollar risks will pay off for CBS.

Contributing editor Adam Snyder last wrote about the syndi-cated show USA Today on TV.


WHAT DO

BM E

MARKETING

DECISIONS

CHANNELS

TBITELEVISIONBUSINESSNT ERNA CS'

CorporateVideo Decisions

Wall11 BIKADCISTitelevision Programming

SOURCE BOOKS

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Promotion Lessons Learned

ShoutingLouder

Successful television promotion, whether broadcast or cable, isincreasingly a matter of having the flashiest voice. Promotionpeople have to decide where they must draw the line.

It's no news that the once subdued televisionenvironment is today more like a sprawling,boisterous carnival. Where fairgoers oncehad but three attractions to choose from,now rows and rows of booths beckon to pass-ersby, each trying to outglitz the other withnew and exclusive rides and games. In the

middle of it all, the carnival barker stands screaminghimself hoarse, trying to lure patrons into one boothover another, and probably increasingly feeling likehe's simply shouting into a hurricane.

At TV stations, and more and more at local cablesystems as well, promotion executives are the oneswalking around with sore throats. This month's InFocus section looks at the increasingly tough job ofTV promotion, and the tricky questions promotion ex-ecutives face. In "Turmoil Touting Tabloid TV,"Richard Katz walks along the fine line stations findthemselves straddling when promoting the currentcrop of hot, reality -based shows dubbed "tabloid" or"trash" TV. Oftentimes merely mentioning an epi-

sode's topic in a promo means the spot must behandled with care, and kept away from slots wherechildren might be exposed. And if the topic is espe-cially controversial, promotions must avoid takingsides or misinforming the viewer. Next, Kathy Haleyreveals how local cable operators are rapidly adoptingthe sophisticated image -oriented marketing campaignsthat local stations have been utilizing for years. Just aswith the broadcast -news spots that have become pro-motional cliches, expect to see ads filled with folksfrom your local cable company-shot in soft -focusedsplendor-laughing and smiling and just being goodneighbors. Finally, Neal Koch looks at the tricks of thetrade in promoting off -network sitcoms. In last Sep-tember's Cosby debut, promotion pros faced the taskof their careers: getting viewers to a show that couldmake or break their station's finances. Havingsurvived-or failed-the test, stations are now lookingback at what went right and wrong, and using whatthey learned to prepare for the next crop of sitcomsthat will debut in syndication in the next two years.


IN FOCUS/Promotion Lessons Learned

Turmoil ToutingTabloid TVWhen, where and how to run on -air promotions fortabloid shows can be tricky business for station pro-motion executives. BY RICHARD KATZ

Before any viewer evergasped over an episode ofA Current Affair or sobbedthrough an hour withGeraldo, promotion execu-

tives at the stations that run thoseshows faced the task of luring viewersto the oftentimes sensational programswithout offending the rest of the tele-vision audience. Program directors canrespond to viewers irate over a partic-ularly shocking episode with some var-iation of the suggestion that they changethe channel during that time period. Butsince sensationalist sound -bite teasersfor tabloid shows can appear withoutwarning during almost any program,promotion directors must judge justhow racy they can get in promo spots.And given that far more viewers seepromotions than see the actual shows, ifthe promos are exploitative or mis-leading, is the station doing a disserviceto its viewers?

"Sometimes the easy way to getpeople to watch is to scare them" notesLance Webster, executive director ofthe Broadcast Promotion & MarketingExecutives association, "and as you getdesperate for viewers, you tend to takethe easy way out."

Yet the difference between good pro-motion and bad taste can be hard to dis-tinguish when talking about so-calledtrash TV shows. "You have to becareful not to be so sensationalistic thatyou're misrepresenting who you are,"warns Brian Blum, creative director, ad-vertising and promotion at WCIX-TV,the new CBS O&O in Miami, which airsGeraldo, This Evening and InsideEdition. "At the same time, there's afine line between being true to the showand trying to attract viewers, andbasing your advertising on what youfeel is acceptable."

WCIX, like most stations, prefers to

save its promotion resources for pro-moting local news, so Blum typicallyruns the promotion spots supplied bysyndicators for their shows, with theonly discussion being about when andwhere the spots are aired. "If I am pro-moting a product that may not appeal tocertain segments of the audience, I willtry not to promote it in those time pe-riods," says Blum. "I certainly wouldnot schedule a Geraldo program aboutlesbian nuns and run it in my kidsblock."

Blum's approach is fairly typical. "Wetake whatever the syndicators send upand we put it on the air," says GracelynBrown, marketing/promotion director ofWPRI-TV in Providence, R.I., an ABCaffiliate that runs Geraldo and Oprah.Brown says her staff reviews all thespots before airing them to check foranything particularly racy, but she can'trecall ever having yanked a spot. "Wedo try to keep most things like Geraldoout of The Cosby Show, and we certainlydon't consider it appropriate for Sat-urday morning cartoons." The WPRIpromo that offended the most viewers

was not for a tabloid show but rather acommercial for the the theatrical movieChild's Play. The spot, which airedduring Cosby and pictured a closeup ofa hand gripping a knife, prompted fourangry mothers to call the station prom-ising they would never let their kidswatch Cosby again.

Brown doesn't think that movie pro-motion is different from tabloid pro-motion or any other genre for thatmatter. She argues the purpose of apromo is to tease, to give the vieweronly the juiciest bits of the show. "Ifyou're doing your job correctly," shesays, "the promos are put together in away that is just as or more exciting thanwhat people will see on the actual show.Promos have always been slightly moresuggestive of the show because that'sthe way they're made to be. That's thevery essence of promotion."

Even if the nature of television pro-motion has not changed, tabloid pro-motion throws a monkey wrench intothe formula because the show topics,which are plugged in the promos, areoften controversial. "The subject matteris a bit more salacious, with topics suchas brothers who rape their sisters, andpromoters find themselves doing whatthey've always done," says Brown. "Attimes we have to ask whether these arein good taste. Sometimes the showsaren't in good taste, so the promos arejust representative of the shows."

Arthur Greenwald, creative directorof CBS affiliate KDKA in Pittsburghand executive producer of Group W'sEvening Magazine (which is part of thecooperative that also produces PM Mag-azine and the more tabloidy ThisEvening), thinks that at times thepromos have gotten out of hand. And he

Because of its largeyouthful audience,The Cosby Show isoff-limits for tabloidpromotions.


Promotion Lessons Learned/IN FOCUS

Stations had trouble finding the right promos for

notes that even after the promotion mis-takes are corrected, viewers tend to re-member only the older spots that werein bad taste. In the process of shiftingfrom promoting the relatively tame PMMagazine to the more sensationalistThis Evening, Greenwald says, some ofKDKA's promos veered over the edge:The switch from promoting light storiesabout waterskiing dogs to sensationalistones investigating whether MarilynMonroe was murdered took somegetting used to.

"In putting a whole different categoryof stories on the air, a couple of storiesand a couple of promos went too far,"says Greenwald, "but we quickly caughtourselves. For some months now, all theGroup W shows have struck a very com-fortable balance. But the people takingoffense today may recall the olderpromos. They don't think about tele-vision the way people who work in tele-vision think about it. They don't say,`Well, that was on today, we'll seewhat's on tomorrow.' They see onepromo and think, 'That's what the showmust be like.' "

Louis Rapage, director of pro-gramming and promotion at KERO-TV,a CBS affiliate in Bakersfield, Calif.,claims that his heavy use of Tribune En-tertainment's on -air promotions forGeraldo has not only won the timeslotfor the station (defeating Orrrah in theprocess) but has led to a better rela-tionship with the community. "One of

This Evening, hosted by Nancy Glass.

the reasons I promote so heavily," saysRapage, "is that from time to time weget complaints about Geraldo being tooracy for 4 P.M. By promoting the showin other dayparts, it allows the parentthe option of not letting his kid watchthat particular topic." Rapage says thatthe only place he will not run a Geraldopromo is during the Saturday morningkids block. "The promos have given mea buffer to respond to viewers," saysRapage, "and honestly, now we getvery few complaints."

Another positive result of the ques-tions raised by tabloid TV is that sta-tions are now more careful to differen-tiate their news promotion from theirtabloid promos. WPRI's GracelynBrown says her station has found,through focus -group testing and callercomplaints, that viewers prefer newspromotion when it's more down toearth, and generally the opposite oftabloid -style promotion. Many ofWPRI's special news projects havebecome community -service oriented, in-cluding a campaign on cholesterol and aseries on why parents should read totheir children. "You can't live on asteady diet of devil worshipers and childabusers," says Brown, "and you don'twant to hear [about such things] fromyour trusted friend the news anchor."

WCIX's Blum agrees: "Taste and thecreative process [of promos] is very sub-jective, but I certainly would notpromote my news or my news people in

a sensationalist way. It would destroymy credibility." But in the area oftabloid promos, Blum says it's a mootpoint that more viewers will see hiswork than will actually tune in to theshow. "This issue applies to all adver-tising. All advertising reaches morepeople and makes an impression onmore people than the product does," hesays. For example, Blum compares itwith what happens when an advertisertries to reach three million people. "Ob-viously, three million people are notgoing to buy the product," he says, "butyou're trying to entice those who maynot know about your product or [in thestation's case] may be interested in aspecific topic to try it one or two days."

Says WPRI's Brown, "You put apromo together and place it on aschedule to collect the most impressionsyou possibly can. Tabloids aren't any dif-ferent. Yes, people are subjected totabloid things they wouldn't necessarilyhave been before," she continues, "butthey're also subjected repeatedly toFriday the 13th Part 8."

Tabloid -style promotion will bearound as long as there is tabloid TV.Promoting the snappiest moments fromshows, in hopes of making them appearmore shocking or exciting, is nothingnew. But perhaps there is a larger issueto consider. "Questions like where toplace promos, what's in good taste, arewe taking only the best bits-those aretimeless questions," says Brown. "Butthe question beyond that is are peopledesensitized to this, and is it turningthem off to the shows and stations?"

Douglas Friedman, vice president ofadvertising and promotion for TeleVen-tures, a company that syndicatesHunter and The A Team, says, "Iwouldn't label the [tabloid] spots un-ethical, but they do undermine society'smorals by sensationalizing non -mainstream behavior and values." Onthe other hand, Friedman, who willchair a BPME panel titled "Ethics inAdvertising and Promotion," has neverheard of a promotion director resigninghis position over having to run a partic-ularly risque Geraldo promo.

"They're capsulizing what's going tobe on the show," says Friedman, "butit's always something like, Women whodo nude back -flips on the city streets.'This is one of the great issues facingmankind? They are lowest -common -denominator shows and they corre-spondingly use lowest -common denomi-nator promotions."



Righting Cable'sImage WrongsLocal cable is finally delving into the world ofsystemwide image campaigns and sophisticated cross -channel promotion to lure viewers. BY KATHY HALEY

The newest TV -image cam-paign in Raleigh/Durham,N.C., opens with touchingshots of school children, fam-ilies and local landmarks and

then segues into an array of differentprograms and services that are offeredto viewers. Shot on 35mm film withsharp, contemporary graphics, originalmusic and custom lyrics, the spot rein-forces the idea that this source of TV en-tertainment and news is a vital memberof its community. It is a bright, youthfulversion of scores of sentimental imagecampaigns that have gone before it inthis and other cities.

The difference is that this one is for alocal cable system-American Television& Communications' Cablevision ofRaleigh/Durham. ATC's new campaign,which is scheduled to run on 80 percentof its systems nationwide by year's end,represents the cutting edge in localcable promotion. More importantly,however, it signals a new attitudeamong operators toward the importanceof using their own "airtime" to promotethemselves to viewers.

Signs of the new attitude are poppingup all over. Just this past May, theCabletelevision Advertising Bureau un-veiled a new version of its heavily usedmonthly tune -in kit. Instead of feedingoperators spots for scores of differentprograms, the new kit zeroes in on justten. It's an effort to better focus cable'son -air arsenal, instead of watering itdown with too many messages.

Early this year, ContinentalCablevision adopted a similar phi-losophy in its cross -channel approach topromotion. It now concentrates its fire-power on a single network each weekand limits its push to a rotating list of 13networks per year.

ATC spent $1 million developing andproducing the basics of its local image

campaign, and the MSO is now custom-izing the ads for each of its systems.

Everywhere, operators are increasingthe amount of commercial inventory de-voted to self -promotion. At ViacomCable, the percentage has gone from 7percent to 15 percent. Continentalupped its figure from 12 to 20 percentthe first of this year, and ATC now rec-ommends its systems devote an extraor-dinary 25 percent of local avails to

stand we're improving our service,"Bennett says. "We don't want to gothrough a negative price -value conflictwith the public."

Another reason is cable's mushyimage in the minds of viewers. "Whencable first sold itself, it sold HBO," saysbroadcast -promotional wizard BobKlein, whose company Klein & createdthe ATC campaign. "The public didn'tknow what cable was, and the worstthing a business can do from a mar-keting standpoint is let the customerdecide what its product is."

ATC researched its image problem,says Tim Evard, ATC's v.p./marketing,and found that 60 percent of consumerscouldn't come up with the name of theircable company. In three of its largermarkets, ATC asked community leadershow they felt about their cable com-panies and 70 percent said they didn'thave enough information to comment."We live there, but we don't tellanybody," Evard says. "We want a re-lationship with our consumers."

ATC's answer is a network -quality

Cable gets warm and fuzzy, as in this system ad positioning Cablevision as a caring neighbor.

promotion-as much as double whatsome systems had been using.

Why the sudden interest in on -aircampaigns? One reason is the bad rapcable operators have gotten from Con-gress and the public, especially duringthe past year or so, according to EdBennett, former executive vice pres-ident for Viacom Cable and now thepresident of cable network VH-1."Cable has gotten bad press recently forrate increases, yet viewers don't under -

image campaign customized for each ofits local systems, one that next year canbe syndicated to other operators'systems as well. Operators may choosefrom two themes: "All the Things WeAre" and "Coming Through." The cam-paign includes 15- and 30 -second imagespots that tout the diversity of cable net-works offered by the system and thatalso reinforce the notion of the systemas a good neighbor. The campaign'sgraphics and music can also be wrapped


Promotion Lessons Learned/IN FOCUS

around tune -in spots and used in IDs.Although ATC's image campaign

probably isn't the first a local cablecompany has used, it is almost certainlythe most extensive and probably themost expensive, Evard says. Lyrics byBob Klein and music by composers TomScott and Rick Krizman, plus originalphotography, are being customized foreach local system. Animation is fromCalifornia Film, the firm responsible forCBS's prime time graphic look.

"What's exciting is that by the end ofthis year, most of our systems will havean on -air look indistinguishable fromnetwork or the best a local station cando," Evard says. "If we want to beatTV we have to look and act like TV."

Local operators aren't the only onesputting greater effort into their on -airimage. The basic cable networksLifetime and American Movie Classicsboth unveiled new promotional strat-egies early this year. Lifetime's is a newimage campaign, created by thenetwork and its ad agency, Arne11Bickford Associates, that pushes the

ences and that Lifetime's programmingreflects many of them. AMC revampedits schedule to allow five minutes of pro-motional time between films and isfilling that time with coming attractions,a contest promotion and other infor-mation about what's on the network.

And cleaning up its on -air look is onlythe beginning of cable's efforts to beatbroadcast TV at its own game. Oper-ators are also working to get a biggerbang for their on -air promotional buckby fine-tuning the way they use tune -in,image and ID announcements.

With hundreds of shows airing on 25or 30 networks, the operators' biggestproblem is deciding what to promote,explains Linda Maslin, director of adver-tising and promotion for ContinentalCablevision. And because cable is a fre-quency instead of a reach medium, ittakes a lot of spots to get a singlemessage across. "We were in danger, ifwe kept going for quantity, of gettingnothing done," Maslin says.

Continental conducted research withArbitron and found it needs a 35 percentreach and 5 frequency for each of itspromos to have an impact. To achievethat, each spot has to air 400 times perweek. (By contrast, a TV station canachieve a 35 percent reach with a singleannouncement.) Continental then de-veloped its "This Week One Network"strategy for cross -channel promotion.

A Cable ClearinghouseThe challenge of unifying the on -airlook of a local cable operator isawesome when you consider the needto promote different kinds of pro-gramming on as many as 30 networks,as well as to create an on -air image forthe cable operator that will leaveviewers satisfied with the check theysend each month. Most local systemsdon't have on -air promotion managers,and even forward thinking ones don'tforesee adding them to their organiza-tional charts for several years.

In the interim, Time Inc.'s AmericanTelevision & Communications andpromotional -consulting firm Klein &may have hit upon a working solution.A joint venture between the two com-panies is gearing up to customize spotsprovided each week by the networksfor local systems' use.

Set to be operational next month,the new company will integratenetwork promotional footage with alocal system's own music, graphics andslogans so that every tune -in spot willfit into the operator's overall on -aircampaign. It will perform this task forATC systems this year and open itsdoors to other companies by 1990.

Aside from saving operators the ex-pense of gearing up to produce suchspots in-house, the new company canact as a kind of clearinghouse for cablenetwork promoters, according to Klein& president Bob Klein. "We'll be ableto collaborate with the networks aboutwhat to heavy up on," Klein says."Right now, there isn't much incentivefor them to respond to a system's re-

quests for special service, but with awhole group of systems asking forsomething, they'll know their materialwill be used."

The Klein-ATC venture will beginby providing about 40 spots permonth, express -shipping them to oper-ators on videotape. "We'll start outpromoting what's on this month, thenlater move to what's on this week andeventually, what's on today," Kleinsays. Right now, most systems don'thave the personnel and equipmentneeded to accept daily satellite feedsand then integrate the commercialsinto their schedules. They need to re-ceive commercials about two weeks inadvance of using them. "The next stepwill be getting the capacity for re-ceiving feeds every day," Klein says,and the more systems get into sellinglocal advertising, the easier that willbe.

Klein and others believe cable isturning up the heat on its on -air pro-motional efforts to prepare for a morecompetitive future. "Broadcasterslearned how to create audience loyaltyfor a collection of the least objec-tionable programming," Klein says."They may say people watch pro-grams, but then why do you have somany CBS and ABC Network affil-iates ranking first in their marketswhile it is NBC that has thenumber -one prime time lineup?

"People watch channels, and as wehead for more and more competition,a cable company will lose out if itdoesn't have an identity." -K.H.

The company urges its systems to pick10 to 15 networks to promote each yearand to concentrate on a different oneeach week, rotating them in and out ona three- or four -week cycle.

In a similar media -planning approachto on -air promotion, Viacom Cable cameup with the best rotation for its tune -incampaigns. "We tell our advertising -sales department to treat the promo-tional department as if it's their biggestcustomer," Bennett explains. "We wantthem to come up with the best schedule,throughout all dayparts, for promotingwhat we have to promote."

Bennett believes that in two years,local cable operators will have full-timetune -in promotion managers who willtake network spots and customize them

for their own systems. A few systemsthat already customize tune -in spots useoutside production houses to graft localIDs and jingles onto network spots.Fewer still do the work themselves,using local -access studios for productionwork. Most operators simply air thespots fed them by the networks eachweek and CAB each month, but changeis on the way.

"Running a cable system during the1990s will be totally different in termsof how we promote and communicatewith our customers," Bennett says."The whole notion of our being a utilitymedium will be dead."

Kathy Haley is a New York -basedfreelance writer



Campaigning forSerious LaughsAfter spending a bundle for the latest hot -ticket off-

network sitcom, station management must rely on pro-motion to bring in the crowds. BY NEAL KOCH

John Heinen's mandateweighed so heavily on himthat the only solution, as hesaw it, was to change the waypeople told time. That's be-

cause Heinen's television station, At-lanta NBC affiliate WXIA, had, ac-cording to one published report, paidabout $102,000 an episode for rerunrights to The Cosby Show, the most ex-pensive program in syndication history.(Heinen says that price is inaccurate,but declines to correct it.) Whatever theexact price, the job fell to Heinen,WXIA's vice president of marketingand creative services, to boost the sta-tion's ratings enough to produce an ad-equate return on that hefty investment.So he pulled out all the stops. Heinensays he blitzed more than 90 percent ofAtlantans with ads on buses, trains,radio, "everything but direct mail,"urging people to set their watches by"Cosby Time." That is, he sought to con-vince people to plan their days andnights around sitting in front of the tubeat 5 P.M. weekdays, and, hopefully, re-maining afterwards for the station'slocal newscasts.

Ratings rose more than 70 percentthis past February over a year earlierfor the Cosby time slot, reaching a 12rating and 24 share, putting the stationin second place. The 5:30 news ratingsgained 20 percent, to a 12/22. Moreover,the demographic profile of WXIA's au-dience improved as well, putting thestation in first place among women aged18-54. Still, considering the station's in-vestment in Cosby and the expectationsbuilt up by the show's syndicator,Viacom, some disappointment lingeredat the station. WXIA hadn't taken overfirst place, and its audience share didn'tmatch what the show had pulled inprime time on NBC. Cosby came insecond behind market leader WSB's

local newscast, which benefited fromThe Oprah Winfrey Show as a lead-in.Worse, only a fraction of the increasedaudience drawn by Cosby stayed withWXIA for its 5:30 news. "We wouldhave liked to see greater householdnumbers, as well as the [improved]demos," Heinen says. "We didn't getthe headlines in the local [newspaper]TV columns," headlines that might havesaid, "Cosby Devastates the Compe-tition."

WXIA's experience highlights a co-nundrum facing station managementthese days: What does and doesn't worklocally in promoting big ticket, well-known off -network situation comedies?It's a question ofpressing importance,given the high pricespaid by stations fortoday's network hits asthey become available insyndication.

Syndicators routinelyprovide stations withpackages of materials touse in promoting theshows locally, such asprint ads and on -airpromos that the indi-vidual stations can cus-tomize by adding theircall letters or avoiceover. And off -netsitcoms are clearly doingwell. After all, this yearCosby, the biggest ticketof all time, edged pastOprah to capture thenumber three spot in na-tional syndicationratings rankings.

But, as WXIA's expe-rience illustrates, all hasnot gone perfectly. Evensome Cosby stations

with ratings gains admit to disap-pointment relative to their investments,with some stations grudgingly con-ceding that they've learned lessons thehard way from their Cosby campaigns.

Heinen has already begun thinkingabout how to promote Alf, which hisstation has for fall of 1990. He says hewill conduct a different kind of campaignfor that show, based on lessons learnedfrom his Cosby experience. Considersome details of his strategy.

Heinen began by running many of theon -air promos supplied by Cosby's syn-dicator, Viacom. But he and his staffwent beyond that to create their CosbyTime campaign, supplemented by othertouches. To position the show as enter-tainment worth planning a day around,WXIA created and ran comic black -and -white promos in newsreel form showing,for example, housewives rushingthrough their housework to create thetime to watch Cosby and kids bar-gaining with their parents by offering togive up cartoons to watch Cosby. In an-other spot, a "professor" explained thetheory of Cosby Time. Accompanyingads ran on radio, trains, buses and bill-boards, targeted in particular to blackaudiences. "Our campaign was based onspecific appeal to minority households,"Heinen says.

Come fall 1990, WXIA will promote Alf heavily to men 18-49.


Promotion Lesson's Learned/IN FOCUS

Heinen also targeted children, on thefollowing theory: In a metered marketwith a high percentage of householdswith multiple television sets, childrencan still get to the show even if an adultcontrols the main viewing set. "Kidsbecome more important beyond the di-aries," says Heinen.

The campaign to introduce Cosbyreruns on WXIA ran four weeks,reaching more than 90 percent of themarket, says Heinen. "There was noway anybody didn't know what wasthere," he says. But, by Heinen'sjudgment, household ratings improvedless than they should have for both theCosby slot and the following newscast.On the other hand, Heirien claims thatWXIA's share of black viewers rose byas much as 40 percent. In addition, hesays, because viewers aged 50 and overdefected to competing stations' news-casts, WXIA's audience grew younger.Nevertheless, Heinen gives the im-pression he views this as small conso-lation. Asked earlier this spring to takestock of the Cosby campaign and citewhat he would do differentlysitcom promotional effort, he said, "Weused a shotgun approach. In the future,we'll probably use a rifle.

Wisat

we will do when we in-troduce sitcoms in the future

figure out who might watchthe thing, figure out who might watchthis genre . . . . We will try to targetthose people who want comedy in the af-ternoon. You can't always take thenetwork numbers for granted." So withAlf, WXIA will target its promos tomen aged 18-49, since the show doeswell with males in its network slot onNBC. Heinen says the station also willmarket Alf as an alternative to talk andtabloid shows.

Philadelphia's CBS owned -and -operated station, WCAU, also thinks ithas learned a major lesson from itsCosby effort, a lesson that it will applyto promoting other off -net sitcoms. Thestation already runs Newhart and hasGolden Girls for fall 1990. WCAUscheduled Cosby at 5 P.M. to feed into itsnews, which begins at 5:30.

Despite the name recognition theshow already had, says Dave Ken -worthy, WCAU's director of creativeservices, "Our attitude was we had tolet everyone know what this show was."The station began by playing on Phila-delphia's claim to being Bill Cosby'shome town by "renaming" the city

Lessons learned from Cosby will help Head of the Class.

"Billadelphia" and buying billboardsthat read, "Welcome to Billadelphia."WCAU also produced on -air promosthat made use of the opening dance se-quence from The Cosby Show and in-tercut Philadelphia residents, includinglocal personalities such as city coun-cilman Thacher Longstreth and a locald.j. The station also created anMTV -like spot to run locally on MTVand morning children's shows. Ads ranon TV, radio and cable. In all, says Ken -worthy, the station spent about $500,000on promotion. Ratings climbedmarkedly, but the station still couldn'ttake first place in the market away fromWPVI in the 5 P.M. and 5:30 time slots.

Kenworthy says he took away severalvaluable promotional points from the ex-perience. First, rather than going afterthe desired audience and trying to bringthem to the time slot, he believes it'smore effective to find out which groupsof viewers are available at the time theshow will run and then create andschedule promos to reach that audience."In other words," says Kenworthy,"figure out how to work the room."Second, don't assume a show's popu-larity on the network will automaticallytranslate into local ratings in reruns."We've learned from this the attitudethat we have to go out and sell it again."In addition to all this, Kenworthy sayshe's decided that the introductory cam-

paign for a sitcom should atleast be followed with-andpossibly replaced by-acampaign that can only belaunched once the show ison the air. DespiteWCAU's success with theBilladelphia image cam-paign, Kenworthy now sayshe places a higher value onprint and radio promotionof individual episodes on orclose to their air dates. "Ihad a question," he recalls."Which would bestronger-the personalityor the episodes? Now I'm afirm believer in the epi-sodes."

Toward that end, sta-tions can make use of someservices routinely providedby studios. For instance,says Jim Moloshok, seniorvice president for creativeservices at Warner Bros.Domestic Television Distri-bution, Warner Bros. gen-

erally asks stations that have bought itsshows for copies of their episodeplayback schedules, which it studies tofind the specific episodes a large numberof stations are scheduled to run duringsweeps periods. Warner then constructson -air promos for the sweeps periodusing excerpts from those shows. In ad-dition, after all the episodes of a serieshave aired once in syndicated reruns,says Moloshok, Warner will suggest toits client stations ways of packaging theshows in theme weeks for easy episodicpromotion, and provide on -air promosgeared to those themes. For example,Night Court might be promoted with"It's Bull Week," for a series of episodesfeaturing the court -bailiff character Bull.The studio's shows currently in orplanned for syndication include NightCourt, Growing Pains (fall '89), Head ofthe Class ('90), Alf ('90), The HoganFamily ('90) and Perfect Strangers ('90).Such services may vary from syndicatorto syndicator, depending on whether theseller sees enough upside to spendmoney on shows that they have alreadysold for cash.

For the most part, though, despitehelp from the syndicators who supplythese shows, station promotion man-agers' most valuable tool will continueto be the sometimes painful trial -and -error education that comes from takingthe initiative.


TECHNOLOGY MANAGEMENT

More Sound for Less by Frazier Moore

Computer -generated music means more options. But does it sound like the real thing?

Thanks to state-of-the-art elec-tronics, producers hungry forfresh music or sound effects for

TV productions have an unprecedentedamount of options to choose from. Ahost of new electronic ingredients canprovide an earful of inventive sound-usually for a fraction of the cost of usingstudio musicians.

Take the theme for Fox Television'sThe Reporters. Thanks to an electronicprocess called sampling, a 1929 Royaltypewriter, of all things, "plays" themusic. "We took the sounds that thetypewriter made-a key striking, thespace bar, the bell ringing at the end ofthe line-and digitally sampled that in-formation," says Edd Kalehoff ofManhattan -based Kalehoff ProductionsInc. "We entered it into a device calleda sequencer, and with this library ofsounds in digital memory, we addedmelody and harmony and created themusic out of it."

Kalehoff s client, Joachim Blunck,producer of The Reporters, is a fan ofsuch newfangled gadgetry, which, hepoints out, can stretch the capabilities oftraditional musical instruments, andcreate a whole new product as a result."Say you wanted an oboe to play acertain series of notes, or a certain pitch,that's impossible for that instrument,"says Blunck. "You could sample theoboe and make the sounds elec-tronically. The computer doesn't knowthe oboe isn't capable of doing what youwant, so it does it. You've then capturedthe essence of the instrument, but ap-plied it in a more ambitious envi-ronment."

In other cases, electronics serves in amore literal fashion as it subs for certaininstruments, or even a full orchestra.Viewers of this season's short-livedABC series Murphy's Law would havebeen mistaken if they assumed the back-ground music-say, a sassy saxophonesolo cushioned in lush strings-had beenplayed by an ensemble of living,breathing musicians, even though itmight have sounded that way.

Instead, one lone musician -cum elec-tronics -specialist, Jeanette Acosta, had

replicated an entire orchestra in her LosAngeles studio, courtesy of a team ofkeyboard synthesizers (one for each in-strument) programmed by a Macintoshcomputer. Once she was done com-posing the music and then programmingeach instrument, Acosta pushed abutton, whereupon the computer trig-gered the "orchestra." Voila, it playedas willingly as would a human ensembleplaying full -tilt under a conductor'sbaton.

Acosta explains that, thanks to Mu-sical Instrument Digital Interfaces, orMIDIs, the one -man -band is no longer ajoke. "All the keyboards can be inter-faced with one another," she says. "Andthey play simultaneously, just as if youhad a number of players in the room,

Computers stillcan't outperforman expert musician,says computercomposerEdd Kalehoff.

each at his or her individual in-strument."

As this phantom ensemble-maybe asmany as 30 pieces strong-performed,the music went straight to a four -trackmaster tape, which was then turnedover to the series' producer for inclusionin the final soundtrack.

The advantage? Speed and flexibility,says Acosta. "Imagine the show's pro-ducer says for a certain segment ofmusic, 'That doesn't feel quiteright-can we change the flute to aclarinet?' The answer is yes, with just abit of dial -twiddling. With live musi-cians, you'd have to bring the orchestraback in and start all over."

But Acosta doesn't regard thishigh-tech alternative strictly in practicalterms. She believes that, aestheticallyas well, electronic substitutes are morethan equal to their human counterparts.

Perhaps not surprisingly, some of herpeers think otherwise.

Despite the virtuoso capabilities ofthe computer, says Kalehoff, "If a mu-sician spends 30 or 40 years perfectinghis ability to play an instrument, I don'tthink a chip is gonna outperform him. Isthe orchestra dead? I don't think so."

James McVay, a Los Angeles -basedmusician who scores for television,echoes, "If you were to put a digitalsample of a cello next to a cellist, andlisten to them at the same time, there'sreally no comparison."

Of course, there may be nocomparison in cost, either. Forinstance, if a TV station news di-rector went to McVay to get atheme recorded for The SixO'clock Report, the premium forreal vs. faux orchestra could besubstantial.

"Rates for, say, twenty piecesgo anywhere from $2,000 to$6,000 an hour," says McVay,"with a minimum three-hourbooking." On the other hand,forgetting overhead and his owntime, the strictly electronicroute "actually doesn't cost meanything, you know what Imean? If a charity asked me for

a piece of music, and I was in to thecharity, I could do it for free."

Saving money may be music to theears of many producers, but how doesthe new technology sound to the musi-cians whose lives it continuously changes?

Notes Henry White, a spokesman forthe American Federation for Musicians,"Around 1840, there was a great panicwhen the saxophone came in. It wasgonna put the clarinets out of work be-cause it was like a clarinet, onlystronger. We adjust. You can't stopprogress."

Frazier Moore is a New York -basedfreelance writer.


MEDIA DEALS

The Rattner Years by Paul Noglaws

As its star player moves on to Lazard, Morgan Stanley comes to grips with the loss.

prominent investment bankerschange jobs as frequently asfree -agent ball players, but when

Steven Rattner left his position as thehead of Morgan Stanley & Co.'s mediaand communications group last April totake a job as general partner of LazardFreres & Co., it was big news. In Rat-tner's case the transition was an eventsimply because of what the former NewYork Times reporter had accomplishedduring his tenure at Morgan. When hearrived in June 1984, his mandate wasto build a finance group to take ad-vantage of opportunities blossoming inmedia. He did just that, and in a bigway.

In less than five years, through ag-gressive deal -making, he transformedwhat started out as a one-man show intoa 15 person group that was among themost successful on Wall Street, withmergers -and -acquisition business to-talling $15 billion and more than $4billion of equity raised. Morgan becameknown for its media expertise, and inthe process, Rattner established himselfas one of the most respected mediabankers and deal -makers.

Then, in April, that success story tookan unexpected twist when Rattner an-nounced he was leaving Morgan to joinLazRrd. Clouding his departure was thefact that three other well-knownmembers of the group-Peter Currie,Ronald Beck and Mike Marocco-hadalso decided to defect within the samemonth. The members of the groupconcur that their decisions to leave wereindividually made and based on opportu-nities they had been offered: Currie theposition of senior v.p. of finance atMcCaw Cellular; Beck a principal po-sition with Acadia Partners (a $1.4billion investment partnership); andMarocco general partner of a newlycreated venture fund at Sandler CapitalManagement. But the buzz in financialcircles was that there had been a fallingout between Rattner and Morgan'smanagement over the types of dealsRattner wanted to do-including more

aggressive financings and a more liberaluse of high -yield securities or "junkbonds." "We could see that Morgan wasnot willing to put financing resources asstrongly behind the media group as webelieved our business merited," says aformer group member. "We were lit-erally watching business walk out thedoor, business we had been offered andhad to turn down."

Eric Gleacher, head of Morgan'sM&A department and Rattner's formerboss, does not deny that disagreementstook place: "There were some deals thathe [Rattner] wished we had done thatthe firm simply decided not to do." Buthe takes exception to the notion that thecompany was not fully behind the group.

Rattner: wanted a more aggressive home.

"We're 110 percent behind the mediagroup," Gleacher says, "but there stillcan be differences of opinion over whatbusiness you do."

While Morgan's competition wel-comes any disruption that may swingthe balance of power on Wall Street(sources disagree as to just how muchbusiness will follow Rattner to Lazard),the company appears to have acceptedthe loss and is concentrating its effortson moving the group forward. "Anytimeyou have a guy as successful as Rattnerleave, it is a loss," says Gleacher. "Butwe're going to be just fine. We've comeup with a very good solution to whatwas a very serious departure." Part ofthat solution is Rattner's replacement,Chuck Cory, a 34 -year -old M&A spe-cialist who has spent seven years withthe firm. Although new to media, Coryis excited about the group and confidentabout the abilities he brings to it. "Inmany ways you can argue that thegroup is even stronger than it used tobe," he says. "Now we have not only abunch of industry experts, we havestate-of-the-art financial skills as well.That's not meant to denigrate what weused to have, it's just we have a dif-ferent mix now and, from a client's per-spective, it's a better mix." So far thegroup appears on a positive course. 'It'snot as though the firm watched[Rattner] leave and laid down and said,`You can walk all over me now,' " saysa source close to the group. "They areabout as active as they have ever been."

As for Rattner, it appears he hasfound a home where his aggressivenessand deal -making prowess can flow un-bridled. If his work load permits, hemay even move beyond media. "I thinkyou'll find us very aggressive and veryopportunistic in structuring transac-tions," Rattner says, "particularly thoseinvolving raising difficult kinds of capitallike high -yield securities."

Contributing editor Paul Noglows is theNew York reporter for Media BusinessNews.


Falcon's EyeOn Classic Kind

Of Service

he Falcon Holding Group,the nation's 17th largest M SO, withclose to 650,000 subscribers, is actuallysix different partnerships, five of whichinvolve institutional investors. Onegroup is public, because, says Falconfounder, president and CEO MarcNathanson, "Steve Rattner [formerMorgan Stanley managing director]convinced us that was how we shouldraise money, and we never understoodit and still don't, but it works verywell." Nathanson is no novice, howev-er: before founding Falcon in 1975 (atthe age of 28), he had worked for GroupW Cable (Teleprompter) and WarnerCable. Falcon operates "classic" ruralsystems in 23 states plus an urban sys-tem in the Los Angeles area, where it isbased. Nathanson recently talked cablewith Channels' editors.

Expanding in a Classic FashionThis summer, we are starting a new in-come fund with Dean Witter to try toraise between $50 and $100 million, be-cause as we see interest rates going up,buying cable systems with all cashmight have an appeal. The fund iscalled Falcon Classic Cable IncomeProperties-we are moving more andmore toward the classic cable business,and out of the urban business. Urban ishigher risk, it has high churn and lotsof politics and labor questions. Give methe classic system any day.

We love small towns-Middle Ameri-ca. Home towns where everybodycame from, or someone came from. Ourdefinition goes from Cedartown, Geor-gia, to Malibu, California. Those areboth small towns under our definitionof classic cable, because they need ca -

Falcon CEO Marc Nathanson warnscable against going Hollywood, and reveals

the secrets of customer -service success.

ble for basic television reception. Thenwe add all the satellite services. We are86 percent addressable [in the publiccompany], with 36 to 54 channels. Wehave put a lot of money into technolo-gy. And our operating margins, exclud-ing the urban companies, are in thehigh 50s. In Los Angeles, they're in thelow 30s. It's a different business.

Hollywood Finds Cable TVIt used to be, you'd go to a party inL.A., and all the people would be in theentertainment business, and they'dsay, "What do you do?" And I'd say,"I'm in the cable TV business." They'dsay, "Oh God, let's not talk to him,"and move on. Now, that's all they wantto do, is talk to cable.

They don't understand what we do,though, first of all: that I am concernedabout whether we should buy Toyotaor Ford trucks to see if our installerscan get better mileage. They want totalk deals. So Spielberg and all the bigmovie people will call up and want totalk about programming ideas andwhat they can do. It's a very hot topicon the cocktail circuit.

Driving Programming DollarsThe cable industry will lose a lot of thequality of its programming-and I'mtalking quality not from a public -broadcasting sense, but from a viewer-ship satisfaction sense-if we try tomake the creative decisions ourselves.But I think producers are going to haveto wait until the cable companies stopbuying systems, develop their cashflow, and then say, "Well, how can weget a 2 percent lift in subscribers?What programming, what channels,

what concepts don't we have-for sen-ior citizens, for women, for othergroups-that we could get a lift in pen-etration from?" Then, there will be alot more money going directly into pro-gramming from the cable community.

Small Operators Get SqueezedThere is going to be increased pressurefrom the programming services towardcable operators, and it's going to be aproblem, especially for the medium-sized operator such as Falcon-thosewith under 1 million subscribers. Now,with the Time -Warner merger-whichI think has many benefits for the cableindustry-one of the questions is, if youhave a new programming service, oryou're going to give equity in yourgreat new talk -channel idea, are yougoing to go to Time -Warner and TCIand then skip over everybody else? Be-cause once those two commit, yourchannel is there; and you might give itto them for 2 cents [per subscriber].Then you come down to Nathanson andto [Simmons Communications'] SteveSimmons and to [Cablevision Indus-tries'] Alan Gerry and you say, "Wehave a rate card, and over 5 millionsubscribers it's 2 cents, but anythingfrom 100,000 to 5 million, it's 20 centsper customer per month."

That has not happened. In a way, Ithink John Malone has been very benev-olent toward the medium-sized cable op-erator. But I think a squeeze could oc-cur. We are very conscious of it.

The Trouble with TelcosI guess I've been in the business toolong, because I always thought thetelephone company was our enemy-


you get these prejudices. I don't trustthe telephone companies. And there'sprobably a lot of synergism. But I re-member the days when we used to op-erate lease -backs, where the phonecompany owned the plant and the onlyway you could get on the poles was tomake a deal with them to build it foryou and lease it back. And every timewe had a service problem, we'd call upthe local [telephone] engineering office,because they maintained the plant, andwe'd say, "We're out of service. Canyou go over there?" And they'd say,"No, no, we have a telephone problem.That's our priority."

Addressable ConvenienceWe will be addressable wherever possi-ble, and the reason is not pay-per-view-that is a small adjunct revenuesource. The prime reason is that it'smore efficient to operate. We useAMLs and microwave systems to con-nect five or six small towns that mighthave 2,000 subscribers apiece but are20 miles apart. In the old days, if some-body wanted to change from Showtimeto Disney, we'd have to roll out a truck,bring a new converter, give it to themand roll the truck back. Now we canjust punch up the converter. We use itfor marketing all the time: "You wantto see Disney? You're going to see it to-night. Tell us what you think." Thetechnology is very good for that.

Local Ads: The Next FrontierSince I've been in the cable business,the first great development was satel-lites. The second was pay TV, becausethat gave us the second revenue stream.Everything else that happened was fine,but that was dramatic. The third greatdevelopment is [local] advertising.

I am convinced-I am not a homeshopping believer; I am not overly con-fident in pay -per -view as a majorsource of revenue-that 30 percent ofFalcon's revenues five years from nowwill come from advertising sales. Evenin the small towns. If the local car deal-er wants his car to be on an NFL foot-ball game, and if his cost per thousandis effective-or maybe he doesn't evencare about that, he just wants to be onan NFL game-he's going to be there.It works. We're doing a bang-up job,close to $3 million a year in our urbanmarkets-on one system, albeit a verylarge system. And we are taking thatexperience and just now starting it upin our clusters of classic systems.

Those Lazy AgenciesIf the media buyers at ad agencies-and my father is an old advertisingman-weren't so lazy, and if they un-derstood what was out there with cable

'If the media buyers atad agencies weren't so

lazy, and if theyunderstood what wasout there with cable

and the attractivenessof it, we'd have muchmore revenue today.'

and the attractiveness of the cable buy,we would have much more revenue to-day. It's a better buy, and the good re-search supports that. What you have,though, is a lazy network of mediabuyers out there, for whom it's mucheasier to call up their Petry or whateverrep and say, "We're going to buy thetwenty major markets and this and that."Even though, from an advertiser cost -per -thousand, that is not a good move. We'vegot to break down some of those patterns.

Taking Stock in CableWe have one public company. We cameout at $20 a share. We pay a $2.15 tax -deferred yield, which is over 10 per-cent. Now, where are you going to in-vest your money and get 10 percenttax -deferred? And we continue to growand our cash flow increases. What isour stock selling at two years later?The same $20. Something is wrong.What it is, is that we either don't tellthe story well or Wall Street doesn'tunderstand it. And maybe I don't care,because in the long run there will be anadjustment, and the private -public val-ues will get closer.

The Customer -Service BugabooWe have to answer our phones in threerings. The first person they talk to hasto be able to solve their problem. Itcannot be a nightmare. People do notlike their cable companies anymore.

In the old days, in the small towns,you'd call up your cable company andyou'd talk to Sylvia. Sylvia knew ev-erybody in town. She'd ask if yourmother came home from the hospitaland was the cable working. If not,she'd send Ray over there to turn it on.I mean, that was customer service.Now, we're getting 9,000 phone calls amonth, not 90, in Pasadena, and it'smore difficult to operate. But the samephilosophy has to be there.

We have hired an outside researchfirm to survey every market that wehave as to customer -service satisfac-tion, and we give rankings, and at ourmanager meetings we show every man-ager who is at the top and who is at thebottom. And they had better get off thebottom, because customer service andsatisfaction is what we're all about.

The Cable PromisePeople can whine and cry about cable,but cable has really, fulfilled the wired -nation promise of an abundance of pro-gramming. We can all say we don't likethis or don't like that. But at 8 o'clockat night, if you live in Malibu, you have54 different choices of what you canwatch. You still might not find anything you like, but there's 54 choices.That dream has come true.


Achieving on theExchange

/n all segments of the television industry, more com-panies saw their stock price improve over the pastyear than saw it decline. Cable programmers and

MSOs fared best, especially CVN Companies, with itsbullish market performance. In the diversilied segment,companies with cable interests generally wound up withstronger stock values, while TV and radio broadcasterslost their footing.

Broadcast Television3/31/89 3/31/88 Change

Chris-Craft 31.63 17.38 82.0LIN Broadcasting 88.25 52.38 68.5United Television 33.38 25.50 30.9McGraw-Hill 67.50 53.88 25.3CBS 173.50 156.38 10.9American Family 17.00 16.25 4.6A.H. Belo 26.00 51.63 A 0.7TVX Broadcasting 3.25 3.25 0.0Lee Enterprises 25.13 26.63 -5.6Telemundo Group 6.00 6.75 -11.1

Liberty Corp. 35.50 45.00 -21.1American Comm. & TV .03 .13 -76.9

Average 9.0S&P 500 10.3

Cable3/31/89 3/31/88 Change

CVN Companies 14.89 5.38 176.8Rogers Comm. 111.00 42.50 161.2Turner Broadcasting 26.25 15.25 72.1

ATC 43.25 25.75 68.0Adelphia Comm. 26.25 16.75 56.7Financial News Network 8.75 5.75 52.2Time 115.88 85.25 35.9Centel Corp. 65.00 48.25 34.7Video Jukebox Network 2.69 2.00 34.5Jones Intercable 16.50 12.63 30.6Acton Corp. 19.88 15.25 30.4Comcast 21.13 25.00 B 26.7WestMarc 20.50 16.50 24.2Cablevision Systems 39.75 34.25 16.1

United Artists Comm. 33.25 29.00 14.7United Cable 38.00 33.25 14.3ICI 30.00 26.50 13.2TCA Cable 32.75 29.50 11.0Falcon Cable Systems 19.88 18.25 8.9Century Comm. 18.88 17.75 6.4QVC Network 9.13 9.00 1.4Home Shopping Network 5.75 6.13 -6.2Nostalgia Network 1.13 1.31 -13.7Playboy 12.88 15.00 -14.1Maclean Hunter 13.00 23.00 -43.5

Average 32.5S&P 500 10.3

Diversified3/31/89 3/31/88 Change

Outlet Comm. 29.25 16.25 80.0Viacom 39.38 22.75 73.1Warner Comm. 46.88 30.50 53.7Multimedia 88.75 63.50 39.8Walt Disney 78.50 59.13 32.8Gulf +Western 47.75 78.25 A 22.0Tribune Co. 44.25 37.00 19.6Meredith 30.50 27.25 11.9Cap Cities/ABC 379.50 341.50 11.1

Knight-Ridder 44.63 40.25 10.9General Electric 44.50 40.38 10.2Gannett 37.75 35.50 6.3Times Mirror 35.75 34.00 5.1

Jefferson -Pilot Corp. 33.75 32.50 3.8Westinghouse 54.25 51.75 1.0Park Comm. 28.00 28.00 0.0Washington Post 211.25 218.50 -3.3Stauffer Comm. 135.00 142.00 -4.9News Corp. 19.50 20.50 -4.9Price Comm. 7.13 7.88 -9.5Great American Comm. 10.38 11.50 -9.7New York Times 26.50 29.63 -10.6Media General 34.00 41.00 -17.1Scripps Howard 59.00 76.50 -22.9Pulitzer Publishing 25.88 34.00 -23.9

Average 11.0S&P 500 10.3

Production3/31/89 3/31/88 Change

New World Ent. 6.25 2.75 127.3Columbia Pictures Ent. 17.38 7.75 124.3MGM/UA Comm. 16.75 9.00 86.1All-American TV 3.13 1.87 67.4Republic Pictures 9.50 6.38 48.9Nelson Holdings .69 .50 38.0

5.75 32.7King World Prods. 25.00 19.13 30.7MCA 52.75 43.75 20.6Prism Ent. 3.25 2.88 12.8Fries Ent. 2.50 2.38 5.0Orion Pictures 15.75 15.63 0.8Vestron 5.88 5.88 0.0Reeves Comm. 5.50 5.50 0.0Carolco 9.25 9.75 -5.1New Line Cinema 6.38 7.25 -12.0Barns 8.88 10.13 -12.3Qintex Entertainment 4.25 5.25 C -19.0Dick Clark Prods. 4.00 5.25 -23.8Heritage Ent. 1.88 2.63 -28.5WesternWorld-Samuel 0.01 0.25 D -96.0

Average 18.9S&P 500 10.3

Radio3/31/89 3/31/88 Change

Satellite Music Net. 5.31 3.88 36.9Osborn Comm. 8.00 6.00 33.3Durham Corp. 32.50 26.75 21.5Jacor Comm. 6.00 5.75 4.3Southern Starr 7.00 7.00 0.0Sun Group 1.63 1.63 0.0Clear Channel Comm. 13.88 14.13 -1.8Olympia Broadcasting 2.50 4.50 -44.4Faircom 0.50 1.13 -55.8Westwood One 9.00 22.75 -60.4

Average -6.6S&P 500 10.3

A Two -for -one stock split, paid 5/88.B Three -for -two stock split, paid 4/88C 1988 stock price is Hal Roach StudiosD Average of high and low bid prices for 3/31/88

Source: Media Business News


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