NBC Buys Option for Paxson Control

NBC Universal on Monday sought to salvage its investment in the ailing Paxson Communications Corp. network, paying $25 million for an option to buy a controlling stake from the company’s founder.

Current Federal Communications Commission station ownership limits would prohibit NBC Universal from buying control of the West Palm Beach, Fla., company. But in acquiring the option from Lowell “Bud” Paxson, NBC Universal can now shop for a partner it believes can reinvigorate the company and better protect the network’s interest.

As part of the deal, Paxson, who had fought frequently with NBC Universal, resigned as chief executive of the network of 60 stations that has struggled to carve a niche with family shows such as “Miracle Pets” and reruns of “Bonanza.” Paxson will be replaced by NBC Universal Executive Vice President R. Brandon Burgess.

“This is a very interesting time for a very interesting asset,” Burgess said in an interview.

Burgess, who stepped down from his NBC post, said a possible partner could be an established media company, such as Time Warner Inc. or Comcast Corp., or a new media giant such as Google Inc. or Yahoo Inc.

With Paxson’s departure, NBC Universal will have greater sway over programming. The deal will also give it another outlet for news and entertainment.

Paxson also represents new opportunities when stations convert from analog to digital signals. That will allow TV stations to broadcast on at least four digital channels.

“We will be able to originate four to five networks out of our existing infrastructure,” Burgess said.

Paxson, the nation’s largest broadcast network by number of stations, is available on most cable systems but has never attracted big audiences.

NBC bought a 32% interest in Paxson for $415 million in 1999 when the FCC was expected to relax station ownership limits. But the FCC did not substantially loosen the rules, preventing the General Electric Co. unit from gaining control because it already owns NBC and Telemundo stations.

Paxson’s stock nearly doubled on the news Monday, closing at 87 cents. Still, that is a small fraction of the $10 a share at which Paxson traded shortly after NBC made its investment.