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JAMES FLANIGAN

The House That Turner Built Has Real Value

December 02, 1987|JAMES FLANIGAN

Robert Edward (Ted) Turner III, the gale force television entrepreneur, journeyed from Atlanta to NBC headquarters in New York's Rockefeller Center this week to talk about his dream of a new cable TV network and about money.

Since there are already three U.S. television networks, and NBC is one of them, and since Rupert Murdoch's attempt this year to create the Fox network is losing pots of money, you have to wonder why the smart executives at NBC didn't show Turner the door.

But they didn't. Nothing concrete has been decided, but NBC is at least talking about giving Turner $400 million in financing in return for a 25% interest in his company, Turner Broadcasting Inc.

NBC is eager to buy into cable, which now counts more than half the nation's TV households as subscribers, and particularly eager to get a piece of Cable News Network, an earlier Turner brainchild that is now a big success.

Corporate Hardball

NBC is not alone. Time Inc. already owns part of Turner's company because its cable subsidiary joined other cable operators in helping Turner out of a financial squeeze earlier this year. Friends of Turner feel now that Time, the communications giant, would like to force the 49-year old Atlanta entrepreneur out of his own company so it could run CNN itself, perhaps as an outlet for its own news-gathering organization.

What inspires such corporate hardball? The increasing viewership, and value, of cable television. The numbers are still small compared to the billions spent on networks, but advertising dollars for cable programming are growing as network TV loses more viewers every year--an erosion that is continuing in the 1987-88 season. NBC, ABC and CBS will be lucky to get 70% of the national audience this year; they once commanded 95%.

Even the suggestion that NBC might pay $400 million for 25% of Turner Broadcasting is a tribute to the new value of cable: It puts a total value on Turner's company of $1.6 billion, far above the current price on the American Stock Exchange, where the stock is held back by Turner's $1.3-billion debt.

Still cable's success is thin. The networks, with 70% of the viewers, can afford to pay for stylish programming to attract advertisers, while cable feeds on a diet of reruns and oddball sports. If it is to become a main event rather than a sideshow, cable needs classy programming.

And fittingly the first to come up with a proposal is Ted Turner, cable's chief idea man from the start. He started CNN, which delivers the news at a third the cost of the big broadcast networks and yet has become the news source people turn to first on TV. "Sweater journalism is dead," remarks one Wall Streeter, referring to Dan Rather's apparel and the decline of anchorman-centered news programing.

Lack of Money

Sportsman Turner also built Superstation WTBS, broadcasting basketball and baseball (he owns the Atlanta Hawks and Braves) throughout the country. Now he wants to expand the WTBS formula into Turner Network Television with major league baseball, NBA basketball, college football and basketball as well as the Olympics, the Kentucky Derby, the Indianapolis 500, Wimbledon tennis, Masters golf and other attractions.

But there's the problem. Turner wants things that cost a lot of money for telecasting rights--and he doesn't have money.

Along with his good ideas, Turner has had a few clinkers. Last year, for example, he paid $1.2 billion to acquire the MGM film library, financing the purchase with "junk bonds" issued by Drexel Burnham Lambert. It was to get relief from particularly onerous terms in that financing that Turner gave cable operators, including Tele-Communications Inc. and Time, 37% of his company and veto power over his actions.

Now he is trying to refinance the junk bonds and having difficulty in the aftermath of the Oct. 19 stock market crash, says analyst John Tinker of the Morgan Stanley investment firm. The debt-burdened finances of Turner Broadcasting make Turner himself vulnerable to the machinations of minority shareholders such as Time Inc. and cloud his prospects for beginning a new venture for cable.

So what will happen? Turner will probably pull a rabbit out of the hat. He is now talking to NBC, the division of giant General Electric that is headed by Robert Wright--who once worked for Cox Broadcasting of Atlanta. Wright wants to bring GE into cable, and Turner might be amenable to a deal. Then giant NBC/GE could more than counterbalance Turner's other shareholders and leave the fast-moving entrepreneur a free hand to pursue new ideas.

"Turner is a force to be reckoned with," says analyst Peter Appert of the Cyrus J. Lawrence brokerage firm. Offering more than double the market price for a piece of Turner's company, NBC's smart executives obviously think so too.

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