Microsoft Sells Most of Stake in TV Channel

The MS is slowly coming out of MSNBC.

Microsoft Corp. on Friday said that after months of negotiations it had sold most of its stake in the 24-hour cable news channel to partner NBC Universal.

Once a 50-50 partner with Microsoft, NBC Universal will now own a controlling 82% interest in MSNBC with an option to buy the rest of the channel within two years.

Financial terms weren’t disclosed. The network is home to such programs as “Hardball With Chris Matthews,” “Countdown with Keith Olbermann” and “Scarborough Country.”

The companies said they would continue to share equal ownership of MSNBC.com, which has become one of the most popular news sites on the Web even as the TV channel struggled.

Friday’s deal portends the eventual unraveling of what had been a landmark television joint venture when it was unveiled nearly a decade ago.

The teaming of Microsoft, the world’s largest software company, with one of the biggest news operations was part of a larger strategy that Microsoft Chairman Bill Gates hoped would give his company the content it needed to gain a powerful foothold on the Internet.

But Microsoft executives realized several years ago that they were better off developing software and Internet services to deliver content created by others.

The Redmond, Wash.-based company sold its online magazine, Slate, to Washington Post Co. last year and has been looking for a graceful way out of the cable channel.

“It makes sense for both parties to focus on what’s core,” said Adam Sohn, an executive in Microsoft’s MSN Internet division.

Executives from the two companies declined to say what finally triggered the agreement disclosed Friday.

It came at the end of a week in which Microsoft’s Internet unit was dealt a setback when Google Inc. struck an online advertising alliance with Time Warner Inc.’s America Online.

Microsoft had spent the better part of the year trying to craft its own venture with AOL.

Shedding its TV operations through the NBC deal appears to be part of Microsoft’s effort to concentrate on the broad competitive threat posed by Google, analysts said.

“Microsoft is moving away from some of these strategic media investments they had made in the ‘90s so they can focus their energies and resources on the Internet-based computing trends that are occurring right now and could potentially be harmful to their core business,” said Brendan Barnicle, senior research analyst with Pacific Crest Securities.

Microsoft helped launch the cable channel in 1996, vowing to invest $220 million over the first five years. MSNBC lost money consistently through 2002, broke even in 2003 and finally started generating a small profit in 2004, according to Kagan Research.

But its profit and viewership have lagged far behind its rival all-news cable channels, News Corp.’s Fox News and Time Warner’s CNN.

New York-based NBC Universal will now have more options for MSNBC, including a possible name change, as the network tries to draw more viewers.

“Acquiring a controlling interest in MSNBC will allow us to fully integrate the channel into our news operations and our overall cable platform,” said NBC News President Steve Capus.

The companies said their Internet venture remained unchanged. MSNBC.com retains the online rights to video clips from such NBC News shows as the “Today” show, “Nightly News” and the CNBC and MSNBC cable channels, MSNBC.com President Charlie Tillinghast said in an article on his company’s website.

“Together, Microsoft and NBC Universal have grown MSNBC.com to the No. 1 news site,” said Bruce Jaffe, a Microsoft corporate vice president. “We are totally committed to taking MSNBC.com to even higher levels of success through our unparalleled marriage of technological innovation and news content.”

But the expected blending of television and software never quite worked out, and Microsoft decided to divorce itself from a medium in which it had lost interest.

“Ten years ago it was a venture to really think deeply about how you merge traditional media with new media,” Sohn said. “It made sense at the time.”

Shares of General Electric Co., NBC Universal’s parent, were unchanged at $34.42. Microsoft shares gained 5 cents to $26.64.