News Corp. cuts travel budget
After jumping in the race to land the Travel Channel and no doubt driving up the price, News Corp. is now pulling out, people close to the situation say.
To be sure, the bidding for Travel Channel has gotten out of hand. When Cox Communications said it was putting the cable network on the block, most analysts and industry observers thought, at most, it would fetch between $600 million and $700 million. Now it is about $1 billion. That's just crazy for a network that doesn't have any shows that regularly average more than 1 million viewers.
With News Corp. backing off, Scripps Network, which owns Home & Garden Network and a big chunk of Food Network and Fine Living, is now in the driver's seat. Obviously Travel Channel is a good fit for them but with News Corp. out of the picture are they now going to go back to Cox to try to lower the price? Other bidders include a private equity consortium led by Providence Equity Partners.
While there is lots of room for growth at Travel, both in terms of ratings and the bottom line (its subscriber fees are a lowly 6 cents per-month, per-subscriber, and it has a net operating revenue of only $186 million, according to SNL Kagan) at that price it is a pretty risky bet. Sure, whoever buys it will immediately lay off half the staff, but the new owner will also have to pump in a lot of money to beef up the programming.
If Rupert Murdoch and News Corp., which isn't shy about spending money on risky gambles (MySpace, Wall Street Journal, etc.) says $1 billion for the Travel Channel is too much then it is too much.
Of course, don't be surprised if this is all a smoke screen and Murdoch jumps back in. Nothing like fear of not getting something to lead to an irrational decision.
-- Joe Flint
Photo: News Corp. Chairman Rupert Murdoch and wife Wendi at Sun Valley mogul gathering. Credit: Douglas C. Pizac / Associated Press