Cable TV Ownership

NBC and Microsoft caught the industry by surprise when, at the end of December 2005, they quietly announced that NBC was in fact taking over a controlling interest in MNSBC. Microsoft divested itself of its stake in the cable network, but continued to keep its interest in the news Web site.11

The Microsoft-NBC deal was a 99-year arrangement that began in 1996. Since the network’s launch, both companies had been equal financial partners in the venture. Now, NBC will have 82% stake, with the option to acquire the remaining stake after two years.

The spilt had been anticipated for some time and spotlights both the strained partnership between the two companies and the dismal performance of the cable channel against its competition. Media reports have contemplated that NBC might take the opportunity now to change the network, possibly giving it a new name (removing the ‘MS’ that stands for Microsoft). Steve Capus, President of NBC News, announced in a statement that he hoped to “fully integrate MSNBC into the NBC News family.”12

MSNBC is distinct from the other two cable news channels in that it develops programming simultaneously for both television (MSNBC-TV) and the Internet (MSNBC.com). Having premiered the same year as Fox News, 1996, MSNBC began with a bang — 22 million subscribers, the biggest subscriber base ever for a new cable service. In the years since, however, it has not made much headway.13

MSNBC uses the newsgathering resources of NBC News and its huge network of affiliate stations, which have the option of providing their own local news and information inserts. In terms of management, NBC News maintains editorial control over the content of both MSNBC-TV and MSNBC.com. It manages the TV channel on its own, while the Web site is jointly managed by both Microsoft and NBC.

NBC itself is a subsidiary of General Electric, which acquired it in 1985. The step was viewed as a way for GE to diversify, and a safety valve of sorts during times when the company’s typical industrially oriented operations struggled. In 2003, GE and Vivendi Universal signed a deal to create NBC Universal. That division owns the NBC Network, the Universal movie studios and the cable channels MSNBC, CNBC , USA , Sci-Fi, and Bravo. In 2005, NBC Universal accounted for about 9% of GE’s sales and 13 percent of its profits. But its performance has suffered in recent years, and profits for 2005 were expected to be flat — though unlikely to hamper GE’s overall results significantly.

CNBC, the niche business news channel run by NBC Universal, was launched in 1989. CNBC and its international versions cover business headlines and financial markets. In the U.S. CNBC provides business news programming from 4 a.m. to 8 p.m. (ET), with the evening and early morning hours (when the markets are closed) populated with talk shows (such as “ Squawk Box” and the Chris Matthews show), investigative reports, infomercials and other programs.

CNBC has operated international versions of its channel since 1995, when CNBC Asia launched. CNBC Europe followed in 1996. Altogether, CNBC reaches about 230 million households in more than 100 countries. (The Dow Jones Company sold its 50% stake in CNBC Europe and CNBC Asia to NBC in January 2006.)14

At the parent division, NBC and MSNBC have had internal turmoil as well. Neal Shapiro, president of NBC News, resigned in September 2005 and was replaced by Steve Capus that November. Rick Kaplan, a former ABC and CNN executive, had been in charge of MSNBC since early 2004. Kaplan named Bill Wolff, who was largely responsible for the Tucker Carlson Show, vice president for prime time programming in September 2005 as well.

MSNBC launched an intensive marketing campaign in December 2005. It was one of its most expensive (reported to cost just under $1 million) and concentrated campaigns based solely on the Internet. The channel bought up all the advertising slots on one day at three major Internet news sites — Newsweek, Washington Post and Slate — in addition to buying up keywords on Google and space on more than 800 blogs.15

From a financial standpoint, MSNBC is a useful outlet for NBC expenses, especially given the range of its news operations. For example, during the national political conventions and coverage of the Athens Olympics in 2004, MSNBC served as an extra channel for coverage. Thus, NBC News makes the most of its resources by producing material for not only NBC network news and MSNBC simultaneously, but also for its owned-and-operated NBC and Telemundo stations as well.

In an interview in November 2005, Steve Capus noted that while management was happy about the gains MSNBC made in 2005 it was “not satisfied,” and that there remained “some questions about the overall definition of the channel.”16