What is the Value of the US Nonfiction Channel Sector?

Just how valuable is the US nonfiction channel sector?

The “financial scale” question came to mind when I read last week’s announcement that Qatari-owned Al Jazeera had acquired Al Gore’s Current channel for $500 million.

  • Current was a failed talk and news network with an ‘independent’ or liberal voice.
  • Its average prime time audience in 3Q’12 was 31,000, a 50% drop since 3Q’11.

AJ didn’t pay half a billion for Current’s meager audience, but for its reach:

In its efforts to gain a foothold in the US, AJ had long struggled against two forces:

  • Bias (“AJ = Osama’s terrorist network”).
  • And the cable / satellite operators’ preference against adding a predictably low-rating hard news channel.

The acquisition of Current gives AJ a US platform and a desirable annual revenue stream of $70+/- million, based on a monthly affiliate fee of 10+/- cents per subscriber.

  • That hefty subscriber fee had been negotiated by Mr Gore, using all of his vice presidential charm and leverage.
  • Mr Gore himself earns a payout of $100 million from the AJ acquisition for his 20% stake in Current.

Travel UK

The Current acquisition demonstrates the enormous premium that channels can earn from their strategic position.

  • I was reminded of the $100 million that Scripps Networks International paid last year for Travel UK.
  • Scripps had acquired the Travel Channel US from Discovery, and buying Travel UK was the quickest route to scale up as a global brand.
  • (I had worked on the business plan for Travel UK in the ‘Nineties. Landmark Communications then owned Travel US, and, like Scripps, wanted to establish a global brand. Landmark later sold Travel UK to its MD Richard Wolfe, who was the well-deserved big winner in the Scripps’ acquisition.)

US Valuations

That brings me back to the “scale” question: What is the value of the US factual or nonfiction channel sector?

Here are some useful pieces of information that help assemble the mosaic:

A+E Networks

  • A+E Networks was restructured last July when NBCUniversal sold its 15.8 percent stake to its partners Disney and Hearst for around $3.0Bn.
  • The transaction valued A+E Networks at $19.2Bn.

Discovery Communications

  • A respected industry analyst places an “enterprise value” of $30Bn on Discovery Communications.
  • Interestingly, Discovery’s International channels contribute 30% of operating revenues and 40% of the analyst’s valuation.

Scripps Networks

  • $12Bn is the enterprise value most heard on the transom.

Nat Geo Channel US & NGC International

  • A friend says “the combined value for ‘global NGC’ is in the $10Bn range, driven by the growth prospects on NGC International.”

Other published estimates:

  • SyFy: $7.0Bn
  • Bravo: $3.0Bn

So far, that adds up to $82Bn!

We could add…

  • Viacom’s MTV & BET Networks, Logo and Spike.
  • TimeWarner’s channels including truTV.
  • Comcast’s channels including E!, Style, and perhaps Weather which offers a nonfiction schedule in prime time.
  • And others including Rainbow and AMC networks, as well as the less widely-distributed Ovation, Showtime’s Smithsonian Channel and several more.

I’ll refine these estimates in the coming months.

In the meantime, $110Bn is a credible preliminary estimate of the total enterprise value of US factual channels.

And outside the US…

For a global valuation, add Canada’s flourishing and wisely-regulated multichannel sector, SKY’s factual channels, Planete and other European channels, plus emerging regional networks in China and elsewhere in Asia, and more.

Autobiographical Takeaways

  • When I first walked into Discovery’s dreary Landover MD office building in the mid ‘Eighties, the fledgling channel had 50+/- employees, few of whom had any prior television experience, and making payroll was still an issue.
  • Ringing in my ears was the well-meaning advice from a senior CBS executive, “Peter, don’t waste your time consulting with Discovery – there just isn’t an audience for documentaries!”
  • It was my good fortune to be invited to work on the due diligence and business plan for Discovery Europe. I quickly saw the enormous value created by the 2nd revenue stream of affiliate fees, which were both predictable and long-term, versus the cyclical, advertiser-only model of the broadcast networks.
  • But who then could have imagined that Discovery could become a $30Bn enterprise?  Or that its then rival A&E would be snapping at its heels with a $20Bn valuation?
  • Maybe it was our just lack of imagination: Discovery’s cable operator stakeholders, notably TCI’s John Malone, were visionaries who were confidently pushing a global strategy, even when the domestic business seemed vulnerable.

Please email your own Takeaways on the global valuation of the nonfiction channel sector. I would welcome your feedback!

(This post is dedicated to Jerry Glover, our partner on the Travel UK plan and launch, and who is still dearly missed.)

AE

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2 comments

  1. Bogumil says:

    Great article. I watched Current a few times and it was a big disaster. It will be interesting to see what AJ will do with the network in the next few years, and if they can transform it into a respectable network.

  2. Steve says:

    Very interesting info. Who knew that little Current would be of such value. Would love to hear your thoughts on the value of the Doc Channel and Participant’s plans.

Comments are closed.