IBM announced that it was acquiring the Weather Co.'s digital assets in a deal that highlights the changing face of media and underlines the rapid introduction of artificial intelligence into our everyday lives.
The technology giant structured the purchase to include the Weather Co.'s fast-growing data businesses: weather.com, Weather Underground, WSI and the Weather Co. brand name. NBCUniversal and two private equity partners will continue to own and operate the television channel that is available in about 90 million homes in the U.S.
IBM declined to say how much it was paying for the Weather Co. But people close to the negotiations who were not authorized to speak publicly said the deal was valued at about $2.5 billion.
The move underscores how companies are scrambling to reposition themselves for the digital era and use "big data" — analytics culled from mobile devices, Web searches and online viewing choices — to learn more about consumer behavior.
The most valuable part of the Weather Co. business was not the cable TV channel that once carried the slogan "Weather You Can Always Turn To." Rather, the real value of the company was its cloud-based mobile app, installed in millions of Apple iPhones, and its weather forecasting and analytics tools.
In announcing the marriage at a company conference in Las Vegas, IBM touted the weather mobile app as the fourth-most-used mobile app in the U.S., handling "26 billion inquiries to its cloud-based services each day."
"I think this is an extremely smart move by IBM," said Andrew Moore, dean of the School of Computer Science at Carnegie Mellon University.
Question-and-answer mobile systems, like Apple Inc.'s Siri or Microsoft Cortana, are the most popular applications of computer intelligence, he noted, and there's a battle among vendors to boast the most-intelligent systems.
"The winner is the one with the highest-quality data," he said, and there's a "land grab" for that data.
With the Weather Channel's digital assets, accurate smartphone answers to "What's the weather today?" will become more detailed responses to trickier queries like "Should I wear a sweater for the big game today?" or "Will I get too hot if I go camping in Norway in July?"
"It's an exciting time for artificial intelligence," Moore said.
Once the world's mightiest computer company, the pioneering IBM has been struggling in its move away from computer hardware and into services.
Revenue has dropped at the $90-billion company for 14 straight quarters. IBM Chief Executive Ginni Rometty has been banking on big growth from its cognitive computing arm known as Watson. Many people know Watson as the supercomputer that beat two of the "Jeopardy" quiz show's top human champions four years ago. Lately, Watson banters with music legend Bob Dylan in TV commercials and the computer tries to sing a song (Dylan quietly leaves the room).
Over the last few years, IBM has employed the artificial intelligence and machine-learning technology behind Watson to sift through ever growing mountains of data to help businesses glean strategic insight. The systems are also being used for predictive analysis, such as weather forecasting price moves on Wall Street.
While humans choke on too much data, "machine learners" thrive on it. The greater the volume of relevant data fed into them, the more accurate the analysis and predictions. The enormous data-gathering operation that IBM is buying from the Weather Channel could lead to more accurate climate modeling and weather forecasts.
The Weather Co.'s private equity owners — Bain Capital and Blackstone Group — had been shopping the company's assets for some time. Suitors zeroed in on the digital businesses and its weather forecasting app, which contains radar maps and pollen level indexes — rather than the fully distributed cable network.
Seven years ago, Bain Capital, Blackstone and NBCUniversal combined to pay nearly $3.5 billion for the channel (outbidding CNN-owner Time Warner Inc.). At the time, nearly 90% of the value of the business was the TV network, according to a knowledgeable person.
But the TV channel — which has struggled in recent years with its programming strategy and squabbles with pay-TV companies over distribution fees — has taken a back seat as the growth in the business increasingly came from the mobile app and its partnerships with Apple and other firms.
Last year, satellite giant DirecTV balked at demands by the Weather Co. for an increase in fees to carry the Weather Channel, on the grounds that its content was widely available elsewhere. DirecTV dropped the Weather Channel for three months until the two sides agreed to terms, including that the Weather Channel scale back some of its reality show-like original programming. Earlier this year, Verizon dropped the channel from its FiOS TV service.
The TV channel is expected to generate nearly $350 million in revenue this year, primarily from cable distribution fees and ad revenue, according to consulting firm SNL Kagan. It remains a trusted source of weather information, with 45% of U.S. households turning on the channel each month, according to the company's data. When major weather events happen, the channel provides live accounts — and its ratings jump.
The Weather Co., which is based in Atlanta, has about 1,350 employees. About 950 are expected to move to IBM while 400 will stay on to run the television channel.
Weather Co. Chief Executive David Kenny will join the Armonk, N.Y.-based IBM. In a LinkedIn essay, Kenny said he was "thrilled" to join IBM because the company had "the global scale needed to keep us the worldwide leader in weather."
Times staff writer Stephen Battaglio contributed to this report.