The Weather Channel is on the block for $3.5 billion says NPR and the dailies. WTF! How can it possibly be cheaper to buy the Weather Channel than to recreate it from scratch? The Weather Channel mostly gets its information from the public domain or information also licensed to the AP, it has very modest overhead, and it is only slightly more original than the phone book.
Hell, for all its political biases and wolf cries, the Drudge Report does a better job of covering hurricanes than the Weather Channel. this is not a natural monopoly.
The Weather Channel has high cable TV penetration, but so does NBC which is thinking about buying it, that shouldn't be such a huge barrier. I assume that it has high Nielson ratings, lots of advertising revenue with low costs, and hence high profits, but still, there is more to value than EBIT (earning before interest and taxes) when it comes to valuing businesses. Textbook valuation theory says that you value a business by multiple methods and then choose the value that makes sense given the purpose of the valuation.
They aren't buying the WC's infrastructure as much as the branding. Creating a new WC as a competitor would cost a lot before it got a prominent niche on the cables.
ReplyDeleteAnd some of us hardcore WC loyalists would refuse to change just out of perversity (or something). This way, we get subtly "converted".
Andrew,
ReplyDeleteWTF is exactly correct. $3.5G is a tad high.
,dave
old bogus,
ReplyDeleteI don't disagree that they are buying the brand. I simply find it unfathomable that one couldn't create a new brand of comparable power (maybe even a stronger one) from scatch for a fraction of the cost.
Hell, the name itself probably isn't even protectable by a valid trademark, as it is merely descriptive.
This deal strikes me as about as wise as Time buying AOL. It's a premium price paid for technology on the way out. Television is giving way to the Internet, and on the Internet, the Weather Channel may be popular but there is no loyalty and plenty of competition continuously nipping at their heels, not least of which is cooperative amateurs and provided for free.
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