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Oxygen In NBCU's Air?

Oxygen Media, the women’s television network founded by cable legend Geraldine Laybourne, is shopping itself to NBC Universal, hoping to fetch as much as $3 billion in a sale, according to a report published Friday.

Oxygen, launched in 2000, would be the fourth entertainment cable network owned by NBC Universal, if it were acquired by the TV and movie programmer. NBC Universal, which is a part of the General Electric Co., already owns Bravo, USA Network and Sci-Fi Channel, as well as its namesake NBC broadcast network.

Oxygen is valued at about $1 billion and could be worth as much as $1.5 billion, according to the Hollywood Reporter, which reported that Oxygen and NBCU were in discussions.

But the trade newspaper said that Oxygen’s owners – Laybourne, Oprah Winfrey and billionaire Paul Allen – could be holding out for "BET numbers," a reference to the $3 billion that Viacom paid for Black Entertainment Television in 2000.

Oxygen’s chief communications officer, Kassie Canter, declined to comment on whether talks were in progress.

"We’re always evaluating options to maximize value for our shareholders, including private equity and strategic partners," she said.

A spokeswoman for NBC Universal did not return a call for comment, by early afternoon Friday.

Oxygen has been in sales discussions with NBC since June, according to the Reporter.

Executives familiar with the situation indicate that NBCU is kicking the tires relative to Oxygen, but emphasized that discussions are in the early stages. The executive said that Oxgen is talking to other potential suitors.

Miller Tabak media analyst David Joyce, who does not follow NBC Universal, nevertheless said that an Oxygen acquisition would make sense for the media giant.

"Everybody likes to have cable networks," Joyce said. "Oxygen hasn’t done terribly well, but Viacom, News Corp., NBC Universal all would be happy to have cable networks to add to their portfolio."

Joyce, however, was skeptical about the $1.5 billion valuation placed on Oxygen. Joyce said that the true value of the network may be in the $1 billion to $1.2 billion range, assuming cash flow of about $80 million (40% of the estimated $200 million in revenue this year and applying a 15 times multiple).

But the value could climb higher if Oxygen were part of a larger entity like NBC Universal.

"There is logic for it to be in a company that has multiple other cable networks rather than as a standalone," Joyce said. "That’s why they could further justify paying up to $1.5 billion, by the synergies of having centralized operational overhead [and] using one manager who is managing another cable network."

A sale would seem like it would be the swan song for Laybourne, who is credited with the creation of Viacom’s Nickelodeon children’s network.

But despite the runaway success of Nickelodeon, Laybourne was never able to repeat that feat with Oxygen. Although it has registered household and impressions growth for 13 consecutive quarters as it has gained distribution, Oxygen has consistently run a distant second to Lifetime Network in terms of primetime among total viewers, as well as in such key demographics as women aged 18 to 34, 18 to 49 and 25 to 54.

Oxygen recently reached the 70-million subscriber milestone, making it a fully distributed network, which could have prompted the talks of a sale.

According to SNL Kagan, Oxygen receives carriage fees of about 9 cents per subscriber per month from cable and satellite operators and is projected to reach $200 million in revenue this year.

The network, which was launched with much hope and fanfare seven years ago, has not become the ratings juggernaut that was anticipated in its early years. Oxygen is trying to continue to boost its Nielsen position, stating that it will invest $88 million in original programming this year alone. The service has taken aim at younger female viewers through a roster of reality fare that includes The Janice Dickinson Modeling Agency, Tori & Dean: Inn Love, Snapped, Monique’s F.A.T. Chance, as well as recent additions Bad Girls Road Trip and Fight Girls