Meredith and Cox's decision to form a programming/tech purchasing cooperative is an intriguing model. But we'll have to wait and see how it works in practice. It's just too bad Meredith and Cox feel they can't tackle retrans and reverse comp together as well because those dealings are what is causing the smaller station operators the most trouble.
Co-Op Scheme A Mother Of An Invention
Last week, I made the point that because of consolidation within broadcasting and the might of the broadcast networks and MVPDs broadcasting was no longer safe for small operators. “No Country For Little Dogs,” the column headline read with a bow to the 2007 movie.
At NAPTE this week, one of the big dogs, Nexstar CEO Perry Sook, predicted that broadcasting would continue to consolidate until all that was left was the four broadcast network groups and perhaps a half dozen others. Consolidation is the way of mature businesses like broadcasting, he said.
But working the Fontainebleau’s suites and poolside cabanas where program syndicators had set up shop for NATPE, Meredith Local Media President Paul Karpowicz and Cox Media Group EVP Jane Williams unveiled another way — a buying cooperative.
They told the distributors that they would be acquiring shows in tandem and, because of their combined bulk, expected the same pricing and deference as groups like Hearst and Scripps get. At 18% coverage, Cox-Meredith has the about same reach as Hearst and Scripps.
“It gives us the benefits of an M&A without actually having to do an M&A,” says Karpowicz in our story on the formation of the co-op.
Within minutes of our posting the story this morning, a commenter who goes by MediaBigData called the plan “brilliant.” I would tend to agree.
According to Karpowicz, the co-op is about more than just the next syndication deal. The partners expect to jointly shop for technology at the NAB Show in April and to share resources like Cox’s news bureau in Washington and Meredith’s TV studio in New York.
Karpowicz also told me that Meredith may also work with Cox in rolling out its programmatic advertising service, Videa.
The only areas that are off limits — at least for the moment — are retrans and reverse comp. They make the antitrust lawyers “twitchy,” to use Karpowicz’s word.
Plus, a retrans co-op could stir up the cable and satellite operators and give the FCC the last nudge it needs to rewrite the retrans rules in a way that makes it tougher for all broadcasters to negotiate for higher fees.
Best to stay away from retrans at least until Tom Wheeler steps down as chairman of the FCC when the Obama administration closes shop.
The co-op may be a brilliant idea, but we will have to wait and see how it works in practice. Before the co-op can shop for anything, Cox and Meredith have to agree on what it is they should be shopping for. Stations within groups cannot always agree on a show or piece of hardware. Can two longtime stations groups, with their different cultures and strategies, find enough common ground?
From the outside, Cox and Meredith do look compatible, but you never know.
When I spoke to him today, Cox Media Group President Bill Hoffman felt strongly that the two groups are similar enough in their practices and long view of the business that they will be able to make a go of it.
Like any marriage, it will require compromises, he also conceded. “We have to be able to do that or this thing won’t work.”
When I first heard of the co-op, I immediately saw it as evidence that Meredith recognized that its “merger of equals” with Media General was a lost cause, that Nexstar will succeed in snatching it away.
After all, if Meredith really thought its merger with Media General was still viable, why would it be fooling around with Cox? A Meredith-Media General combination would have a footprint covering 30% of the TV homes — more than enough to merit A-list treatment by any programming or technology vendor.
But Karpowicz says that’s the wrong way to look at it. Meredith is still determined to do the Media General deal and, if it is successful, it will simply fold the Media General stations into the co-op with Cox. Possible, I suppose. There is a cap on a group’s coverage (39%), but not on a co-ops.
Karpowicz also shot down the suggestion that the co-op was the first step toward a merger between the groups. I believe him.
Hoffman assured me that Cox is not looking to exit the broadcasting business, and Meredith’s management, I know, doesn’t want out. In fact, Meredith agreed to the Media General deal only with the understanding that its management would survive.
Eighteen percent is substantial. By my reckoning, only nine other full-service English-language station groups have more reach and one of them, Hearst, only barely. To paraphrase Karpowicz, Meredith and Cox can enjoy some of the marketplace benefits of being one company without being one company.
It’s an intriguing model. It’s just too bad Meredith and Cox feel they can’t tackle retrans and reverse comp because those dealings are what is causing the smaller operators the most trouble. If a group can’t extract maximum retrans from the MVPDs, it is going to have a tough time meeting the networks’ reverse comp demands.
If the model works, it gives groups that are not ready the sell, but recognize the need for scale, new hope.