T AT&T Inc

By Benjamin Mullin 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 19, 2019).

Sony Corp.'s Sony Pictures Entertainment is buying AT&T Inc.'s stake in Game Show Network for $380 million, a deal that will make Sony the sole owner of the U.S. cable channel.

The purchase of AT&T's 42% stake implies a valuation of about $905 million for Game Show Network, a cable channel that airs quiz show staples like "Family Feud" and "Deal or No Deal" alongside classics like "Match Game."

The network will continue to be carried by AT&T's DirecTV service, according to a person familiar with the matter. Game Show Network will continue to be operated by Sony Pictures Television, which will add Game Show Network's catalog of shows to its library, Sony said in a statement.

Game Show Network Chief Executive Mark Feldman will continue running the channel.

Doubling down on a cable channel cuts against the grain in a media environment where many consumers are ditching traditional pay TV service in favor of online video streaming services like Netflix and Amazon Prime Video. Other entertainment companies such as Walt Disney Co. are focusing their investments on their own subscription streaming services.

But Sony executives are confident that Game Show Network will continue delivering profits well into the streaming era, according to a person familiar with their thinking.

About 90% of Game Show Network's revenue comes from advertisers, with only a small slice from the channel-carriage fees paid by pay TV providers, the person said. That gives Game Show Network some cushion in a media landscape where providers are trying to cut programming costs, the person said.

The audience demographics for Game Show Network also make the channel durable, despite cord-cutting, Sony said. The viewership skews older and is more inclined to watch traditional TV, and almost all of Game Show Network's audience watches live, which makes the advertising more effective, the company said.

AT&T is receiving $500 million in cash in connection with the deal, reflecting about $120 million in cash on the books of Game Show Network that AT&T is keeping in addition to Sony's $380 million payment.

Included in the deal is GSN Games, a division of Game Show Network that produces casual games for mobile users. The division's revenue comes mostly from players who make in-app purchases while they're playing free games, according a person familiar with the matter. Some games on offer correspond to shows on the Game Show Network cable channel, including "Wheel of Fortune."

The deal comes as AT&T is selling assets the company deems nonstrategic to help pay down debt from its 2018 purchase of Time Warner for more than $80 billion. AT&T sold its 9.5% stake in Hulu to Disney for $1.43 billion in April. In October, the telecom giant agreed to sell its Puerto Rican and U.S. Virgin Islands businesses to Liberty Latin America Ltd.

AT&T is pinning its ambitions in the video-streaming space on HBO Max, a $14.99-a-month service that will launch in May and will include programming from across the WarnerMedia empire. AT&T is spending big to fill HBO Max with attractive shows. It paid about $600 million for the rights to stream "South Park" for five years and has lured directors such as J.J. Abrams with big-ticket production deals.

Write to Benjamin Mullin at Benjamin.Mullin@wsj.com

(END) Dow Jones Newswires

November 19, 2019 02:47 ET (07:47 GMT)

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