Investors are excited by a report in Variety that says the matter was discussed at a Discovery board meeting today. Scripps Networks shares are up 15.6% in post-market trading to $87, which would be a new high and give it a market value of about $12.7B. The owner of HGTV, Food Network and Travel Channel would be an interesting target for Discovery. CEO David Zaslav told investors yesterday at the USB Global Media and Communications Conference that he considers the U.S. cable market to be mature. This year he spent $1.7B for Scandinavian TV and radio company SBS Nordic and paid $222M for a 20% stake in Eurosport. He also looked at Liberty Global’s Chellomedia, which AMC Networks ultimately bought for $1B. Still, Scripps is one of the few, large independent owners of must-have cable channels — and investors have long wondered when someone would make a bid. Discovery CFO Andrew Warren told his shareholders in October that the company’s “first priority” is to invest “in our core businesses…be it through investing in existing networks and platforms or through exploring acquisition opportunities.” If Discovery owned Scripps it likely would try to persuade cable and satellite companies to pay higher fees for its content — about 69% of Scripps revenues last year came from advertising. Any bid would have to pass muster with the Edward W. Scripps Trust, which controls about 90% of the voting shares and two-thirds of the board.
In March the CBS chief predicted that “within a year” it would be an industry standard for advertisers to pay for the number of viewers who see commercials within a week after they air (called C7), up from three days (or C3). But Leslie Moonves seemed less certain today when he spoke to the UBS Global Media and Communications Conference. In next year’s upfront “there’s going to be a lot more C7″ — though it may not be the industry standard. (Earlier today Disney’s Jay Rasulo said it will take longer for the change to take hold.) “I don’t think it’s that hugely significant. … Eventually it’s going to be even greater than C7″ — perhaps going as high as C30. “We may not get paid as much, but you’re selling Kraft Macaroni and Cheese, what’s the difference if you watch now or 22 days from now?” Speaking of the ad market, he says that scatter sales are “fine.” National is “stronger than local, but local is OK.”
The 21st Century Fox COO has a lot at stake in preserving the pay TV bundle, and scoffs at consumers’ continuing interest in a la carte pricing. “It is a farce,” he told the UBS Global Media and Communications Conference. “People may want different bundles, but a la carte isn’t the answer…The bundle is still a great proposition for the consumer, when you compare it to the world of $5 lattes and cell phone bills.” Chase Carey concedes that pay TV networks and distributors have been too slow to offer content on the Internet. “TV Everywhere is the right path but has been poorly executed….We have to be part of the solution, not just sitting here, picking and complaining.” That will have to include developing business models for digital. “We haven’t scratched the surface.” He’s glad, though, that his company, Disney and Comcast decided not to sell Hulu. “Once we became convinced we had a shared vision for the opportunity, we moved naturally to a place …where we put the capital commitments behind it.”
Outside of Comcast and Verizon, cable and satellite companies “haven’t moved fast enough or effectively enough” to offer video on demand to their subscribers, the Time Warner CEO told the UBS Global Media and Communications Conference. Distributors have the rights to offer shows on VOD, and audiences want it. “If you think about the success of things like Netflix, the interest YouTube – it’s mostly because you can get your stuff on demand.” It’s “a gigantic opportunity” for pay TV. But “there’s very spotty performance among distributors on how these tremendous VOD rights are conveyed to you.” if distributors don’t move more quickly then the demand “is going to be filled by somebody else” — probably a tech company. That would be “a missed opportunity….It’s not going to serve consumers as well and won’t serve the broadband plant” or programming diversity. He seemed uncertain, though, that someone will soon offer an online pay TV service that would compete directly with cable and satellite — which became a big issue here yesterday when Viacom CEO Philippe Dauman said he believes an over-the-top competitor will launch in 2014. “We’re all open to it,” Bewkes says. “The question for consumers and rights providers is: What service do they provide?” He also wonders whether the Internet infrastructure can handle the additional bandwidth demands for video. “That’s an open question.”
A combo deal offering consumers an Aereo subscription with broadband service “makes a ton of sense,” Aereo CEO Chet Kanojia said today at the UBS Global Media and Communications Conference. That would help the fledgling, Barry Diller-backed operation which offers its subscribers streams of local broadcasters’ free, over-the-air signals. It also could help cable companies that have said they’d consider launching their own version of Aereo if broadcasters continue to demand big price increases for retransmission consent rights. Aereo would be difficult to mimic because there’s a “broad portfolio [of patents] that we’re pursuing,” Kanojia says. His process of using micro antennas tuned to different frequencies “has never been done before.” Aereo also enjoys marketing advantages by being first out with the product. Nothing is likely to happen until the courts decide what to do with broadcasters’ charge that Aereo infringes on their copyrights by transmitting their signals without their permission. (Aereo says that it simply leases versions of the kinds of equipment consumers already use to watch free TV.) But Kanojia says he doesn’t worry that, if he wins in court, broadcasters will make good on their threats to take their signals off the airwaves. “I have the deep conviction that Congress will protect free broadcast.”
Jay Rasulo isn’t as sure as Viacom CEO Philipe Dauman is that we’ll see an online pay TV service in 2014. But one “is coming” he said today at the UBS Global Media and Communications Conference — and Disney would be “happy to license our content.” Here’s the catch though: It would have to license content from others, too, and “look like existing [cable and satellite] offers” that require viewers to pay for channels they don’t watch. “We believe that the [pay TV] system is still the most valuable way the product can be offered to the consumer,” Rasulo says. The system also works well for Disney. The growth of pay TV retransmission consent payments ”have been a huge boon” to the industry, They also have added about $500M to Disney’s revenues over the last few years and “have mostly fallen to the bottom line.” On another broadcast matter, Rasulo is less certain than CBS chief Les Moonves is that the industry will sell most ads next year on the basis of viewing over seven days as opposed to the current three. “The hesitation has to do more with the advertiser side than the content producer side.” Like other execs, though, Rasulo is excited about opportunities to offer TV content on smartphones and tablets. He calls mobile “the single largest” technology opportunity.
The rosy prediction reflects growing strength in the economy, and in the performance of the broadcast TV networks, CBS Chief Research Officer David Poltrack told investors today at the UBS Global Media and Communications Conference. He says that the growth figure would remain strong, at +4%, if you factored out the expected ad sales boost from the Winter Olympics. Don’t be too quick to scoff that Poltrack’s forecast may be colored by a conflict of interest: He’s had a pretty good track record in recent years, which is why so many people in the industry track his annual UBS presentation. He was right about on target last year when he predicted that network ad revenues this year would drop 2%, reflecting a 3% underlying growth rate when you factor out the 2012 Olympics and election. Economists “are encouraged by recent trends in the housing market as well as gains in private sector employment,” he says. “They see a continuing, but somewhat plodding, recovery.” But Poltrack is enthusiastic about the broadcast business — suggesting that this season may mark a transition to a period where networks will benefit from increased on-demand viewing, and excitement from people who use Twitter and other social media to chat with fellow fans. Last year “I concluded my presentation by posing the question, ‘Are we entering a new golden era for broadcast network television?’” Poltrack says. “Today I am going to try and convince you that the time may have come to drop the question mark.”
The big challenge Charter faces in making a bid for the much larger Time Warner Cable is that it might force Tom Rutledge to take on too much debt. But he seemed undaunted in comments to investors today at the UBS Global Media and Communications Conference. He currently wants to keep Charter’s debt at less than 4.5 times its cash flow, “but if there was an opportunity for us we would go higher.” He adds that today’s low interest rates make this “the best” time to borrow “that I’ve ever seen.” While he didn’t discuss any specifics regarding a possible deal, conceptually he says a company like his could make a transaction pay off by operating the company well “to unleash the full power of these networks” — for example by getting rid of analog transmissions and going all digital. That would help to increase subscriptions and “there is a big difference in value between growing subs and losing them.”(TWC lost 306,000 subs in Q3.) He also says that cable companies like his have to address the fact that they negotiate deals with “several large programming companies that have a de facto monopoly product” while he has to compete with satellite and telco distributors. “The good news is that our competitors have the same problem. The bad news is that people are getting priced out of the video market.” And “the trend lines don’t seem to be changing.” Although the FCC has some authority to regulate retransmission consent negotiations with broadcasters, it “has not done it.”
That would be huge if Viacom CEO Philippe Dauman’s prediction is accurate — although he declined to elaborate in his presentation today at the UBS Global Media and Commmunications Conference. Viacom reportedly has talked with Sony about teaming up to offer an online service that would include the same kind of channels that now are only available to cable and satellite TV subscribers. Many programmers fear that a national online service could undermine their ability to sell their channels in bundles that require people to pay for services that they don’t watch. Intel met stiff resistance from cable networks when it proposed to introduce what’s known as an over-the-top service, and now wants to sell its technology.
TV networks should be encouraged by the ad forecasts presented this morning at the UBS Global Media and Communications Conference. Global spending on the medium will grow 7.7% in 2014, up from +1.8% this year, Magna Global EVP Vincent Letang …
Listen to (and share) episode 62 of our audio podcast Deadline Big Media With David Lieberman. Deadline’s financial editor talks with host David Bloom about growing interest in some corners of Washington D.C. about crafting new communications policies for the Internet age; AMC’s best concession deal in decades with a stock deal for its customers; a report that suggests breaking up the pay-TV bundle would “devastate” consumers and the oligopoly that dominates the industry; and new government efforts to measure the economy that say the country’s creative industries generated $915 billion in 2011, and what that might mean for new policies for Hollywood.
You’re hearing a big sigh of relief from broadcasters today. New FCC Chairman Tom Wheeler said in a blog post that he wants to postpone the voluntary auction that will enable wireless broadband providers to use airwaves now controlled by TV stations. It originally was planned for 2014, but Wheeler says he believes “we can conduct a successful auction in the middle of 2015.” It’s easy to imagine that his decision was influenced by the troubled web rollout for the Affordable Care Act. “I have often defined the complexity of this multi-part simultaneous [auction] process as being like a Rubik’s cube,” Wheeler says. “As part of our auction system development, we will check and recheck the auction software and system components against the auction requirements, and under a variety of scenarios replicating real life conditions. … Only when our software and systems are technically ready, user friendly, and thoroughly tested, will we start the auction.” Wheeler also has to make a controversial policy decision about whether the government should limit how much spectrum might go to wireless giants Verizon and AT&T.
The $7.99-a-month streaming service appears to have dampened many consumers’ interest in DVRs, which cost $10 or more a month, according a study out this morning from Leichtman Research Group. It shows DVR growth plateauing: 47% of …
The board authorized an annual dividend of 86 cents a share, up 11 cents, Disney says. It’s the 58th consecutive dividend and will be paid on January 16 to those who own shares as of December 16. “Disney had a great …
It’s fun to see Wall Street analysts defend the pay TV oligopoly’s bundled pricing as a model of market capitalism — and a kind of public service. And nobody does it better than Needham and Co analyst Laura Martin, who has some eye-popping estimates this week in her intriguing analysis of what might happen if consumers had the freedom to just pay for the networks they want. She figures that could result in the loss of at least 124 channels, $45B a year of TV ad sales, 1.4M jobs, $20B in annual tax payments, and $117B in market value for media company investors. The big problem: Channels need to reach at least 30M households in order to be measured by Nielsen, and most wouldn’t cross that threshold if they had to compete on their own. That would endanger much of the $56B that national advertisers paid content creators in 2012. To stay even at about 180 channels per subscriber, then, consumers would have pick up the slack — adding the advertisers’ expenditures to the $76B that subscribers paid (60% of which went to content creators with the remainder to distributors). The average annual bill would rise about 75% to $1,260. But that’s a fantasy: The goal of a la carte is to lower consumer payments. Surveys show that consumers want to pay about $30 a month. That leaves too little revenue to sustain the status quo. It costs an average of $280M a year to program an entertainment channel (from $1.1B for TBS to $50M for TV Guide Channel). While at least 124 would have to go, as many as 173 might disappear depending on other assumptions. The economic argument is so lopsided that “we foresee only a remote chance that the TV ecosystem will be unbundled in the U.S.,” Martin says.