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Viacom´s UPN Ultimatum: Profit or Ax

Speaking at an investors conference in London, Viacom president and COO, Mel Karmazin, emphasized to attendees that if UPN doesnt begin to make a profit it would either be shut down or sold off. Karmazin said Viacom expects UPN to meet the performance criteria set for all its operating divisions. The total losses for the five-year old network have risen to nearly $800 million. "UPN will become profitable, or it wont exist," Karmazin said. "If we cant make it profitable, we dont need it." The recently approved US$50 billion merger between Viacom and CBS will create strict standards for the fledgling UPN. "We will grow our EBITDA (operating earnings before interest, tax and other financial charges) at a minimum of 20%. Were in the business of generating a return for our shareholders. Thats what weve told everyone [within Viacom] if they dont deliver that profit, they wont be part of Viacom." Karmazin also said he would make a "million-dollar bet" that UPN would become profitable now that it is controlled 100% by Viacom. Originally, UPN was a 50/50 joint venture between Viacom and Chris-Craft Industries. In March 2000, Viacom purchased Chris-Crafts half for only $5 million. Much speculation surrounded the Viacom and CBS merger, hinging on the UPN factor. FCC rules prohibit one company from owning two networks, however the FCC eased their rules stating larger networks like NBC, ABC, CBS and Fox could own smaller networks like UPN, the WB and PAX TV.

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