Viacom

Here's the column I wrote for the Wall Street Journal's op-ed page about the shake-up at Viacom. Jim Cramer has an excellent column on the same subject in last week's issue of New York magazine. And last Friday's "Heard on the Street" provides a good insider-y account of how Viacom's stock rebounded last week.

Dick Kollar

The thing about life, said the poet Robert Frost, is that it does go on. But for those of us who are lucky enough to be members at the Sleepy Hollow Country Club, life will seem a bit diminished now that Dick Kollar has passed away. He died in his sleep last Thursday night at the age of 71.

He was a golf professional; the head pro for a time at Mahopac, an assistant pro at Garrison before that. At 51 he moved indoors and ran the men's locker room at Sleepy Hollow. He played golf whenever he could. Winter, rain, cold, he didn't care. He loved the game.

If, during the course of your day, you saw Dick, it meant that that day was a good day, because you were near the course or the range, and the thwack of a four-iron hitting a Titleist ProV1 would soon be the sound in your ears.

Because of this, you were always especially glad to see Dick. And the great thing about Dick was that he was always seemed especially glad to see you. Even if he wasn't. "Got a game," he'd say, as he wheeled around the locker-room, a crooked smile on his warm face. "Andy shot 74 today. He's got some game, that guy. Hits the ball a mile."

Dick had game. We will miss him more than we know.

WSJ

John Batchelder, the ABC Radio talk show host, told me a funny story today about Katie Couric. Apparently, Ms. Couric was interviewing Mike Wallace and at the end of the interview, asked him what he would like written on his tombstone. "Tough, but fair" said Wallace, who then turned the tables and asked his host the same question. I'm sure you're too young to have even thought about it, said Wallace. No, no, replied Ms. Couric. I know exactly how I would like it to read. Well? asked Wallace. "Perky no more," replied Ms. Couric.

Anyway, here's the piece from the Journal, for those of you unable to access it:


Fatten Before Sale


Fifty years ago, there were two publications that were required reading for all employees at the CIA. One was the New York Times. The other was the morning transcript of the CBS News World News Round-Up. The latter was required reading because if you didn't know what CBS News was saying that day, you didn't know what was going on.

Today, CBS News is a nonessential and under-performing division of a media conglomerate that couldn't care less about journalism and thinks of news as something best practiced at MTV Networks. CBS management would sell the division in a heartbeat if they could, but they can't, at least for the time being. Fiduciary duty thus requires that they do something to enhance the value of the asset, so that it might fetch a higher price when it is finally divested.

The basic math is straightforward. If every broadcast news organization employs roughly 1,000 people and the average salary cost per person is $125,000, then the payroll cost is $125 million. Multiply times three (for overhead, operating costs, special events, etc.) and you have a starting budget of nearly $400 million.

The only real source of revenue to offset these costs is advertising. Unless a broadcast network also owns a cable news channel, there simply isn't enough advertising time to sell to cover costs and deliver an acceptable profit to Wall Street. NBC Chairman Bob Wright understood this when he took the helm at 30 Rock in the late 1980s. He created CNBC as a business news channel and later created MSNBC (in partnership with Microsoft) as a news channel. Those two organizations have time to sell seven days a week, 24 hours a day. And all those ads, cheesy though they may be, make healthier the finances of NBC News.

CBS has no cable news network to spread cost across. It has the CBS Evening News for 30 minutes every night, the successful but aging "60 Minutes" franchise, and its woeful morning news shows. The basic math is therefore untenable. CBS News is not, long term, a viable financial enterprise.

What to do? Ideally, CBS management would like to sell CBS News to Time Warner or -- imagine the culture clash -- to Fox (which has a cable news network, but no broadcast news division). A deal with Time Warner might look like this: TWX buys CBS News for some multiple of revenues. TWX then leases back the "60 Minutes" franchise, the Evening News and a hybrid morning chat-and-news show for inclusion in the regular CBS programming schedule. The costs of maintaining CBS News is transferred to TWX, which can defray those costs across two cable news channels (CNN and Headline News)and repurpose the video and audio libraries of CBS News across those and other TWX channels. CBS gets news programming, ad revenue that easily covers the leasing fees, and the fulfillment of its "public service" obligation that is a requirement of its broadcast license.

When to do it? Never sell at the bottom. CBS News is just now emerging from the debacle that caused Dan Rather to "retire," the dismissal of four senior employees, and the decent-interval defenestration of the news division's then-president. Having lived through the debacle, CBS Chairman Les Moonves knew better than anyone that he had to rebuild the reputation and image of CBS News if he was ever to realize the full value of the asset. Rearranging the deck chairs wasn't going to cut it. He needed something that changed the perception of CBS News and, if possible, wrought some havoc upon the competition.

Hiring Katie Couric certainly rattles NBC News. The "Today Show" franchise has been a money machine for the network since Ms. Couric took the helm there. Will her departure cause morning viewers to graze elsewhere? It's a question Mr. Moonves is happy to have on the table.
Whether or not Ms. Couric can change the context in which CBS News is understood is less certain. But whatever else she may be, Ms. Couric is accustomed to success. She has dominated morning news for nearly 15 years. She is, among baby-boomer women especially, hugely popular. And she's credible enough to keep the CBS knights of journalism quiet. The organization has no choice but to embrace her.

Launching her as the new face of CBS News gives the CBS publicity machine five months to reposition and redefine the news division. Given the resurgence of its prime time schedule and long-established hold on older, less-urban viewers, it seems unlikely that the ratings for the CBS Evening News will be hurt over the time leading up to Ms. Couric's arrival. Given Ms. Couric's proven appeal to baby-boomer women, it seems likely (amid a huge publicity blitz) that the ratings for the evening newscast will tick upward shortly after she assumes the anchor post. And given Ms. Couric's proven ability to hold the viewers she acquires, it seems likely that her $15 million annual salary will be more than covered.

Assuming the prime time schedule continues to perform, it is not hard to imagine that Ms. Couric will lead CBS News into a more competitive stance. At which point, the value of the asset can be realized in a deal. Katie Couric is, metaphorically, the transitional figure between a once-great broadcast news organization and what will almost certainly be the first news division ever sold off by a broadcast network. Given the options available to Mr. Moonves and the playing field he inherited, he could have done a lot worse.



http://online.wsj.com/article/SB114445219364320690.html

The Vote in Iraq

John Burns provides a typically excellent "interactive report" on the voting in Iraq. Click here, today, December 16th. If you come to this site after December 16th, I think you'll probably need to hunt the Burns report down. It is well worth the effort.

Another View of the Knight Ridder Sale

My friend Mr. M emails as follows:


....I am not sure I totally agree with (your column on Knight Ridder). In fact, I think there is a certain amount of remaining value in Knight Ridder -- and the rest of the dinosaur newspapers.

KR throws off about $700MM in cash. Aggressively, one could probably take out about $300MM in costs, primarily in sales & admin, but also in layers and layers of editors and reporters who cover the same thing over and over, so you could probably remain with a company that throws off about $1B in cash, for at least a few more years. On top of that, the web sites leverage actually good brands, Miami Herald, Inquirer, etc. that could probably be organized into a growth business that will be successful, though they won't be yahoo.

I am actually surprised that the private equity folks aren't taking a more solid look at KRI.
Even if one assumes the business declines at 10% per year, one could create about 8-10B of value which would more than make today's shareholders ($4.B) and today's bond holder ($2B) happy and leave a little something for the risk taker.

Ellisblog Back!


Out of the blue, a man named Tunku asked me to write a short piece about Knight Ridder. So I did.

Postscript: A couple of readers emailed to ask: "did you realize that the AP is a not-for-profit co-operative owned by its member papers?" The answer is yes, I did. Thus its www.ap.org URL.

The fact that it now exists as a not-for-profit co-operative owned by its member papers does not mean that it must continue to exist as such. It can be reconfigured. That's what investment bankers and $1000-an-hour New York lawyers do. They reconfigure things! And the pressure is on the AP board to perform, to say the least. One way they might perform is to sell it to Google at 2x or 3x revenues.

Had I had more words to work with (the WSJ gave me a word count of 600), I would have addressed this issue in detail. But I didn't, so I didn't.

Things That Make You go "Wow."


If you do nothing else this summer, do this:

1. Click on http://earth.google.com/.

2. Download the software.

3. Click on the desktop icon that says "Google Earth."

4. And think about what it means in say, 25 years.

Yvedt Matory

There will be a memorial service for Yvedt Matory at the Memorial Church of Harvard University, Cambridge MA on May 26th at 11:00AM .

Yvedt Matory.

Yvedt Matory died yesterday of cancer. A leading cancer surgeon in Boston, mother of three children, wife to Harvard Law School Professor Randy Kennedy and maybe the best neighbor one could ever have, she was a gift to everyone who knew her. Funeral arrangements will be announced shortly and posted here.

Update: Yvedt's funeral will be held at The National Cathedral in Washington, DC (where she and Randy were married) on Wednesday, 20 April, at 1:30pm. There will also be a memorial service in Boston down the road.

Book Recommendations.

Joe Kanon's latest is out. It's called Alibi and it's a great read. Disney War by James Stewart is the best business book I've read in a long, long time. I Am Charlotte Simmons by Tom Wolfe was widely panned. Turns out it's a great read.

Coming soon will be George Peper's new book entitled The Secret of Golf. George used to edit Golf magazine and has always been the best guy on golf around. I'll blog it after I read it.