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UPN put under watchful eye

By Cynthia Littleton

LOS ANGELES (The Hollywood Reporter) --- What was once seen as an inevitable corporate restructuring in the wake of last year's Viacom-CBS merger is now a done deal.

Viacom on Monday confirmed plans to shift control of UPN from Paramount to CBS, integrating the operations of the two networks under the oversight of CBS president and CEO Leslie Moonves.

The decision prompted the resignation of Paramount Television Group chairman Kerry McCluggage, who had been responsible for UPN.

Calling it the "culmination" of last year's Viacom-CBS merger, Viacom president and chief operating officer Mel Karmazin said the shift "realizes an important opportunity to bring new efficiencies to the broadcast business, while maintaining the distinct voices of CBS and UPN as leaders in free, over-the-air broadcasting."

The move raised myriad questions about how much consolidation would occur between the operations of the two networks, and it renewed speculation about the future of UPN president and CEO Dean Valentine, who already is in the unusual situation of having filed a breach-of-contract lawsuit against the network he's running.

Viacom brass vowed that CBS and UPN would maintain separate on-air identities and affiliate relationships, but Moonves said that it was far too soon to comment on specific details.

The over-arching goal, Moonves said, is to gain economies of scale by streamlining operations wherever possible to help the 7-year-old UPN network become profitable. CBS already had taken the first step toward running UPN last year when it assumed oversight of the 19 Paramount-owned TV stations, all of which are UPN affiliates.

"It just makes a lot of sense when you've got a company this big to reorganize this way," Moonves said. "It's hard to be efficient when you don't have all the pieces together (in the same division). But when you do, the businesses go hand-in-hand and financially, a lot of good things can happen for this company," Moonves said.

Viacom insiders sought to downplay speculation that the UPN shift amounted to the end of a struggle between Viacom chairman Sumner Redstone and Karmazin over whether to keep UPN in the Paramount fold or move it to the CBS side. UPN has seen its fortunes rise considerably in the 2001-02 season thus far, thanks to the success of the new "Star Trek" drama "Enterprise" and the high-priced acquisition of "Buffy the Vampire Slayer," but it is still a money-losing drain on Viacom's balance sheet.

McCluggage and his boss, Viacom Entertainment Group chairman Jonathan Dolgen, were known to have lobbied hard to maintain the status quo with UPN under Paramount's control. Moreover, Redstone was quoted in the Los Angeles Times last month as being against the combination of CBS and UPN.

It's still unclear how deep the streamlining of the two networks will go. There will no doubt be a push to use CBS' muscle to boost UPN's advertising sales, and certain back-office administrative functions will likely be consolidated.

Sources familiar with the players involved said that it is unlikely that Valentine will remain with the network over the long term under Moonves. There was speculation that Moonves would seek to bring in strong programming and development executives but not a direct successor to Valentine, who has spearheaded UPN's development for next year since Tom Nunan departed as entertainment president in June.

Valentine would not comment on Monday about his future at UPN -- other than to say, "I'm still here" -- nor would he comment on the status of the lawsuit filed in September over what Valentine maintains is up to $22 million in corporate bonuses promised in his original 1997 contract with the network.

The expansion of Moonves' corporate plate also raised speculation about whether he would bring in additional top managers at CBS or perhaps establish a new executive layer within CBS Television to help juggle the competing responsibilities. Eric Tannenbaum, former president of Columbia TriStar Television and Artists Television Group, was rumored as a possible candidate for a top post in the CBS Television universe, but he was also mentioned as a possible candidate to fill a post-McCluggage void in the executive ranks at Paramount.

Viacom shares fell 9% to $41.51 on Monday, primarily on fears that the company is exposed to costly asbestos lawsuits through its acquisition of CBS, once owned by industrial giant Westinghouse. Viacom said in Securities and Exchange Commission filings that it faces almost 130,000 asbestos claims from Westinghouse.


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