CSTV’s Addition by Acquisition

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After two and a half years of going to school, CSTV Networks Inc. is transferring to a much bigger campus.

CBS announced Thursday it would acquire the independent company, whose curriculum includes College Sports Television, a linear network dedicated to college athletics in nearly 15 million homes and an expansive Web business that operates sites for some 250 universities and conferences. The purchase price: $325 million of CBS Corp. stock. The transaction is expected to close early next year, following the planned split of Viacom and CBS.

CSTV will still be led by cofounder and CEO Brian Bedol, who will report to Les Moonves, chairman of CBS, co-president of Viacom and CEO-to-be of the new CBS.

This is the second score for Bedol. Along with Steve Greenberg, a CSTV investor and its chairman, Bedol sold Classic Sports Network in 1997 to ESPN for about $200 million. That network is now ESPN Classic.

CBS will have to keep its eye on the ball. CSTV, launched in April 2003, now faces intensifying competition. Fox Cable Networks Group converted three regional sports services into Fox College Sports. ESPN debuted ESPNU, a cable service and multimedia programming initiative, in March.

“We never got into the business as an independent for the sake of being an independent,” said Bedol of the company he co-founded with president Chris Bevilacqua. “You can be nimble and react quickly as an independent, but you don’t have the resources and clout that a big media company can bring to bear. This is a deal that can really help CSTV go to the next level.”

He said that CSTV will build up content and services by being aligned with CBS and CBS SportsLine.com. It could also get a marketing boost from promotions on those networks, plus UPN, as well as Infinity radio stations and billboards that are part of the new CBS Corp.

Bedol declined to describe the company’s plans for getting more distribution of its content; or discussing whether being owned by CBS will get it more carriage on cable systems. Moonves, who is expected to demand cash payment from cable operators who want to carry the company’s flagship CBS television network, could also demand that they carry CSTV as a basic cable service as well. The demand could come as part of upcoming negotiations where CBS has to give its consent to cable operators wanting to retransmit the over-the-air signals of its CBS stations to their customers.

“A lot of this has to do with retransmission consent,” said Kagan Associates sports analyst John Mansell. “This is a fallback position if Moonves can’t monetize the CBS stations.”

Sparks Capital principal Dennis Miller, who led the initial institutional investment round for CSTV while with Constellation Ventures, agrees.

“There are three reasons why this is such a good fit. CBS is already a major player in college sports with football and basketball and the NCAA tournament,” he said. “Second, being part of CBS will give CSTV multimedia platform exposure that an independent just can’t leverage. And retransmission consent: CSTV is the only basic network in the CBS Corp. portfolio. It should be in a strong position to gain distribution.”

CSTV covers 30 men’s and women’s college sports, but does not have rights to live coverage of major college football and basketball conferences, such as the Big Ten or the Atlantic Coast Conference. Instead, it has struck deals with the Mountain West Conference and Conference USA, whose teams include Texas Christian and Tulane universities.

But Bedol said there are “tons of existing rights and others that will become available’’ and, hopefully, added to CSTV.

In the meantime, CSTV will continue to ply the Web sites of more than 250 schools and conferences and provide video on high-speed Internet connections for games from more than 100 of them. Bedol said CSTV currently offers “all-access” broadband packages that encompass various elements, ranging from streaming games, audiocast of contests, game highlights, and coaches’ press conferences. CSTV also derives a cut of revenue from online merchandise sales.

In September, its site, CSTV.com, attracted some 6.5 million unique users. That made it the seventh most-visited ranking sports site for the month, according to Nielsen/NetRatings. CBS Sportsline.com was ninth with 5.67 million.

“I believe CSTV’s Web business created a lot of the interest,” said Dean Bonham, principal in the Bonham Group, a Greenwood Village, Colo., sports consultancy. “It’s tough to put an exact value on it, but broadband is a business of the future, and something that certainly makes the company more valuable.”

Next year, CSTV is slated to launch regional sports networks for the Mountain West and Conference USA. Bedol said they were still works in progress, but could manifest as “hybrids” of video channels, Web sites and other forms of programming.

One sports network executive familiar with CSTV said talk of such “hybrid” approaches means CSTV may be having difficulty getting cable operators to take the channels.

“I think you really need to watch the regional sports networks,” he said. “Conference USA has Rice, Houston and SMU, but I’m not sure what the incentive is for a Time Warner in Houston or Comcast in Dallas to launch a regional college sports network that doesn’t have games from Texas, Texas A&M or Texas Tech.”

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