Murdoch buy threatens UPN

NEW YORK Just one month ago, the outlook for UPN seemed a lotbetter. The 5-year-old network, while still struggling to achieveprofitability, had pulled out of a ratings slump, chalked up gains inad sales and announced a new name and logo to highlight itsassociation with the Paramount entertainment brand.

Corporate parent Viacom Inc., which already owns CBS and hadrecently taken full control of UPN, was lobbying federal regulatorsto ease regulations barring one company from owning two networks.

But now that Rupert Murdoch's News Corp. has outbid Viacom inacquiring Chris-Craft Industries Inc., the owner of eight major UPN-affiliated stations, the future of the fledgling network is far morecloudy.

While UPN is affiliated with more than 100 stations, the eightbeing sold to News Corp.-owner of the rival Fox network-cover some ofthe biggest cities in the country. If all eight drop UPN, it wouldcut the network's national reach from an average of 87 percent to 67percent and leave it out of the crucial markets of Los Angeles andNew York.

Viacom, which had been in serious talks to buy Chris-Craft,wouldn't comment on News Corp.'s $5.4 billion acquisition, or how itwould affect the future of UPN, which is changing its name to theParamount Network next year. But Mel Karmazin, the hard-charging newViacom president and former head of CBS, has said he would close thenetwork if it did not become profitable.

Peter Chernin, the president of News Corp., made it clear in aconference call with investors that the company had little interestin the future of UPN or whether the Chris-Craft stations remainedaffiliated with the network.

"I'm not sure I know what will happen to it. . . . I don't thinkwe care enormously," Chernin said. "Whether it's to be a UPNaffiliate, whether it's to run these as independent stations . . . wehave multiple ways to go."

News Corp.'s main motive for buying the stations is to takeadvantage of recently relaxed federal rules allowing one company toown two stations in the same city, which allows for major costsavings in combining sales forces, news and programming operations.News Corp. already has a profitable two-station combo in Dallas.

In adding the 10 Chris-Craft stations to the 23 it already ownsacross the United States, News Corp. would have two stations in eachof four key cities: New York, Los Angeles, Phoenix and Salt LakeCity.

News Corp. will have to dispose of several stations in order tocomply with a cap on total station ownership, but Chief FinancialOfficer David DeVoe told investors on the conference call that thecompany hoped to use station swaps with other companies to achieve atleast five other two-station arrangements.

News Corp. is paying a total of about $5.35 billion for Chris-Craft, but after accounting for cash held by a Chris-Craft subsidiaryand planned sales of television stations to comply with federalownership limits, the final value of the transaction will be about$3.6 billion.

Chris-Craft's shares have been on a wild roller coaster ride sinceFriday. At first they plunged 11 percent to $62 following Viacom'sannouncement that it had ended talks to acquire the former boatbuilder.

Associated Press