A Really Bad Day At Black Rock

You're Westinghouse Chairman Michael Jordan. You're on the verge of closing a deal for CBS for $5.4 billion. How do you unwind?

Pardon the 59-year-old executive if his first choice isn't tuning in to a CBS show. The crew at 60 Minutes is still fuming over a network decision to yank a segment critical of the tobacco industry for fear of litigation. Most of the network's fall lineup has been panned by the critics. And late-night host David Letterman has taken to trashing his CBS Inc. bosses almost every night. What's a good reason, Letterman asked on a recent program, to shut down the government? "With a million government workers at home, maybe one or two will watch CBS."

Not many other people are tuning in. Two months into the current season, CBS's prime-time lineup is drawing 20% fewer viewers than in 1994. Operating earnings through the first three quarters are down 98%, even though ads are at a cyclical peak. And an effort to lure young viewers flopped so badly that CBS executives have scrapped virtually the entire Friday night schedule.

SICK NET. Can Westinghouse Electric Corp., whose power-generation business is so sick that it helped saddle the company with a $52 million third-quarter loss, revive the onetime Tiffany Network? Westinghouse executives, awaiting final regulatory approval by the Federal Communications Commission, aren't talking. Still, burdened with $8 billion in debt after the CBS purchase, Westinghouse has to move quickly to show some results from its pricey acquisition.

That will mean slimming down. The company plans to sell divisions, possibly its Power Generation and Energy Systems units, to help pay down debt. And sources close to Westinghouse say it aims to improve its station groups, which provide some 80% of CBS's cash flow. Seagram Co., whose Universal Pictures unit needs an outlet for production, is rumored to be talking to Westinghouse about investing in CBS. Management is also counting on higher ratings to boost CBS's cash flow by $200 million to $300 million. But experts are, at best, skeptical. "None of that will happen soon," says Smith Barney Inc. media analyst John Reidy. "This is a problem that will take a long time to fix."

That's for sure. The CBS station lineup, its link to the outside world, is the sickest among the Big Four. The defection of eight stations to Fox Broadcasting Co. in 1994 left CBS with lower-powered UHF stations in key markets such as Atlanta and Detroit, so CBS now reaches an estimated 1 million fewer homes. And unlike the other three networks, CBS has virtually no channels to feed the fast-growing cable-TV market.

With football lost to Fox, ratings have eroded for the Sunday night CBS standard 60 Minutes. The loss of promotional opportunities on Sunday afternoons hurts other shows as well. The ratings slide has angered Letterman, who recently hinted he wouldn't mind leaving the network that pays him $14 million annually. "My next trip--ABC," he joked after returning from a week of broadcasts from Los Angeles designed to boost his ratings. To block such a move, CBS may exercise an option this summer in Letterman's contract to keep him until 2000.

"DO IT FAST." By then, CBS could be the industry's fourth-rated network. Of its 10 new shows this season, only the Monday night comedy You Can't Hurry Love is a hit. Despite hefty promotion, such new shows as Central Park West and Courthouse flopped miserably. CBS occasionally trails Fox in total viewership and decisively trails the upstart network among the younger viewers advertisers want. "The loss of younger viewers will kill CBS's comeback," frets media buyer Paul M. Schulman. "When NBC came back in the '80s and ABC in the '70s, they had a core of younger [demographics] to give them a boost."

For now, that leaves it up to highly respected Leslie Moonves, who joined CBS this spring from Warner Bros. as head of the entertainment unit, to find youth-oriented shows that will stand up to Fox and ABC. Sources say he is talking to the folks at DreamWorks SKG about creating new programming.

Until then, though, Jordan and company will have to patch up what remains of CBS's bruised eye. Westinghouse is negotiating to retain broadcast group head Peter A. Lund, whose contract allows him to leave if Tisch sells the network. And the affiliates are pressing Jordan to pour more money into promoting their programs. "Whatever they dm, they had better do it fast," says Ralph Gabbard, president and general manager of CBS affiliate WKYT-TV in Lexington, Ky., and head of the network's affiliate group. "Right now, they're killing us." Maybe Michael Jordan should keep his remote handy.

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