News Corp. closing in on Travel Channel, but it may be an expensive trip


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Apparently the cost of travel really is on the rise.

News Corp. has emerged as the leading contender to buy the Travel Channel, the cable network that Cox Communications put on the block, according to a report in today’s Financial Times. That News Corp. is interested in the Travel Channel isn’t surprising, but the price tag being tossed around for the network may raise some eyebrows.

Originally, when the channel went on the block, industry scuttlebutt was that it might fetch north of $600 million. Now the speculation is that it will top $800 million and could even reach $900 million. Other bidders for the network include Scripps Network and a private equity consortium led by Providence Equity Partners. Time Warner’s Turner Broadcasting has glanced at the channel but is not actively looking, and NBC Universal was interested but perhaps has bigger things on its plate these days between trying to do a deal with Comcast Corp. and figure out what Vivendi is going to do with its 20% stake in the company.


Does $800 million sound a little steep for the Travel Channel? Well, yes. But Rupert Murdoch’s News Corp. certainly doesn’t mind overpaying for assets ($5 billion for the Wall Street Journal, $580 million for MySpace). In this case, the scenario being discussed would have News Corp. acquire the channel through its partnership with National Geographic, according to the FT report. The two co-own the National Geographic Channel and a soon-to-be-launched spinoff channel.

News Corp. is probably betting that it can cut costs from the channel and boost what cable and satellite operators pay for it. Right now, according to Kagan Media, Travel Channel charges about 6 cents per subscriber. To give you an example of how out of whack that is, Kagan says Fox Business, which won’t disclose its ratings because, well, you figure it out, gets 11 cents per subscriber and the little-watched Fox Movie Channel gets 16 cents per subscriber. See what having a big corporate parent can get you? The more networks one owns, the better negotiating position one has with distributors.

The Travel Channel has done a decent job of improving its ratings over the last few years. Its audience is small but on the rise. Its biggest show is Anthony Bourdain’s ‘No Reservations,’ which has nearly a million viewers.

The logic behind News Corp.’s desire for the Travel Channel is similar to what is motivating Comcast’s move to take control of NBC Universal. Cable networks are cash cows and, because they get subscriber fees and advertising revenue, are better positioned to weather economic uncertainty.

That said, one day distributors may actually find a way to start tying the fees they pay to carry channels to ratings performance, and then it’ll be a whole new ball game.

-- Joe Flint

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