There are certain accepted truths in each new TV season: There must be more sitcoms dissecting the angst of hip young singles; Columbo will return for another made-for-TV flick; and General Electric Co. would like nothing better than to sell NBC.
In the wake of the Viacom-CBS merger, the National Broadcasting Co. may seem like even more of an anachronism than ever. After all, it's the only big TV network not part of a megamedia conglomerate complete with movie studio and television production. And conventional wisdom suggests that with programming costs rising and network audiences declining, savvy GE would do well to unload NBC while it's still churning out decent profits.
But hold that clicker. While NBC has explored many a merger, but done nothing on the megascale, it has made a string of moves that could keep the Peacock more attractive than ever to its corporate parent.
How? By buying into the Web, GE Chairman John F. Welch's current obsession. Suddenly, NBC could be more than a mere media company. It could transform 100 million viewers into GE e-commerce customers. "I don't think Welch is itching to unload it," says David J. Pizzimenti, who covers GE for Schroder & Co. in New York. "Now, NBC is a business that plays well into GE's e-commerce strategy."
Just since mid-September, NBC has made a small foray into online trading through a stake in Archipelago Holdings, and unveiled an online shopping strategy linking its Snap.com portal with ValueVision International, a TV-shopping channel 40% owned by NBC. At the same time, it shored up its position in old-line broadcasting by agreeing to pay $415 million to buy into a fledgling second network, Paxson Communications Inc. Its founder, Lowell "Bud" Paxson, is also the founder of Home Shopping Network. "He has a lot of shopping ideas--both e-commerce-related and TV-related," says NBC CEO Robert C. Wright, "and we'll get to them."
MANY TALKS. NBC's fascination with the Net is hardly new. It has led the pack among media players when it comes to the Net, starting with its 1996 launch, with Microsoft Corp., of cable channel/Web site MSNBC. More recently, NBC launched a CNBC.com Web site to complement its successful cable business news channel. Thomas S. Rogers, the president of NBC Cable and architect of the network's Web strategy, says he and Wright have been talking to GE Capital chief Dennis D. Dammerman about ways to integrate GE's consumer-finance businesses with CNBC.com. In the near term, expect to see GE insurance and mortgage products sold on the CNBC site.
How will the strategy unfold? NBC's plan to create a publicly traded Web vehicle--called NBCi--is critical to the e-commerce effort and to the parent company. Both Welch and GE Chief Information Officer Gary Reiner are on its board. By creating a separate Net company, GE will have a currency--NBCi stock--with which to buy more Web properties. When the deal to create NBCi closes in November, it will combine the Snap.com portal as well as some other NBC Internet businesses with Xoom.com, a site that gives free Web services in return for the ability to direct-market. So far, though, investors are skeptical: Xoom stock is off 50% since the NBCi announcement in May.
Spinning off the Web enterprises is also good for NBC, which lives under orders from GE headquarters to produce real earnings--and not just the cash flow that most media giants measure themselves by. While the Web unit will maintain synergies with the network, NBC will be freed from having to finance a hungry Web operation's growth.
That said, not everything can be solved by putting an e in front of it. Wright admits that NBC still faces a big challenge. He predicts "more partnerships" in the year ahead. Overall, GE bull Nicholas P. Heymann of Prudential Securities Inc. estimates that GE has invested about $900 million in NBC over the past several years, creating $11 billion to $13 billion in value. But rather than another big media deal, he predicts that GE will unlock some value for stockholders with a CNBC.com public offering around February, followed by MSNBC later next year. "These guys won't have to buy a studio," says Heymann. "GE has figured out how to skin this cat." Indeed, if its Web moves pan out, the network that seemed to be left behind may end up leading the pack.