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NBC AND PAX TV FALL OUT OVER INFOMERCIAL PLANS

Jointly Owned Entity Unilaterally Plans to Terminate Spot Sales

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NEW YORK (AdAge.com) -- NBC Universal is studying its legal options against Paxson Communication's decision to turn their jointly owned broadcast network Pax TV into an infomercials channel.
In 1999, NBC invested $415 million for a 32% stake in Pax TV.

Paxson, which outlined the decision in its annual report filed March 31, is also terminating sales agreements with NBC, which invested $415 million for a 32% stake in the network in 1999.

Strongly worded statement
NBC issued a strongly worded statement this evening, saying, "Paxson's attempt to terminate its sales agreements with NBC Universal and to abandon network programming constitutes a breach of the contractual agreements between Paxson and NBC Universal. NBC Universal will not agree to this course of action in the absence of a viable new business plan that preserves and maximizes the value of Paxson's assets."

A spokeswoman for Paxson Communications said the company had no comment on the matter.

Pax TV currently airs light family-oriented programming, such as America's Funniest Home Videos and some religious series such as Faith Under Fire. But it has also been gradually adding infomercials to its early evening schedule. The network does business with brands such as Little Debbie and Lean Cuisine and sells a broad array of products at its Web site.

No ratings improvement
In its annual report, Paxson said it failed to see any significant improvement in its ratings or ad revenues as a result of developing new programming in 2004. The network is consistently praised, however, by the Parent's Television Council for its family-friendly programming.

According to Paxson's annual report, the company plans to "substantially reduce or eliminate our sales of spot advertisements that are based on audience ratings, which are presently sold for us by our JSA (joint service agreement) partners and NBC, and to focus our sales efforts on long form paid programming and non rated spot ads."

Long-term value of assets
But NBC last night said it "strongly disagrees with Paxson's attempt to terminate operational agreements that sustain the company and its stations as a broadcast network. We believe that the elimination of all sales and local operational capabilities will reduce the long-term value of the company and its station assets."

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Abbey Klaassen contributed to this report.

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