UPN and the WB to Join Forces as CW

UPN and the WB are America’s fifth and sixth broadcast networks, and neither has had the kind of financial success expected upon their launch. CBS, which owns UPN, and Warner Brothers Entertainment, which owns the WB (and the definite article is a marketing ploy that seems to have stuck), have opted to merge the two. They will own 50% each of the new network (the CW, C for CBS and W for Warner), and the owners hope it will reach 95% of the nation’s TVs. The question is whether merging two struggling entities merely creates a bigger struggling entity.

CBS Chief Executive Les Moonves said, “UPN was approaching a point where we were hoping to break even, and we were getting close. The long range plan looked far better with this [merger].” Barry Meyer, the CEO at Warner Brothers Entertainment, echoed this saying, “We saw coming down the pike a challenged landscape to keep [the WB] alive. There’s a very good chance that the [CW] network will be profitable from the get-go.”

That would be nice, but the merger and acquisition game isn’t entirely that easy. Naturally, the consolidation will reduce competition, but in those markets where there is a WB and a UPN, only one station will wind up at CW. Those stations that aren’t part of the CW won’t go away. They can remain independent or sign up with another network. Also, both networks have targeted younger audiences with programs like “Buffy the Vampire Slayer,” “Everybody Hates Chris,” and “Gilmore Girls.” So to the extent they were poaching each others’viewers, this merger can only help. Furthermore, both were providing several hours of programming a week, and this will allow them to drop some of the weaker shows. Better ratings may follow.

Nonetheless, a merger between two weak entities is not the same as the union of two strong ones or of one weak and one strong. The synergies tend to be negative rather than positive when two weak enterprises come together. There are many pathways to success in business, but disaster tends to be a single road, costs exceeding revenues. Neither UPN or the WB were profitable for the long term.

The CW Network will have to find ways to reduce costs while increasing its ad rates. In the short term, it will have to do so against cable and satellite TV that are close to ubiquitous in the US. In the long-term, it must face the reality of TV delivered by internet as well, to say nothing of iPod video and such content delivery systems as have yet to be invented. The Kensington Review wishes the CW all the luck in the world – because it may need it.


© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent.
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