CBS and the Westinghouse Broadcasting Company agreed yesterday to a deal that would bring three stations owned by Westinghouse into the CBS affiliate lineup and create a partnership to purchase future stations, produce syndicated programming and sell local advertising time.
The deal, the latest affiliate reshuffling at the broadcast networks, will significantly enhance CBS's group of affiliates. Coming just a day after the collapse of the proposed merger between CBS and QVC Inc., the deal represented what CBS executives called a welcome injection of good news for an embattled network.
"The timing is certainly fascinating," said Peter Lund, the president of the CBS Television Network. "It absolutely gives us a positive bounce after the QVC business."
Christopher Dixon, a media analyst for Paine Webber, said the deal was not likely to affect any potential sale of CBS.
"It would have if it was a dumb deal, but it isn't," Mr. Dixon said. "This is a deal in keeping with the needs of both companies. For CBS, it is essentially saying to the television station people, 'we're still in business.' Psychologically, that's extremely important because it conveys the message that despite the QVC blowing up, CBS isn't dead in the water."
The deal is also positive for Westinghouse Broadcasting, known as Group W, said Bill Korn, its president. "We have been looking for ways to get bigger, faster, to grow into a diversified media company," he said. "This accomplishes that goal in a number of different areas."
The biggest loser is NBC, which will see affiliates in Philadelphia and Boston go to CBS. Mr. Korn said NBC had negotiated intensely with Group W for a similar wide-ranging alliance. "NBC was always offering more in the way of cash," he said. "But they couldn't match the strategic value that CBS brought."
In a statement, NBC said it regretted losing the affiliates and would find other stations in the two cities. But one senior NBC executive said NBC could not match one element in the CBS deal. "They wanted the deal to include a merger on radio and we don't have radio," said the executive, who spoke on condition of anonymity.
Both CBS and Group W are major operators of radio stations and many of those stations use the same format: all news. Executives close to he deal said yesterday that the radio portion of the deal had not been entirely worked out, but was likely to be completed in the near future.
Under the terms announced yesterday, CBS and Group W will sign 10-year affiliation agreements for the five Group W stations. Two of them, KPIX in San Francisco and KDKA in Pittsburgh, were already CBS affiliates. WBZ in Boston and KYW in Philadelphia were NBC affiliates. The fifth, WJZ in Baltimore, has been a longtime ABC affiliate.
But CBS already owns a station in Philadelphia, WCAU. The network has agreed to put that station up for sale and keep KYW as its Philadelphia affiliate. Station-Ownership Venture
KYW will also become the the first station to be owned by a Group W-CBS joint venture. The new entity also plans to purchase other stations, all of which would become CBS affiliates. First, it will either sell WCAU and use the proceeds to buy another station or it will simply swap WCAU for a different station.
Group W will manage the new venture and will own 51 percent of it. As Mr. Korn put it, "We get to expand our television distribution using 50-cent dollars."
CBS will be putting up the other half of the money. "But CBS won't get ownership attribution, and that's what they want," Mr. Korn said.
This is because CBS is limited by F.C.C. rules to owning stations that reach a total of 25 percent of the country's home with television. With the stations CBS now owns, it reaches 21.8 percent of the country. Owning the new stations outright would put CBS over the limit.
But using the new entity controlled by Group W to actually make the purchases, CBS can legally, and greatly, expand the base of stations that will be guaranteed distributors of CBS programming. Group W's stations reach only 9.7 per cent of the country.
Under the deal, CBS will eventually buy a half interest in Group W's production company, which syndicates programs. CBS will provide creative support for those programs, as well as financing. But this part of the transaction will be delayed until late 1995, when Federal rules preventing a network from participating directly in syndication are due to expire.
Another element of the partnership is a joint effort to sell local advertising time in the combined lineup of CBS and Group W stations, which would reach almost one-third of the country. "This is the sleeper in this deal," Mr. Korn said. "That advertising sales operation could have an awful lot of effectiveness."
For CBS, a prime motivation for the deal was the increased security it offered for distribution of its programming, Mr. Lund said. CBS was blindsided in May when Fox Inc. took away eight of its affiliates by agreeing to buy a stake in New World Communications. The deal set off a wild game of station checkers, in which each network has been attempting to jump the other in different parts of the country.
