Microsoft and NBC Form Strategic Alliance for Multimedia Products and Services

Strategic Insights -

Microsoft Corporation and NBC announced a new alliance yesterday to create a range of multimedia products and services, including CD-ROMs, interactive television services, and content for Microsoft's new online service, the Microsoft Network. While the details of the partnership are still unclear, it appears to be a significant move by both companies to capitalize on the growing demand for digital content.

Key Takeaways:

  • The alliance between Microsoft and NBC involves the joint development of CD-ROMs, interactive television services, and content for Microsoft's new online service, the Microsoft Network.
  • Unlike the MCI Communications Corporation's deal with News Corporation, Microsoft will not pay NBC upfront for access to its services, such as coverage of the Summer Olympics or the Presidential election.
  • NBC will phase out its involvement with Prodigy and America Online, which currently carry NBC material, although it will continue to maintain a site on the Internet's World Wide Web service.
  • America Online stock fell $3.125 to close at $38.625 on unusually heavy Nasdaq volume of almost 3.9 million shares, while shares of Prodigy's owners, IBM and Sears, Roebuck & Company, also slipped slightly.
  • Microsoft shares jumped $3.5625 to $84.875 as investors reacted to the deal and Microsoft's assurances that it intends to ship Windows 95 on schedule this August.
  • The Microsoft Network is expected to be a major player in the online service market, with industry experts estimating it will sign up 2.5 million subscribers within three years, as many as America On-Line has now.
  • NBC executives see the alliance as a way for the network to leverage Microsoft's expertise in software development, particularly in CD-ROMs, to bolster its own efforts in this area.
  • The alliance also raises questions about the value of NBC's existing relationship with General Electric's Genie online service, which has 200,000 subscribers.

Statistics:

  • America Online stock fell $3.125 to close at $38.625 on unusually heavy Nasdaq volume of almost 3.9 million shares.
  • Shares of Prodigy's owners, IBM and Sears, Roebuck & Company, also slipped slightly.
  • Microsoft shares jumped $3.5625 to $84.875 on the news of the alliance.
  • The Microsoft Network is expected to sign up 2.5 million subscribers within three years, as many as America On-Line has now.
  • NBC's service on the Microsoft Network will not include the "coolest" features of NBC's on-line offering, according to Martin Yudkovitz, NBC's senior vice president of NBC Multimedia.
  • Genie, an online service owned by General Electric, has 200,000 subscribers.

Sources:

  • The New York Times, "Microsoft and NBC Announce Alliance for Multimedia Products and Services"
  • Forbes, "Microsoft and NBC Partner on Multimedia Services"
  • Bloomberg, "Microsoft, NBC Team Up on Multimedia Products, Services"