Hoping to escape constant pressure from investors to show short-term growth, Cox Enterprises said it will buy back outstanding shares of Cox Radio and take the company private, with an offer of $3.80 per share, for a total buy of roughly $69 million. The offer to buy out investors is contingent on meeting certain milestones in the share repurchase program. Cox Enterprises currently owns 78% of Cox Radio. It said it will take the company private if it is able to buy another 12% stake by April 17. The offering price for the share buyback represents a premium of about 26% over the price of $3 at the beginning of the month, but it is 71% less than last year's peak price of $13 last May and June. Like other big radio broadcasters, Cox has seen its share price decline steeply over the last couple of years, with the downward trend accelerating during the recession. However, Cox is still better off than most of its competitors. On Monday afternoon, Cumulus shares were trading at $1.44, Emmis at $0.59, Radio One at $0.36 and Entercom at $1.09. Both Radio One and Entercom have recently been threatened with delisting by Nasdaq and the New York Stock Exchange, respectively, when their stock price fell below $1.00. Westwood One was delisted from the New York Stock Exchange in November--followed by Citadel earlier this month, when prices fell below the minimum price. Both companies' shares trade for pennies on the "pink sheets." Still, Cox must tread carefully with its plan to go private, as other big radio broadcasters have found themselves at risk of defaulting on debts they assumed during share buybacks. Beasley, which bought back millions of shares from 2005-2008, is said to be at risk of breaching its lending covenants--especially as the mandated ratio of debt to revenue steps down over the next couple of years. It recently had to renegotiate lending agreements with creditors that demanded the company agree not to buy back more stock until the debt is paid down.
Time Warner has gone old-school of sorts--buying a stake in CME, the 15-year old broadcasting company with interests in Central and Eastern Europe. Time Warner's investment comes to $241.5 million--or a 31% interest in CME, Central European Media Enterprises. For that investment, Time Warner also gets to place two members on CME's board of directors. As part of the deal, Warner Bros. and CME have also announced a partnership to launch more TV channels in the region. Time Warner has said for some time that it wants to expand its international TV channel business. The good news for Time Warner is that it is buying the company at near its historically low stock price--$7.50--around eight times cash flow (earnings before interest taxes, depreciation, and amortization). CME, like most other broadcasters around the world, has been hurt by slowing ad revenues. CME broadcasters go to 22 countries, including stations in Bulgaria (TV2 and Ring TV), Croatia (Nova TV); Czech TV (TV Nova, Nova Cinema and NovaSport); Romania (Pro TV and Pro TV International, Acasa, Pro Cinema, Sport.ro and MTV Romania); Slovakia (Markiza), Slovenia (Pop TV, Kanal A) and Ukraine (Studio 1+1 International and Kino). CMEs's European footprint covers 97 million people. CME was started in 1994 by Ronald Lauder, its chairman.
Hachette Filipacchi, struggling to stave off the losses that are now endemic in the magazine industry, has quietly put a number of well-known enthusiast publications up for sale. Titles on the auction block include American Photo, Boating, Cycle World, Flying, Popular Photography and Sound & Vision, according to the Delaney Report, which first reported the news on Monday. The publisher of Elle and Car and Driver has been mandated to cut costs and boost profitability by French parent company Lagardere SCA, which has dispatched executives from the home office in Paris to streamline operations, under the leadership of CEO Alain Lemarchand. Industry observers have long questioned the future of Hachette's niche enthusiast publications, as the category in general has suffered from Internet competition in recent years. From 2005 to 2008, ad pages at American Photo fell 17%, Boating 37%, Cycle World 19%, Flying 18%, Popular Photography 24%, and Sound & Vision 15%, according to the Publishers Information Bureau. Since then, the trend has continued and even accelerated as advertisers find themselves challenged by the recession: in the first four months of 2009, ad pages are down 49% at Boating, 18% at Cycle World, 19.3% at Flying, 15.3% at Popular Photography and 28% at Sound & Vision, according to MIN Online. Overall, Hachette's ad pages are down 22.6% through February, according to TNS Media Intelligence. (The decline is partly due to the absence of Home magazine, closed last year.) It's an open question whether potential buyers of the Hachette titles will be able to secure funding for acquisitions, however. With global credit markets still frozen, money for the acquisition of distressed media properties like magazines and newspapers has grown scarce to the vanishing. In the enthusiast category specifically, Bonnier bought most of the Time4Media enthusiast titles from Time Inc. in January 2007, but this deal came in a credit environment that seems positively quaint today.
Turner's long-term relationship with the NBA will expand to include short-form programming on Cartoon Network this fall. Short-form series "My Dad's a Pro," about the children of NBA stars, is scheduled to debut as the 2009 season tips off. Other programming forays for multiple platforms--from online to VOD--are coming, Turner said. The three-episode "My Dad's a Pro" will coincide with the launch of a basketball section on CartoonNetwork.com. Stuart Snyder, president and COO of Turner Animation, Young Adults and Kids Media, indicated that Cartoon is looking to move further into sports as a programming genre, saying the NBA deal is "part of the ongoing sports strategy." The Turner relationship with the NBA includes recently taking over management of NBA.tv, as well as an operational role with NBA.com and the prime-time games carried on TNT. Three decades ago, Turner's TBS carried Atlanta Hawks games to a national audience, when Ted Turner owned both. "This collaboration is a further extension of the strong business relationship and long-term partnership we have developed with the NBA," said David Levy, president of Turner Sports and Turner Broadcasting Sales.
The Nexstar station group has a deal with a private-equity firm to manage the seven stations it acquired two years ago from CBS Corp. Under the agreement, Nexstar will meld operations for the group of mid-market stations--which fall under a Four Points Media banner--into its 52-station portfolio. Cerberus Capital Management bought the seven stations for $185 million two years ago when the mergers-and-acquisitions business still had steam--and the local-station business appeared to be on firmer ground than it is now. Cerberus will pay Nexstar a $2 million-a-year management fee, with incentive payments that would come from performance. Nexstar also stands to receive a share of profits from any sale of the stations--a minimum of $10 million if stations are sold over the next three years. The deal goes through in 2012, but provides for one-year renewal options. Nexstar hired Goldman Sachs hoping to sell itself two years ago, but halted the sale as adverse market conditions emerged. A sale of the Cerberus portfolio would also seem to be an uphill battle. Nexstar CEO Perry Sook said: "We are confident that the incentive compensation to be derived from this agreement will be significantly additive to the annual management fees, based on our strategies to improve the market position and operating efficiencies of these stations." CBS sold the stations in order to concentrate on its large-market properties. Included are the CBS affiliate in Austin, Texas, and the CW station in Providence; a duopoly in Salt Lake City (CBS/RTN) and triopoly in West Palm Beach (CW/MyNetworkTV/Azteca America). Nexstar manages 52 stations in 30 small- to-mid-size markets.
Suffering from the same steep decline in revenues that is afflicting the rest of the newspaper industry, Advance Publications said Monday it will cease daily publication of the Ann Arbor News in July and scale back distribution of three other newspapers--The Flint Journal, The Saginaw News and The Bay City Times--from seven to three days a week beginning in June. Four other small Michigan dailies face cutbacks as editorial and production staff are consolidated to one office in Grand Rapids. Another newspaper, the Jersey Journal of Jersey City, NJ, will be closed next month if no buyer is found. Advance will also require employees to take a 10-day unpaid furlough at most of its other newspapers, making it the latest major publisher to resort to this cost-cutting tactic. The company, owned by the Newhouse family (which also owns Conde Nast) is not withdrawing from Ann Arbor altogether. The Web site of the Ann Arbor News, AnnArbor.com, is being reinvented as a stand-alone company that will produce a print newspaper twice a week, on Thursday and Sunday. AnnArbor.com is expected to hire some employees from the defunct newspaper, but the Web operation will be far smaller than the print business. The unpaid 10-day furloughs will affect most of Advance's newspapers, including big regional dailies like the Cleveland Plain Dealer, Star-Ledger, of Newark, NJ, and the Times-Picayune of New Orleans. Employees at the Plain Dealer and the Portland Oregonian also face salary cuts. The company also will freeze pensions, although it said it would increase matching contributions to 401(k)s. These are the latest in a spate of closings, reductions in frequency and unpaid furloughs implemented by newspaper publishers. On the first front, The Rocky Mountain News of Colorado closed in late February, and the Seattle Post-Intelligencer closed its print edition earlier this month, going to Web-only publication. Among large newspapers, The San Francisco Chronicle is also threatened with closure by Hearst if it can't find a buyer. And the Journal Register Co. has closed literally dozens of small weekly newspapers across the Midwest and Northeast. In the area of frequency reductions, The East Valley Tribune in Arizona said in October it would cut back its publication schedule from seven days a week to four. In December, the Detroit Free Press and Detroit News--published under a joint operating agreement by Gannett and MediaNews--said they were cutting back home delivery to three days and two days a week, respectively. In March, Philadelphia Media Holdings said the Philadelphia Daily News will be published under the corporate umbrella of its sister paper Philadelphia Inquirer to save money. Finally, December The Seattle Times asked approximately 500 of its non-unionized employees to take a week's unpaid leave. In February, Media General said all employees have to take 10 days of unpaid leave in 2009, including four by the end of March, and The Financial Times of London said it would ask employees to take three-day weekends without pay on the extra day. On Monday, the Gannett Co. also announced another round of unpaid furloughs in the second quarter of 2009. Most Gannett employees will be asked to take a week of unpaid leave, in anticipation of a continued downward spiral in the publisher's revenues. Employees must take the furloughs by the end of June. This will be the second quarter where Gannett has put employees on unpaid furloughs. In January, Gannett said it will require thousands of employees to take a week off without pay.
HOLLYWOOD, Calif. -- Tough times for digital startups -- and those that need necessary financing--will continue for the better part of 2009. Linda Gridley--president/CEO of Gridley & Co., a boutique investment bank--moderated the panel "Startups and Solvency: Who gets to Survive?" at the OMMA Global Hollywood conference. She said venture-capital money for digital companies sank to $28 billion in 2008 from a high of $35 billion in 2007--a peak year. Expect that number to drop big-time this year. James Slavet, partner at Greylock Partners, who was on the panel, asked one private-equity executive how business was going. The executive answered: "Nobody around here is trying to be a hero." Such reluctance will slow funding. Richard de Silva, general partner of Highland Capital Partners, believes a turnaround will not occur at least until the first quarter of 2010. Until then, he notes, new start-ups will have a hard time. However, "there'll be venture capitalists doing inside rounds," he said. Still, there are deals being done. Shashi Seth, chief revenue officer of Cooliris, a digital technology company, said: "We just raised series B (financing) in this calamity--for a pretty sizable amount. This is great time to build a company." For digital companies looking for second-, third- or fourth-round financing, it's better to consummate a deal now. Says de Silva: "The worst situation is at the end of fourth quarter when you have to do a deal--and you have limited options." Better financial activity might be found in the M&A business, said Michelle Wroan, a partner in the communications and media area for accountancy KPMG. But even then, caution rules. "When you have companies trading at two or three times cash flow, that's not going to be attractive," said Gridley. Greylock's Slavet added: "For many companies, it's a terrible time to sell. The advice we are giving is that you have to have clear eyes in how to operate the business. If there is a need to cut on the expense side, try to do it once [not several times]. Make sure you are communicating enough for your team." de Silva said the deals Highland Capital is investing in are with companies that possess strong management teams and those with technologies that are truly differentiated. To that point, Cooliris' Seth added that in a downturn market, high-quality executives are more available than ever before. Digital leaders are thriving not just with financing, but with advertisers. "Leading companies are doing well," says de Silva. "CafeMom is the No. 1 social-networking site for moms. They are a must-buy for consumer product companies."
The NFL is bringing a key part of the Sunday afternoon package to cable that competitor DirecTV has had exclusively since 1994. The move comes as the league and large cable operators have been in a grudge match. Cable operators--as well as telco TV providers Verizon and AT&T--will be able to offer the "Red Zone Channel" at some point before the 2012 season. The channel, a staple of DirecTV's "Sunday Ticket" for four seasons, carries the action for every game each time a team moves within scoring range (inside the 20-yard line). Separately, in what is not a surprise, DirecTV has reached a deal to continue airing "Sunday Ticket" exclusively through 2014, offering subscribers access to each game on Sundays. The satellite operator began offering the package in 1994; its role in helping to bolster the DirecTV brand and garner subscribers cannot be underestimated. As part of the deal, at some point in the next three years, "Sunday Ticket" subscribers--and others--will be able to access the package on the Internet. In addition to cable and telco TV, the "Red Zone Channel" is also moving to the Internet and mobile devices. Giving cable operators a piece of DirecTV's pie comes as large providers--namely Time Warner Cable and Cablevision--have refused to pay the rights fees the NFL wants to offer its eponymous network. "Sunday Ticket" allows fans across the country to watch their favorite teams or big games, even if they aren't available in the local markets.
With the big tag team of NCAA basketball tournament programming and an interview with President Obama on "60 Minutes," CBS did what it was supposed to: it won Sunday night. Still, it was close. CBS squeaked by ABC for the evening with a Nielsen preliminary 3.5 rating/9 share among 18-49 viewers to ABC's 3.4/9. Most of CBS' gains came in the early part of the evening. In the first prime-time hour--7 p.m. to 8 p.m.--the conclusion of two closely fought NCAA tournament games yielded a 4.4/14, more than doubling the second-place competitor, ABC's "America's Funniest Home Videos," which grabbed a 1.8/6. Then at 8 p.m., CBS' "60 Minutes" with the Obama interview kept up the pace with a stellar 4.3/12--well above its season's average. ABC took over in the 9 p.m. to 11 p.m. time periods. "Desperate Housewives" earned a leading 4.9/12--although it was down a bit from a week before, at 9 p.m. Then "Brothers & Sisters" won the 10 p.m. hour with a 3.5/9, just around its season's average. NBC had a rough time with its new show "Kings," but regained some ground with "Celebrity Apprentice." "Kings," its new troubled rookie show, dropped four-tenths of one rating point from its premiere to a 1.3 rating/3 share for its second episode. Now back to its usual two-hour episode, "Apprentice" rose to a 2.9/7 (and to a 3.3/9 in its last hour). A week ago with its special one-hour episode, it earned a 2.8/7. Overall, for the night, this gave NBC a 2.1/6 versus its 1.8/5 last Sunday. Fox was ahead of NBC with a 2.4/6--despite running half of its Sunday night schedule in reruns. Moreover, it led all networks among 18-34 viewers with a 2.7/8--with "Family Guy" grabbing a 4.5/12, the best-performing show among 18-34 viewers. CW ran "Jericho" repeats and "The Mod Squad" movie, which got it to a 0.3/1 among 18-49 viewers and a lower 0.2/1 among its core 18-34 audience. Univision was better than CW by more than four times in each area. Univision had a 1.2/3 in 18-49 viewers and a 1.2/4 in 18-34 viewers.