Until recently the TV Guide Channel was seen not as a destination but merely as a waystation, with almost no cable TV viewers sticking around long enough for the channel to earn a significant rating.
With a scrolling-log TV schedule on the bottom third of the screen and repetitive promotions running on the top most of the time, few paid much attention to its content. “I never watch it,” an executive with a major cable system operator noted recently. “I only use our electronic program guide.”
Now Gemstar/TV Guide International, the public company behind the service (which is 43 percent-owned by News Corp.), wants to move forward with plans to make it a more robust channel in terms of programming and ratings (which currently run under three-tenths of one rating point).
To prepare for the move into higher-profile celebrity-oriented programming, the TV Guide Channel has expanded its distribution from about 57 million TV homes to about 80 million, according to Ian Aaron, president of the TV Guide Television Group. “We’re all about celebrating TV,” Mr. Aaron said. “To do that, you have to participate in it. We have to show that long-form programming will move the needle.”
It has quickly become apparent that it will not be easy. The TV Guide Channel faces tough new competitive pressures and objections from some cable operators, who might not stick with the channel if they don’t approve of its new direction and content.
The first public indication of the TV Guide Channel’s plans to change was the hiring of Joan Rivers and her daughter Melissa in a deal reportedly worth $6 million to $8 million over four years. It was seen as a coup when it was announced. Mr. Aaron has said that Ms. Rivers will tread the red carpet as she has for the E! Channel at high-profile events, which he called “tentpole events” that will invigorate the entire schedule.
However, even that hire has brought new controversy.
When the deal was announced, it was expected that the first appearance by Joan and Melissa Rivers would be on the Emmy red carpet in September. Then it came out that the E! Channel has an ironclad agreement with the Academy of Television Arts & Sciences, which puts on the Emmys, to be the only outlet besides the flagship network (ABC this year) allowed to broadcast live during afternoon arrivals. All others may interview celebrities, but can air their footage only after the show has ended. This agreement makes it highly unlikely that TV Guide will use the pair at the event this year to pull in the big-name celebrities that help pump up ratings. Negotiations involving a compromise with the TV Academy apparently have not made any progress.
Mr. Aaron confirmed that the E! deal is problematic, but denied the widespread belief in the industry that TV Guide was blindsided by what happened. “We knew there was an issue,” he said. “We will be at the Emmys.”
According to sources close to the situation, the extent of the exclusive agreement between E! and the TV Academy was not known by Gemstar or, incredibly, by Joan and Melissa Rivers themselves when they signed with Gemstar. One of the sources indicated that E! had managed to keep the agreement quiet, and that Gemstar was furious about the situation.
Ms. Rivers and her daughter are expected to represent TV Guide in the future at the Oscars and other events where they will be able to score top celebrity interviews.
Official Olympics Guide
In the meantime, the TV Guide Channel does have a deal with NBC Universal to act as the official electronic guide to the Olympic Games. According to NBC, the on-screen listing will include a dedicated area that will provide an at-a-glance guide to events and where to watch them. Specials are also planned that will offer personal stories of the athletes and promos of upcoming coverage.
A few weeks ago, shortly after the Rivers deal was announced, Mr. Aaron said TV Guide Channel was planning a major change in its programming direction. Last week he said that was not correct. Instead, Mr. Aaron described the channel as merely “evolving.” He said that far from wanting to compete with E! and its parent company, Comcast, which is also the largest cable system operator, TV Guide Channel wants to work with them. “We promote E! on our own network,” he said, adding that all programming on TV Guide Channel will continue to have the same mission-to promote cable entertainment.
The flip-flop in emphasis during the past few weeks has to do with a number of events behind the scenes, and the reality of the cable industry. In the past year, Comcast, Time Warner Cable and other operators have repeatedly invoked so-called “content clauses” with programmers, which give operators the right to jettison a channel if major changes are made in programming direction. While Mr. Aaron stressed that the channel’s 80 million homes are “locked in” with long-term deals with all the major players, he conceded that content clauses exist in those deals. If TV Guide Channel is perceived as a newly revamped and different service than what operators agreed to carry, it could lose some carriage.
“It is interesting to see what TV Guide does, and how operators greet the changes they’re making,” observed Larry Namer, the founder of Movietime, which started off much like TV Guide, as a cable promotional tool, and morphed into E! “For example, why should Comcast offer a competitor to E!?”
And E! does think that the new channel, at least based on its pronouncements, will be competitive. “We have to look at [TV Guide Channel] as competition,” said Mark Sonnenberg, executive VP of entertainment at E!
Ted Harbert, recently hired to head E! Networks, said the new team at TV Guide is made up of “smart people.” He called the Rivers hiring “a big statement that they are in the business now for real.”
That isn’t the only complication. Comcast paid $250 million in a deal with Gemstar to use that company’s interactive program guide technology (now called i-Guide). The two companies have also been working together on VOD projects.
Comcast has 51 percent of the joint venture, with most staff coming from Gemstar. That means that on the one hand, with E!, Comcast is competing head-on with Gemstar. On the other hand, it is in a joint venture with it. “Maybe it does seem a little peculiar, but again, this is the media business,” quipped Sanford Bernstein analyst Craig Moffett.
Mr. Aaron conceded that the long-term deals Gemstar/TV Guide reached with many of the bigger operators involve little or no carriage fees, making the channel almost wholly dependent on ad revenue. That means TV Guide Channel has to program something people will watch. But if that programming is seen as different from what was agreed to, the channel could lose carriage. Mr. Aaron said TV Guide offers many more ad avails to cable operators than other comparable networks-“four or five times more”-which should help ensure operator loyalty.
TV Guide and Gemstar certainly have other things going for them. In terms of name recognition and distribution, it remains a valuable franchise. “[Gemstar] has a multitude of media assets, and they are all focused on TV entertainment,” said Bob Flood, executive VP and director of national and electronic media for Optimedia, a media buying service. “They are the pre-eminent brand in TV navigation.”
These hurdles come at a difficult time for parent Gemstar. According to figures for the second quarter released late last week, revenue from Gemstar’s publishing arm dropped 11.2 percent to $95.1 millio, compared with a year earlier, primarily due to declining revenue for the print product. TV Guide, the magazine, reported a 20 percent drop in newsstand sales. Despite a redesign in the last year that cost $20 milliion, circulation is still well below its heyday. The magazine has nothad an editor since Mike Lafavore left in May.
Gemstar is reportedly looking into launching a TV Guide spinoff magazine to compete with People and Us. According to Women’s Wear Daily, Gemstar wants a “a new weekly magazine that will focus on television celebrities.” Mr. Aaron declined to confirm the re
port, calling it “a rumor.”
Whatever the goals for the TV Guide Channel, the first order of business is to come up with more compelling content. A glance at the channel on a recent weeknight provides a case in point. A 60-second promo appeared that promised “long-form programming,” with snippets of past shows and celebrities. It was cut off in midsentence, and then it appeared again. This repeated five times before a program appeared. TV Guide spokeswoman Georgia Juvelis said this could have been a local system glitch and that she was not aware of any technical problems.
To help it “evolve,” TV Guide has brought in a number of new executives, including Danila Koverman, senior VP of programming, and TV Guide Channel General Manager Tom Cosgrove, who segued from ABC Family.
Gemstar Faces Challenges
As a public company (GMST: Nasdaq), Gemstar has taken its lumps in recent years. Now trading at just over 4, about half of its 52-week high of 8.40, Gemstar acknowledged in its SEC filing in March that it faces many challenges, with consolidated revenues for last year off 12.3 percent from the year before.
For the second quarter of 2004, the company reportedthat revenues declined 1 percent from a year ago to $179.1 million. Net income was up due to some one time events.
The Cable and Satellite Segment of Gemstar’s business, which includes the TV Guide Channel service and other interactive guide products, showed a smart increase of 48 percent. However, the consumer electronics division saw a 32 percent decline in revenue due to less income from set top boxes.
For all of 2003, TV Guide Channel revenues were up a small amount, by $6 million, or 6.2 percent, compared with 2002. But despite increased distribution, Gemstar warned in its annual report that revenue would probably fall “as a result of decreased rates paid by cable operators under the terms of their agreements.”
James Hibberd contributed to this report.