TV Guide Network Faces a Tough Sell


Macrovision has officially put the TV Guide Network and smaller TVG Network on the block, about five months after buying parent firm Gemstar-TV Guide and in the teeth of a financial-market meltdown that seems likely to depress the sale price, according to analysts.

Macrovision closed its $2.8 billion purchase of Gemstar in late April and signaled at the time that it would look to sell the two basic-cable outlets. Variety last week reported TV Guide Network officially was on the block, with preliminary sale prospectuses being distributed and naming a possible interested bidder — Constellation Ventures, the New York-based venture-capital fund that sprung from Bear Stearns Asset Management in 1998. Constellation's cable holdings include African-American–targeted TV One, and the fund had been an early investor in such networks as College Sports Television (since sold to CBS) and the Gospel Music Channel.

People familiar with the process said the TV Guide Network sale process was being run by UBS Securities, but UBS declined to comment.

Variety said TV Guide Network might sell relatively cheaply — about $400 million, or what the network was valued at as part of the Macrovision purchase. With 83 million subscribers, that appears to be an extremely low valuation.

In April, before the Gemstar deal was closed, SNL Kagan analyst Derek Baine estimated that the channel, along with its companion TVG Network (a horse-racing channel), online assets and the TV Guide magazine could attract as much as $1 billion.

At the time, Baine said he thought the TV Guide Network would fetch a premium price because of its carriage. Fully distributed networks are not easy to come by in the ever-crowded cable landscape.

Now he's less bullish. “I think the market is that bad, valuations on many of the major media companies are down 40%, and most of the potential buyers are hoarding cash because of the credit crunch,” Baine said last week in an e-mail. “There just aren't many companies that are potential buyers in the cable-network space right now. It's pretty bleak.”

Based on Macrovision's breakdown of the deal — it purchased Gemstar for $2.35 billion — TV Guide Network was valued at $408 million, TVG Network at $112 million, the magazine at $61 million and online networks at $32 million. Together, that would put the value of a deal at about $613 million.

In contrast, the Sundance Channel, which has about 30 million subscribers, was sold to Cablevision Systems in May for $496 million (much of that in General Electric stock held by Cablevision). The Weather Channel, with 96 million subscribers, and its high-volume Web site sold to NBC Universal earlier this year for $3.5 billion.

Janco Partners media analyst April Horace called a $400 million price tag reasonable, given the current state of the credit markets and the makeup of the channel itself.

TV Guide Network basically is a scrolling guide channel with some entertainment programming. While it has made some big strides in adding entertainment-news shows and other entertainment-oriented programming — the guide now takes up only about one-third of the screen — it is still perceived as a guide channel.

Horace, who values the channel at about $425 million, said that, as cable operators transition their subscribers more and more toward digital cable service — and the requisite interactive programming guide — the need for a dedicated guide channel diminishes. There is some question as to how much a buyer would be able to change the format of the channel without violating carriage agreements.

“To my understanding, there are some glitches in the carriage agreements,” Horace said. “It's almost on an MSO-by-MSO basis.”

She said that, on DirecTV, for example, the channel doesn't include a scrolling guide but, in Comcast systems, the guide must remain.