NBC believes its young women-oriented programming and content on cable network Bravo, its women-targeted Web site iVillage, as well as its "Today Show" franchise, will be bolstered by the purchase of Oxygen.
"When we go to market we'll be selling young women and affiliate women in a way that virtually no one else can," says Jeff Zucker, president/CEO of NBC Universal, said in a press conference. The seven-year old young women's network, available in more than 74 million homes, is one the last independently owned cable networks. Oxygen had been looking for a buyer for sometime, as has another fully distributed cable network, Hallmark Channel.
NBC seemingly got a deal. "It's cheaper than that $1.1 billion or $1.2 billion I thought it would take," said David Joyce, media analyst for Miller Tabak LLC. "It's important for NBC to continue to build scale with its key demographics."
Pricing for cable networks has dropped substantially over the last few years. NBC's Zucker noted that when it bought Bravo six years ago, it spent $1.2 billion or $22 a subscriber for a 54-million-subscriber network. With Oxygen, it buys a much broader distributed network--74 million subs, at $12 a subscriber.
"NBC is the natural buyer for it," said Hal Vogel, CEO of Vogel Capital Management. "They can consolidate operations and be stronger to the advertising community." What about the low price tag? "There is no big excitement over any specialized cable network these days," he adds. "That's the reason of the diminished price per sub."
From Oxygen's point of view, executives note that it couldn't grow much more in being an independent operator. It couldn't gain much more leverage in terms of extracting higher cable affiliate fees, nor that for higher advertising rates. For example, Oxygen gets 9 cents a sub from cable operators.
NBC intends to do with Oxygen what it did with Bravo--but the effort will be somewhat easier. Six years ago NBC took Bravo, which was a 54 million-subscriber network to 80 million subscribers. "It's not nearly as great as what we had to do with Bravo," said Jeff Gaspin, president/COO for Universal Television Group. "The task isn't as great."
During that time NBC used its cross platform resources to grow Bravo. Bravo's "Top Chef" and "Project Runaway", for instance, gain some cross-promotion exposure by getting on "The Today Show" which helped pushed Bravo's ratings higher. This is something Oxygen has needed. "What is apparent now is that we do cross promotion," says Geraldine Laybourne, chairman/CEO of Oxygen Media, who will be leaving at the end of the year. "That is the biggest issue for us. We have no cross promotional platforms."
In turn Oxygen could help promote NBC's big iVillage asset--NBC's $650 million purchase some time back--which had some early synergy problems when NBC forced, too heavily, its exposure on some NBC daytime shows, such as "iVillage Live" and "The Today Show." "We do hope we can replicate the success we had with Bravo," said Zucker. "But keep in mind, Oxygen is still a nascent brand, only seven years old. Bravo had been around for 20 years."
The Oxygen purchase will be substantially paid for by NBC selling two independent Telemundo television stations: KWHY in Los Angeles, one of its two Spanish-language stations in that city, this to comply with FCC rules. The other station for sale is WKAQ in Puerto Rico.