Deal Pumps Up Oxygen

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NBC Universal hopes to breathe new life into the Oxygen Media franchise with its recent purchase of the distaff-targeted company for $925 million.

The deal ends Oxygen founder and CEO Geraldine Laybourne's seven-year effort to build her company into the pre-eminent female-oriented cable network. One of the last successful independently owned services, Oxygen was able to gain significant distribution, but was never able to catch category leader Lifetime in terms of ratings or female viewers.

But with the vast marketing and financial resources of NBC Universal behind it now, Katz Television Media Group vice president and director of programming Bill Carroll believes Oxygen has the wherewithal to make a run at Lifetime.

“They now have not only the financial sources of NBC Universal, but they also have access to the NBC Universal library and all of the other NBC-owned platforms to promote Oxygen,” he said. “All of that usually yields more viewers and advertising.”

Under the agreement announced last Tuesday, NBC Universal will acquire the 74 million-subscriber network for $925 million. Net of financial assets, NBCU will pay approximately $875 million for the service, founded in 2000 by Laybourne, talk-show host Oprah Winfrey and television producers Marcy Carsey, Tom Werner and Caryn Mandabach.

ALLEN'S IDEA

But it was a request to seek a financial suitor for the channel from Oxygen's largest shareholder, billionaire Paul Allen, that put the network's sale process in motion, according to Laybourne. She would not reveal specifics of the financial stake that Allen's Vulcan Ventures investment company has in Oxygen, or that of any other shareholder.

“Paul had the right to ask me to pursue a good transaction, so we pursued a bunch of different transactions, and this felt the best way to preserve Oxygen and to make it grow,” Laybourne said.

She added the network had other suitors, but would not provide specific names. “The others were interested because they felt we had a platform that they could build an interactive business on and that we had an interesting interactive strategy,” she said. “It would have been a completely different direction.”

NBC Universal CEO Jeff Zucker said the Oxygen deal will cost $12 per subscriber compared to the network's 2002 purchase of Bravo, which was $22 per subscriber.

Since its Bravo purchase, the network increased is subscriber numbers from 54 million homes in 2002 to 89 million homes today. But NBC Universal Television Group president and chief operating officer Jeff Gaspin said the task to increase Oxygen's subscriber base is not as great as it was for Bravo.

Zucker added that Oxygen will further enhance NBCU's cable portfolio, which includes Bravo, USA Network and Sci Fi Channel, as well as its namesake NBC broadcast network. It also gives the company an additional asset in reaching female viewers.

“The fact that we can now put [female-skewing] Bravo, [female-targeted Web site] iVillage and Oxygen together as we go to market is something that makes us more excited,” he said.

PROMO POWER

Laybourne said NBCU will give Oxygen the cross-promotional exposure for its original shows that was not available to the network as an independent.

Laybourne, however, will not be part of the new regime: she will be leaving Oxygen at the end of the year.

Laybourne leaves Oxygen having established a strong, female-skewing brand that eventually gained significant distribution, but it was unable to attract a sizable viewing audience.

Initially the repository for The Oprah Winfrey Show outtakes and off-network sitcoms like Roseanne and Living Single, the network found its original programming legs over the past two years, with the launch of several successful reality series. With such shows as The Bad Girls Club, Fight Girls, Snapped and Mo'Nique's F.A.T. Chance, the network has appealed to younger viewers.

For third-quarter 2007, the network posted an 11% increase among women 18 to 34, from 53,000 last year to 59,000 this year.

But that pales in comparison to Lifetime, which averaged 217,000 in the demo during the quarter. In fact, Oxygen's third-quarter 0.3 primetime household rating was well short of the 1.3 rating for Lifetime and the 0.7 rating for Lifetime Movie Network.

“Because women are 52% of the population, just about every broadcast and cable network is trying to reach them. Competition is nothing new to us, and there is plenty of room for more content directed to women,” said Lifetime director of corporate communications Gary Morgenstein.

Yet Carroll believes that NBCU's guidance can help close the gap between the two networks while reaching even more female viewers.

“Oxygen has established a brand and a specific target audience, and I think obviously NBC believes that there is a potentially growing audience that has not been completely tapped at this point,” he said.

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