But what do Oprah’s plans mean for the TV business? Not that much, argues JP Morgan (JPM) analyst Michael Meltz. Short version of his note published this morning: It’s not bad for OWN, the cable network Oprah co-owns with Discovery (DISCA). But it’s also not terrible for CBS (CBS) and Disney’s (DIS) ABC, the two broadcasters currently in the “Oprah” business.

That’s because while the move makes for unpleasant “optics”–bizspeak for “looks bad”–for broadcast, it turns out that Oprah didn’t make that much money for the business. (But plenty for herself, obviously.)

Medium-sized version of Meltz’s argument:

• The show made $50 million a year for CBS, which syndicated the program. CBS would rather have that money than not, but losing it will amount to a “rounding error” in 2012.
• The show was a big ratings hit for local TV stations, but they paid a lot for it–upward of $200,000 a week in big markets. That made it a loss-leader for most broadcasters, Meltz says.
• And yes, the show provided a big lead-in audience to local TV news broadcasts, particularly in top ABC markets. But given that it’s not going to end up on a rival broadcast channel, “it is conceivable that station audience/ad share won’t change much for the day-part.”

Okay. Back to the crying and teeth-gnashing.

Analyst Imran Khan says he talked to 20 ad buyers and planners, who control a collective $1.6 billion in ad spending, and they tell him that they’ll spend more in the second half of 2009 than they did in the first six months. But that’s not useful information, since ad spending is traditionally weighted that way.

More tellingly, Khan’s correspondents tell him they think spending will be “roughly flat to down” in the last six months of 2009, compared to 2008. And as we’ve discussed before, ad spending started plummeting in the second half of 2008. So if it isn’t improving now, that’s unpleasant news.

More pleasant: Things should get better next year:

2010 ad budgets are looking positive. 25% of respondents see upside of 5-9% in 2010 and an additional 25% see upside of 10-14% vs. 2009. Approximately 40% think that ad spend in 2010 will be roughly flat with 2009 levels.

Looking for more concrete data? Wait a week. Earnings season kicks into high gear Thursday, Oct. 15, when Google (GOOG) hands in its Q3 report card; in the following weeks we’ll also get updates from big media players, including Yahoo (YHOO) and Time Warner (TWX).

The deal was hammered out by reps at a Tuesday meeting, Waxman reports, citing “two individuals informed about the meeting.” The $35 billion price tag happens to be the value that a recent JP Morgan report assigned to the company.

Comcast (CMCSA), in a statement, says the story is untrue: “While we do not normally comment on M&A rumors, the report that Comcast has a deal to purchase NBC Universal is inaccurate.” NBC Universal has no comment.

Clintonian parsers will note that Comcast’s denial has potential wiggle room: It isn’t denying, for instance, that the two companies had or are having talks. On the other hand, this is exactly the situation where corporate PR protocol calls for the “we don’t comment on market rumor and speculation” line. That way, you have the option of updating your statement if the story does turn out to be true. And for what it’s worth, I can’t recall the last time I saw a big, publicly traded company respond to an M&A story with this specificity.

UPDATE: The Los Angeles Times’s Joe Flint now says that Comcast is “kicking the tires” at NBCU, according to ”people familiar with the situation.” His report is much more hedged than Waxman’s.

All that said, this is a tie-up that has a first-blush logic to it: Comcast is flush with cash and could presumably take on more debt if it wanted to, and the company has shown an interest in branching out into content before. In 2004, it made a run at Disney (DIS). And the drumbeat for GE (GE) to dump its 80 percent stake in NBCU has been more or less constant, even while the industrial conglomerate insisted it had no interest in selling.

Those drumbeats get louder every year around this time, by the way. That’s because Vivendi, which owns the remaining 20 percent stake in NBCU, has a put option that kicks in every November and that could theoretically force GE into buying out the stake or spinning the whole thing out to the public.

More theoretical ammunition for a deal: Comcast is one of the few potential buyers that could swallow up all of NBCU. While there might be lots of people interested in NBCU’s cable properties (USA, Bravo, SciFi, etc.), there aren’t many who also want the company’s flailing broadcast property.

And while Universal’s film library is potentially attractive to some buyers, many of them–like Time Warner (TWX), for instance–have no interest in the film studio because they already have one.

If you want to play out the theoretical implications for digital, things could get very interesting. NBC is one of the founding partners at Hulu, the free Web TV portal that’s caused consternation for Comcast and other cable providers, which worry that the site is undermining the value of the TV programming they spend big money on. And Comcast and Time Warner have been trying out a “TV Everywhere” strategy that is, in part, a reaction to Hulu’s initial success. But let’s let the dust settle for a minute before we head in that direction.

Khan’s estimate is the first one I’ve seen floated in public so far. The analyst has proven to have a pretty good grip on AOL’s business to date, so I’m taking it seriously.

But for the record, note that not only is the $4 billion number a pittance of the company’s value during the original Web boom (remember those days?), it’s also marked down from the $5.5 billion Google assigned to the company when it wrote down its five percent stake earlier this year. Which was, of course, a markdown from the $20 billion value Google (GOOG) had given it in 2005.

UPDATE: Pali Capital’s Rich Greenfield also pegs AOL at “around $4 billion.” Greenfield is also in the growing group of people who think Time Warner is likely to sell off its Time Inc. publishing unit. I think otherwise, but this will be interesting to watch.

Here’s how Khan got to his number (click chart to enlarge).

Per usual, you can either argue that these modest gains are good news for Microsoft (MSFT), especially because they come after months of declines. Or you can argue that they are way too modest, given the hype and the media blitz that accompanied the launch.

My question: If you’re Carol Bartz and company and you’re about to launch a Bing-sized marketing campaign of your own, do Microsoft’s results give you encouragement or pause?

Again, the half-full argument is that the Bing blitz proves that given enough brute force, you can indeed use offline advertising to change online behavior, at least in the short term.

Half-empty: At least Microsoft’s pitch has an intriguing come-on–”Hey you! We’ve got a search engine that works better than Google (GOOG)! Come see for yourself!” But unless I’m missing something, there’s nothing equally compelling powering Yahoo’s “Its You!” push.

Maybe I’m wrong: Yahoo (YHOO) formally takes the drapes off its campaign this morning at a series of Advertising Week events. I’ll report back a little later today.

In the meantime, here are the newest comScore (SCOR) numbers, courtesy of JP Morgan’s Imran Khan (click on table to enlarge):

[Image credit: Seattle Municipal Archives]

But that was Thursday, and that’s old news. After a run-up of more than 10 percent, Real’s stock is back in the $3.30 range, where it stood before the iPhone announcement.

The problem: While a lot of digital music nerds I’ve talked to in the last day or so are excited about the app, the first of its kind to hit the market in the U.S., Wall Street seems to think consumers won’t care. They’re just not going to pay a monthly fee to listen to music.

Here’s JP Morgan’s Vasily Karaysov: “Rhapsody’s subscriber base (750K as of Q2 ’09, a decline of 50K sequentially) reflects the existing demand for a subscription-based music service irrespective of the device on which it’s available. We don’t expect the new application to reverse the challenging trend.”

To be fair, Real Networks (RNWK) is a thinly traded stock with other challenges, and it can move for all sorts of reasons. For instance, there has been a bit of buzz about the damages that Real will have to pay Verisign (VRSN), which could be significant.

But I do get the sense that even in the Apple-crazed tech press, which goes bananas for every Apple (AAPL) morsel it can find (true or not), Real’s app seems to have floated under the radar. But Real’s rival, Spotify, whose app does more or less the same thing at the same price but is only available in Europe (for now), says that demand has been overwhelming, so much so that Spotify has had to restrict its offering to new subscribers, at least temporarily. So what gives?

[Image credit: Kaibara87]

Wal-Mart is adding three outsiders to its sales mix, which it says will add an additional one million items to its inventory, and the company plans to add more in the future. Is this a problem for either Amazon (AMZN), which features some third-party sales, or eBay (EBAY), which offers nothing but?

Maybe one day, but not in the near future. That’s primarily because Wal-Mart is so far behind the big guys. The $1.7 billion Wal-Mart did in Web sales last year makes it the 13th biggest online store in the U.S. Chart via JP Morgan’s Imran Khan:

And even if Wal-Mart’s new partners do boost sales significantly, the ecommerce market is likely to grow even faster. Bernstein analyst Jeffrey Lindsay expects U.S. online retail to grow by $13 billion in 2010 and another $19 billion in 2011. So don’t expect to see Wal-Mart’s Web foes wiping their brows just yet.

[Image credit: PinkMoose]

So bear this in mind when reviewing the newest comScore (SCOR) search numbers, which show Microsoft (MSFT) continuing to make modest search share gains. Bing is now up nearly a full point since May, when Microsoft introduced the new “decision engine.”

If you’re in glass-half-empty mode, you can complain that the blitz of publicity (free and paid) for Bing should have moved the needle farther. But if you’re a half-full type, you can argue that there is a very large swath of people–even those with a passing interest in the Internet–who have no idea Microsoft has a new search engine. Which means there is a very large swath of potential converts.**

Here are the July data, courtesy of JP Morgan’s Imran Khan. Note that both Google (GOOG) and Yahoo (YHOO) saw share drop by 0.03 percent (click chart to enlarge):

And if you’ve already had your fill of the Bing ad blitz, brace yourself. Barclays analyst Doug Anmuth predicts another deluge in a few months “as we move closer to the holiday season, specifically highlighting the Cashback program and other differentiated features.”

Here’s the Bing spot that left my fellow moviegoer bemused (note that the ad has its own overlay ad at the 10-second mark for…Bing):

*Kafka At the Movies minireview: Way better than “Punchline.” And if you like your Adam Sandler angry (which I do) and your Seth Rogen slimmer (meh), you’ll be happy. But at two-hours-plus, way too long.

**Alternate take: You might worry that Microsoft’s decision to describe Bing as a “decision engine” may be confusing potential converts.

That projection comes from a survey of Web users that Internet analyst Imran Khan commissioned last month. Khan’s survey found that 37 percent of respondents were familiar with the Kindle. And of that group, five percent said they already owned one of the devices, and another 15 percent said they expect to buy one within the next year. Extrapolating those results for the U.S. population, Khan figures that Kindle ownership will hit 10 million in the next 12 months. (Click chart to enlarge)

OK. But what if Amazon (AMZN) dropped its proprietary ebook format, a supposed weakness that competitors Sony (SNE) and Plastic Logic are trying to take advantage of by agreeing to use an open, common standard? Won’t matter that much, say Khan’s respondents: Only 15 percent of people who say they don’t plan to buy a Kindle cite format issues as a concern. I’m surprised the number is that high.

On a related note: Whatever happened to Amazon’s plan to work with the New York Times (NYT) and the Washington Post (WPO) to bundle newspaper subscriptions with its jumbo-sized Kindle DX reader?

When Amazon unveiled the DX in May, it briefly mentioned plans to sell the $489 machine at a discount to people who bought subscriptions to the Times, Post or Boston Globe, but didn’t say much more than that. Details were supposed to be released “this summer.”

Now we’re midway through August and we haven’t heard a peep about the program. What gives? I asked Amazon, the Times and the Post, and none of them had anything to say–save for a comment from a Post rep who said that the subscription-plus-discount offer would be “a small experiment.”

My gut: Not a needle mover.

The summary for June: Google (GOOG) is flat, and so is IAC’s (IACI) Ask and Time Warner’s (TWX) AOL. And Yahoo (YHOO) is down. Microsoft’s increase of 0.4 percent, to 8.4 percent, looks to have come at the expense of Yahoo, which dropped from 20.1 percent to 19.6 percent.

Yesterday, JP Morgan’s Imran Khan (who supplied us with these data today) predicted that Bing would eventually boost Microsoft by two percent, at the expense of AOL and Ask (click charts to enlarge):

The bad news for Microsoft: For most people, Google is already working just fine.

Details from JP Morgan’s (JPM) Imran Khan, who commissioned a survey of search users a month after Bing’s launch: 59.1 percent of respondents have heard of Microsoft’s (MSFT) new search engine and 24.9 percent of them have tried it. And people who tried it, liked it, just like Mikey (if that doesn’t mean anything to you, see video below, from ye olden days).

But Khan says these are samplers, not switchers: Only four in 10 Bing users turned to the search engine more than five times in the last month.

The problem here is that for most people, there’s no problem with Google (GOOG), and no reason to make a permanent switch.

Khan:

We think the biggest impediment to Bing’s attempt to gain market share is that the majority of people are perfectly happy with their current search experience. 62.6% of participants claimed that there were no factors that they would improve on their current search experience. As such, we think it will be more difficult for Microsoft to disrupt current user habits.

At best, Khan figures, Bing may help Microsoft claw its way to a two percent search share gain, but that would likely come at the expense of IAC’s (IACI) Ask and Time Warner’s (TWX) AOL.

The only way for Redmond to really move the needle would be even more expensive than the $100 million marketing outlay it has already committed: Building up its content business (that’d be you, Scott Moore), or ponying up for another distribution deal–which my employers at News Corp. (NWS) hope means them.

In order to gain meaningful market share, we believe Microsoft has to 1) create a markedly better product, 2) significantly expand its distribution (it will cost them higher TAC), or 3) invest heavily in content development to build out O&O properties. We believe that time spent on MSN O&O properties could lead to better search market share. While we expect competition in the search market to increase, we think it will be difficult to shift search behavior if people are completely satisfied with their current search engine. Of the above approaches, we think it is most likely that Microsoft will search for distribution deals to support this product launch.

Other key data points from Time Warner’s (TWX) Q4 report card:

Overall revenue at AOL dropped 23 percent (the remainder of the decrease stems from AOL’s evaporating but still substantial dial-up business). But operating income, before accounting for a gigantic write-off the company had preannounced, actually increased six percent. So if new sales boss Greg Coleman, last seen at Yahoo (YHOO), can make even modest progress in the next couple months, AOL will be able to limp along for a bit longer.

But not before more overhauls: Time Warner announced that it has earmarked another $250 million for restructuring charges at AOL and its Warner Bros. movie studios in 2009.

Time Inc.’s ad revenues dropped 20 percent, and adjusted operating income dropped 70 percent. But you can’t pin all of that on Ann Moore and company: Time had to take a $57 million charge on rent that Lehman Bros. (R.I.P.) won’t be paying to lease space at the company’s midtown office.

TIme Warner’s network TV business–HBO and Turner Broadcasting–did just fine. Gangbusters, really, by today’s standards: Revenues were up nine percent, including a seven percent bump in ad revenues.

Want to see the numbers for yourself? Click the table below to enlarge, or read the full release:

Why? Because DVD sales have been on the down slope for quite some time and because no one seems to have much interest in Blu-ray, the expensive new DVD format pushed by Sony (SNE), which was supposed to replace DVDs as Hollywood’s cash cow.

And because, while people are more likely to spend time huddled around the TV these days, that doesn’t mean they’re going to actually buy movies–they may rent them, which is good for the likes of Netflix (NFLX), but doesn’t do much for Hollywood.

So who gets hit worst? Khan has ranked the major media conglomerates by their exposure to home entertainment, expressed as a percentage of earnings*:

Viacom (VIA): 21 percent

Time Warner (TWX): 20 percent–or 10 percent if you include the company’s contribution from its Time Warner Cable spinoff

News Corp. (NWS): 18 percent

Disney (DIS): 15 percent

All things being equal though, you’re probably still better off tied to the DVD business, which is slowing, than the ad business, which is disappearing.

Case in point: Viacom shares are down 60 percent in the last year. But that looks fantastic compared to the performance of sister company CBS (CBS), which is down 80 percent. And yes, I’m trying to argue that being down 60 percent is the new up. But that’s where we are these days.

*Khan uses different definitions of earnings–sometimes he’s talking about EBITDA, sometimes OIBDA, etc.–for different companies. Chances are you don’t care.

This morning Nina Link, the CEO of Magazine Publishers of America, presented a state-of-the-industry talk for a conference call hosted by J.P. Morgan, as part of its “virtual advertising & marketing summit.”

Don’t worry if you missed it–the accompanying slides, which I’ve embedded below, do a good job of summing up Link’s presentation. And I can do the same in a couple sentences: Things aren’t great, but they could be worse. And they’ve got to get better: People like magazines!

I actually agree with part of Link’s thesis: People do like magazines, and will continue to do so. In fact, the more time I spend creating and consuming online content, the more value I see in print titles. They’re a refreshing break from the relentless crush of the Web, which tends to make really good stuff read and feel just the same as really bad stuff.

Also, as my old employer and current Forbes Media investor, Roger McNamee, likes to point out, you can read magazines on the toilet.

But none of that changes the real problem magazines face, which isn’t going away: Publishers rely on advertising for most of their revenue, and advertisers are increasingly moving their money to the Web.

And almost none of the publishers have figured out how what to do about that–Time Warner’s (TWX) Time Inc., which has been perhaps the most aggressive about getting on the Internet, gets only 10 percent of its revenue from the Web.

Surely more will follow suit, but when they do, they’ll face a new problem: The clichéd-but-true “analog dollars for digital pennies” phenomenon, which means that the same content becomes much less valuable once you move it from print to the Web.

But you’ve heard plenty about that and will continue to hear about it going forward, and I promised you the bull case. So here you go. Click on “full screen” button to make this pitch legible and right arrow button to page through the presentation.

MPA presentation – Free Legal Forms

[Image Credit: dickuhne]

J.P. Morgan’s Imran Khan does some quick math and concludes that what Time Warner (TWX) is really saying is that ad revenue at AOL dropped 18 percent in the last quarter (see below for math). That’s awful, but believable: AOL ad revenue dropped six percent in the previous quarter, and as I noted last fall, those results only included a couple weeks of flat-out economic collapse.

This obviously doesn’t augur well for the rest of the Internet ad business, either. But only the most die-hard optimist thought that the Web was going to survive this thing unscathed anyway.

No comment from Time Warner on Khan’s math. We’ll see actual numbers Feb. 4, when CEO Jeff Bewkes announces the company’s year-end earnings results.

Khan’s estimate, from his note:

“We estimate that advertising revenue shortfall at AOL is at least $64M implying an 18.4% Y/Y advertising revenue decline. We make the following assumptions to arrive at this estimate: (1) we assume that half of the 1% shortfall in Y/Y Adjusted OIBDA growth that TWX press release attributes to both Publishing and AOL is due to online ad revenue shortfall; and (2) we assume a 100% incremental margin.”