Microsoft Reportedly Seeking Major Stake in NBC : TV: Observers doubt pact is in the works. The two firms are expected to announce plans for cable news channel this week.

Microsoft Corp. is in secret talks with General Electric Co.’s NBC about buying as much as 49% of the television network, according to a published report Sunday.

Spokespersons at NBC and Microsoft could not be reached for comment, but high-level sources at both companies said they are doubtful that continuing talks between the two firms in the last several months are that wide-ranging in scope.

The report came from Weekly Variety, the Hollywood trade publication, but it gave few details and quoted unnamed sources. But it did say that the proposed deal has the support of GE’s management.

Software giant Microsoft already has a deal with NBC for the exclusive use of the network’s sports, entertainment and news programming for its online service. And late this week, the two companies are expected to announce plans to launch a 24-hour all-news cable channel to compete against Cable News Network that would be linked with an online news service.

Redmond, Wash.-based Microsoft is expected to invest about $50 million in the new channel, according to industry sources.

Microsoft Chairman Bill Gates is clearly steering the company away from its narrow focus on software to target the wide world of content or programming. Earlier this fall, Microsoft was in discussions with Turner Broadcasting System Inc. about investing in the company in exchange for a live feed of news from CNN to Microsoft’s online network. Those talks broke off when Turner agreed to be acquired by Time Warner Inc.

In announcing Microsoft’s new strategic focus on the Internet on Thursday, Gates said that just as most money in TV is made in programming, “overwhelmingly content [on the Internet] is where the branded, scale-type assets will exist.”

The ultimate content market will be so large, Gates said, “even Time Warner and Turner together would just have a few percent of the revenue.”

But a Microsoft source doubts that Gates would put up in the neighborhood of $4 billion to buy half of NBC as a content play.

“Gates is interested in content, but he doesn’t have to spend billions of dollars to get it,” the source said. “He’ll just make a series of deals with programmers.”

For instance, Gates invested $15 million in March in a joint venture with DreamWorks SKG that will give him access to the substantial talents of the new company.

Analysts doubt Gates will put such a large cash hoard into NBC when he has such ambitious plans to reengineer Microsoft to exploit the growth of the Internet.

“They have a huge number of projects they are working on now. Why put so much money on one investment?” said Robbin Young, news director at Windows Watcher, an industry publication focused on Microsoft.

For NBC, choosing Microsoft as its partner would represent a radical shift in direction. In the last year, the network has had serious discussions to pair up with a production studio.

The network’s first choice was a purchase of Turner Broadcasting, owner of CNN and several other cable networks. But in talks during the last year, Chairman Ted Turner was unwilling to give up control of his cable company, which he recently agreed to sell to Time Warner. Ironically, NBC was close to taking a large equity interest in Time Warner a year ago.

Pressure on NBC to broaden its global reach mounted this summer, after rival Capital Cities/ABC Inc. agreed to be sold to Walt Disney Co. Rumors quickly circulated that NBC was in talks with Viacom Inc. and Sony Pictures Entertainment Inc.

Some analysts have speculated that NBC, with the substantial backing of General Electric, might try to go it alone, building its own stable of brand names through joint ventures like the one with Microsoft. Under the deal, sources say, NBC will promote Microsoft’s online service on the cable channel and Microsoft will promote the cable channel on the online service.

NBC is expected to get the necessary cable access for its news channel by converting the 20 million subscribers of its America’s Talking talk show channel to the new service. Like ABC, which announced plans to launch an all-news channel in 1997, NBC is aiming to cut into the sizable cash flow generated by CNN, the second-most profitable cable channel after ESPN with an estimated $270 million in cash flow next year, analysts say.