NBC to Control Cable Channel After Deal With Microsoft

NBC Universal is taking control of its flagging cable venture, MSNBC, ending the decade-old broadcast partnership with Microsoft Corp., the two companies said yesterday.

Microsoft's share will drop to 18 percent under the agreement, but it will retain 50 percent ownership in the MSNBC.com Web site, which has been far more successful than the broadcast operation in attracting viewers.

The site has about 24 million viewers a month, NBC said.

Under the restructured deal between NBC and Microsoft, NBC acquired a controlling interest in MSNBC and has the option of buying the operation outright over two years.

The changes come as traditional media outlets struggle to adapt to an online world, and as Internet firms extend their reach into different ways of delivering news and entertainment. Companies such as Time Warner Inc., America Online Inc. and Google Inc. are looking to expand the audience for video, television and grass-roots content such as online blogs.

Analyst Rob Enderle said the dissolution of the cable partnership is logical, given the companies' different focuses.

"They're recognizing that the partnership didn't work. Clearly, the traditional media was more closer to what NBC had done," while Microsoft was an outsider to the broadcast business, said Enderle, principal analyst with the Enderle Group, a technology research firm in San Jose. The shift in ownership will likely bring big changes for MSNBC's operations, although it's not clear what, he said. "I think it's part of a general shift to new media."

"Acquiring a controlling interest in MSNBC will allow us to fully integrate the channel into our news operations and our overall cable platform," Steve Capus, president of NBC News and NBC Universal said in a written statement.

The Washington Post has an ongoing partnership with MSNBC to share news content on the channel and on both companies' Web sites.

"We are totally committed to taking MSNBC.com to even higher levels of success through our unparalleled marriage of technological innovation and news content," Bruce Jaffe, a Microsoft vice president, said in a written statement.