Changing channels

TV Guide cable able after $2 bil TCI deal

NEW YORK — TV Guide’s brand name will move onto both domestic and international cable systems as a result of News Corp.’s $2 billion cash-and-stock sale of the mag to a Tele-Communications Inc. affiliate company, United Video Satellite Group, United Video confirmed Thursday.

United Video’s Prevue Channel, which now offers electronic TV channel listings to 50 million cable customers domestically and 3 million customers overseas, will be renamed the TV Guide Channel, United Video president Peter Boylan said.

But in giving a fresh lease on life to the TV Guide name, the deal also reinforces doubts about the long-term future of the print edition at a time when the number of cable channels is growing faster than the mag. News America Publishing chairman Anthea Disney conceded to reporters Thursday that TV Guide could drop the listings from its print edition entirely sometime “down the line.”

Disney ventured that, “If you project ahead five years, I could see that the listings will be much more valuable electronically, and we will be able to create a full-service entertainment magazine” out of the print edition.

As expected (Daily Variety, June 11), News Corp. and TCI are effectively creating a joint venture of TV Guide through United Video. News Corp. will sell the magazine for $800 million in cash and $1.2 billion of stock in United Video, a figure equivalent to 40% of the outstanding stock or 48% of the voting rights.

TCI, which now controls United Video, will retain 44% of the stock as well as 48% of the votes. The two companies will jointly control the United Video board (public shareholders own the minority stock).

Wall Street applauded the deal, pushing News Corp.’s stock price up $1 to $24.56 while United Video’s stock price rose $1.50 to $38.50 amid a heavy overall market sell-off. Wall Street analysts said News Corp. got a good price for the mag, given its poor growth prospects.

Falling circulation

TV Guide’s circulation has gradually fallen from 17 million in 1987 to 13 million today, according to the Audit Bureau of Circulations, while its operating profits are down from about $200 million 10 years ago to roughly $175 million currently.

“From a fundamental operating perspective, our biggest concern (about News Corp.) was the decline in circulation at TV Guide,” said Merrill Lynch analyst Jessica Reif Cohen, who added that the merger “clearly makes this a more important asset, and they got a good price.”

Indeed, the price is high enough that News Corp. claimed it did not expect to have to make any “material” writedown on the sale. News Corp. had acquired TV Guide in 1988 as part of its $2.9 billion acquisition of Triangle Publications from Walter Annenberg and it had sold the other two mags in that deal — Daily Racing Form and Seventeen — as part of the $650 million sale of several magazines in 1991.

TV Guide’s circulation was hurt by aggressive cover price increases as well as growing competition from newspaper listings. But recent years have also seen a proliferation in cable channels to 100 or more in some parts of the country, and TV Guide doesn’t have the space to list every channel, while some markets now have specially designed cable and satellite guides offering full listings coverage.

“The key to this deal is that we wanted to look at how TV Guide will look in the future rather than how it looked in the past,” Disney said, adding that the mag “can’t just be a print vehicle. We have been struggling with this for a little while.”

This deal meant that “TV Guide is no longer just a magazine,” Disney said.

Promise of the future

The introduction of digital cable services, offering sophisticated set-top boxes allowing for interactivity, holds the promise of an electronic listing guide with all sorts of added features like channel sorting by genres, Boylan said.

Said News Corp.’s digital publishing president James Murdoch, one of Rupert Murdoch’s progeny now rising through the ranks of News Corp., “Interactive guides occupy key strategic real estate” in the digital world now developing.

TV Guide’s editorial side will help develop the content side of the Prevue Channel’s offerings, Disney and Boylan said.

Boylan also said United hoped to expand the channel’s international distribution through focusing on satellite TV services around the world, many of which are partly owned by News Corp., such as BSkyB in Britain.

Different deal

Boylan said the deal was “a very different transaction” to past efforts by TCI and News Corp. to offer electronic versions of TV Guide, which he said did not include the magazine.

The companies said the deal would make it easier for the magazine to offer more customized cable editions domestically, as well as negotiating arrangements with cablers to market the mag to their subscribers. TV Guide already has marketing arrangements with Time Warner and MediaOne.

Cablers like TCI and Cablevision Systems have similar marketing arrangements with monthly and weekly cable TV guides published by privately held TVSM, which News Corp. revealed Thursday it has recently agreed to acquire for $75 million in cash. TVSM will be included in the sale.

Combining the TV Guide and Prevue Channel listings operations, as well as marketing and sales, will yield annual cost savings of $30 million to $40 million, execs from News and United Video told analysts.

The acquisition doubles the size of United Video, which, aside from running the Prevue Channel, also operates satellite uplink services for superstations like WGN in Chicago. United Video chairman Gary Howard estimated the company would end up with a value of about $3.6 billion, including $650 million of debt it will take on, compared with its market value now of about $1.5 billion.