For months, TV executives have wondered whether NBC would go through with its groundbreaking affiliation switch in San Francisco. NBC has said yes, it did intend to go through with the switch, from local powerhouse KRON-TV to KNTV(TV) San Jose, Calif.
KNTV owner Granite Broadcasting agreed to pay $362 million in a precedent-setting reverse-compensation deal.
But last week, as Young aggressively shopped KRON-TV, and possibly the entire station group, NBC sources said the network would listen to pitches from Young to sell its San Francisco outlet.
So far, sources say, one Young proposal was dismissed out of hand. It was said to have suggested a price greater than the $823 million the company paid for the station last year. That was wishful thinking, sources say. NBC insists KRON-TV is worth less today than two years ago, when it bid around $780 million.
Victor Miller, broadcasting analyst for Bear Stearns, says the existing deal is a "lose-lose-lose" proposition for NBC, Granite and Young. That grim analysis may be key to what happens next. By his estimate, deteriorating market conditions make it highly improbable that Granite and KNTV will be able to generate the cash flow to pay the NBC affiliate fee.
NBC would be out the affiliate fee as well as another $30 million or $40 million in lost distribution.
KRON-TV, in becoming an independent, is expected to take a huge cash-flow hit.
Miller says a more sensible alternative would be for NBC to buy KNTV and work out a new affiliate deal with KRON-TV.
Meanwhile, NBC has what one source calls a "SWAT team" at KNTV working to help make the station as strong as possible. "KRON is intriguing, but we think we can make KNTV a very successful station," says a network source.
Young has also pitched selling the entire group to Disney's ABC. No official comment from Young or ABC (or from NBC or Granite, for that matter), but an ABC source says it's doubtful the network will make a formal offer.
NBC sources strongly denied one rumor last week: that they had made a counter-offer to Young's original proposal. "We are not proactively talking with them," says one source at NBC. "They are proactively shopping it."
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