FOX JOLTS NETS INTO NEW ERA

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Rupert Murdoch's partnership with Ronald Perelman ushers in a new world order for network TV that has implications far beyond the U.S. markets that will shuffle Fox affiliates.

Last week, Mr. Murdoch said he was investing $500 million in Mr. Perelman's New World Communications Group and that New World's TV stations will switch affiliation from the Big 3 to Mr. Murdoch's Fox.

The move is expected to be only the first assault in a long-term affiliate marketing battle that will disrupt relationships on every network.

"This just ain't about stations in a dozen markets switching to Fox. This is an affiliate war that is going to spread across every [market] in America," said Jon Mandel, senior VP-director of national broadcast at Grey Advertising, New York. In the short term, Mr. Mandel said, all networks will be losers by creating confusion among viewers and advertisers.

The confusion comes at a particularly bad time for the networks, because advertisers were just about to lay down billions of dollars in upfront spending for the 1994-95 TV season.

"Buyers don't like uncertainty. And the uncertainty is more than just CBS," Mr. Mandel said.

The Fox/New World deal helps solidify Mr. Murdoch's base in the U.S. at a time when he's also seeking to broaden his TV assets worldwide. In addition, it should strengthen the Fox brand on the U.S. airwaves.

"In the 500-channel universe, communicators with a brand identity will thrive and survive," said Fox President Lucille S. Salhany.

She said 8-year-old Fox, which earned prime-time ratings of 7.2 for the 1993-94 season, already has a strong brand identity with viewers. But she added the New World deal and Fox's recent acquisition of NFL National Football Conference TV rights will enable the network to promote itself more effectively.

"We believe we have the strongest brand name in TV. And with the NFL, our New World investment and new schedule, it sends a strong message to advertisers, which now have an even stronger pipeline into their target demo-18 to 49," Ms. Salhany said.

CBS appears to be the biggest initial loser in the Fox/New World deal, as eight strong TV stations jump to Fox.

Following news of the Fox/New World deal, CBS' market value dropped about $500 million.

"Loyalty just went out the window," said CBS President Howard Stringer. He said CBS is considering increasing affiliate compensation and investing in stations in a move similar to the one Fox made, to attract the best TV stations.

Most network executives said such disruptions will ultimately be a negative by causing confusion among viewers.

NBC President Pier Mapes said that the real value in a strong network and affiliate partnership is in maintaining a strong brand that viewers are familiar with.

"They understand the huge risk of switching affiliations," Mr. Mapes said, noting stations that switch affiliations almost always drop in the ratings.

At its annual affiliates conference in Los Angeles last week, NBC executives discussed the impact of the Fox/New World deal and resolved to work more closely together.

Jim Waterbury, general manager of KWWL, the affiliate in Waterloo, Iowa, and chairman of NBC's affiliate board, said NBC affiliates want to strengthen their partnership with the network.

Both NBC and CBS executives indicated, however, that they are seeking longer-term contracts with the stations, upwards of five years.

Most observers agreed that the New World deal and the NFL give Fox an even playing field.

"The problem," said an executive at a rival network, "is they don't have the players to put on the field."

While the added promotional circulation of the NFL will help Fox turn its modest hits into bigger hits, most agency executives said they don't see any real potential for a breakout show on Fox's new schedule that would rival the Big 3.

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