Purchase order
NBC buys KNTV for $230 mil
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The Peacock had been in negotiations with Young Broadcasting, which owns KRON, about buying the station, but NBC ultimately rejected Young's $750 million asking price.
The transaction, which is subject to regulatory approval, is expected to close in the first half of next year. The KNTV acquisition will bring the number of NBC O&Os to 14. In addition, once NBC's acquisition of Telemundo closes, 11 Telemundo stations -- including KSTS in the San Francisco market -- will become part of the NBC stations group. The Telemundo station in the S.F. market will give NBC a duopoly there.
KNTV was already slated to become an NBC affiliate beginning January 1, but the deal puts an end to months of speculation about which station in the nation's fifth largest market NBC would buy. Indeed, the saga goes back two years when Young outbid NBC and paid $750 million in cash and stock for KRON, the NBC affiliate in the market. At that time, the net asked Young to pay $10 million a year in reverse compensation to keep their NBC affiliation. Traditionally, nets have paid local affiliates to air their programming.
While Young rejected the idea and announced plans to run KRON as an independent station, Granite, which was losing its affiliation with ABC, agreed to pay NBC $37 million a year to become the NBC affiliate on KNTV. Now that NBC will purchase KNTV, Granite has been released of its obligation to any reverse compensation fees. Granite plans to use proceeds from the sale of KNTV to reduce its debt and increase working capital.
"This agreement recognizes the tremendous job Granite has done in building KNTV into a first class NBC affiliate and the significant value we have created for Granite shareholders by turning our initial cash investment of $45 million into cash of $230 million," said Granite chairman and CEO W. Don Cornwell.
Without NBC programming, broadcast industry insiders predict that KRON will likely falter in the ratings. But Deb McDermott, Young's exec VP of operations, said that's not necessarily a given. "With KRON's presence in the market and its success, we'll be very successful. I hope we'll continue to be No. 1," said McDermott, who points to Phoenix's KTVK, which maintained its No. 1 spot in the market even after it lost its ABC affiliation and went independent in 1995.
KRON, which has been affiliated with NBC for 52 years, plans to double its local programming and increase its news coverage to more than four hours a day.
One downside for NBC is that KNTV doesn't have as broad a reach as KRON and doesn't reach key parts of the San Francisco market, including the East Bay and parts of Marin County. KNTV has cable carriage, but more than 20% of the market doesn't have cable. NBC is looking for ways to improve the signal.
"Our goal is to make sure we have as broad as coverage as possible," said Jay Ireland, prexy of NBC Television Stations. "We're committed to the San Francisco/San Jose market and to making KNTV a market leader."
Besides, according to NBC, there are 2.4 million television households in the San Francisco-Oakland-San Jose market; 1.9 million have cable, and 200,000 have satellite dishes.
About 300-400,000 get only the over-the-air signal, and about 100,000 of these households couldn't get NBC on KRON either because of the Bay Area's coastal mountains and other impediments.
NBC said that the net will launch a multi-million dollar promotional effort to get word out about the net's primetime sked and the upcoming Olympics in order to help viewers make the switch to KNTV.
