Week in review: News Corp. and fiestas

(from the TC+M web site on Friday if you missed it...)

It's been another good week for big fish eating up smaller fish in the media world. This week that seemed to largely translate to big media giants consolidating smaller social media plays into their strategies.

On the same day that CBS snapped up the hipster online radio community last.fm for a relatively modest sum of $280m,, News Corp.'s online division, Fox Interactive, itself bought up two more social networking sites: the online photo organising site Photobucket and Flektor, a site that lets users create mashups, slide shows and other presentations of their user-generated content.

The two unknown-value deals will give News Corp.'s social networking sites, namely MySpace, another way of trying to monetise its still-growing user base.

Both sites are already popular with MySpace users who use them to incorporate graphics on their pages, so in a sense it was a matter of solidifying a relationship already in place.

It will mean that Fox will be able to embed the functionality of Photobucket and Flektor directly into its own site, which will make the experience easier for users.

But more importantly it helps the company consolidate any traffic that might be passing through Photobucket's and Flektor's services for its own financial gain.

This in fact was a touchy subject between Photobucket and MySpace only weeks earlier. MySpace had started blocking Photobucket usage when it said the image sharing site was using its service to encourage users to run ad-supported slideshows on their pages.

Now that MySpace owns the two sites, any potential ad revenue gained in such a way will be theirs to keep.

According to Fox, the two products will continue to operate as standalone entities and will still be able to be used on other sites like YouTube and Facebook.

(For a closer look at the Last.fm deal with CBS, you can read a blog entry I wrote on the day of the deal. There will also be a longer analysis, including an interview with one of the Last.fm founders, in the upcoming monthly issue of TC+M, out in two weeks).

Burritos in China
Saw an interesting item on the wires today about how Grupo Televisa, the largest broadcaster in Mexico, has done a deal with the Chinese government to export its reality TV shows and soap operas to the Mainland. Chinese broadcasters, like broadcasters in many other parts of the world, already dub Mexican programmes for their market, but this deal will let Chinese producers recreate the various shows for their own market.

The terms of the deal were not disclosed. But what stands out about this to me is that despite the huge potential of the Chinese market, there seems to be a distinct dearth of content to fill the airwaves.

Back in Mexico, the Chinese government broadcaster CCTV will be providing a feed of its channel to Grupo Televisa, who will deliver it in its domestic market dubbed.

The two countries of China and Mexico may have more in common than previously thought, in addition to their tastes for telenovelas and raucous variety shows with mariachi bands. This week, the high court in Mexico struck down a ruling that effectively lets the country's two dominant TV companies, Grupo Televisa (70% of the market) and TV Azteca (30% of the market), to continue to stay on top. In fact, the CCTV deal shows that today there is an opening for smaller new channels to emerge, but it takes a deal with a big player to make it happen. Perhaps in the future you won't need a tie-up with one of the big-two to do this.

Last.fm gets snapped up by CBS

When Google bought video sharing site YouTube for $1.65bn in 2006, it triggered a lot of media companies into action. Among them, the longtime U.S. broadcaster and television producer CBS set out to position itself as a forward-thinking member of the digital media vanguard.

“We don’t want to buy YouTube, we want to buy the next YouTube,” said Leslie Moonves, the chief executive of cross-media broadcaster CBS, not long after the deal.

Today CBS made a little move toward filling in Moonves' strategy when it announced it would pay $280m for online user-generated radio site Last.fm.

The London-based company has been quietly building up a loyal user base since 2002. When I recently spoke to one of the founders, Martin Stiksel, he told me that on average the site has 20 million active users every month and is 'generating substantial revenue' from several income streams, from amazon music retailing to ticket sales.

There's some interesting synergies between CBS and Last.fm. I'll be curious to see if the two companies them. For one, CBS has relaunched its own music label, CBS Records, which had originally been sold to Sony. And while Last.fm is in many ways a product of the web 2.0 juggernaut, it's also run a little like a broadcaster: it may have 20m active users, but it only has some 5.5 million registered visitors. That means that like CBS's TV channels, it banks on advertising to a critical mass for revenue generation.

I have to say, though, that as a long-time fan of Last.fm, one of the things I've always loved about it is its quirky, quiet approach to offering music: the exact opposite of many radio stations, and definitely the opposite of the 'big media' kind of experience offered by other online radio sites like Yahoo's.

It's also been frighteningly good at sussing out my tastes (if at times I seem to get into jags where all I get are songs by The Decemberists).

For now the management will remain in place and all they can talk about is how the deal will give them the money to do all the things they've always wanted to do. I'll look forward to seeing if CBS really lets Last.fm keep control of the jukebox.

Week in review: Endemol and Telefonica's fear factor

(Originally published in Total Content + Media earlier today.)

Among the noteworthy M&A deals this week in the media industry—they included online advertising companies snapped up by Microsoft, WPP and AOL and Thomson finalising its deal to buy Reuters—Telefonica finally offloaded its 75% stake in Endemol to the tune of €2.6 billion.

It sounds like a nice sum, except for the fact that the Spanish telco had actually bought the stake in the TV production company in 2000 for €5.5 billion.

The consortium of successful buyers was led by Endemol’s founder, John de Mol and his investment vehicle Cyrte Fund, and included the Italian media giant Mediaset as well as Goldman Sachs.

"John de Mol did a great deal," one executive from a major broadcaster, told me this week. "He’s basically bought back his company for almost half of what he sold it for a few years ago! We should all try to do that.”

Putting aside the obvious waste of money in buying Endemol at a high and selling it for a low, one has to ask whether Telefonica would have ever been able to capitalise on its asset.

Endemol has been hugely successful in its traditional market of TV, producing franchises in largely in non-scripted formats: shows like Big Brother, Deal or No Deal and Fear Factor now grace millions of TV sets in dozens of countries.

But it’s also been setting the pace in new markets, too, developing mobile-only programming, games and products for other new formats like IPTV. Endemol has made some interesting progress here, signing distribution deals not just with Telefonica properties like mobile operator O2 but with a number of other distributors (mobile and otherwise). And it partners with a number of content companies to develop the products themselves.

Now it may not be your particular cup of tea, but a recent product, a mobile-only TV programme called Get Close To…Sugababes, was done in partnership with Universal Music, appeared exclusively on the O2 network, and really works to push the idea of how to use a small, short mobile format in a compelling way not just for the viewer, but also as part of the programme itself.

In the mobile space alone, Endemol claims that mobile users have downloaded 10 million minutes of Endemol-produced content, and that one million people have streamed endemol shows on their phones.

But all this still didn’t seem to be enough to make Endemol a compelling asset for Telefonica to keep, or to raise its price above what the telco had paid in 2000.

To be fair, Telefonica did try to work some convergence magic on Endemol over the last seven years. This apparently was why the telco didn’t sell it sooner. According to a source, Telefonica had actually wanted to sell off Endemol as far back as 2005 but held off after it bought mobile phone operator O2.

“They didn’t want to upset the relationship between the two,” he said, referring to the deal Endemol had struck with the mobile operator to run text voting for programmes like Big Brother, a lucrative mobile data deal for O2.

“Telefonica seemed to do the right thing buying Endemol,” said the executive. “They just did it at the wrong time.”

Looking to the future, early days under its new owners might be rocky for Endemol. From the moment the deal was announced, there were reports that the company would lose some key executives. Stephane Courbit, the chairman and founder of Endemol France, who was one of the unsuccessful bidders, said he would leave if John de Mol returned to the helm. And the chief creative officer and chairman of Endemol UK, Peter Bazalgette is also rumoured to be eyeing up the exit.

Mediaset, the Berlusconi-owned Italian media conglomerate, may have less time for new projects like mobile TV and IPTV as previous owner Telefonica did. Mediaset has been quick to release a statement saying that Endemol will retain its editorial independence, but this wouldn’t rule out trying to shape the production company’s product line up to better fit with its own media assets.

And Goldman Sachs could stay on the sidelines as a pure financial punter, but it too wouldn’t be in this deal if it didn’t think it could make some money out of it at some point. Perhaps those bankers know something that Telefonica did not.

Big Brother is watching...and being watched

While the current season of Celebrity Big Brother continues to get a new lease of life on its ratings, courtesy of some racial slurs from B/C/D-list celebs staying in the house and the international furore this is causing, the creator of the BB format, Endemol, is also getting the once-over in the press.

We have a good article on the site today, actually posted yesterday, from our lowlands correspondent Erik, on Endemol and its will-they won't-they selloff by majority owners Telefonica. It's timely, given all the attention industry people are paying to the future ownership of this reality-TV megaproducer. Dow Jones today published a similar sort of story, and I suspect there will be more in the weeks to come. My soon-to-be-former editorial director, David, suggested an alternate lede for the article, which I thought would have been a perfect start to a pulpy novel on the reality TV business:

One day in October 2006, Jon de Mol looked out the window of the tenth floor office in Madrid.
The skies were clear, he noticed, all but for one bank of dark clouds away to the west.
Oncoming gloom was what he felt, too.

The offices were not his, but those of Telefonica, Spain's national telco and parent company of his previously wildly successful TV production outfit Endemol. And he had just been told by the board to prepare for some bad news.

"Your ratings are down Jon. Your stocks down- the company's worth half what it used to be. We need to do something. Get Jade Goody on your show...."