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Personal message:
This is a Yahopo!/Reuters story about NBC-TV changing affiliations in the San Francisco/San Jose Market.
One interesting note: If KRON indeed becomes an independent,
it may, by default, get all the San Francisco/Oakland/San Jose area pro sports teams (Giants, A's, 49ers and Raiders pre-season
gamnes, Sharks and Warriors) because KRON would be the only station able to clear time to air the games.
NBC mines huge fee in affiliation deal
http://dailynews.yahoo.com/h/nm/20000215/en/television-granite_2.html
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Tuesday February 15 2:38 AM ET
NBC mines huge fee in affiliation dealBy Michael Schneider HOLLYWOOD (Variety) - Granite Broadcasting has agreed to pay NBC a staggering million to align its San Jose station KNTV with the network for 10 years beginning in 2002. Monday's announcement came just days after Young Broadcasting announced that it would strip longtime NBC outlet KRON San Francisco of its affiliation at the end of 2001. Young had balked at NBC's demand that KRON pay the network million a year in reverse compensation to continue its affiliation. Instead, NBC will receive million a year for nine years from Granite, which also sealed 10-year deals for its NBC affiliates in Duluth, Minn.; Fresno; and Peoria, Ill. New York-based Granite's CEO, Don Cornwell, defended the rich deal. ``While these payments may appear at first blush to be a lot of money, we clearly view this as an investment and a partnership,'' Cornwell said. ``The way we see it, we're acquiring the right to be the NBC affiliate in the fifth-largest TV market.'' Cornwell argued that, after tax breaks, Granite's investment would be worth closer to million. If KNTV generates cash flow of at least million in its first year as an NBC affiliate, he said, the station group is paying for affiliation at five times cash flow. ``We believe we can accomplish a virtually seamless transition to NBC in 2002,'' Cornwell said. Nonetheless, Wall Street expressed concern that Granite may be overpaying for the NBC affiliation, as the company's shares dropped .82 to .94. As part of the deal, NBC has been granted warrants that would allow it to acquire 4.5 million shares of Granite, representing an ownership stake of 18%, at prices of .50- per share. The two sides are also discussing the possibility of launching a Bay Area cable news channel that would compete with Young's Bay TV. Assigned to the Salinas/Monterey market designation, KNTV is handicapped by spotty coverage in San Francisco. Granite hopes to boost KNTV's power and relocate the station's signal in order to penetrate the San Francisco market. The station also must boost its cable coverage in the market; Granite confirms that about 20%-30% of San Francisco cable households don't receive KNTV. ``The over-the-air signal in two years should provide 100% coverage in the Bay Area with the power increase,'' Granite chief operating officer Bob Selwyn said. NBC Television Network president Randy Falco played down concerns that Granite's expensive pact may be an example of things to come in network-affiliate relations. ``It seemed to me an immediate convergence of shared values,'' Falco said. ``While a new model, it may not be the model that fits in every market.'' Cornwell said he ``wouldn't pretend to'' predict what this deal means for Granite's relationship with other networks. ``I think that every station owner is thinking long and hard over what their relationship will be with the networks in the future,'' Cornwell said. ``There are fewer and fewer hard and fast rules.'' A longtime ABC affiliate, KNTV had earlier agreed to drop its affiliation with the network this summer. KNTV will operate as an independent until the NBC affiliation takes effect Jan. 1, 2002. Granite also owns WB affiliate KBWB-TV in the market. Rival market execs questioned Granite's major investment, and said NBC at best would break even by losing KRON but picking up KNTV's million. ``I think Bob Wright sacrificed ratings for revenue,'' said KTVU GM Kevin O'Brien. ``He took advantage of Granite, catching them at a weak moment. They would have made much more money as an indie controlling their inventory.'' Young Broadcasting chief Vincent Young was quick to question the NBC/Granite deal. ``It's not a deal you could ever believe was made by two broadcasters,'' Young said. ``There are a number of multiple leaps of faith going on here to think any of this makes sense.'' Meanwhile, sources said NBC may have an out to the KNTV deal should KRON become available for sale. Young outbid NBC for the station last year, paying million. Under its old affiliation deal, NBC paid KRON compensation worth million. NBC has made it a priority to end affiliate compensation in the coming years. Reuters/Variety Earlier Stories
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