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NETWORK—WB Network Chief Predicts Profit in 2002

Despite four straight years of losses, WB Network President Jamie Kellner predicts the network will be profitable by 2002. The struggling Burbank-based network, now in fifth place among six television networks (as evaluated by A.C. Nielsen ratings), has been under pressure from investors and now from its new parent company, AOL Time Warner. Kellner said that with its current lineup, which includes a bone fide breakout hit as well as a mix of new and old shows that have been steadily cutting into the audience shares of its network competition, WB is poised to turn a profit sometime next year. Among the shows leading the charge for the network are “Seventh Heaven,” which at No. 76 last week was its highest rated show, and “Buffy, the Vampire Slayer,” which came in at 87th. Other programs that target the highly lucrative 18- to 34-year-old market are “Popstars,” “Jack & Jill” and “Charmed.” Although Kellner refused to be pinned down on exactly when the company’s fortunes would change, he noted revenues have improved considerably since last year. With $384 million in revenues in 1999, compared to $183 million in 1998, the network made headway thanks to a strengthened lineup focusing on teen-oriented programs like “Dawson’s Creek” and “Felicity.” But it still struggled with ratings and revenue. It also suffered a blow last year when it lost one of its strongest affiliates, WGN-TV in Chicago. The company, including cable and television syndication sales, accounted for 20 percent of the old Time Warner’s overall advertising revenues of more than $5 billion. The company was able to stave off a challenge from fellow upstart UPN, which remained mired in last place in the network ratings race at the end of the 1999-2000 television season. Thanks to its teen dramas, this season the network has been in a virtual dead heat with UPN for fifth place in the ratings with an average of 4 million viewers each night, according to last month’s Nielsen ratings. Time Warner Entertainment owns 64 percent of the company, The Tribune Co. 25 percent and WB executives the remaining 11 percent. During a recent teleconference with network affiliates, Kellner pledged to keep the network on its current track and agreed not to lay off any of the company’s estimated 350 employees, saying the network is lean and efficient at current staffing levels. That news came six days before parent company AOL Time Warner announced the planned layoffs of 2,000 employees, none at the network. The newly-merged company has also announced it plans to honor last year’s pledge to produce $40 billion in total revenue and about $11 billion in cash flow. The cuts will come from eliminated redundancies and shared technology infrastructure created by the recent mega-merger, the company said. Pressure from new bosses In 1999, Time Warner had $27.7 billion in total revenue while AOL garnered $6.8 billion in revenue. However, AOL had a whopping $1.2 billion in profit while Timer Warner netted about $630 million. AOL Time Warner’s revenue pledge puts added pressure on the fledgling WB Network to turn the financial corner quickly and produce its first profit ever, network officials admit. Youssef Squali, an analyst at ING Barings, said a soft advertising market hurt the WB Network and its parent company in 2000, despite an estimated upturn in the quarter ending Dec. 31 when overall sales for AOL Time Warner increased by 63 percent. But Squali predicted the WB Network would break even for 2000, although final figures for the year have not been released by the company. The WB began broadcasting in January 1995. It now has more than 100 affiliates around the country, airing programming geared primarily toward children and young adults. In November, the company scored its highest ratings ever among 18- to 34-year-olds the most prized demographic in television with highly rated episodes of “Felicity,” “Buffy” and “Dawson’s Creek.” Kellner said the company’s new shows have helped pull in additional revenue and improved ratings. Among them are “Popstars,” a so-called reality-based show featuring contestants who vie to be pop stars, and “Gilmore Girls,” a drama about the relationship of a mother and daughter. “The network has never been in better shape,” Kellner said. Kellner said he believes the company is on the upswing with new programming that advertisers find attractive. He said the company’s market share and demographics could have helped then-presidential candidates Al Gore or George W. Bush had they advertised with the network. “They didn’t spend any money on our (18-34) demo(graphic). They didn’t even think about it, but they vote as much as 50-, 60- and 70-year-olds,” he said, referring to commercials both candidates ran on ABC, CBS and NBC, where most viewers are between the ages of 44 and 70. Susanne Daniels, the network’s president of entertainment, said the company is moving on its network television competitors with its youth-oriented programming. She said the network is banking on new shows like “The Oblongs,” an animated show featuring a strange cartoon family, and “Jack and Jill,” a one-hour drama featuring a 20-something couple dealing with post-collegiate life. But a dispute between the network and 20th Century Fox, which produces the WB’s top-rated “Buffy, the Vampire Slayer,” may throw a monkey wrench in the network’s efforts to post a profit. Fox is reportedly demanding nearly double its licensing fee from the network in order to keep the show on the WB. Kellner says the company is limited by how much it can pay for the hit show. Losing “Buffy” could devastate Kellner’s plans, but he said the network will not lose viewers even if the show leaves the fold. Its star, 23-year-old Sarah Michelle Gellar, added to the speculation by hinting that she may not return to the program if “Buffy” moves to another network. Kellner remained optimistic: “We hope that it works out and we’re going to do our best.”

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