NBC eyes cut of stations' profits

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NBC is considering a radical new plan that would tap into affiliates' profits to help defray the anticipated cost of renewing its National Football League contract.

Under the plan, the network would take a certain percentage of the profits local affiliates make selling ad time during pro football broadcasts. The percentage would be based on a sliding scale, said those familiar with the concept, factoring in the size of the market and whether it has a team in the American Football Conference, the NFL division to which NBC has TV rights.


Affiliates are likely to balk at the plan if NBC tries to implement it.

"When you're talking about actual money changing hands for programming from the affiliates to the network, that's a pretty difficult bridge to cross," said Roger Ogden, president and general manager of KUSA-TV, the NBC affiliate in Denver. He added that he had not heard from the network about the concept.

Denver is home to the Broncos, one of the most successful franchises in the AFC. Mr. Ogden, who formerly worked for NBC, is

NBC eyes affiliate profits now employed by Gannett Co., which owns the largest number of NBC affiliates.

While NBC executives declined to comment officially about the plan, some network and station insiders emphasized that the profit-sharing idea was just one option under consideration as NBC decides how much it can bid to renew its NFL contract during forthcoming negotiations with the league. NBC's current contract cost the network about $870 million over four years.


The next four-year AFC rights deal is expected to be valued at between $1.5 billion and $1.8 billion, and could even hit $2 billion.

Traditionally, networks have asked affiliates to help defray the cost of big-ticket sporting events by giving back to the networks some local ad time that the stations would usually sell. The networks then sell that time.

NBC affiliates, for example, will give up some ad time to the network to help offset the cost of the Olympics, which the network has the rights to through 2008. And Fox affiliates gave 90 seconds of commercial time per week back to their network to help pay for its current NFL package.

But in those plans, the affiliates were just giving up time.

"What we'd be doing here is giving cash--real money--to NBC," said one general manager of an NBC affiliate. "That's both a physical and psychological barrier I think few stations want to tear down. It's one thing to give up spots . . . it's another thing to give up the cash itself.

"Remember, historically, it's the networks who pay us to carry their programming, not the other way around," the general manager said.

One network executive countered by saying it is exactly that model that has bothered the networks for years.

"We [would] be in much better financial shape if we had the cable model, where the local cable systems pay the programmers," the network executive said.


But those familiar with NBC's plans said that in considering the profit-sharing plan--expected to be presented to its affiliate board at a meeting Nov. 18--the network is trying to be fair to affiliates.

"The network is looking for a win-win on this," said one executive familiar with the plan, adding, "The idea is that it's not fair to make the affiliate in El Paso, which probably could care less about the AFC, pay the same amount as the affiliate in Kansas City, where it means a hell of a lot."

It's also possible NBC will follow a more traditional approach, asking all affiliates to give up some time.

Copyright November 1997, Crain Communications Inc.

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