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NBC adds a gal pal to its TV holdings

MEDIA

The $925-million purchase of women's channel Oxygen shows the importance of cable to the bottom line.

October 10, 2007|Meg James | Times Staff Writer

NBC Universal put out a welcome mat for a new girl posse Tuesday by agreeing to pay $925 million to buy Oxygen Media, the independent cable television channel for women launched seven years ago by talk-show host Oprah Winfrey, cable programming pioneer Geraldine Laybourne and Los Angeles TV maverick Marcy Carsey.

The sale gives Oxygen's private owners a graceful exit from a tough business. As the media landscape became more cluttered and fragmented, Oxygen found it increasingly difficult to garner attention for its shows that catered to young women and to make big ratings strides.

The Oxygen deal also demonstrates just how important cable channels have become to NBC Universal's bottom line, particularly since the NBC broadcast network's prime-time fortunes collapsed two years ago.

NBC's cluster of cable channels -- USA Network, financial news channel CNBC, Sci-Fi, Bravo and MSNBC -- contributes 50% of the company's profit.

"Cable is the real driver of this company," NBC Universal Chief Executive Jeff Zucker said during a conference call with reporters to announce the acquisition.

The sale is expected to close next month. NBC Universal plans to sell two of its Spanish-language television stations, including KWHY-TV Channel 22 in Los Angeles and another in Puerto Rico, to help finance the transaction. NBC owns two other stations in L.A.: KNBC-TV Channel 4 and the Spanish-language Telemundo station, KVEA-TV Channel 52. NBC needs to shed one L.A. outlet to comply with FCC rules that limit station ownership, and KWHY has the smallest audience.

Many in Hollywood have wondered whether NBC is plumping up its portfolio in case parent company General Electric Co. decides to sell its media arm after next year's Olympics in Beijing. In August, NBC agreed to pay $350 million for London-based Sparrowhawk Media, which has the U.K. Hallmark cable channel. In an interview Tuesday, Zucker dismissed the suggestion.

"This is a real expression of support and commitment from GE to this company," he said. "They have been willing to step up and support us in making strategic acquisitions that will help us grow our business."

The purchase price was less than the estimated $1.1 billion to $1.5 billion that some analysts expected the asset would fetch. Oxygen is available in 74 million homes, which is a sizable reach for a relatively young cable channel. Such wide distribution is increasingly rare as cable operators have gotten stingier with their shelf space because of the proliferation of channels.

NBC Universal paid about $12 for each cable subscriber who receives Oxygen, substantially lower than the $22 per subscriber it paid in its 2002 deal for Bravo.

"The price is low, but it's not all that surprising because of the credit crunch and the weaker markets," said Derek Baine, a cable television analyst with SNL Kagan. "We're looking at really rock-bottom valuations here."

Laybourne declined to discuss how the proceeds would be divided among the owners, who include Microsoft co-founder Paul Allen and television producers Carsey, Tom Werner and Caryn Mandabach as well as Winfrey and Laybourne.

In an interview, Laybourne said she was confident the timing was right, in part, because the channel had been profitable for several years. NBC Universal, she said, could use its reach and marketing muscle to "get it to that next level."

"We got it built from scratch and we established a strong brand," she said. "But our programs are way better than our ratings. Oxygen needs to grow and it needs a bigger audience."

Zucker plans to pair Oxygen with NBC's other female-oriented properties, including NBC's "Today" show, the Bravo cable channel and its iVillage website to create what he called "a virtual women's network" to sell to advertisers. Laybourne said those platforms could be useful in promoting Oxygen's shows and stars.

"What we lacked was cross-promotion," Laybourne said. "What this acquisition is really about is a boost-off for Oxygen."

Oxygen lags in the ratings behind Lifetime Entertainment, a joint venture between Walt Disney Co. and Hearst Corp. Lifetime appeals to an older audience in an industry that values younger viewers. The average age of Oxygen's audience is 39.

Some of Oxygen's most popular shows include "Campus Ladies" and "Tori & Dean: Inn Love," which gives a glimpse into the life of the daughter of the late television mogul Aaron Spelling.

Although NBC has eyed other cable channels that have been on the market, "this is the one that made the most sense for us," said Jeff Gaspin, president of the Universal Television Group. "There are very few cable networks that are independent, that have good distribution and a brand that caters to a younger demographic. This will be one of our youngest-skewing cable assets."

Women are a lucrative target because they make up a majority of the TV viewing audience, and because women frequently influence household spending decisions -- a fact not lost on GE, which sells appliances and healthcare products.

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