Troubled broadcaster Paxson Communications said it plans to switch from network programming to infomercials and that it's pulling out of its sales agreements with NBC Universal -- the latest twist in an ongoing spat between the broadcaster and the media conglom.
NBC thinks the move constitutes a breach of contract that fails to "preserve and maximize the value" of its 32% investment.
"We are evaluating our legal options," an NBC spokesman said.
NBC Universal acquired its stake in Pax for $415 million in 1999, when the outlook for the family values network and station group looked sunnier -- and with an eye toward buying the rest of Paxson if and when regulators boosted the cap on station ownership.
But NBC turned to other deals, including the purchase of Spanish-lingo broadcaster Telemundo, and has insisted that Paxson is contractually obliged to buy back the 32% stake.
Struggling Paxson disagrees, and, in any case, doesn't have the funds to do it.
In a filing Thursday with the Securities and Exchange Commission, Paxson announced plans to sever its business ties to NBC Universal as part of a shift in the station group's business model from network programming to infomercials, direct-response advertising and paid programming.
In a statement, NBC Universal 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. ... NBC Universal will not agree to this course of action in the absence of a viable new business plan."
Last month, Paxson chairman Lowell "Bud" Paxson said he decided against a major merger or acquisition to solve the station group's financial troubles and ditched consultants Bear Stearns and Citigroup. No viable strategic transactions had emerged after a two-year review.
He said then that his company would pursue refinancing alternatives and consider selling under-performing stations.
Pax already announced that it had approached NBC about terminating its joint sales agreements with Peacock stations. NBC-owned outlets handle ad sales for 14 Pax stations in 12 markets. Pax has also already told other station owners that have JSAs with Pax stations that it would end those agreements at the end of June.
Pax's network service has been marching toward the end for some time; the announcement that it was returning to its all-infomercial roots was expected (
Variety, April 11-17). Pax already schedules infomercials outside of primetime.
Move comes a year after Pax made a last-ditch effort to make some programming waves. The net hired industry vet Rob Word in April 2004 to revamp its programming schedule, while NBC loaned out senior VP Sheraton Kalouria and development exec Narendra Reddy to consult on the net's lineup.
As a result, Pax developed new entries such as the Kelsey Grammer-produced "World Cup Comedy," the action series "Young Blades" and the reality competish "Cold Turkey."
The new shows were developed in an attempt to bring down Pax's old-skewing demos (thanks to a schedule that was rife with repeats of shows like "Bonanza" and "Diagnosis Murder").
But insiders said Pax failed to financially support the new programming move. The schedule wasn't promoted -- and in the end, young viewers didn't find the shows and Pax's core older demos turned it off.
Kalouria and Reddy, whose contract with Pax was month-to-month, eventually stopped consulting. And when it was apparent earlier this year that Pax hadn't found a buyer, the company slashed its overhead by eliminating the remainder of its programming budget and clearing out its already tiny staff.
Pax TV launched as the seventh broadcast network in the fall of 1998, airing a diet of mostly off-net family-friendly series. The broadcaster eventually added some original fare, including "Doc" and "Sue Thomas F.B.Eye."
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