NBCU’s Weather Vein

NBC Universal’s purchase of The Weather Channel offers carriage opportunities.
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NBC Universal has two jobs once it completes its buyout of The Weather Channel: raising anemic carriage fees received by TWC’s flagship basic-cable network and untangling a web of conflicting corporate allegiances.

TWC averages just 11 cents per subscriber, per month in carriage fees from multichannel-TV platforms, while 25 cents is more typical for other basic-cable networks with its circulation. Raising that per-subscriber rate could rain cash on its new owners.

“It is low,” said Derek Baine, senior analyst at SNL Kagan Research, adding that NBCU “might be able to raise it 10%-15% per year,” but he doubted that a huge jump was possible from the start. “It depends on how interactive they can make it, and change the makeup of it,” Baine said.

But 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 since it doesn’t serve up pricey movies, series and sports. 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 a definitive agreement July 6 to buy TWC and its associated properties for what sources put at nearly $3.5 billion. The deal is expected to close by year-end.

NBCU already has a half stake in the NBC Weather Plus multicast channel, a joint venture with its NBC-affiliated stations that is one of TWC’s biggest rivals. Although even competitors suppose principals will find a way to combine the two operations, any cooperation is speculative. That’s because NBCU owns just one-third of TWC, although it is the managing partner. Private-equity outfits Bain Capital and Blackstone Group own the rest.

Several affiliates said they’re taking a wait-and-see attitude. “We as affiliates are putting our heads together to see what makes sense for us, and I’m sure the other side is doing the same,” said Marci Burdick, senior vice president of Schurz Communications, an NBC Weather Plus board member and immediate past head of the NBC affiliates board. “Do we have anything concrete today? No.”

Weather Plus uses a portion of a station’s digital spectrum, and its existence positions the station as a market’s weather leader. Various estimates suggested that it’s a not big moneymaker, but stations probably won’t abandon the idea.

“No matter what, our intention is to stay in the multicast business,” said KING Seattle general manager Ray Heacox, adding that 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,” said Joel N. Myers, founder and president of 46-year-old AccuWeather, another major weather service.

The sale of TWC lets AccuWeather make inroads with stations that buy information from TWC’s Weather Services International, which some stations may want to replace now that NBCU will control it. Added Myers, “We’re always happy when a competitor is eliminated and it doesn’t cost us a dime.”

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