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New York celebrity, gossip and news blog Jossip was reporting today that CBS News (CBS Corporation) was acquiring Jossip’s fellow New York blog Wallstrip for approximately $5m in cash with a formal announcement likely early this week.

I try to stay away from reporting on rumors but sources and information regarding this deal are credible enough to suggest it is highly likely the rumors are dancing around truth – though the price may be exaggerated.

Wallstrip is a video blog characterized as one part Saturday Night Live and one part CNBC.   It’s comedic, off-beat approach targets Generation Y and the so-called "YouTube Generation" with 3 minute episodes covering stock market news or corporate with a less than traditional tone.

Wallstrips’s audience is growing but it is not yet substantial and its content is considered inconsistent. It’s most popular episode was a show spoofing CNBC’s Jim Cramer. That episode generated 30k viewers in January. According to a Business Week article Wallstrip did reach 10k viewers in its first three months.  

While Wallstrip did receive 500k in Angel investment, from a technology standpoint there is little to no innovation worthy of acquisition – the site is built using Revver (a YouTube competitor) for its video technology and the open-source Wordpress platform is the foundation of  its website. Wallstrip’s website at this time is not directly ad-supported leading to reports that the company has revenue of $0. Jossip got that part wrong. Revver, the platform Wallstrip is built on (and distributed through) shares revenue from ads incorporated into the video 50/50 with the content creator. Revver’s revenue sharing system is well documented in their sites Frequently Asked Questions section. Still, Wallstrip’s revenue is likely small.

The rumor being reported is that CBS wants the services of Wallstrip’s host, 29 year old actress Lindsay Campbell for its own online, and possibly TV, news services.   (Lindsay’s bio and background can be found here on her personal site. She is originally from Northern California, has a degree from Stanford, and has appeared a number of New York based TV shows including Law and Order and the Sopranos.)

It’s not unrealistic that Lindsay’s caught the eye of folks at CBS. She extremely attractive and manages to comes across as more than just a pretty lady. She is well educated, credible and articulate, balanced with a style that feels hip, casual and light-hearted enough to appeal to younger audiences in Gen X and Gen Y. It’s certainly true that CBS is actively developing its online presence, including last weeks investment in Joost.  Lindsay may fit into that, and based on the rumor, would only sign a contract if Wallstrip was acquired.   

It’s unclear what underlies a price tag of $5m, or if that information is accurate.  Even as a relatively low dollar number, it seems exorbitantly rich for a start-up of Wallstrip’s stage based on available information, and likewise, however talented Ms Campbell may be, and however creative a method of recruiting/hiring personnel, $5m is an exorbitantly high cost for corporate headhunting.

It’s been an up and down week for the year old IPTV startup Joost but it’s ending on a high note; a very high note.

After several big announcements were made about content and advertising partnerships, the web was abuzz at the beginning of the month that the supposed broadcast-quality, free, peer-to-peer,  net-television service was officially going live (from beta).   Those announcements were slightly misleading (as access was dependent on invitation) but there was a spike in traffic, and interest.    Shortly thereafter, the Joost blog reported that the company’s central servers, which are located in Luxembourg, were having problems handling the demand and load. 

While Joost may be struggling to get it’s systems tuned to scale with demand, Joost released news that will likely leave the week, and the month, on a positive note no matter what happens next.  Earlier Thursday, the company announced the closing of a substantial Series A financing round.  In total, $45m was raised.

The venture round was led by Sequoia Capital and the European firm, Index Ventures (which also invested in the Joost founder’s prior company, Skype).

Though, as is the norm for private/venture transactions, little information was announced regarding valuation, it is clear  that the pre-money valuation accepted by the investors was substantial. The $45m dollar investment was characterized as buying a minority stake in the company which translates to a pre-money valuation of greater than $45m – though it’s not clear how much money was invested previously by the founders (who were flush with cash from the sale of Skype to eBay).  $45m pre-money is still  a staggering number for a year old company yet to have revenue or roll out its product in a wide release.   

Perspective on just how big a transaction this is comes with a comparison to investment in Joost’s competitor Veoh Networks.  In April 2006, Veoh a rival P2P IPTV company closed its Series B round. That transaction raised $12.5m from venture investors Shelter Capital and Spark Capital as well as Time Warner and other corporate partners. That round also resulted in two board seats going to industry heavyweights Michael Eisner (former CEO of Disney) and  Art Bilger (the former vice-chairman of Akamai and current managing partner at Shelter.).

The Joost deal is nearly 4 times the size of the Veoh investment – and it’s an A–round financing, not a Series B.   In what should be the understatement of the month,  Joost co-founder Janus Friis said “This funding represents a tremendous vote of confidence in Joost’s platform.”  Sequoia, which recently saw a tremendous return on its investment in YouTube, and hasn’t been scared to take large gambles in its transactions,  is clearly betting big on Joost.

In an indication that, like Skype, Joost’s has global plans from the start, Click to Read More

Entertainment conglomerate Viacom (NYSE: VIA), today reported Q1 numbers that beat analyst estimates but overall profit was reported down 36% due to restructuring costs ($56m at MTV) and increased expenses.

Wall Street consensus estimates were for profit of 31c a share, less the restructuring charges Viacom reported profits of 34c

First quarter revenue was up 16% over the same period last year to $2.75b. Consensus estimates were for revenue of $2.55b. Ad sales were up globally by 10%. Operating income was down 3%. Net income was reported at $202.9m, down from $317.2m.

For the Cable Networks (MTV, Nickelodeon, VH1, BET and Comedy Central, Spike, CMT etc), executives downplayed TV ratings and suggested their focus is on building Internet presence and online affiliate advertising. They noted Nickelodeon’s online project Nicktropolis had 3m registered users since January. For TV audiences, Comedy Central continued to do well but MTV visitors were watching the site less frequently. Overall, revenue for the TV properties was up 10% but operating income was down by 3%.

For the Paramount Studios component, sales were up 27%, but there was an operating loss. Filmed entertainment operating income showed a loss of $105.7 million, from net income of $51.1 million for the same period last year. That was attributed to increase in expenses related to higher print and advertising costs.

More detailed press coverage on Viacom’s finances can be found at:

Yahoo Finance
Google Finance
Marketwatch
Viacom Fact Sheet

Today was a relatively busy day for earnings announcements.  Networking giant Cisco announced their numbers after the markets close.  In addition, in the Entertainment Industry, both Disney and leading game publisher Electronic Arts announced their quarterly results.

Electronic Arts:
For EA, it was a rough day.  EA Reported revenue down 4% to 4613m.  Even excluding a one time accounting charge, net income was off a whopping 56% to $19m.  For EA’s full fiscal year, which ended March 31, revenue was slightly up to $3.1b (up 5% over last year). 

The drop was partly attributed to increased costs associated with R&D and marketing associated with the fall/winter release of next generation platforms (Wii, PS3), and the transition of titles which effected the entire industry.

In guidance for the next quarter EA also was cautious. EA forecast revenue for the quarter ending June 30 will fall the range of $300 million to $360 million. Analysts were expecting $460.6 million.  The downward adjustment was attributed, in part, to changes in accounting for the way the company books some gaming revenue.

More detailed press coverage on EA’s finances can be found at:

Yahoo Finance
Google Finance
Marketwatch

Disney:
Disney’s reported numbers that analysts were characterizing as decent to good but not impressive.  Revenue was in at $8.1b, up 1% over the same period last year.  Operating income was reported up to $1.8b from $1.4b.

For the quarter, the film studio revenue (which owns about 1/5 of Disney’s gross income) was down 13% relative to last year to $1.55b on the quarter. But lower costs and fewer high profile titles to market during the quarter helped increase operating income by 60% to $235m.  The coming months, with the high profile release of several major titles will be a big test for the quality of the Studio Division’s year. (Pirates of the Caribbean 3 has been a huge earner (info on the earning history of many of this summers sequals can be found here)) is in theaters May 25th, and Pixar’s Ratatouille, comes out June 29th.)

The TV division reported solid returns.  Cable channels (ESPN, Disney etc) saw a 19% increase in operating income to $963m.  ABC showed solid returns with increased ad-rates in prime time and positive notes on syndication sales of its hits Lost, Desperate Housewives and Grey’s Anatomy.

More detailed press coverage on Disney’s finances can be found at:

Yahoo Finance
Google Finance
Marketwatch

The humorist Erma Bombeck once said “You hear a lot of dialogue on the death of the American family. Families aren’t dying. They’re merging into big conglomerates.”

Looking at some of the biggest corporate acquisitions completed (or in the works) so far this year –, and the power of a few families in those transactions (especially those holding alternate classes of  shares with special voting rights ) – her sentiment may have been more accurate than she intended.

First there was Tribune Co., the countries 3rd largest newspaper company.    It sold to Sam Zell but only after the Chandler family, whose trusts controlled more than 20% of the stock, initiated a strategic review and pushed for its sale.

Now there are two more multi billion dollar sales in discussion, or on the grapevine, where a single family will play a major role:

1.  The Offer:

Today, the Wall Street Journal reported News Corp (Fox, MySpace etc) made a friendly offer of approximately $5billion to acquire Dow Jones, the publisher of the Wall Street Journal, Barrons, MarketWatch and owner of  other financial-information services.  The offer constituted a 67% premium over market value (the stock jumped more than 50% to $56.20 a share. 

The deal, even at a premium, could be a valuable addition to News Corps product portfolio. Based on 2006 revenue, the addition would increase News Corp. newspaper and magazine revenue by a $1b/yr  to over $6b (approximately 20% gain).  The Marketwatch property would also provide another news channel to be added to the new MySpace news offerings.  Given the troubled state of the publishing industry, one has to believe that Rupert Murdoch and his team at News Corp see significant value both in combining Dow Jones business news with Fox TV news properties, and also in the online components of the deal (both those already online, and those that could be).

The Family behind the Scenes:  

The Bancroft family holds 24.7% of the outstanding shares of Dow Jones. The voting rights of those shares give them control 64.2% of the company.  So far, the family has rebuffed the offer.  That may be because they aren’t’ interested in selling but that is unlikely. Since 1986 the family has reduced it’s holdings by more than 50%.   More likely is the theory that the rejection is gamesmanship to further drive the price. Click to Read More

As part of an ongoing effort to get lean and streamline its business ventures, Blockbuster Inc., the leading movie rental chain, sold its UK game retail unit, Game Station, to the British-based Game Group plc for $150m in cash. In a statement, Blockbuster CEO John Antioco said the sale "underscores our intent to focus on our Blockbuster-branded assets in North America in support of our goal to grow our overall share of the video rental market, both in-store and online."  This announcement follows several other similar divestitures.  In 2006, Blockbuster sold its Movie Trading Co. locations and Movie Brands Inc. subsidiary, and sold its Taiwan subsidiary. Blockbuster has also sold its U.S.-based Rhino Video Games.  While much of the sale’s proceeds are earmarked to pay down debt, there is little doubt the company wants more free cash flow available for the heavy toll of marketing expenses it’s been taking in its all-out war with Netflix.

User Generated Video content uploaded onto websites like YouTube often have a limited amount of meta-data that describes what is in the video.  The absence of that data makes archiving and searching the video content somewhat difficult.

Google, and Truveo (acquired by AOL in ’06) have created tools to try and work around this.    Startup,CastTV, which hopes to compete with a solution of its own, announced a $3.1m Series A financing round yesterday.

The CastTV approach, like Truveo and others, tries to compensate for the lack of meta-data by mining surrounding text content for context.  It also indexes any available tags. The technology then takes it’s combined data and searches the web for any additional data. The whole mix is put into their index and theoretically provides more accurate results.

The company is still in early development.  A private beta test is a few months off and a commercial release not do at least until mid summer based on current press.