NBC to end Paxson relationship

NBC is pulling the plug on its troubled relationship with Paxson Communications and its 61 television stations. The bailout could cost Paxson as much as $600 million.

The network is exercising its right to demand a full redemption of its investment in Paxson, the New York Times reported. The move immediately kicked off a bitter dispute between the two companies, similar to the one that led to an arbitration two years ago after NBC decided to buy the Spanish-language network Telemundo over Paxson’s strenuous objections. NBC won that fight.

Brandon Burgess, the executive vice president for business development at NBC, told the Times that the network had run out of patience with Paxson because “it had become undermanaged and its business plan wasn’t working.”

Paxson executives issued statements declaring NBC’s move a victory for Paxson because it could now free itself for other outside investments or even a takeover. Executives also denied that Paxson was under any obligation to repay NBC for its investment, instead labeling NBC’s opportunity for the redemption a request.

Burgess dismissed Paxson’s position on the redemption as “more spinning” that would not change the facts. “This is the same nonsense we go through with these people all the time,” he said. “The facts are, they owe the money, period.”

In 1999, General Electric’s NBC bought a 32 percent stake in Paxson, which, in addition to broadcast stations, owns PAX-TV, a part-time network devoted to family programming, for $415 million. At the time the investment was seen as a precursor to a takeover of Paxson by NBC, as soon as regulatory changes in Washington made it possible for NBC to own more stations.

NBC retained an option to buy a controlling stake in Paxson within 10 years. But that interest waned after NBC acquired Telemundo in 2001. Paxson was outraged, saying the deal made it far less likely that NBC could ever acquire the Paxson stations because NBC would be pushed far over the limit on station ownership imposed by the FCC.

Now the entire station ownership issue has become further clouded because of opposition in Congress to the loosening of caps on ownership proposed by the FCC in the summer.

Burgess said concerns about the possibility that the limits on station ownership would stay in place did not play a role in NBC’s decision. Similarly, he said NBC’s recent acquisition of the entertainment assets of Vivendi Universal did not cause NBC to lose interest in its Paxson investment. “If anything that should have increased our interest because we’re becoming a much bigger content provider,” he said.

The main driver of the decision, Burgess told the Times, was NBC’s conclusion that “Paxson was going nowhere.”

For more information visit www.nbc.com or www.paxtv.com.

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