GO
Loading...

Microsoft and NBC Complete Web Divorce

Microsoft splits from NBC
Source: Microsoft and NBC
Microsoft splits from NBC

On Sunday night, MSNBC.com did something that successful Web sites almost never do: it renamed itself.

The site became NBCNews.com, signifying the end of a relationship between NBC and Microsoft that dates back to the earliest days of the commercial Web. Early next year, MSNBC.com will be reborn as a stand-alone site for the cable channel MSNBC, ending the brand confusion that has plagued the site in the past.

With the changes, “we will fully own our digital businesses,” said Steve Capus, the president of NBC News. That’s because the company that controls NBC, Comcast , is acquiring Microsoft’s 50 percent stake in the joint venture that brought MSNBC.com to life in the mid-1990s — in effect, a big investment by Comcast in the news division’s future.

Microsoft is receiving roughly $300 million for the stake, according to people with knowledge of the transaction who insisted on anonymity because the total price was not being made public. A portion of the total price comes from the joint venture’s past profits.

The moves come at a time when television news operations like NBC News, the home of “Today” and “NBC Nightly News,” are increasingly looking online for advertising dollars and new audiences. NBC executives say they will bring the television and NBCNews.com staffs closer; improve the digital distribution of their TV programs; and make more apps and Web sites optimized for mobile devices, a major area of growth.

“It’s undeniable how big a part of all of our businesses the digital properties are going to be,” Mr. Capus said in an interview at his office at Rockefeller Center in Manhattan. “We think we have a much better opportunity to shape them, and frankly grow the news division over all, if we have direct control over all of it.”

In describing MSNBC.com, Mr. Capus said, “What we have right now is fine.” He stretched out the last word. “But I hate the word ‘fine.’ We want something more than fine.”

Like a couple who stays together for far too long — to their friends’ discomfort — the breakup between NBC and Microsoft has been a long time coming. The partnership was pioneering at first, with a best-in-its-class Web site owing to Microsoft’s technologists in Washington State and a companion cable news channel run by NBC’s news-gathering teams in New York. But drastic changes in the media business, differing priorities inside the companies and the physical distance between them brought them apart.

Microsoft’s stake in the cable channel was dissolved in 2005. But NBC came to feel handcuffed by the Web arrangement; an increasing number of advertisers wanted to buy ads both on its TV newscasts and its Web sites, a strategy called cross-media sales, but it could not respond effectively because Microsoft ran the ad sales part of the business.

The joint venture set up a special team for such sales, and it has been particularly successful with the “Today” show and Today.com.

“Our success in cross-media sales was one of the driving forces in wanting to get a deal done,” said John Kelly, the executive vice president for ad sales for NBC News.

Another driver was MSNBC, the cable channel, which started to take on a politically progressive persona several years ago. As the image of MSNBC changed, the head of MSNBC.com, Charlie Tillinghast, floated a name change.

“Both strategies are fine, but naming them the same thing is brand insanity,” he said to his staff in early 2010.

NBC and Microsoft could not agree on proposed changes that year. But conversations resumed after Comcast acquired a majority stake in NBCUniversal in early 2011. Divorce talks between Comcast and Microsoft started in earnest last winter and were reported by a number of media outlets in the spring. The deal was signed last Friday.

For now, MSNBC.com will automatically redirect browsers to NBCNews.com, and the site will initially look the same, save for a new logo. But it will be owned and operated by NBC, which will make changes more nimbly in the future. Production of the site will shift to New York, though some engineers and other technical employees will stay in Washington State, where NBC will set up what it calls the NBC News Innovation Center.

“The whole news organization will benefit,” said Vivian Schiller, whom Mr. Capus hired a year ago to be the chief digital officer for NBC News.

Microsoft, too, expects it will benefit from the breakup. The restrictive terms of the joint venture stopped its portal site, MSN.com, from doing deals with any other news providers, putting it at a disadvantage to other portals.

Bob Visse, its general manager, said the site would now make such deals and link to competitors of MSNBC.com. In addition, he said, “we’re going to go out and build a world-class news team.” He declined to say how many journalists would be hired for the new site, which will be introduced in the fall.

About half of MSNBC.com’s traffic came from MSN, and through a new traffic deal between the two companies, this will continue for some time. But NBCNews.com may seek other sources of traffic. NBC News had informal conversations with The Huffington Post this year, but the terms of the joint venture limited how far those talks could go; now that the joint venture is dissolved, Mr. Capus said, “we’re open for business.”

“I expect that Vivian’s phone is going to be lighting up all the time with people who want to do deals, and we’ll consider them,” he said.

By venturing out on its own, NBC is playing down the importance of portals — a stark contrast with ABC News, which aligned itself with Yahoo last year.

Yahoo and ABC News’s combined news sites have 81 million unique visitors a month in the United States, according to the measurement firm comScore, with Yahoo representing the vast majority of the traffic. Detractors say ABC is inflating its totals via its Yahoo partnership, but ABC describes it as an important growth move.

MSNBC.com and its associated sites have 50 million visitors, according to comScore; CNN and its sites have nearly 56 million.

At first, NBCNews.com will retain sections for MSNBC’s political programs like “The Rachel Maddow Show” and “Morning Joe.” But those will be moved onto a new MSNBC.com early next year, further splintering traffic.

Most of the joint venture’s roughly 300 employees will remain employed by NBC.

The name, Mr. Capus said, “liberates them to think: how do we jump forward a couple steps ahead of everybody else, in terms of new ways to deliver news, new ways to deliver video?”

Said Mr. Kelly, “There’s a big opportunity for the MSNBC cable brand to have its own digital destination.”

Comcast owns the majority shares of NBC Universal, CNBC's parent company.

Comcast owns the majority stake of NBC Universal, CNBC's parent company.

Contact Technology

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Squawk Alley