NBC Universal has two jobs once it completes its buyout of The Weather Channel (TWC): raising anemic carriage fees received by TWC's flagship basic cable network, and untangling a web of corporate allegiances.
Nothing has been decided about what NBCU will do with the now seemingly redundant NBC Weather Plus, the multicast channel it owns in partnership with its affiliates.
Several affiliates say they're taking a wait-and-see attitude. “We are putting our heads together to see what makes sense for us, and I'm sure the other side is doing the same,” says Marci Burdick, senior VP of Schurz Communications, a Weather Plus board member and immediate past head of the affiliates board. “Do we have anything concrete today? No.”
One rosier upside of the acquisition is that The Weather Channel averages just 11 cents per subscriber per month in carriage fees from multichannel TV platforms. If NBCU can raise that (25 cents is more typical for other basic cable networks with its circulation), that per-sub rate could rain cash on its new owners.
“It is low,” says Derek Baine, senior analyst at SNL Kagan Research, who adds that NBCU “might be able to raise it 10%-15% per year,” but doubts a huge jump is possible from the start. “It depends on how interactive they can make it, and change the makeup of it.” Consider this: With TWC's carriage in 97 million subscription TV households, each penny increase works out to nearly a $1 million gain in revenue.
TWC's below-average fee reflects its relatively low production costs. The weather info format is ripe for building up interactive capabilities, and its information has three-screen relevance for TV, computer and mobile video users.
NBCU led a consortium that announced an agreement July 6 to buy TWC and its associated properties for what sources put at nearly $3.5 billion. The deal should close by year-end.
NBCU already has a half stake in NBC Weather Plus, which is one of TWC's biggest rivals. Though even competitors suppose the principals will find a way to combine the two operations, any cooperation is speculative. That's because although it is managing partner, NBCU owns just one-third of The Weather Channel. Private equity outfits Bain Capital and Blackstone Group own the rest.
NBC Weather Plus is broadcast using stations' digital spectrum, and also gets valuable carriage on local cable systems. Various estimates suggest it's not a big moneymaker, but stations probably won't abandon the idea.
“No matter what, our intention is to stay in the multicast business,” says KING Seattle General Manager Ray Heacox, who adds he's not sure what NBCU will do.
“I suspect that the NBC Weather Plus operation one way or another will be combined with the Weather Channel,” says Joel N. Myers, founder of AccuWeather, another major weather service. The sale lets AccuWeather make deals with stations that don't want to buy information from TWC's Weather Services International when it's under NBC control.
Says Myers, “We're always happy when a competitor is eliminated and it doesn't cost us a dime.”