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How Much Is Weather Worth?

$5 billion price tag for The Weather Channel may be too steep 1/04/2008 07:00:00 PM Eastern



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The potential sale of The Weather Channel has already stirred a tempest over whether the channel is actually worth its asking price of $5 billion. Last week analysts, investors and TV commentators debated over its core value.

Five billion dollars is “fair,” according to Decker Anstrom, president/COO of the channel's parent company, Landmark Communications. Anstrom said the price was an accurate reflection of the network's starting value, since privately held Landmark projects that Weather and its digital assets will post double-digit profit for 2008 and beyond. Weather also operates a top 20-trafficked Website.

“If you looked at the current profitability and future growth prospects, you'd conclude that that's a very fair starting point in terms of our businesses,” he said.

Norfolk, Va.-based Landmark said last week that it had retained JP Morgan and Lehman Brothers to explore the sale of its assets. Aside from The Weather Channel, they include CBS-affiliated broadcast stations in Nashville, Tenn., and Las Vegas; three metro dailies and a slew of community newspapers; an Internet marketing unit; and a managed data-network service.

The $5 billion figure seemed high to some analysts, who pointed to Weather's comparatively small annual revenue—some $290 million for 2007, according to SNL Kagan—and to NBC's purchase of independent women's cable network Oxygen last fall for $875 million, with its $200 million in annual revenue.

Others said the number seemed just right; in a media world where branding is critical, Weather's name recognition and genre dominance both on TV and in new-media platforms is invaluable. Unlike Oxygen, The Weather Channel is fully distributed—in some 95 million homes, according to Kagan. The 25-year-old network is almost fully high-definition, and while it has perpetually struggled to increase the length of time viewers watch, it is a must-see for breaking weather news.

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Perhaps more importantly, Weather.com is a lucrative Web draw and an asset whose importance likely matches or outweighs that of the linear channel to Landmark. With 34 million unique visitors in November, Weather's Website was the 16th-most visited site in the U.S., drawing more traffic than the sites of Facebook, Disney, ESPN or Scripps, according to comScore. A Kagan report released last week said if the company did sell for $5 billion, more than $3 billion of that would be for the Website.

Further, Weather's mobile application is the second-most used in the country, behind only Yahoo e-mail, and its consumer products have sold well—a jazz CD released by the network in October is currently No. 2 on Billboard's contemporary jazz charts.

“It's a unique brand to have advertising both online and on TV, and the brand is a draw because people know to go directly there as a source of information and they're used to it,” says Miller Tabak & Co. analyst David Joyce. “Plus, they've been expanding their field of coverage, so I think that number [$5 billion] can be justified.”

The most likely buyers for Weather would be major media conglomerates that could integrate the channel and its digital assets into existing cable portfolios. They include NBC Universal, News Corp., Discovery and Comcast. Representatives from all four declined comment on the matter.

More lucrative cable network sales have included BET to Viacom in 2000 for nearly $3 billion, and Fox Family and Fox Kids to Disney in 2001. BET went for about $38 per subscriber, and the Fox channels for about $34. (Weather would be selling for about $52, with the $5 billion price tag).

But independent Hallmark Channel has had tougher luck. On and off the market again for the past several years with a $2 billion valuation, the channel hasn't found a buyer.

Landmark is at the earliest stage of exploring a sale of Weather and would be happy to hold on to the network if it did not find a buyer and a satisfactory price point, Anstrom said.

“If this ended up with us operating it going forward, we'd be comfortable with that,” he said. “As a private company, from time to time we review what's happening in the marketplace in terms of what other companies are doing. As we looked at the environment and our own business, we thought this was a good time to test the market because our businesses are very strong right now.”



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