NBCU Lobs New Salvo in Paxson Fight

Apr 21, 2005  •  Post A Comment

The ongoing battle between NBC Universal and Paxson Communications took another turn Thursday when NBCU indicated it is examining its legal options in a bid to block Paxson from converting its television network’s programming to focus more on various forms of paid programming.

Paxson earlier this month began informing investors and advertising partners that it is abandoning its current programming format of family-friendly fare for paid programming, including direct-response advertising and infomercials. To that end, the company a few weeks ago began terminating joint sales agreements with station groups that owned TV stations in markets where Paxson also owned stations, as well as canceling national and local sales agreements with NBCU. Paxson has indicated it intends to make the switch to a paid-programming format by the summer.

In a statement released Thursday, NBCU said it “strongly disagrees with Paxson’s attempt to terminate operational agreements that sustain the company and its stations as a broadcast network. We believe that the elimination of all sales and local operational capabilities will reduce the long-term value of the company and its station assets.”

The battle brewing on this front adds to an ongoing imbroglio between the two companies that has lasted for years. NBCU is trying to monetize its 32 percent stake in Paxson and has maintained that Paxson must honor the request by paying NBCU a fair price for the stake. Cash-strapped Paxson has argued it is not legally obligated to pay NBCU, despite NBCU’s assertions, and even if it wanted to pay NBCU, it could not because it doesn’t have the cash. Both companies are awaiting a ruling from a Delaware judge on the matter.

The latest developments come as there is growing interest in the troubled broadcaster. Syndicated programming impresario Byron Allen and talent-management company The Firm each have expressed interest in Paxson, which boasts 60 television stations covering more than 90 percent of the United States.

In Thursday’s twist, NBCU officials added that the termination of the sales agreements and the programming change both represent contract breaches, and said NBCU “will not agree to this course of action in the absence of a viable new business plan that preserves and maximizes the value of Paxson’s assets.”

Added an NBCU spokesman: “We are evaluating our legal options.”

A spokeswoman for Paxson declined to comment.

NBCU’s willingness to publicly rebuke Paxson’s new strategy comes amid frustration at Paxson’s insistence on proceeding with the format change despite NBCU’s protests, according to sources familiar with the matter.