USA Networks CEO Kay Koplovitz Resigns

In the largest defection at USA Networks since a takeover by Barry Diller in February, Kay Koplovitz, chairwoman and chief executive of the general entertainment cable channel, has resigned. The departure marks the beginning of an expected management realignment under the new owners.

Koplovitz, a cable industry pioneer, built USA, the first advertiser-supported basic channel, from scratch in 1977 into one of the nation’s most highly rated and valuable networks, reaching nearly 75 million homes. Diller paid Seagram Co. an estimated $3.8 billion for USA and the Sci-Fi Channel, a spinoff launched in 1992 that reaches 48 million homes.

Diller has praised Koplovitz for building the networks despite difficult circumstances--multiple owners and restricted budgets--but he was intent on running the operation himself.

“It’s Barry’s company now, and Barry needs to do what he wants with it,” said Koplovitz, speaking Thursday from Augusta, Ga., where she was hosting USA clients at the Masters golf tournament. “We have been discussing this for weeks.”

Sources say Diller paid Koplovitz a settlement of more than $7 million, but Koplovitz says that figure is incorrect.

Diller aims to sharpen the image of the channel, which has long been faulted for not having a strong identity or point of view. The channel has had success with some of its original series such as “La Femme Nikita” and most recently with its two-part “Moby Dick” remake, on which it spent $25 million and that attracted the largest audience ever for original programming on basic cable.

But USA has been criticized for inconsistency and for what is considered a confusing jumble of programming, from reruns of the frumpy “Murder, She Wrote” to the steamy “Silk Stalkings” drama to a mix of sporting events that includes tennis and wrestling.

Koplovitz says she is considering various options in media and is not restricting herself to cable. “I’m an entrepreneur and have built this company through a 1,000 different regimes,” she said.

Indeed, cable executives applaud Koplovitz for having skillfully maneuvered through various ownership structures and upsets. Perhaps the most difficult period for the channel, which began as the Madison Square Garden Sports network and was renamed USA in 1980, was last year. After a nasty and personal year-long court fight between USA’s 50-50 owners Seagram and Viacom Inc. over their partnership agreement, the court ultimately forced the owners to dissolve their alliance, resulting in Seagram’s purchase in a deal that valued the channels at $3.5 billion.

Within hours of taking control of the operation, Seagram struck an agreement to sell it to Diller in exchange for a 45% stake in his company, recently renamed USA Networks Inc. Diller is integrating the various operations he has purchased over the last two years, including a TV station group, the two cable channels, the Home Shopping Network, Ticketmaster, and Seagram’s TV production operations, which produce shows such as “Jerry Springer” “Xena: Warrior Princess” and “Law & Order.”

Sources say Diller plans to make other personnel changes to give him closer control of TV production and to put in his own team at the cable channels. One source close to Diller said he could cut at least $40 million in overhead from the channel: “You could run three channels on USA’s overhead budget.”