VIACOM ADDED TO NET GUESSING GAME

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The best network TV show this fall will be in the boardrooms of the Big 3, as they calculate countless merger and acquisition scenarios.

Suddenly, CBS, NBC and ABC are hot properties again, emerging from near extinction to being, in the words of one top media management consultant: "incredibly powerful platforms."

"This activity reflects the fact that broadcast networks are still the most effective vehicle for reaching mass audiences. And they still are the most powerful machine for originating programming," said Michael Wolf, a partner and head of the media and entertainment division of Booz, Allen & Hamilton, New York.

That explains the bevy of suitors lining up to merge with the Big 3. The question is: which ones are serious?

Clearly, QVC Chairman Barry Diller was serious about his intended marriage with CBS. He just didn't have the clout to make it happen. That time.

Whether Mr. Diller will rejoin the M&A fray isn't clear, but broadcast row can feel the heat ofactivity building and the pace of merger talks escalating to the point of self-fulfillment.

How serious are talks between Time Warner and General Electric Co. about NBC, or Walt Disney Co. and CBS?

CBS executives downplay a Disney deal, noting that Chairman Laurence Tisch denied such talks. But Mr. Tisch also denied he planned to sell CBS just before announcing a deal with QVC. As for Time Warner and NBC, broadcast and financial industry executives said it's a matter of terms, and if GE and Time Warner can work it out, it might be a good fit.

"Warner realizes they need a broadcast network to guarantee an outlet for their programming and they've discovered that it's not easy to start one on your own," said a top media industry executive, referring to Warner's new WB Network.

The executive said Viacom may be having the same experience starting the United Paramount Network and may also seek to acquire one of the Big 3.

That may surprise observers aware of the $10 billion debt Viacom accumulated in acquiring Paramount, but this week's Electronic Media reports Viacom is close to capping the sale of nearly $5 billion in non-strategic assets and may be ready to make another major acquisition, including a Big 3 TV network.

EM quotes a high-level Viacom executive describing a network acquisition as "high on the company's list of priorities." CBS would seem to be the most logical, if a somewhat ironic, match for Viacom.

For one thing, CBS is clearly in play following Mr. Tisch's failed attempt to merge with QVC, and it's just a matter of what suitor it hooks up with. More significantly, CBS and Viacom have a common heritage and extremely compatible programming brands.

"Basically, Viacom started as a dividend to CBS shareholders," said PaineWebber analyst Alan Gottesman.

Viacom was created in 1970 because the Federal Communication Commission's financial interest and syndication rules required CBS to divest its programming library. As a result, Viacom owns some of CBS' most distinctive programming brands.

"It would be a great blend," said a senior CBS executive. "And we would be a great fit for them, because we're the only thing they're lacking."

Such a deal has impetus, because the so-called fin-syn rules expire next year. That is partly what is fueling talks, or rumors of talks, with most of the major U.S.-based studios, including Disney.

But financial executives said an outright acquisition of a network by Disney is unlikely, because the company is loath to pay a premium, even for what might be construed as a strategic asset. It's more likely, they said, that Disney would seek a strategic alliance or joint venture with one of the Big 3, possibly Capital Cities/ABC.

Though the M&A rumors currently center on CBS and NBC, industry observers believe all three are in some form of play and will change hands within the next couple of years.

Valued at about $15 billion, Cap Cities/ABC would be the biggest bite for a Big 3 network acquisition, suggesting the company might opt for more of a true merger, or strategic partnership.

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