Fnn: Sickly, Scandal Scarred And Adorable

For sale: 24-hour cable TV network offering business and financial news. Lost $72 million in 1990. Now operating under Chapter 11 bankruptcy protection. Chief financial officer was ousted amid charges of book-cooking. Faces tough competition from rival cable network. Minimum price: $115 million.

Based on that prospectus, and given its onerous debts, the Financial News Network Inc. looks like a classic corporate white elephant. So why are three top media companies in a fierce bidding war for the beleaguered cable network?

SWOOPING IN. On Apr. 3, a federal bankruptcy judge will decide whether to sell FNN to a partnership of Dow Jones and Westinghouse Broadcasting or to the Consumer News & Business Channel, a competing cable network owned by NBC. The decision will come after a frenetic three months: On separate occasions, both parties seemed to have sewn up a deal to acquire FNN, only to see the other swoop in with a counteroffer.

Now, both sides say they are determined to prevail at the Apr. 3 hearing. That may mean bidding up the price for FNN even higher than the $115 million Dow Jones and Westinghouse offered on Mar. 20. CNBC won't say whether it plans to top that bid. But a spokesman for General Electric Co.'s NBC unit declares: "We fully intend to acquire FNN."

The ardent courtship of FNN underlines the cachet even a troubled cable franchise possesses. Since 1981, FNN has fed a daily diet of business news to 35 million U. S. homes. Despite its slightly no frills stage sets and "infomercials"--commercials billed as investment advice programs--FNN has won loyal viewers hungry for financial news. (BUSINESS WEEK editors regularly appear on FNN.)

Reaching upscale viewers by other means has proved difficult. NBC Inc. has struggled with CNBC, the channel it launched to compete with FNN in 1989. CNBC boasts more polished correspondents and slicker sets than FNN. But it has only half the subscribers (charts). CNBC has attracted advertising, but FNN's bigger audience gives it an edge. And industry experts fear that with Turner Broadcasting System Inc.'s Cable News Network, the market for 24-hour news is already overcrowded.

So, CNBC's reasons for swallowing FNN are simple: It wants the network's 35 million subscribers. "Our plan is to take the best of the two networks and integrate them," says Joseph Rutledge, a spokesman for NBC. But FNN employees say CNBC has indicated it would basically shut down FNN, retaining fewer than 40 of its 375 staffers.

Those employees would face a considerably brighter future with Dow Jones & Co. and Westinghouse Broadcasting Co. Anxious to break into a new market, these companies are likely to retain about half of FNN's staff and some of its programs. Westinghouse mainly wants to expand its cable holdings, while Dow Jones wants to make an aggressive move into electronic media, after years of mostly halfhearted efforts. The company, which publishes The Wall Street Journal, already produces a half-hour news show called The Wall Street Journal Report. But the syndicated program, which airs on weekend mornings, attracts only 650,000 TV households.

CRIPPLED. Dow Jones says it would use FNN as an outlet for programming that draws on its news-gathering capability. Eventually, the company plans to expand FNN internationally. But for now, Dow Jones says that it would merely upgrade FNN's existing programs. Among other things, it plans to cut out those infomercials. "Our immediate goal is to turn FNN into a first-rate cable network," says Peter G. Skinner, senior vice-president of Dow Jones.

But first, the network's new owner must figure out how to extricate FNN from its financial mess. Crippled by an overambitious plan to supply stock market data, FNN owes $142 million to banks and lessors. And it must live down a scandal in which it says its former CFO, C. Steven Bolen, made unauthorized payments to himself. A lawyer for Bolen, who was fired last October, has denied any wrongdoing.

Yet none of this has cooled FNN's deep-pocketed suitors. In a last-ditch effort, Dow Jones and Westinghouse have asked the bankruptcy judge to disqualify CNBC on the grounds that buying its main rival violates antitrust laws. Fifteen states are also asking the judge to rule against CNBC. But regardless of who prevails, the big question is whether viewers will have the same interest in FNN's future that so many have in its turbulent present.

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