Metue.com

Like the old maxim of killing two birds with one stone, sometimes a small change can fix several problems. Tuesday, GE’s NBC Universal unit said it would pay $925m for Oxygen Media, the woman-centric cable TV network. $925 may not be a small change but NBC is certainly hoping it will be one of the especially effective stones.

If the promise of the deal is realized, in one move the acquisition could both breathe new life into an occasionally faltering Oxygen, recharge NBC owned Internet property iVillage and fortify NBC’s mission-critical cable property portfolio.

Oxygen was formed at the apex of the Internet bubble by an All Star team. The founding group included Paul Allen (co-founder of Microsoft), TV and media superstar Oprah Winfrey and cable veteran Geraldine Laybourne. At formation, Oxygen was planned as a multimedia property: one part cable network and one part Internet destination. Through 2005, more than $300m was spent building and marketing the property. Performance has been decent but at times not met expectations.

The $925m price NBC will pay amounts to about $12.50 for each of Oxygen’s 74m subscribers. Comparatively, NBC bought Bravo in 2002 for about $22 per cable subscriber. The money for the deal will be “substantially self funded,” NBC said. Some of the cash will come from the sale of two Spanish language affiliates. Earnings upside is expected within one year of the anticipated November closing date.

The Business Case or the 3 Benefits of the Deal:

Strengthening Oxygen – the network has struggled in part due to limited marketing and advertising spend. That is a challenge quickly solved as part of the NBC portfolio. Through the deal Oxygen picks up the ability for significant in-network cross promotion across 13 properties. Now Bravo, NBC, USA Network, Telemundo, the Sci Fi channels are all potential partners.

Membership in the NBC portfolio brings the ability for potentially lucrative and desireable bundled ad sales; a media buyer can now buy ads on several NBC networks at once.

With NBC channels as siblings, the possibilities for content syndication and shared programming are far greater. Now woman-centric shows from the NBC lineup like the Today show or prime time hits can theoretically be rebroadcast on Oxygen. It could be similar to the way the Law and Order programs can be found on both NBC and USA over the course of a week.

All of these pieces tie together especially well in consideration next year’s summer in Olympic in Beijing. NBC owns the rights. It’s foreseeable they could use the Oxygen Network as an outlet to host footage of certain woman centric events and reap the rewards from specially targeted advertising.

Recharging iVillage – since NBC bought the internet site in 2006 for $600m critics have questioned NBC’s ability to grow and build the brand. In August, iVillage saw only 3% year over year growth in audience. During the same period, younger competitor Glam Media drew a substantially larger audience ( about 20m unique users to 15m).

Oxygen and iVillage share the same target audience. Combined, their mix of viewers could help support both. Likewise, combining content. It could add efficiency but increase value. Also, marrying the online and on-air offerings creates the added ability to bundle advertising sales bringing in a potentially lucrative new stream of revenue.

Fortifying the Cable Properties — internationally the cable television portfolio is an essential part of NBC’s business. It currently accounts for nearly half of the companies operating profits. (and percentage growth forecasts for the next few years are in the lower double digits.)

The Oxygen purchase is the second cable buy since Jeff Zucker took over as CEO in February 2007. In late August, NBC acquired European cable properties with the purchase of Sparrowhawk

Zucker has noted, "As we’ve said all along, cable is the real driver of this company. It’s something we will always take a look at and always be interested in.”

Just as with Sparrowhawk, Oxygen is a natural fit for that goal.  

Related Metue Content
NBC Buys Sparrowhawk