NBC, Paxson Tie Knot


As expected, NBC cut a deal last week to buy up to 32
percent of Paxson Communications Corp. for about $415 million.

According to the agreement, NBC will fund new preferred
shares of Paxson stock convertible at $13.01 apiece, and it has the option to increase its
stake to 49 percent of the company in February 2002.

That option would include Paxson chairman Lowell
Paxson's supervoting shares, but it would only be exercised if Federal Communications
Commission rules change.

The deal has been rumored for weeks, and it gives NBC a
potential path to a second national distribution outlet for programming via Paxson's
72 television stations, while bringing Paxson some much needed additional financial

"At a time of rapid consolidation in the broadcast
industry, we want to be invested as strategically as possible," NBC president Bob
Wright said. "This is a significant investment by NBC in a one-of-a-kind company with
television stations in many key markets and a national broadcasting network."

Paxson hired Salomon Smith Barney last month to seek out
strategic relationships, soon after the FCC allowed broadcasters to own two television
stations in one market. That ruling also inspired the $37 billion merger between Viacom
Inc. and CBS Corp.

Paxson will also jointly develop additional programming
with NBC. The cash infusion should allow the company to complete station acquisitions and
to build out its digital television stations.

Paxson's top management -- including Lowell Paxson,
president and CEO Jeff Sagansky and other key executives -- will remain in their current

Even if NBC converts its initial preferred investment for
32 percent of Paxson stock, it will have no direct operational control of the company,
although it will have material input into operations.

Pax TV was launched about one year ago. Although it
struggled early on to win "must-carry" status with cable operators, the company
said 90 percent of cable systems in its markets carry Pax TV. And in the top 50 markets,
55 percent of its cable carriage is between channels 1 and 20.

"We have a great presence in what we call the
'white areas.' We're on the satellite, and we've never had a
problem," Paxson said in a conference call with reporters. "We've had a
great relationship with cable and, in fact, the relationship with NBC will enhance

"They've had very good success in the last few
weeks with their most recent launches," Wright added. "These are not the numbers
we are traditionally used to seeing on NBC, but they are numbers that are very competitive
with other channels that have been launched in the past three or four years on cable
systems. Were trying to participate with them and figure out how to do mutually
advantageous programming arrangements that are both national and local."