Microsoft said Friday that after months of negotiations it had sold a controlling stake in the 24-hour cable-news channel to partner NBC...
Microsoft said Friday that after months of negotiations it had sold a controlling stake in the 24-hour cable-news channel to partner NBC Universal, which also received an option to buy the rest of MSNBC within two years.
Financial terms weren’t disclosed, but NBC Universal will now own 82 percent of the network.
The companies said they would continue to share ownership of MSNBC.com, which has become one of the most popular news sites on the Web even as the TV channel struggled.
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The deal portends the eventual unraveling of what had been a landmark television joint venture when it was unveiled a decade ago. The teaming of Microsoft, the world’s largest software company, with one of the biggest news operations was part of a larger investment strategy that Microsoft Chairman Bill Gates hoped would pay dividends by giving the company the content to gain a foothold in the Internet as it took off.
But Microsoft executives realized several years ago that they’re better off creating software and Internet services for distributing content, rather than paying people to create that content.
Microsoft sold its online magazine, Slate, to Washington Post Co. last year and has been looking for a graceful way out of the cable channel.
Executives from the two companies declined to say what triggered the agreement, disclosed Friday.
But it came at the end of a week during which Microsoft was dealt a big setback for its Internet unit, a key to the company’s growth strategy. Google on Tuesday struck an online advertising alliance, with Web search at its center, with Time Warner’s America Online, after Microsoft spent months trying to craft a joint venture with AOL.
Shedding its TV operations through the NBC deal appears to be part of Microsoft’s efforts to concentrate on the competitive threat posed by Google, analysts said.
“Microsoft is moving away from some of these strategic media investments they had made in the ’90s so they can focus their energies and resources on the Internet-based computing trends that are occurring right now and could potentially be harmful to their core business,” said Brendan Barnicle, senior research analyst at Pacific Crest Securities.
Microsoft helped launch the cable channel in 1996, vowing to invest $220 million over the first five years. MSNBC lost money consistently through 2002, broke even in 2003 and finally started generating a small profit in 2004, according to Kagan Research.
But its profits and viewership have lagged far behind its rival all-news cable channels, News Corp.’s Fox News and Time Warner’s CNN.
The increased control will give New York-based NBC Universal more options for the network as it tries to boost its rating.
“Acquiring a controlling interest in MSNBC will allow us to fully integrate the channel into our news operations and our overall cable platform,” said NBC News President Steve Capus.