• by Wayne Friedman , David Goetzl  @dgoetzl, January 25, 2006

LAS VEGAS--A day after a massive bomb hit the TV industry, advertisers, agencies and programming executives today will begin assessing the fallout over Tuesday's announcement that CBS Corp. and Warner Bros. will merge their respective, financially struggling UPN and The WB network to form a new network called The CW. The main question on everyone's mind will be whether one plus one equals something more than the sum of two fractional networks.

CBS and Warner Bros. will each have a 50 percent interest in the network that will launch this fall. Programming will be a merged effort--taking the best of WB and UPN, such as "Smallville," "Gilmore Girls," "Everybody Hates Chris," "Veronica Mars," and "Girlfriends," among others.

Tribune Broadcasting and CBS stations signed 10-year affiliation agreements with the new network, covering 48 percent of the country. Both WB and UPN will cease operations in September 2006 when the new network starts up. Tribune gives up ownership in the WB, and won't be an owner of the new network.

Dawn Ostroff, president of UPN, will be president of entertainment of The CW. John Maatta, currently chief operating officer of The WB, will become chief operating officer of The CW, taking over all non-entertainment duties--business affairs, network distribution, legal, finance, and human resources. In the release there was no mention of Garth Ancier, chief executive of the WB.

For advertisers and viewers, the network will offer a diverse programming lineup--one that will be targeted to a younger audience, similar to the WB and UPN's current viewership. Bill Morningstar, executive vp of advertising sales at the WB, will take over as head of advertising sales for the new network.

The move seems inspired and pushed by CBS Corp., which as a new, separate, publicly traded company since the start of this year, has made several significant deals. One executive said the deal came together in the last three weeks.

The deal hit even insiders attending the National Association of Television Programmers Association conference here like a bomb.

"I was taking a shower when I noticed Les Moonves [chairman of CBS Corp.] was being interviewed on TV," said John Nogawski, president of domestic television for CBS Paramount Domestic Television. "I was thinking, why is he on TV right now? He then said WB and UPN were ceasing operations. I jumped out of the shower, went to my BlackBerry, and e-mailed Les with this message: 'Wow!'"

The new network will take on the WB's current prime-time scheduling model, running Monday through Friday from 8-10 P.M.; Sundays from 7-10 P.M.; and Sunday from 5-7 P.M.. There will also be two non-prime-time blocks: a Monday through Friday afternoon block from 3-5 P.M. and a 5-hour Saturday morning animation block.

The biggest fallout will come from those former WB or UPN stations that aren't picked up by the new CW as affiliates. Many come from the News Corp. group of stations, where they are UPN affiliates (from News Corp.'s previous Chris-Craft station deal of a few years ago). Other station groups will also be affected.

"The biggest effect will be that on station valuations," said Bill Carroll, vp and director of programming for TV station advertising sales rep firm, Katz Television Group.

Even Tribune and CBS stations will be affected. Tribune and CBS own a combined seven stations that will be without network programming as a result of The CW. Those are Tribune-owned WB affiliates in Atlanta, Seattle, and Philadelphia, and CBS-owned UPN stations in Dallas, Boston, Miami, and New Orleans.

News Corp. spokesman Andrew Butcher indicated that the UPN programming might have been more of a hindrance than a help (News Corp. stations had been considering leaving the UPN fold with contracts expiring this year.)

"They didn't merge the two networks because they were overperforming," Butcher said. News Corp. has not decided how it would program the 10 hours a week per station now freed up, said Butcher. He said the company was optimistic that it will come out stronger: "This is a change that presents us with another opportunity to put on new and different programming."

On Wall Street, CBS stock rose 4 percent, and Time Warner was up 1 percent on the news. Merrill Lynch's Jessica Reif Cohen referred to the combined network as a "mild positive" for both companies with "clear cost/programming synergies," although "it is unlikely to have a significant impact on either company's financials or stock price."

CBS Corp. and Warner Bros. must first dissolve their respective networks before starting a new one. By stopping WB and UPN, their respective station affiliation agreements will be terminated, even if some stations have multi-year agreements extending beyond September 2006. As a result, some stations might take legal action.

From a programming standpoint, the new network will have a lot to choose from. "At least this year they'll be dealing from strength," said Brad Adgate, senior VP and director of research for Horizon Media.

It's a different programming point of view from soon-to-be-former UPN and WB stations. Right now, they don't know what to do.

About a hundred UPN and WB stations are in state of uncertainty. Should they buy syndicated programming for the fall? Will they become new CW affiliates? Will Fox set up a new network, perhaps a programming service for station refugees without programming?

"My programming executive already e-mailed a list of possible movie packages for the fourth quarter," said Greg Armstrong, president and general manager of KTVD Denver, a UPN affiliate.

Many executives here at NATPE are already looking at possibly extending their stay--perhaps to buy additional programming for prime-time slots that will be need to be filled for the fall. It could represent a boon to the syndication business. "This is very good news for us," said Rick Feldman, president and CEO of NATPE. That is especially true for the two companies involved--CBS Corp. and Warner Bros. Their respective syndication divisions, CBS Paramount Domestic Television and Warner Bros. Domestic Television Distribution, could gain syndication program sales business. It could be a boon for other companies as well.

UPN stations will have their own separate problems. UPN's network programs only five days a week--versus that of The WB, which programs six, as well as other non-prime-time dayparts.

Many soon-to-be-former UPN stations have already made programming commitments for certain non-prime-time, non-network periods--such as daytime and Saturday morning and early Sunday evening. But now under the CW network, those time periods are to be programmed by the new CW network.

"If you made a program commitment for those non-prime-time periods," said Bill Carroll of Katz, "how do you deal with that?"

This is a story that won't die for some time. "There is a lot of confusion," said Carroll. Although some mobile devices helped executives through this disorder, he said: "It was the day of the BlackBerry."