Cable's Power Plays

Too many deals like these will make it increasingly harder for broadcasters to demand an ad premium--or sky high retrans cash payments 5/11/2010 02:50:00 AM Eastern

Oprah's Mission of Discovery

Discovery Communications CEO David Zaslav pulled off a big coup: wooing
Oprah Winfrey, daytime's top ratings earner and a bona fide multimedia
brand, away from a 25-year career in broadcast television. But false
starts (the network was supposed to launch in 2008 and now is set to
go live on Jan. 1, 2011) and sputtering personnel hires have been obstacles.

The Deal:
A 50/50 joint venture between Discovery Communications and Winfrey,
Discovery is obligated to provide a maximum of $65 million to OWN in
2010, Discovery CFO Brad Singer said on the company's first-quarter
earnings call. Discovery spent $35 million on the channel in 2009 and
has put in $15 million this quarter; it has been spending between $2
million and $3 million a month.

The Payoff:
OWN will replace Discovery Health on most cable systems. The little-watched
net gets 12 cents per subscriber, according to SNL Kagan. OWN, which
will launch in Discovery Health's approximately 80 million homes,
is said to be asking for almost 50 cents. This sharp increase would
put OWN's sub fees well above those generated by the flagship Discovery
channel, which gets 25 cents per sub, Kagan says. Procter & Gamble
recently committed to a $100 million deal over three years for advertising
and integration opportunities, which is a drop in the bucket for the
packaged- goods behemoth.

TBS Snags Conan O'Brien

After his highly publicized exit from NBC, Conan O'Brien was well
on his way to landing a late-night franchise on Fox. But there were
sticking points galore, not the least of which was the cost of mounting
such a franchise weighed against affiliates' willingness to scrap
lucrative syndicated fare in favor of O'Brien, who had yet to prove
himself on The Tonight Show.

The Deal:
O'Brien's five-year deal with TBS will pay him about $10 million
a year. But more importantly, it gives him an ownership stake in his
show, so he stands to earn much more than if he were simply the latest
in a long line of hosts tapped to sit behind the same desk. It's a
model that David Letterman's Worldwide Pants employs on Late Show
and The Late Late Show With Craig Ferguson.

The Payoff:
TBS has built a comedy franchise around Tyler Perry (House of Payne,
Meet the Browns
). And its foray into late-night sketch began last
year with George Lopez, whose Lopez Tonight
will slide to midnight when O'Brien debuts in November. Turner Entertainment
chief Steve Koonin has said O'Brien fits with TBS' young, male sensibility.
The average age of Lopez's viewers is 33. The broadcast network's
late-night hosts have audiences that are perilously close to the motorized-wheelchair
demo. Nevertheless, O'Brien has his work cut out for him. The most
popular late-night hosts among men 18-34 are already well-established:
Comedy Central's Jon Stewart and Stephen Colbert.

Turner Gets In on the (March)

2010 NCAA Championship Game DukeAnalysis:
The NCAA saw an opportunity to get a premium for its March Madness basketball
franchise at a time when broadcast networks competing for retransmission
cash and cable networks looking to expand their ratings prowess are
willing to pay dearly for sports.

The Deal:
A $3.8 billion, 14-year agreement between the NCAA, Turner and CBS Sports
means that all games will be shown live across four national networks
beginning in 2011-a first for the 72-year-old championship. The NCAA
gets to escape from its 11-year, $6 billion deal with CBS Sports; the
contract still has three years left on it. Turner is contributing more
than $800 million, according to sources. The new deal gives the NCAA
more than the $700 million it would get from CBS for each of the next
three tournaments, upping the NCAA's take to $771 million a year.
CBS Sports will retain coverage of the regional finals as well as the
Final Four and the national championship game through 2015. Beginning
in 2016, coverage of the regional finals will be split by CBS and Turner,
with the Final Four and championship game alternating between CBS and

The Payoff:
CBS Sports gets help with the bill. That's key because although March
Madness generates more than $400 million in ad revenue per year, it
is, like many big-time sports properties, a major loss leader. And Turner's
networks, including TBS, TNT and TruTV, get to participate in one of
the toprated sports franchises on television. CBS has had a lock on
March Madness since 1982.