TV Guide in Fire-Sale Deal

Significant losses and deferred sub liability help explain price, says buyer.

By Jason Fell
Monday, November 10, 2008

Apparently Reed Elsevier isn’t the only publisher willing to pony up millions of dollars in order for someone to purchase its magazines.

TV Guide owner Macrovision mid-October said it agreed to sell the print edition of TV Guide to Beverly Hills, California-based investment firm OpenGate Capital. Terms were not disclosed at the time of the announcement, but according to SEC filings, OpenGate purchased the magazine for $1, less than half the cost of a single copy of the magazine.

As part of the financial terms, Macrovision will loan OpenGate up to $9.5 million at 3 percent interest. For now, Macrovision will keep TVGuide.com.

According to the most recent Publishers Information Bureau figures, ad revenue at TV Guide was mostly flat through the third quarter at $154.7 million, up 2.4 percent. Ad pages, however, were down 7 percent in comparison to the same period last year.
In its announcement, Macrovision identified the print magazine as a business “not aligned with its core corporate strategy.” The company said its primary goal for the product is to consolidate “key technology assets, including the interactive program guides.”

Following the deal, a statement from OpenGate founder and managing partner Andrew Nikou said the terms of the deal need to be “taken into perspective,” meaning the transition from a listings focus to an entertainment magazine was a costly one. The statement says that losses in 2007 were $20 million, with more expected this year. Combine that with a deferred subscription liability of a reported $50 million and a $1 sale, and a $9.5 million loan begin to make sense. Nikou says OpenGate plans to restore the magazine’s profitability by the end of 2009.

In April, Gemstar-TV Guide stockholders approved the company’s merger with Macrovision Corporation, the Santa Clara, California-based digital software solutions firm that agreed last December to acquire Gemstar for $2.8 billion in cash and stock.