The week in review

It’s been a somewhat quiet week, with the masses slowly returning from holidays and getting their heads around 2007. In the US, media types are gearing up to storm Las Vegas for the annual Consumer Electronics Show, which seems to be getting more converged and content friendly as the years go on. Here are some other highlights of what happened in the world of media business this week:

In television, apart from the news that US broadcaster Fox is axeing The OC in February, there has been little from the US. One interesting piece that came over the wires today concerned a dispute between cable operator Mediacom and broadcaster Sinclair. Sinclair had been asking for cash payments upfront for channels that are put out over Mediacon’s network. Usually, such payments are based on cuts from advertising sales and made in arrears. This week, the FCC has officially endorsed Sinclair’s demand. Given the general downturn that television advertising has been facing of late, this could have an impact on dealmaking in the cable industry for many other players.

Over in Europe, Vivendi, TV1 and M6 completed the merger of their pay-TV stations. The merged group, which will be controlled by Vivendi, becomes one of Europe's biggest broadcasters, so one needs to watch this space.

In the UK, ITV seems to be having a few weeks break from the M&A rumour mill. The UK's largest commercial broadcaster is using the breathing space to announce the appointment of Annelies van den Belt as the new managing director for its broadband portal. Van den Belt has spectacular web credentials, having revamped the sites to great acclaim at UK newspapers The Times and The Telegraph. His hiring could not have come at a better time for ITV, whose web success has been pretty flat to date with slower growth at Friends Reuinted since being bought by them one of the more recent problems.

UK satellite broadcaster BskyB, which is owned by News Corp. and now has a stake in ITV, has beaten its own targets for selling set-top boxes for its premium Sky+ service: it’s now sold 2 million of them. The company says its next big thing will be offering a 'placeshifting' service that lets users access their recorded or on-demand programming from anywhere, a la Slingbox.

Over on the silver screen, the film industry loves the post-holiday season. They get a big bump in theatre traffic, lots of people buy movies, and devices to play them, as presents, and the producers begin the big push for consideration in the awards season.

This was also a good news week for them in more technical parts: it appears that there has finally been some agreed standard for digital movies copyright protection, in the form of the content scrambling system (CSS), developed by Sonic Systems and approved by all major video parties. And it looks like there will be several new products coming out, not just from consumer electronics companies but also from the content/distribution camp, that will offer the dual-format of Blu-ray and HD-DVD, the respective (and thus-far rival) offerings of high quality video from Sony and Microsoft/Toshiba.

In the print world, publishers are continuing to cut costs and sell off assets, underscoring the pain and suffering they’re all experiencing in their advertising and circulation departments. The new owners of the once-mighty Philadelphia Inquirer started a long-expected round of layoffs in the newsroom, numbering 68 in a staff of 415, as part of a plan to shave $20 million off operating costs.

The New York Times Company looks like it is trying to stave off any big asset or personnel cuts by taking out small, non-strategic parts of the business first. This week it sold a group of television stations for $575 million to Oak Hill Capital Partners. Taken together, the stations number eight; were in ‘non-core’ markets for the NY Times; and made up only 5% of the group’s operating revenue. But they are profitable.

Meanwhile, in Chicago, the fate of the Tribune Company is still up in the air. The latest is that one of the media company’s strategic shareholders, the Robert McCormick Foundation, has hired the Blackstone Group to look over the books. Reports are that this is either to decide how to handle their investment, or possibly for them to make a buyout offer for the group, which comprises newspapers, television stations and the Chicago Cubs baseball team. The foundation has a long and local association with the Tribune, so they, rather than a PE or another large publisher, may well be the most sensitive to how best to carry the group without breaking it up altogether.

Last but not least, in the Internet sector, Google had a shot of cold air blasted on it in a recent article that pointed out it’s honeymoon period with search-advertising might be over. Bascially, the popularity of its search advertising among advertisers has meant that it’s getting harder and harder for them to get their ads seen—in other words, more advertisers mean less chance of their individual products coming up with a keyword search. So they are finding that they need to spend more and more budget on Google to get more of their ads into the system. On top of that, the conversation rate of ads to sales for many advertisers is pretty bad. Typically it is 5% for online advertisers, but with some Google Adword users it seems to be much lower. The sceptics forecast that Google’s revenue growth will slow to 47% this year from 80% last year, and much of their revenue comes from this advertising model, so a drop in advertising will hit the company hard.

Unsurprisingly, and in light of this news, the media giant is continuing to look for new markets, both vertically and geographically, in which to extend its business. This week’s Google move: China, where it has tried but not yet succeeded to supercede homegrown titans like Baidu (once an investment for Google…). Google has struck a deal with China Mobile for loading its search tools onto its phones. And it made an investment in Xunlei Network Technology Co., which provides video and game downloads, signalling that Google may yet have another trick beyond search up its sleeve.