Tuesday, May 25, 2010

NY Post Stirs Speculation About ABC/CBS Sale

RBR-TVBR: With Comcast in the midst of buying NBC Universal from GE, the New York Post on Monday speculated about the possibility of another TV network sale – either ABC or CBS. The underlying premise was that the nets are suddenly more attractive because of retransmission consent cash flowing in.

The premise of the Post story is that the networks are in line to split as much as $5 billion annually in retrans sharing with stations by 2016, which makes the networks more attractive after years of not having a second revenue stream like their cable competitors.

But the story also claims that the value of the networks is held back by their ownership of broadcast stations, which have been hard hit by the advertising downturn of the past couple of years. The story fails to note that Comcast has emphatically stated that it does not want to sell off the O&O stations and become 100% dependent on affiliates for distribution of NBC.

Disney CEO Bob Iger has been asked repeatedly about whether he would be willing to sell off ABC – and he has diplomatically done what any good CEO would do – never say never and leave the door open to future possibilities.

Sumner Redstone, the controlling shareholder of both CBS and Viacom, has been more resistant to any talk of selling – but then, he will turn 87 next week.

RBR-TVBR observation: Only a fool would want to buy a broadcast network without its big market O&Os. Rupert Murdoch, whose News Corporation owns the NY Post along with Fox, has tried to explain that numerous times to dunderheaded Wall Street analysts who just don’t get it.

As for whether ABC or CBS will be sold, we can say with considerable confidence that Bob Iger would be willing to sell ABC if someone offers Disney a premium price above its value to the parent company. To overcome Sumner Redstone’s ego, though, a bid to buy CBS would probably have to be at a really big premium to win acceptance.

Broadcast Networks in Good Time Slot for Sale

The upfront presentations may have wrapped up last week, but the broadcast networks' sales pitches may be just beginning.

With General Electric in the process of selling NBC Universal to cable giant Comcast, some Wall Street dealmakers predict Sumner Redstone and Disney will begin debating whether to put CBS and ABC, respectively, on the block.

Among bankers, CBS appears to be garnering the most attention amid signs Redstone these days isn't dismissing out of hand the notion of selling CBS.

"This is a good time to sell a network," said one Wall Street exec. "Retransmission makes it look more interesting. [CBS] has assets in radio but no long-term strategy in cable." Retransmission refers to fees for "retransmission consent," in which cable and satellite operators pay a network a monthly per-subscriber fee to carry the channel on their systems.

Reps for CBS and for Redstone, who is CBS' majority owner, declined to comment.

Meanwhile, ABC's future in the Mouse House is also not guaranteed, with Disney chief Bob Iger said to be taking a hard look at the network.

"There are no guarantees," he said recently about ABC's future at Disney. A source said the issue is what to do with the accompanying stations.

Sources said this year may be broadcast TV's best hope for finding buyers. While the audience tuning in to broadcast TV continues to erode, the Big Four networks -- ABC, CBS, Fox and NBC -- collectively are expected to pull in as much as 20 percent more in ad dollars at this year's upfront than in last year's dismal showing. (News Corp. owns both Fox and The Post.)
Further, the networks are gaining ground in their years-long fight with cable and satellite operators to get paid for their broadcast signal the way ESPN and MTV do.

Analyst Larry Gerbrandt forecasts that networks could each reap up to $400 million in the coming years, thanks to retransmission fees. He predicted that by 2016, the networks' take from retransmission consent could hit $5 billion.

That's good news because these days broadcast networks make little, if any, profit just by airing sitcoms and dramas.

While audiences will still show up in droves for tentpole events like the Super Bowl or an awards show, the increased popularity of cable is eating into broadcast networks' bottom line, which is further hampered by the high costs associated with producing series, steep sports-rights fees and expenses tied to owning a news operation. Also weighing on broadcasters is their ownership of local TV stations, which have been hit hard by the ad slowdown.

Experts said the networks' real money-making opportunities lie in ancillary businesses, such as international syndication, DVDs and other merchandise, and ownership of a network isn't necessary to reap those benefits.


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