NBC in Talks to Partner with KRON

By Michael Malone -- Broadcasting & Cable

Young Broadcasting shopping for shared services agreement for beleaguered San Francisco flagship

NBC is in advanced negotiations to partner with Young Broadcasting's KRON San Francisco, according to bankruptcy court documents filed last week.

A brief filed by Sonnenschein Nath & Rosenthal, the law firm representing Young in bankruptcy, said Comcast's deal to acquire a majority stake in NBC does not affect the progress made in talks to work out a shared services agreement between KRON and NBC, which owns KNTV in San Jose.

KRON would presumably operate out of KNTV headquarters should the deal be worked out.

NBC Local Media apparently isn't the only network-owned group interested in a management role at KRON. "The negotiations with NBC have progressed," reads the brief, "and there is at least one other network interested."

"There have been some discussions around shared technical services," NBC said in a statement, "but there is no agreement at this point."

A spokesperson from Sonnenschein Nath & Rosenthal said, "I can't give you any details" on the negotiations with multiple networks and asked that word of the KRON-NBC negotiations not be published. An ABC spokesperson said the network is not in negotiations with KRON. A CBS spokesperson said CBS is not involved in any negotiations between KRON and Young.

That NBC and Young would sit at the negotiating table might stun some industry watchers. Young famously acquired KRON, then an NBC affiliate, for the mammoth sum of $823 million in 1999 after outbidding NBC. KRON lost its NBC affiliation at the end of 2001. The affiliation went to KNTV, which NBC purchased for $230 million in 2002.

KRON is now affiliated with MyNetworkTV, and its value is a crumb of what it once was. Briefs filed in bankruptcy court set KRON's stick value between $25 and $50 million.

A partnership with KRON would expand NBC's presence in the No. 6 DMA. KNTV is in San Jose, which is about 45 miles from San Francisco. NBC also owns the local Telemundo outlet KSTS. Insiders say NBC may also be keen to control more ad inventory in the Bay Area.

Should the plan for a shared services agreement regarding KRON not come to fruition, Young plans to sell the KRON building in San Francisco and move to a smaller facility in a less expensive part of town. "The move would represent a substantial net positive to Young," reads the brief, "because KRON's real estate has been appraised ‘in the ten million [dollar] plus range,'" while the capital expenditure for a new facility would be $5 million or less.

Young Broadcasting filed for bankruptcy in February 2009. Lawyers representing a coalition of senior secured creditors and a second group of unsecured creditors are due to file final briefs regarding Young's bankruptcy strategy today, which a judge will rule on. Among the items at stake is a plan for Gray Television to manage seven of the 10 Young stations, not including KRON. That arrangement would pay Gray an annual fee of $2.2 million and incentives.

Young called off an auction for its stations in July after the preliminary bids failed to pass
muster. The brief says KRON is doing better than some might expect, after restructuring its syndication expenses and other cost-cutting measures.

"Young now anticipates that KRON will make a profit of approximately $2 million in 2010," it reads, "a projection that is based upon expenses that are already ‘a known number' from the restructuring process and projected revenues that are ‘rather conservative.'"

Related:
Bankruptcy Judge Signs Off on Young Deal
Young Broadcasting Calls Off Auction
Life Goes On at KRON
Young Puts KRON On the Block