Despite rivalry, UPN and WB may someday merge.

At the UPN affiliates meeting last week. outgoing network Chief Executive and President Lucie Salhany wore a plastic pin depicting the top-hatted cartoon "spokesfrog" for rival network The WB - with a dagger in its heart.

It was a fitting symbol of the acrimony between the two upstart networks, especially since it seems that neither is strong enough to survive independently. The betting is that Time Warner Inc.owned WB network eventually will merge with Viacom Inc.owned UPN (United Paramount Network).

UPN Ratings

The six major networks pulled down the following average ratings
during the 1996-97 TV season, which ended May 21.

Network         Rating
ABC             9.2/15
CBS             9.6/16
NBC            10.5/18
FOX             7.7/13
UPN              3.2/5
WB               2.6/4

Source Nielsen Media Research

Certainly, neither one of them is doing particularly well on its own.

Neither The WB nor UPN been able to pull down anything close to the ratings of its four bigger competitors, ABC, CBS, NBC and the Fox Broadcasting Co. network. Although both have shown minor ratings improvements since their debuts, each has cost its corporate parent hundreds of millions of dollars in losses.

How long will Time Warner and Viacom tolerate such losses'? Analysts say it's anybody's guess, but Time Warner is struggling from a debt problem after acquiring Turner Broadcasting System Inc.

And Viacom. whose Blockbuster Entertainment Corp. subsidiary is a major drain on corporate resources, can ill afford to keep pouring money into a losing proposition.

"I think they're desperate people." said Arthur Rockwell. research director with Yaeger Capital Markets. "I think that eventually they'll come to some kind of merger agreement. As for UPN, I'm not sure (Viacom chief) Sumner (Redstone) has the deep pockets that Time Warner has."

Since its inception three years ago, UPN has lost $320 million. Originally owned entirely by TV station group Chris-Craft Industries Inc. (owner of the local UPN affiliate, KCOP Channel 13), Viacom agreed in January to exercise its option to buy half the network by paying half its losses, ponying up $160 million.

However, some analysts point to strains in the relationship between Redstone and the Siegel family, which controls Chris-Craft. The impending departure of Salhany is believed to be a reflection of that.

Well-liked by the Siegels, Salhany has frequently clashed with Paramount Television Group Chairman Kerry McCluggage. When Viacom (which owns Paramount Pictures and its television arm) bought into UPN it was widely reported that Salhany's days were numbered.

Salhany announced last month that she would leave her post in September in order to form a consulting firm in Boston called JH Media.

During last week's affiliates meeting. Redstone mounted the podium for a brief speech in which he complimented Salhany and called the Siegels his "good friends."

Amid the hoopla of the affiliates meeting there was some genuine cause for celebration. As Salhany pointed out, UPN added 11 new affiliates last year (two of which were former WB affiliates), bringing its total reach to 166 stations with access to 93 percent of U.S. television households.

It also managed to grow in the ratings, an impressive feat considering that the other networks are losing viewers. During the May sweeps, UPN averaged a 3.0 rating, 5 share (the rating is the percentage of total TV households watching a given network, while share represents the percentage of people actually watching television who are tuned in). That's an 11 percent increase over last May's 2.7 rating, 4 share.

Critics point out, however, that UPN's ratings were so low to begin with, they had nowhere to go but up.

In the fall season, UPN will continue its strategy of airing urban sitcoms combined with action/science fiction dramas, targeting a young demographic. New shows debuting next season include "Good News," "Head Over Heels" and "Hitz." It is also picking up a show that was dropped by ABC - "Clueless," which is produced by Paramount. The 8.0 rating it pulled down wasn't good enough to survive on ABC, but if the show can manage half that on UPN it would be one of the network's top-rated programs.

The network is also expanding its prime time slate to Thursday night (currently it airs shows only from 8 p.m. to 10 p.m. Monday through Wednesday, with a Sunday morning children's block) starting in 1998. At 8 p.m. Thursdays it will air a two-hour science fiction movie.

Although UPN may continue to lose millions into the foreseeable future, some analysts say Chris-Craft and Viacom will tolerate the losses because of the gains on the television station side. Viacom owns 11 TV stations, 9 of which are UPN affiliates, and Chris-Craft owns eight stations. six of them UPN affiliates. Despite UPN's low ratings, most of these stations are believed to be doing better now than they were as independents.

"The value of the stations owned by Fox went up significantly after the formation of the Fox network, and Viacom hopes to do the same thing," said entertainment analyst David Davis with Houlihan, Lokey, Howard & Zukin. "These UPN stations had no identity before they became affiliates, and now at least they have a certain amount of stability and identity."