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Hearst, Disney and NBC are in talks for new cable venture. Why it makes sense and why it doesn't

June 3, 2009 |  6:46 pm

Imagine if the New York Yankees were co-owned by the Boston Red Sox and Baltimore Orioles. Sounds crazy, right? But in the entertainment industry such partnerships among rivals are becoming more and more the norm. For example, Hulu, the red-hot online video site, is owned by News Corp., NBC Universal and the Walt Disney Co. The CW Network is owned by Time Warner and CBS.

Now Disney, NBC Universal and Hearst Corp. are near a deal to create a new joint venture that would house cable networks A&E, History Channel and Lifetime. The news was broken by Claire Atkinson at Broadcasting & Cable. Here's how it would work, per Atkinson. Hearst, Disney and NBC already are partners on A&E and History and a handful of spin-off channels (Hearst and Disney each owns 37.5% and NBC has a 25% stake). Disney and Hearst co-own Lifetime. The three companies would create a new company combining all the networks that would be majority owned by Hearst and Disney, with NBC getting a stake that would be less than 25%, according to a person briefed on the talks.

On the surface, the deal makes sense for everyone. NBC gets a chunk of Lifetime, a very successful cable network, while Disney and Hearst get a bigger piece of three powerful cable channels.

There are cost-savings (that is, layoffs). The new entity will probably combine a lot of backroom operations such as affiliate relations and maybe even sales and marketing.

But here's the rub. While the companies are partners on these channels, they have other interests that conflict. NBC owns Bravo, USA, SyFy and Oxygen, which compete with Lifetime and A&E. Disney and Hearst own ESPN, which competes with NBC on occasion for sports rights. These networks often find themselves bidding on the same content, and the channels that have multiple ownerships can find their needs taking a backseat.

Viacom used to be in the joint-ownership game but recognized the unintended consequences when it was partnered with Time Warner on Comedy Central and owned a stake in Lifetime. It ultimately bought out Time Warner and sold back its interest in Lifetime.

From a purely competitive standpoint, these partnerships are ultimately bad news to the creative community. It becomes tougher to create bidding wars for content if the channels you're pitching are all owned by the same companies.

There is some irony in all this if the deal goes through. NBC, which lost a nasty legal battle to stop "Project Runway" from leaving Bravo to Lifetime, would be able to profit from the show. 

-- Joe Flint