A five-way deal announced Wednesday will reinvent a cable network and, if they get it right, forge a new variation in the business model of TV distribution.
Mark Cuban has sold stakes in HDNet to AEG, Ryan Seacrest Media and CAA with the intent to rebrand it as a TV destination for live programming. HDNet will become AXS TV later this summer in 35 million U.S. homes thanks to an expanded distribution deal with Dish Network.
The satcaster will also be able to offer its subscribers exclusive off-channel perks relevant to the programming including ticketing opportunities that Cuban and his new partners see as a redefinition of the traditional relationship between a channel and viewers.
“The value proposition for subscribers isn’t just about what’s on air,” said Cuban. “There’s all sorts of incremental value we can deliver.”
AXS TV will look to sprout tentacles that would bring together the combined assets of AEG and Cuban in a way that could realize revenues beyond screens to arenas and movie theaters.
Financial terms of the deal were not disclosed, nor did Cuban specify the size of the ownership stakes taken by his new partners. Cuban will continue to run the operation.
AXS TV will build off of HDNet’s emphasis on live events from music concerts to mixed-martial arts, which will remain on the network as well as a news program featuring Dan Rather. But what AEG brings is access — hence the network’s new title — to both an archive of past concerts and rights to broadcast future shows at Anschutz Co.-owned facilities from Los Angeles’ Staples Center to London’s O2 Arena.
AEG has been shopping for a TV extension to its concert business for three years, according to the company’s CEO, Tim Leiweke. Together with Seacrest and CAA, the company kicked the tires of a variety of existing cable networks before settling on HDNet. Cuban approached them and wrapped up the deal in three months.
“Tim has $3 billion to $4 billion worth of facilities, assets and access (at AEG),” said Cuban. “Combine it with HDNet and that accelerates things considerably.”
Dish, which has not taken a stake in AXS, is upgrading the channel to its America’s Top 120 tier, which means 8 million additional homes. HDNet is carried by DirecTV but still lacks carriage with two major cable operators, Time Warner Cable and Cablevision.
AXS TV plays into Dish’s recent repositioning as a more consumer-friendly subscription TV provider with more innovative offerings. Part of the exclusive partnership with the venture will include the August launch of the AXS Headliner Club, which allows artists to audition online for the opportunity to perform in AEG-owned venues.
While some aspects of the deal will be exclusive to Dish, some of the off-air extensions will be offered to existing and new distributors, said Cuban.
Cuban will also bring to bear other elements of his entertainment empire, with his theater chain Landmark Theaters and Magnolia Pictures banner likely to lead to distribution synergies exclusive to the network. The possibilities could include window-disrupting digital downloads of Magnolia titles to the homes of Dish subs while still playing in Landmark theaters.
Anschutz-owned Regal Entertainment Group, the nation’s largest exhib, could also come into this mix, according to Leiweke.
Five partners and exponentially more moving pieces to their combined assets might seem like there’s not only too many chefs in the AXS TV kitchen but lots of utensils. Not so, said Leiweke. “Things like this don’t usually become deals because they’re too complicated,” he added. “Here, complexity is our opportunity.”
The deal is not unlike the strategy employed in 2004 by an investor group led by Al Gore, which acquired a struggling network, NewsWorld Intl., and rebranded it Current TV. Buying existing channels that already have distribution is seen as a smarter move than starting from scratch given distributors rarely launch new channels anymore on their already overcrowded systems.
Cable channels are seen by well-heeled investors as an incredible opportunity because of their dual revenue stream of advertising and subscription fees, not to mention global spinoffs.
Profitable as they are, cable networks can be difficult to grow. After numerous fits and starts, Current TV is still looking for greater traction with U.S. auds even after the addition of Keith Olbermann. Even within a sophisticated operation like Discovery Networks, the rebranding of Discovery Health as OWN has met similar troubles despite the high-profile participation of Oprah Winfrey.
Seacrest, who will not appear on air for AXS TV, will make the channel part of a growing empire of media interests that include a production company behind the multiple shows featuring the Kardashian family on E!. In addition to taking an unspecified stake in the channel, his connections in the entertainment world — as well as those of his reps at CAA — will be leveraged. Seacrest’s company will produce programming for the network.
The new business opportunity for Seacrest comes as he is in talks with NBCUniversal for a wide-ranging deal that could include a prominent role on NBC’s flagship morning show, “Today.”
In addition to live events, AXS will look to position itself as an ESPN of pop culture, with “Sportscenter”-like coverage of what’s going on in entertainment on any given night. Plans are already afoot to launch a flagship show based in a studio overlooking AEG’s L.A. Live campus.
But E! and ESPN may offer less of a comparison for AXS TV than MTV, or at least the 1980s version of the network that had close ties to a music industry it has since abandoned for unscripted programming. The rebranded network would lean heavily on the concert scene but go broader than just AEG- or CAA-aligned content. Live performances would mix with behind-the-scenes fare packaged from the red carpet to the green room.
In addition, live TV content is more than just a marketing hook in an age when digital video recorders have devalued anything that can be recorded for later consumption with ad-skipping. Conversely, the DVR-proof world of live sporting events has skyrocketed in value.
The possibility remains that the rebranded venture could eventually be sold to a conglom like NBCUniversal given the conventional wisdom on growing distribution for a channel like AXS TV is to shed its independent status and sell to an owner that has the clout to get more homes. But Leiweke said it’s the combination of AXS TV’s innovation and independence that will appeal to MSOs.
“The fact we didn’t walk in with 19 agendas, 18 channels and the complexities they’re going through on new distribution deals,” said Leiweke. “We walked in with a unique set of assets that will re-energize their platform. It changed the tone of the conversation because distributors weren’t fearful of this mammoth monopoly.”
HDNet launched in 2001 with a singular focus on providing high-definition TV programming at a time when that was still a novelty. But as HD became a commodity, the network’s distribution stalled; few major advertisers pay much attention to channels in less than 40 million homes.
AXS TV marks another surprising chapter for Cuban. The mogul-cum-TV star (he’s a judge on the ABC reality show “Shark Tank”) has carved out a mini-empire in the entertainment business by innovating at every step, from the breakthrough $5 billion sale of his Broadcast.com to Yahoo in 1999 to the audacious experimentation with shaking up the windowing of films like the 2006 Steven Soderbergh pic “Bubble.”