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 Posted: Sat Oct 31, 2009 11:42 pm |
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http://bizofhockey.com/index.php?option=com_content&view=article&id=281:nbcu-a-versus-an-alternative-to-espn&catid=46:articles-and-opinions&Itemid=64
Written by Pete Toms
Friday, 30 October 2009 21:18
Sink the Mothership? VERSUS could be
going after market share at some point
Is the VERSUS Network about to become a worthy competitor to ESPN?
Would sports fans, leagues, cable and sat providers benefit from a
merger of NBCU and Comcast? The most recent speculation surrounding
the sale of NBCU revolves around comments by Vivendi CEO Jean-Bernard
Levy, reiterating Vivendi’s desire to divest themselves of their 20%
stake in NBCU. From Reuters;
NBC Universal could be floated on the stock market if France's Vivendi
decides to sell its 20 percent stake in the group majority-owned by
General Electric, Vivendi's chief executive said on Tuesday.
AND
Sources close to the discussions have said GE is negotiating a sale of
a majority stake in NBCU to cable operator Comcast to create a
powerhouse spanning TV broadcast, cable networks, movie and theme
parks worth about $30 billion.
Such a deal would depend on Vivendi's selling its stake.
Those who are doubtful that this deal will happen frequently point to
the negative reaction the rumoured deal has met with from the market.
In 2004, Comcast failed to acquire a different media giant, Walt
Disney Co. (which includes ESPN and ABC), a potential deal that
engendered the same negative reaction. Earlier this month BusinessWeek
reported;
It's become an almost Pavlovian response among Wall Street analysts
and money managers: holding their noses when an executive proposes
bringing content (movies and TV shows) and distribution (cable,
satellite, and Internet) under one roof.
And so when investors learned on Sept. 30 that Comcast CEO Brian L.
Roberts was considering a deal to take majority control of General
Electric's (GE) NBC Universal (NBCU), the cable giant laid an egg on
Wall Street. Its share price fell 7% the next day, to 15.67. The
Street's worry was clear: Roberts' yen for NBCU's movies and TV shows
would divert his executive team from the core business of providing
cable TV, broadband, and phone service to Comcast's nearly 25 million
subscribers.
Roberts has had a bad rap on Wall Street ever since 2004, when the
cable company bid $54 billion for Walt Disney and then walked away
once the Mouse House played hard to get. Roberts is mindful of that
and of the Street's obsession with quarterly numbers. But he also
needs to manage for the long haul. That means finding a way to offset
slowing growth at Comcast, which is losing subscribers to phone and
satellite companies and could suffer as more viewers move to the Web
to watch movies and TV shows
Reuters reported in a separate piece concerning the possible sale of
NBCU;
To some investors, Comcast's bid might trigger a sense of deja vu. In
2004, Roberts launched a hostile and audacious $54 billion bid to buy
Walt Disney (DIS.N), but ultimately failed. Since then, investors have
feared the cable company would make a similarly large and possibly
value-depletive deal.
Those who believe that this deal makes sense see the value to Comcast
in NBC’s content (including their cable channels), a stake in online
video streaming website Hulu and a better position in the ongoing
battle between networks and cable operators over carriage fees.
Earlier this month, Brian Steinberg reported for Advertising Age;
Comcast's interest is obvious, particularly after the once-sleepy
concern made a bid in 2004 for Walt Disney Co. Gaining control over
NBC would give Comcast scads of content to ship over its cable and
broadband lines, and it would add a raft of cable networks that have
two streams of revenue -- subscription fees and advertising.
In looking at big media companies, "the best businesses that all of us
have in the entertainment business are the cable content channels, and
those channels, with that dual revenue stream, are really good
businesses," said Stephen Burke, chief operating officer of Comcast,
at a recent investor conference. "And I think we wouldn't be doing our
job if we didn't try to figure out a way to get bigger in those
businesses."
In a second piece on the proposed NBCU/Comcast deal, Mr. Steinberg
wrote;
Media that relies primarily on ad revenue is suffering far more than
those companies that have a hefty revenue stream coming directly from
customers. Comcast, for example, is clearly betting that consumers
will continue to be willing to pay for the content they want, when
they want it. The company already gets hefty monthly fees from its
cable and broadband subscribers, and it gets consumers to pay extra
for premium, pay-per-view and digital video recorder options. Now it's
looking to be in control of not just the pipes, but what comes through
them.
Earlier the WSJ reported on the battle between TV networks and cable
operators over carriage fees. Cable channels (including ESPN) have
been outperforming “over the air” channels because of their “dual
revenue stream” of advertising and carriage fees. As ad rates decline,
CBS has successfully negotiated some deals for carriage fees and News
Corp. (Fox) is seeking the same. In some markets, local TV stations
are threatening to withhold their “over the air” signals from cable
companies if a resolution is not found. If Comcast acquires NBCU, the
WSJ reports that the stakes will rise in the “fees for carriage”
dispute.
The issue could become more heated if Comcast Corp. takes control of
the NBC network. Comcast, the biggest cable operator in the U.S. by
subscribers, is in talks with #General Electric Co. about a
transaction that would give it control of NBC Universal and its
namesake broadcast network, according to people familiar with the
matter. If that deal goes through, Comcast could influence how
forcefully NBC will push cable operators for subscription fees. It's
also possible that regulators would step in to oversee Comcast's deals
with NBC and other broadcast networks.
Of particular interest to readers of this site is the impact that an
NBCU/Comcast deal would have on VERSUS Network. Could this signal the
beginning of VERSUS growing into a worthy competitor to ESPN?
In a separate report for the WSJ, Sam Schechner reported;
Comcast Corp. executive Jeff Shell said at an industry conference in
June that expanding the sports business at his cable networks was the
"top of our list over the next five years."
If Comcast's bid to control NBC Universal succeeds, it would advance
Mr. Shell's goal overnight, creating a potential new rival to #"Walt
Disney Co.'s ESPN.
As the cable-TV giant and NBC Universal's parent, #General Electric
Co., work through details of a deal that would merge Comcast's cable
networks with GE's NBC Universal, people close to the negotiations say
the two companies see the creation of a combined sports business as a
key benefit of a partnership.
The new company would marry Comcast's VERSUS and Golf Channel cable-
sports networks and multiple regional sports networks with NBC
Universal's broadcast-sports operation and rights to major sports
events, including a Super Bowl and two Olympic games.
AND
VERSUS is in 75 million homes and averaged 125,000 viewers this year
through Oct. 4, up 17% from a year earlier, according estimates from
Nielsen Co. "We have a huge opportunity," Mr. Shell said of VERSUS at
the June marketing conference in New York, to create "another sports
brand in America," he said. Still, VERSUS's average number of viewers
is less than a seventh of ESPN's, and just over a third of that on
ESPN2.
In the aforementioned BusinessWeek piece, sports media consultant and
former president of CBS Sports, Neal Pilson is quoted;
With NBC, Roberts will "have effectively created a potent competitor
to ESPN," says Neal Pilson, a former CBS sports executive who now
consults. Pilson figures Comcast will use NBC Sports' national
platform to complement its 11 regional sports networks, which include
major markets such as New York, Chicago, Philadelphia, and San
Francisco. Throw in Comcast's Golf Channel and VERSUS, which has
college football and pro hockey games, and the new entity clearly
would give agita to executives at ESPN headquarters in Bristol, Conn.
Assuming the deal is concluded (far from certain), how would the
sports industry react to VERSUS attempt to compete with ESPN? Last
year when ESPN acquired the rights to the BCS, in the process
obliterating any competing bid, many wondered if it was proof that
ESPN could and would own the rights to any and every sports property
that they wished. Did the ESPN/BCS deal hammer home the message that
the ad supported “over the air” model will never compete with the
“dual revenue stream” cable for sports rights? The March to Cable was
one of The Sports Business Journal’s stories of 2008.
Sports have been migrating from broadcast to cable for a long time.
For the past several years, late-round playoff games from MLB (TBS),
the NBA (TNT and ESPN) and the NHL (VERSUS) have been telecast
exclusively on cable.
But 2008 could be known as the year when the dam finally broke, thanks
in large part to ESPN’s four-year, $495 million bid to poach the BCS
games from Fox.
In the aftermath of the deal, broadcasters said they were unable to
compete with ESPN’s dual revenue stream of affiliate and advertising
fees. The big question is whether broadcasters will be able to figure
out a way to compete with the newfound strength of the cable networks.
Soon after the ESPN/BCS deal, John Ourand reported for The Sports
Business Journal on industry concerns over the dominance of ESPN;
…some bemoaned the fact that no other network — broadcast or cable —
was able to come close to ESPN’s bid.
Obviously, there’s no recession, and all roads lead to Bristol,” said
Howard Katz, the NFL’s senior vice president of broadcasting and media
operations.
The deal, which saw ESPN bid $100 million more than Fox to secure the
BCS rights, had attendees questioning what broadcasters had to do to
be able to compete for future rights.
Cable networks, like ESPN, have an advantage thanks to their dual
revenue streams from advertising and affiliate sales.
AND
As it stands now, executives seemed to be preparing for more sports to
follow the money to cable, and some openly rooted for other networks,
like VERSUS, to step up and compete with ESPN.
“This is going to force the market to create a competitor to ESPN,”
said PGA Tour executive Gil Kerr.
A much more robust VERSUS could provide sports properties a welcome
alternative to ESPN. Currently, if a sports property is not a partner
with ESPN, they get less “play” from the ESPN multi media giant. The
NHL, formerly an ESPN partner and a current partner of both VERSUS and
NBC, has complained that their exposure on ESPN’s flagship
“SportsCenter” has diminished significantly since their rights deal
was not renewed.
Along with sports properties, the cable and sat providers might
embrace a legitimate rival to ESPN. These industries have long been
unhappy with the cost of sports programming. Disputes over “sports
tiers” and carriage fees have been widespread. At $4.00 per
subscriber, ESPN is easily the most expensive cable channel. By
comparison, VERSUS currently charges $0.20 to $0.25 per sub. Rick
Horrow wrote earlier this month for BusinessWeek (Mr. Horrow also
hosts a sports business talk show on VERSUS);
Moreover, the strong platform the new entity would provide would
likely give Comcast more leverage when negotiating carriage fees with
ESPN. Comcast and other cable companies are paying approximately $5.8
billion to carry ESPN's seven domestic networks this year, according
to the Journal. (Author’s note, “Journal” is the WSJ)
In the larger scheme, VERSUS is likely a small consideration in the
discussed NBCU/Comcast deal. Should it happen, the affects on sports
fans, sports properties, MSOs and ESPN will be interesting to watch.
Fairly or not, there is considerable enmity in the sports industry
towards ESPN, who justifiably argue that they should not be criticized
over their staggering success. If VERSUS doesn’t answer the call to
challenge the WWL, how long until somebody else rises to the
challenge? |
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