New Entertainment Division Wants to Expand

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ORLANDO ( -- In an effort to become a top-tier media conglomerate, Vivendi Universal Entertainment is on the prowl
Photo: AP
Barry Diller: Ready to buy.
and looking to buy more entertainment properties, perhaps even a broadcast network, Barry Diller said.

Speaking before the American Association of Advertising Agencies' Media Conference today, the CEO of USA Networks Inc., and soon-to-be chairman-CEO of Vivendi Universal Entertainment, said the recent deal to merge all of Vivendi Universal's entertainment divisions with USA Networks' cable channels gave the company new weight.

'You have scale'
"When you put all these together you have scale to get to being a tier-one media company," Mr. Diller said. "Now we have enough assets to get us the next assets."

Could that be a network such as NBC?

Reached after the event, Mr. Diller said it didn't necessarily have to be an network. "You don't need it. But you'd like to have it."

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He added: "It's not a single asset."

During an informal question-and-answer session, he talked about the growing problem of program costs -- specifically how these continously eat away at the high profit margins at cable networks.

40% profit margins dropping
"The 40% profit margins are tacking slowly down. There is no solution to that," he said.

Broadcast networks also have a problem with programming costs -- and as a result see the need to buy more stations. All this, he said, is one way to re-purpose broadcast network programming.

"Networks are going to have to own their own distribution systems," he said.

He said he expected, for instance, that the Federal Communication Commissions' limits on station ownership by networks would be relaxed.

"We started Fox with six stations; now they have 42 stations," he said. "They'll own their distribution."

Two-station ownership
Broadcast networks are increasingly owning two stations in the same market -- another way to lower programming costs. Viacom Inc. recently agreed to buy KCAL in Los Angeles for $650 million in cash.

But Mr. Diller stopped short of suggesting that one owner would be allowed to own two major networks, such as CBS buying NBC.

"CBS already has UPN," he said. "They'll build up UPN."

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