The Cutting Edge: COMPUTING / TECHNOLOGY / INNOVATION : Microsoft Lures NBC Away From Rival On-Line Services
Playing hardball as it prepares to enter the on-line computer services business, Microsoft Corp. has wooed NBC away from rivals America Online and Prodigy with a lucrative deal under which the software giant will pick up the broadcaster’s expenses for developing computerized versions of its programs for the Microsoft Network.
Under the broad agreement announced Tuesday by Microsoft Chairman Bill Gates and NBC Chief Executive Robert Wright, NBC will create programs exclusively for the Microsoft Network--scheduled for launch this August--requiring it to drop its previous arrangements with America Online and Prodigy.
In return, Microsoft will loan NBC software programmers and underwrite development costs associated with transforming broadcast programming into on-line information. Microsoft will also pay for promoting NBC programming on the new on-line service.
Additionally, the two companies will collaborate to create CD-ROMs and eventually programming for interactive television.
“We’re spending Microsoft’s money to create content that we will own,” explained Marty Yudkovitz, senior vice president of NBC Multimedia. “And, Microsoft is underwriting a substantial portion of our development costs for the on-line service.”
America Online, the current leader in on-line services, boasts 2.5 million members while the Microsoft Network does not yet even exist as a commercial service. Even so, Microsoft’s commitment of staff and money--and the expectation that the Microsoft Network, which will be available to consumers as part of the Windows 95 operating system, will eventually be a dominant competitor--was attractive enough to extract a promise of exclusivity from NBC.
Microsoft, however, is free to pursue other broadcasters for the Microsoft Network.
Yudkovitz said NBC has made little money off of either America Online or Prodigy. An America Online spokeswoman said that although the company is disappointed with the loss of NBC, “It is one of hundreds of content providers on AOL.”
NBC and Microsoft’s deal to develop CD-ROMs will be flexible, Yudkovitz said.
Last week, Microsoft announced 40 content providers for the Microsoft Network, including C-Span, the Home Shopping Network, QVC, and the New York Times Sports Leisure Magazines. Recently, it announced a joint venture with Dreamworks to create CD-ROMs. Gates said that the Dreamworks Interactive CD-ROMs would be mostly games and children’s titles while its work with NBC will focus on adults.
