Microsoft/NBC Venture Is Not Without Hurdles; MSNBC Debut Nears As Some Cable Operators Balk; Web Side Still Developing

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[redmond, wash.] Microsoft Corp. and NBC bill their MSNBC cable/Web venture as "the news service of the next century." But while the service launches July 15, it may be close to the next century before this attempt at interactive TV can really take off.

At a media briefing here, Microsoft tried to reset expectations to show that interaction between the TV and Web programs will be evolutionary. It could take 18 months to two years for the Web service to reach its interactive potential, said Peter Neupert, Microsoft VP-strategic partnerships.

The 24-hour cable news channel with a free companion service on the Internet (http://www.msnbc.

com) is set to replace NBC's America's Talking on TV and MSNBC's Web version replaces Microsoft Network's news service.

HOW MANY SUBSCRIBERS?

Questions loom as to how many subscribers the cable service will reach at launch. NBC says MSNBC will start with 22 million homes. It arrives at that number by counting the homes now getting America's Talking. Because that channel is being converted into MSNBC, NBC claims its contracts with operators allow the switch.

While some cable operators, including the nation's largest, Tele-Communications Inc., have said their America's Talking contracts do indeed allow the switch, others, such as Time Warner Cable, have balked.

CRUCIAL CABLE CARRIERS

MSNBC hasn't reached an agreement with Time Warner and another pivotal cable multiple system operator, Cablevision Systems Corp. For advertisers, the two are essential-they reach the most affluent cable subscribers in the nation's No. 1 market, New York.

NBC executives have asked the Federal Trade Commission to mandate that Time Warner carry MSNBC as one of the prices for approving Time Warner's pending acquisition of Turner Broadcasting System, say knowledgeable executives. TBS owns CNN, a direct competitor to MSNBC. And, in a proposal before the FTC, these executives say, Time Warner has agreed not to be a "bottleneck" for competing cable services.

"Time Warner could say tomorrow that it will put MSNBC on its systems, but it wants to make it seem that doing so is a big concession to the FTC so the FTC will approve the Time Warner/Turner deal," said one executive.

Cablevision has taken the most aggressive stance yet regarding MSNBC. In postcards recently sent to "most of our 600,000 AT subscribers," said a Cablevision spokesman, the subscribers have been notified that America's Talking will cease service July 15 and be replaced with another network. The name of the replacement service varies according to where the subscriber lives, but in no case have subscribers been notified it will be MSNBC.

40 MIL HOMES IN 4 YEARS

NBC executives express confidence they will deliver the 22 million households at launch-and 40 million in four years. CNN, by comparison, today reaches 67.2 million U.S. homes.

For the new venture, NBC is managing TV sales, and Microsoft is selling MSNBC Web ads as part of the Microsoft Network portfolio, which also includes the Webzine Slate.

Microsoft and NBC are making joint sales calls, but so far no advertiser has bought a TV/Web combination, said Steve Goldberg, Microsoft Network manager of advertising development and strategy. The network is not now offering discounts for ads on both TV and the Web.

About six Web-only advertisers have signed on for MSNBC's launch, Mr. Goldberg said, declining to name them.

MSNBC initially will charge 4 cents an impression for a Web banner, but it plans to start charging different rates in about a month based on traffic to specific sections, such as tech topics or business.

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