The two are in ongoing negotiations, and a deal to merge the operations could be announced within the next two months.
The Cable Guide ended 1996 with gross revenues of $137.9 million, while Total TV had gross revenues of $35 million. That means a deal using 1996 revenues of $172.9 million, based on Advertising Age estimates, could be valued between $150 million and $200 million; the actual price is likely to depend on current revenues.
TVSM KICKED OFF NEGOTIATIONS
TVSM, whose chairman and part owner is publishing impresario Peter Diamandis, originally approached TV Guide with an offer that could have been worth up to $2 billion. But talks have now turned the other way, with TV Guide offering to absorb TVSM.
Both TVSM titles have been profitable since 1995, when TVSM was reunited into a single company.
A 1992 turnaround deal orchestrated by Mr. Diamandis, TVSM's chairman and white knight, brought in a consortium of cable companies to take a 35% to 40% share in the publications and split the operation into two separate operations, TVSM Inc. for The Cable Guide and Total TV Inc. In 1995, when profitability was achieved at both titles, the two operations were merged into TVSM Inc.
The TV Guide deal could hinge on keeping the cable partners happy with any agreement. The five with a stake in TVSM are Comcast Cable Communications, MediaOne Group, Cox Cable Communications, Tele-Communications Inc. and Time Warner Cable.
The cable companies are vital to TVSM's business model because of the distribution contracts they hold to deliver the magazines.
News America Publishing Group declined to comment, as did executives from TVSM.
The pending deal is potentially beneficial for both sides. TVSM would benefit from being part of its higher-profile and deeper pocketed 13 million-circulation rival. The TVSM publications offer TV Guide a distribution infrastructure that has local cable companies handling distribution and billing for the titles directly to their customers.
TV Guide's newsstand sales have steadily declined in recent years in the wake of newsstand wholesaler consolidations. For the last six months of 1997, TV Guide had a 20.2% drop in newsstand sales, to 3,239,822. Making up for that lost circulation by using TVSM's distribution infrastructure would help TV Guide offset expensive newsstand costs.
TVSM also has developed an expertise in creating cable system-specific listings that could benefit TV Guide in production of similar editions. TVSM produces cable system-specific editions of The Cable Guide for a circulation of 4,544,778, while Total TV has a circulation of 732,101 for the six months ended Dec. 31, according to BPA International.
TV Guide produces about 180 regional editions, with 64 being cable specific.
News Corp. owner Rupert Murdoch bought TV Guide in November 1988 as part of his purchase of Triangle Publications, which included The Daily Racing Form and Seventeen, for $3 billion, a price he has since admitted was too high by at least $1 billion.