MGM Sells Most of its International Channels to Liberty Global

MGM Logo - H 2012

MGM Logo - H 2012

Liberty’s Chellomedia content division acquires 13 channels, two joint ventures and licenses the use of the MGM name and access to its huge library. Chellomedia also makes a deal with CBS to launch new branded channels around the world.

Metro-Goldwyn-Mayer has sold most of its international television channels to Chellomedia, the international content division of Liberty Global, it was announced Wednesday.

MGM, which has been shopping the international channels since earlier this year, is keeping its network businesses in the U.S., UK, Germany and a joint venture in Brazil and Australia. The deal includes 13 channels, two joint ventures and the service which feeds the content.

Separately, Chellomedia also announced Wednesday from London that it has entered into an agreement with CBS Studios International to create CBS-branded channels within the Chellomedia channel division called Chello Zone, which has existing operations in 83 territories across Europe, the Middle East and Asia. The two companies have been partners in other CBS branded channels in the UK since 2009.

CBS will hold a 30 percent stake in the new venture, which will form a new board from both companies.

As part of the deal with MGM, Chellomedia will have the right to use the studio's famous roaring lion brand on the channels; and has made a licensing deal which will give it continued access to the 4,000-plus titles in the MGM movie and TV library. The library includes not only MGM titles, but also those from United Artists, Orion and others acquired over the years. Those include Rain Man, When Harry Met Sally, Thelma and Louise and Silence of the Lambs.

Chellomedia will now own a group of channels that the former management of MGM spent nearly a decade assembling, including outlets in Spain, Turkey, Israel, Benelux, Poland, India and South East Asia.

Chellomedia has also acquired the 50 percent of MGM Latin America that it does not already own, after operating as a joint venture since 1998. Chellomedia also acquired the rest of another joint venture operated with MGM in Central Europe.

In a 2011 financial report, privately held MGM indicated the annual revenue from all of its international channel operations was about $150 million. That is believed to have produced about $20 million to $30 million cash flow, and about $20 million in deferred profit.

Many of the channels sell advertising as well as earning subscriber fees when carried on cable or satellite systems. Most are also available on pay-per-view or on demand.

In the announcement, Chellomedia alluded to its interest in the channels and content for use in the “on demand world.”

The acquisition of the MGM channels, per the announcement, will increase Chellomedia channel portofolio to reach 382 million TV households.

Niall Curran, the President of Chellomedia, said, "The MGM channels are superb assets with a great brand and fit extremely well within our existing channel portfolio, which we have built successfully over the last ten years. We see lots of scope to enhance the movie lover’s experience through choice and control and look forward to working with operators around the world to develop this much loved classic movie channel for a TV on demand world.”  

Since MGM got new management when it emerged from bankruptcy in December 2011, there has been an evaluation of which assets are core to their new business plan. It was determined earlier this year most of the international channels were not part of that plan, although MGM never made any formal announcement that it was shopping the channels.

Now the studio says that this sale marks a shift in that strategy.

“Chellomedia has the scale to bring the MGM Networks business to a new level and we are excited to continue our relationship with this platinum standard partner,” said Roma Khanna, MGM’s President, Television Group and Digital. “MGM is not exiting the channel business completely.  We are instead shifting our channel focus to the territories of the U.S., Canada, UK and Germany along with our joint venture territories of Brazil and Australia.  We will continue to grow our global television licensing strategy to generate increased revenue and cash flow from our library and new product, while developing new strategic options within former channel territories and unlocking shareholder value through the gain recognized by the asset sale.” 

Barclays Bank PLC acted as financial advisor to Chellomedia.

In a separate deal with CBS, Chellomedia said it will launch a whole new group of channels and modify others .

Channels that have fallen under the name Chello Zone will now be rebranded as CBS Reality, CBS Drama and CBS Action channels. They will draw on the CBS TV library, which the company says is the largest in the world with 70,000 hours of content. It includes such shows as Star Trek, Dynasty, Judge Judy, Touched By An Angel and America’s Next Top Model. The channels will also continue to acquire drama, reality and long form content from third parties.  

Liberty Global is one of a group of companies that John Malone has created and overseen. He currently serves as chairman. It was formed in 2005 by the merger of the international arm of Liberty Media and UGC (UnitedGlobalCom). Liberty Global has been very aggressive in expanding its overseas operations in cable and satellite, and even before the MGM and CBS deals had operations in 13 countries and had nearly 20 million customers, as well as more than 33 million video, Internet and voice subscribers to its services.

Last year, Liberty Global recorded $10.1 billion in revenue on operations and it had 22,000 employees worldwide. In the past year its stock price has risen from about $42 a share to about $52 a share.

Based in Englewood, Colorado, Liberty Global also has headquarters in Amsterdam and London. It boasts on its web site that “operations benefit from Liberty Global’s international scale and operational expertise, combined with its commitment to locally-managed culture and content environments.”

Now it has ramped up that scale of operations even more.