New York -- As it renegotiates deals for MSNBC and CNBC,
NBC will be pitching cable operators a variety of offerings, including several that could
prove to be tough sells: home shopping network ValueVision and the Olympic Games.
Last week, NBC and GE Capital Services unveiled their plans
to acquire a 15 percent stake in ValueVision International Inc. for $44 million, with
warrants to buy another 4.9 percent at a later time.
As part of its strategy, NBC is looking to jump-start
ValueVision's cable distribution, which now stands at about 15 million homes on a
NBC Cable president Tom Rogers and NBC Cable Distribution
president David Zaslav said ValueVision will be part of a package of products that NBC
will have on the table when it talks to operators about analog-carriage renewals for CNBC
"Tom and I are in the process now, over the next year,
of renegotiating all of our deals," Zaslav said.
As part of that effort, NBC will be asking cable operators
to ante up some kind of additional surcharge or compensation in exchange for getting
Summer Olympics coverage next year on MSNBC and CNBC.
The Olympics will be carried on cable, as well as on the
NBC broadcast network, for the next 10 years, according to Zaslav.
But several operators, including MediaOne Group Inc., were
already expressing concern about being asked to in effect help underwrite the $3.6 billion
fee that NBC shelled out for the Olympics TV rights.
During its negotiations with operators, NBC will also start
hawking several new digital-cable networks.
In the second quarter, NBC aims to launch what amounts to
an international version of CNBC -- a business-news service with live coverage from Europe
and Asia -- Zaslav said. NBC also expects to bow a second digital-cable network, most
likely a localized weather channel.
Those assorted bargaining chips aren't all that NBC has in
the mix to discuss with operators. It will also be talking to MSOs about renewing
retransmission-consent deals and securing digital-broadcast agreements for the NBC
NBC only recently revealed, as reported last week in Multichannel
News, that it plans to offer cable operators an alternate feed with 2000 Olympics
coverage from Sydney, Australia, that will air on MSNBC and CNBC. Cable's Olympics
coverage will be different from what airs on NBC, Zaslav said.
Operators don't have to carry that feed, Zaslav stressed,
because MSNBC and CNBC will continue to offer their own programming 24 hours per day. But
he added that MSOs have reacted positively to carrying the coverage.
Cox Communications Inc., for example, has had preliminary
talks with NBC about the Olympics, and it is interested in what will amount to "a
multichannel exclusive [Olympics] product," an MSO spokeswoman said.
And AT&T Broadband & Internet Services (formerly
Tele-Communications Inc.) is in "active discussions" with NBC, an AT&T
Broadband spokeswoman said.
But Zaslav has declined to offer any details about how
operators will be charged for the Olympics feed, other than saying that the matter will be
part of contract renewals for MSNBC and CNBC.
"We'll be looking for value for the Olympics,"
Zaslav said, declining further comment.
MSO officials are still in the dark about how all of the
"products" that NBC is pitching will fit together in terms of cost. But the
prospects of paying extra for the Olympics, of permitting NBC to in effect amortize its
Olympics costs by raising license fees or of adding surcharges to CNBC and MSNBC have
raised some red flags.
According to MediaOne, "On its face, it's a good
idea" for NBC to put the Olympics on cable, an MSO spokesman said.
"But at this point, we think that we are paying a fair
price for MSNBC and CNBC, and we don't think that this is something we should be paying
additional for," the MediaOne spokesman added. "And our customers shouldn't have
to absorb [the cost]."
Linda Stuchell, vice president of programming for Harron
Communications Corp., said NBC is "going to have a tough time" charging MSOs any
additional fee for the Olympics on cable.
"Our expenses and budgets are put to bed," she
said. "They'll be hard-pressed to ram anything down the cable industry's
One of Stuchell's colleagues had a similar reaction to the
prospect of extra charges for the Olympics.
"It's concerning," said Frank Hughes, senior vice
president of the National Cable Television Cooperative, which represents about 10 million
subscribers. "NBC has already built retransmission consent into the rate for MSNBC
and CNBC, so their license fees are already marked up."
In exchange for carriage for its ill-fated America's
Talking network, NBC offered cable operators -- especially in markets where the
broadcaster had owned-and-operated TV stations -- retransmission consent. There were also
charges for retransmission consent that were tacked onto A-T's license fees, sources said.
In July 1996, NBC basically replaced A-T with MSNBC.
Carriage deals for MSNBC and CNBC expire in 2000 and 2001,
Sources said MSNBC's rate card now falls in the 10- to
15-cent-per-month, per-subscriber range, although some smaller operators that didn't have
retransmission consent pay as low as seven cents. CNBC's rate card is in the 17- to
19-cent range, sources said. MSNBC is in 48 million homes, and CNBC is in 68 million.
There are many scenarios that could play out in terms of
the NBC deals. Some observers suggested that NBC will lose its leverage regarding renewals
for MSNBC and CNBC and collecting an Olympics surcharge because it will be eagerly trying
to get carriage for ValueVision.
The issue is whether NBC will have to discount its core
channels' rate cards in exchange for ValueVision distribution, or perhaps even forfeit
compensation for the Olympics.
"There's a lot of complexity around this," one
industry observer said
NBC officials said ValueVision is attractive to operators,
since it doesn't charge license fees and it gives cable systems a share of its merchandise
But several MSO officials see ValueVision as a third-ranked
home shopping also-ran, and they questioned why they should make space for it.
Kent Gibbons contributed to this story.