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Apple Pulls Trigger On First Original TV Show, Starring Dr. Dre

Apple ( AAPL ) is getting into the TV-show business, starting with a dark semi-autobiographical drama starring Beats co-founder and rap legend Dr. Dre. Dre, aka Andre Romelle Young, became an Apple executive after the Cupertino, Calif.-based consumer electronics giant bought Beats for $3 billion in August 2014. The Hollywood Reporter said Friday that Apple is backing a six-episode series called “Vital Signs.” The series likely will be distributed on Apple Music, the company’s subscription streaming music service, THR said. It’s also possible the show could turn up on iTunes or a rumored Apple streaming-TV service. Apple has been poking around the pay-TV business for years, trying to put together a skinny bundle of TV channels to market to cord cutters and cord nevers. Executives from CBS ( CBS ) and Walt Disney ’s ( DIS ) ESPN have spoken recently about their as-yet-fruitless talks with Apple. Apple Music would be an obvious outlet for the Dre show because it already includes some video, such as a recent exclusive Taylor Swift concert performance. But some analysts have speculated that Apple might go the route of subscription on-demand video and compete with the likes of Netflix ( NFLX ), Hulu and Amazon.com ‘s ( AMZN ) Amazon Prime Video. RELATED: Netflix Scores Big At Screen Actors Guild Awards With Four Trophies Apple M&A speculation continues with Time Warner chatter .  

Comcast NBCU Aims For Film, Theme Park Synergies; Taking On Disney

Box office hits may slow in 2016 at Comcast ’s ( CMCSA ) NBCUniversal after a big run last year, but operating synergies between its film business and burgeoning theme park build-outs could be the gift that keeps on giving. Think Walt Disney ( DIS ), which a plucky Comcast tried to buy in 2004. Comcast instead pivoted and purchased all of NBC Universal from General Electric ( GE ) in 2011, getting cable TV networks, broadcaster NBC, a movie studio and two theme parks. Now a theme park rivalry is growing between Disney and NBCU as Comcast steps up investments in Florida and California and expands overseas as well. Comcast-NBCU in September acquired a 51% stake in Universal Studios Japan’s theme park in Osaka for $1.5 billion. It’s also building a $3.3 billion theme park in Beijing with local investors, slated to open in 2019. Comcast’s U.S. theme park attendance has climbed, owing to Orlando’s Wizarding World of Harry Potter and other projects.  In 2015, Comcast’s theme park revenue jumped 27% to $3.34 billion, pro forma for the Japan deal, in Q4 rising 38.6% and topping $1 billion in a quarter for the first time. Operating income rose 42% to $1.17 billion. Excluding Japan, Q4 theme park revenue still rose 15.6%. “Theme parks must now be viewed as a foundational element of the Comcast story,” Craig Moffett, an analyst at MoffettNathanson, said in a research report. Harry Potter, Volcano Bay Coming This April, NBCU plans to open a Harry Potter attraction in Hollywood. In 2017, it’s slated to open up a water park, Volcano Bay, in Orlando, Fla. On Comcast’s Q4 earnings conference call this month, executives confirmed the acquisition of 475 acres of land, for $130 million, in Orlando, near an existing theme park. “We have a lot of land to work with,” noted  NBCU CEO Stephen Burke on the call.  Aside from expanding its theme parks, Comcast will likely build more hotels, a growing revenue source. While a U.S. recession could slow park attendance in any given year, Comcast’s theme park business is less tied to big events than is broadcaster NBC, which gets periodic lifts from the Olympics, Super Bowl and election-year advertising. New blockbuster movies, as well as older movies,  provide grist for new attractions, since NBCU holds the intellectual property. Under Comcast, NBCU has added park attractions tied to its “Transformers” and “Fast & Furious” movies. More park attractions are on the way, analysts say, such as Reign of Kong and the Incredible Hulk Coaster. NBCU’s filmed entertainment revenue jumped 46% to $7.3 billion in 2105 thanks to the box office success of “Minions,” “Jurassic World,” “Furious 7” and “Fifty Shades of Grey.” The film unit’s operating income rose 75% to $1.21 billion. In 2016, NBCU has a weaker slate of films, analysts say, though new movies will come from its Focus Features unit, formerly USA Pictures. JPMorgan estimates film revenue will slide 33% in 2016, with operating cash flow also down. Reinvestments could spark a stronger 2017, when new releases will include the newest Mummy flick, “Mena,” as well as “Fast & Furious 8” and “Despicable Me 3,” according to BoxOfficeMojo.com. On Comcast’s earnings call, CEO Brian Roberts noted that the cable TV company has doubled the operating cash flow at NBCU since it took a controlling stake in 2009. Comcast’s free cash flow growth is lower than operating cash flow because it includes Comcast’s sizable investments in broadcaster NBC’s content, such as winning rights to broadcast the Olympics, plus theme parks. In 2015,  NBCU capital spending rose 13.5% to $1.4 billion. Higher Ad Rates, Fewer Viewers For NBCU Comcast bought its controlling stake in NBCU close to the bottom of the advertising cycle. NBCU has been garnering higher ad rates. However, broadcasters and cable networks in general face falling audience ratings and a dropoff in pay-TV subscribers. NBCU’s cable networks — including USA, Syfy, Bravo, E! and CNBC  – generated 70% of NBCU’s operating cash flow as of mid-2013. In 2015, the cable networks provided only 54.6% of OCF. “It’s hard to build a bullish story for Comcast’s mostly middle-of-the-road general entertainment networks,” said Moffett, though USA produced a hit in “Mr. Robot” in 2015. Theme parks churned out nearly 24% of OCF in 2015, up from 21% in 2014. Including Japan, theme park OCF could hit $2.2 billion in  2016.  By 2020, theme park contribution to NBCU’s total OCF could rise to 35%, analysts say. Disney on Tuesday posted results for the December quarter, its fiscal Q1, and analysts say its theme park and resorts business performed well.  U.S. park attendance rose 10%, with revenue growing 9.5% to $4.28 billion. Disney has been refreshing older attractions, such as Star Wars. In June, Disney is expected to open a park in Shanghai, its first in mainland China. In 2017, it’s slated to open an Avatar-themed park in Orlando. Like Comcast-NBCU, Disney seeks synergies between films and theme parks. “(With) Shanghai, Disney will have the opportunity to use the park to help exploit its considerable intellectual property portfolio, (and) the park may help open up the Chinese film market to more Disney releases in the future,” Omar Sheikh, a Credit Suisse analyst, said in a research report.  

TV Auction View: AT&T, VZ Top Bidders; Comcast In; Google, AMZN Out

JPMorgan is bullish on the upcoming “Broadcast Incentive Auction,” which will free up prime, low-frequency airwaves owned by local TV broadcasters for wireless data services. Naysayers continue to contend that the Federal Communications Commission faces many challenges in pulling off a successful auction, which for now is scheduled to start late next month. One risk is that broadcasters might drop out of the auction if they determine that bidding prices are disappointing. The auction is key for T-Mobile US ( TMUS ), which needs spectrum.  AT&T ( T ) and Verizon Communications ( VZ ) own most of the available low-frequency spectrum, in which waves travel longer distances, among other advantages over higher-frequency spectrum. JPMorgan expects at least 70 MHz of airwaves, and possibly more, to be auctioned. The key is that broadcasters that own two local TV stations will sell off airwaves from one and keep spectrum from the other, says JPMorgan. “We estimate that 70-100 MHz will be auctioned, for $25 billion to $35 billion,” said JPMorgan in a research report. Twenty-First Century Fox ( FOXA ) and  CBS ( CBS ) are expected to sell airwaves in some markets. While Comcast ’s ( CMCSA ) cable company is a potential bidder , it also owns media firm NBCUniversal, a likely seller of airwaves. Smaller local TV station owners include  Sinclair Broadcast Group ( SBGI ) and  Gray Television ( GTNA ). “We view FOX and CBS as best positioned to monetize duopoly affiliates in large markets, followed by Comcast and Sinclair,” said JPMorgan. Walt Disney ( DIS ), which owns ABC, is not expected to sell airwaves. Private investment firms such as Columbia Capital are eyeing the auction, says a Washington Post report . JPMorgan predicts cable TV firms will show up, but it doubts that Internet giants will bid. “We expect that AT&T, Verizon, and T-Mobile will be the biggest bidders ($21 billion-$30 billion cumulative spend), that Sprint ( S )/ SoftBank ( SFTBY ) will not register, and Dish Network ( DISH ) will at most be an opportunistic buyer,” said the JPMorgan report. “We estimate Comcast, potentially in partnership with other cable companies, could spend $3 billion-$5 billion, and private equity funds in aggregate could spend $1 billion-$2 billion. “We do not expect digital economy players like Alphabet -Google ( GOOGL ) or Amazon.com ( AMZN ) to bid, though they can never be ruled out.”