Will buyers curb their enthusiasm for TV Guide Network?
When Lions Gate Entertainment Corp. bought the TV Guide Network just over three years ago, chief executive Jon Feltheimer told the Los Angeles Times he wanted to turn the cable channel into a "billion-dollar asset."
That may turn out to have been wishful thinking. Lions Gate is now shopping the channel, and the price tag being floated is about one-third of what Feltheimer thought the property could one day be worth.
If the channel were sold for north of $350 million, Lions Gate would come out a little ahead. It paid $255 million for the channel and later sold about half of it to One Equity Partners, an investment arm of JPMorgan Chase.
While Lions Gate still has not officially said TV Guide Network is on the block, it is no secret that the film and TV production company is looking to unload it. In light of Lions Gate's $412.5-million merger with production company Summit Entertainment, the importance of TV Guide Network as a strategic asset has taken a back seat to the opportunity to raise cash. Also, the company as of late has made clear that while it values the television production business (Lions Gate shows include AMC's "Mad Men" and Showtime's "Weeds"), being in the distribution business is not the high priority it was three years ago.
Still, finding a buyer for the channel may be no small task. While TV Guide Network is in more than 80 million homes, it has never established itself as a competitive outlet. Launched in 1981, TV Guide was initially a programming guide telling viewers what shows were on what channels. Over the last decade, the channel has tried to become more of a general entertainment network while also maintaining the program guide that eats up a chunk of the screen. It has bought reruns of shows including HBO's "Curb Your Enthusiasm" and its own "Weeds."
However, neither purchase panned out. A glance at TV Guide Network's schedule shows "Curb Your Enthuisam" playing at 4 a.m. and "Weeds" at 5 a.m. The network's evening hours are filled with even older reruns, including "Dharma & Greg" and "Designing Women." There is also a heavy diet of old movies and reality shows.
In a story Monday, the New York Post said CBS and Discovery were interested in the channel. While both companies declined to comment on the story, people familiar with the matter said neither had any real interest in making a purchase. Other major cable network owners including Time Warner, Viacom and News Corp. also seem unlikely to make a play for the channel.
That does not mean there are not potential suitors in the form of private equity firms. Although the consensus is that cable networks are better off in the hands of big media companies, where there is more synergy, a deep-pocketed equity firm might figure it can turn around the network and flip it in a few years.
Besides the ratings, there are other red flags for potential buyers. Derek Baine, an analyst with SNL Kagan & Co. said "anyone looking at TV Guide would have to go through the affiliate agreements very carefully." That's because many of the channel's agreements with cable operators require the onscreen programming guide. If it goes away completely, the operators could either drop the channel or renegotiate the terms for carrying it. "You would have to be very cautious with the due diligence," Baine warned.
According to SNL Kagan, last year TV Guide Network made about $101 million in advertising revenue and subscription fees, and that figure could jump to about $122 million in 2012.
"It's still a very attractive property. I just think buyers are being very cautious after what happened with OWN," said Baine, referring to the cable network that Oprah Winfrey and Discovery Communications launched last year that has yet to find solid ground.
— Joe Flint
Photo: Larry David of "Curb Your Enthusiasm." Credit: Anne Cusack / Los Angeles Times.