RATINGS ASIDE, CBS HAS GOOD VALUE

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CBS could use a high-profile distraction as the network prepares for disappointing first-quarter earnings and ratings. Those results will be in stark contrast to last year's Olympian results. Indeed, at this point, the only growth at CBS is in the number of corporate suitors lining up as the network goes on the block.

"CBS will be taken over," said Jay Nelson, an analyst with Brown Bros. Harriman & Co., New York.

For now, the lead candidate appears to be former QVC Chairman Barry Diller, said to be courting backers so he can make his second run at CBS. Mr. Diller last year failed to take control of CBS in an aborted merger with QVC.

Now other agents may also be at work: For one, Media Co.-a joint venture of Creative Artists Agency, Bell Atlantic Corp., Nynex Corp. and Pacific Telesis-reportedly has an eye on CBS.

CBS insiders branded that deal as "undoable" for regulatory reasons. The rumors, they say, were spawned by Media Co.'s courtship of CBS Broadcast Group President Howard Stringer, who's expected to take the job.

A more likely buyer is Viacom, which has discussed a merger with CBS.

Turner Broadcasting System also is looking like an acquisitor following Time Warner's plan to sell its Turner stake, though Turner is said to be in renewed discussions with General Electric Co. about a merger with NBC.

Walt Disney Co. and ITT Corp. also loom as potential bidders.

Still, CBS insiders can't confirm the network is in play even though the public market believes it is.

"We have CBS valued at $45 to $50 a share," said Merrill Lynch analyst Jessica Reif, who said a bidding war could boost CBS' private market share to more than $80. "Right now, it's trading at $62 to $63 a share."

Brown Bros.' Mr. Nelson said CBS' current weak ratings mask strong underlying value for a buyer, particularly a studio. Regulations barring a network and studio merger expire this year. Other regulatory changes could factor into a CBS play, including proposals to allow foreign ownership and increase the number of stations networks may own.

The rules could bring out new bidders, which is what at least one CBS insider thinks Chairman Laurence Tisch may be thinking.

"If there are more bidders, you can afford to be patient because the asset value is going up," said the CBS executive.

Other observers believe Mr. Tisch might also do well to wait for a time when CBS' prime-time performance looks more stable.

"This is not the time for them to sell," said Paul Schulman, president, Paul Schulman Co. He said one or two hits would put CBS back on an upward path.

Season-to-date through Feb. 19, CBS prime-time ratings were down 17% to an 11.5 Nielsen rating. That puts it third behind ABC's 12.2 rating and NBC's 11.6. By the end of February, the fall-off will appear more severe because of the contrast with CBS' February 1994 record Winter Olympic ratings.

But Mr. Schulman said not much has really changed.

"The big difference is that their Tuesday night is no longer working for them," Mr. Schulman said. "A year ago, CBS' Tuesday night was a strong second place to ABC. But because of what happened with `Wings' and `Frasier' at NBC, NBC took over the No. 2 spot on Tuesday nights."

He said CBS already has strong series on the bench and has money to put into programming previously tied up in NFL and Major League Baseball rights deals.

In March, CBS will begin airing many new contenders, including "The George Wendt Show;" "The Office," starring Valerie Harper; "Under One Roof," starring James Earl Jones; and "Double Rush," starring Robert Pastorelli. The network also won rights for key prime-time projects, including a new Don Johnson series.

"But they have their work cut out for them," said Mr. Schulman, "especially when you consider they're setting their goals on making the network younger."

Indeed, according to a BJK&E Media Group analysis, the median age of CBS' audience hit a new high in the fourth quarter.

"For the first time, CBS' median age is 50," said Steve Sternberg, senior VP-broadcast research at BJK&E. "That's up from a median age of 48.1 last year."

By comparison, Mr. Sternberg said the median ages of other networks' viewers have been relatively stable: 38.3 for ABC, 42.8 for NBC and 29.6 for Fox. But Mr. Sternberg and others note the overall ratings margin has grown so narrow that "one or two hits" can turn a network around.

Noted Booz Allen & Hamilton Partner Michael Wolf: "The challenge for CBS, is to rebuild their pipeline of great programming. And they're already taking some steps to do this."

Joe Mandese coordinates Mediaworks.

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