John, Think BIG ! Plunk Down $3 Billion for NBC
TO: John Sculley, chairman, Apple Computer
EX: Mickey the Agent
RE: Operation Peacock
Hey, John! Love your nifty spiel on the future of personal media. Apple really is inventing the future: The PowerBooks are fantastic, the Newton personal communicator is brilliant, and the company’s investment in General Magic’s hand-held tele-computer is nothing short of genius.
So have I got a deal for you! It’s bold, it’s simple, and it’s elegant. It perfectly positions Apple for the mass multimedia marketplace you say you crave. And best of all, John, it’s cheap. Let’s call it “Operation Peacock.”
Buy NBC! Yeah, I know they’re losing Letterman and that Leno’s monologue is erratic, but that’s not the point. Jack Welch and General Electric would be happy to get $3 billion for the network and the stations they own and operate. It’s no secret that GE’s been discreetly entertaining offers, but everyone in the know believes that the price is too high.
So here’s what you do: Pay GE the $3 billion and get NBC. Then resell the network and the stations to Paramount, Disney or Turner for, say, $2.5 billion. That should make them happy.
What’s in it for you? Here’s the beauty of the deal: Apple sells the network but it also keeps the access rights to all the television frequencies on the network! Remember, the networks are all stuck in the 1970s analog mind set that believes their market value comes from programming, shows and advertising. They’re looking at the wrong asset.
But, John, we know what the digital future will look like. It’s filled with cellular phones, portable faxes, hand-held computers, smart automobiles, mobile offices--all of which will need to be networked together. What will make those networks possible? That most precious natural resource of the Information Age: the frequency spectrum.
As you know, they ain’t making frequency spectrum anymore. We understand that there can be as much, or more, economic value in the frequencies that carry today’s TV shows as in the shows themselves. The arrangement is simple: NBC’s stations would be required to give Apple access to the frequency if they want to carry NBC programming. In other words, the NBC affiliate stations would also become Apple affiliates.
Given Apple’s ambitions to create mass multimedia technology, owning the right airwaves would be analogous to Exxon owning the right to Saudi oil fields. Don’t forget that American Telephone & Telegraph paid more than $3 billion for the right to own just a third of McCaw Communications--the not-quite-national cellular phone company. You have the opportunity to buy the nucleus of a national interactive network that would let you link together millions of Apple computers.
The trick, of course, is to be able to share the television frequency without causing interference for non-cable viewers. There are serious technical challenges. While there is still room on the television frequency to broadcast all kinds of electronic mail and video games to portable computers across the country, it will be tough to build in two-way communications without causing at least a little interference to the TV picture.
By the way, there’s an added benefit to owning a frequency.
According to the 1934 Communications Act, a foreign company can’t own U.S. radio frequencies. Buying NBC and retaining frequency rights thus protects Apple from any unwanted foreign investments. Isn’t that alone worth a couple of hundred million?
When TV broadcast standards finally change--and they will--and more frequency is allocated for mobile interactive computing, Apple will be in a perfect position to take advantage. Think about it, John. AT&T; is moving in your direction--isn’t it time you gave them a shock?
Hey, gotta hop--I’ve got Bill Gates on the phone. Gee, I wonder what he wants to talk about . . . .
Michael Schrage is a writer, consultant and research associate at the Massachusetts Institute of Technology. He writes this column independently for The Times.
