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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

July 16, 2012 at 9:48 AM

Microsoft, NBC finally split, becomes

It was a good marriage, one of the best among their circle.

But 16 years later, with the children grown and on their separate paths, Microsoft and NBC are ready to try new things and perhaps join with different partners.

On Friday, the companies formally dissolved their joint venture in Redmond-based, ending a grand experiment in online news conceived early in the dot-com era.

Both companies are eager to refresh and broaden their online offerings amid broad shifts in where and how people consume online news. They insist it’s an amicable parting.

“I think we’ve had a great run,” said Charlie Tillinghast, president, who is mulling whether to move to New York along with his news operation.

NBC is buying out Microsoft’s half and re-branding the online news site — the nation’s fourth largest — as


Terms weren’t disclosed. When the partnership was announced in 1996, the companies said it was a $600 million venture.

NBC is also moving the news team to its New York headquarters, ending Redmond’s stretch as the home of a major national news organization.

It’s not all going away, though. The venture’s technology and online production team will remain in the Seattle area at a new “NBC News Innovation Center.” It will handle technical operations of and develop new technologies for NBC’s news and entertainment groups.

The innovation center will also help NBC build an entirely new online site for the MSNBC cable-TV network, which NBC took over in 2007. Its new, distinct website will debut in 2013.

NBC’s Seattle team will also work on local news sites in markets where NBC owns and operates TV stations. The local news operation could be extended nationally, but NBC executives declined to discuss future plans.

No layoffs are planned, but some employees who work with content may need to relocate to keep their jobs. has about 300 employees, including about 180 in Redmond. Executives said at least 100 will work at the innovation center. That leaves about 80 jobs in flux as the companies try to figure out how many positions will move to New York.

Steve Capus, president of NBC News, expects most content creation to be done in New York, where NBC already has most of its vast broadcast-news operation.

“It only makes sense to link up these editorial operations and do it in one place,” he said.

Capus said it’s been “a very successful partnership” but that the online brands need to be clarified and both companies want more flexibility.

“NBC and Microsoft were in a relationship where it was only going to be the two of us, and that precluded Microsoft from doing some stuff with different news organizations, and it precluded us from doing things with other technology and online companies,” he said. “We’re excited about being able to go out and do business with other partners.”

Microsoft may partly fill any local void created by the split. It has already begun revamping and expanding the news product offered through Windows devices and its MSN portal, which draws more than 120 million people a month.

The centerpiece of that effort is a new, independent news operation in Bellevue to debut this fall. In addition to feeding MSN, it will contribute to the “News” app in Windows 8.

“While we think they’ve been a quality provider for many years, we believe that there’s a lot of room for new innovation,” said MSN General Manager Bob Visse, “and we also believe that the online consumer really hungers for a news product that provides multiple perspectives and multiple sources. We really weren’t able to do that as well as we would have liked to in an arrangement where we had one exclusive partner.”

Visse said the changes will “give MSN a new spark and a new life and a new reason for people to come and show up to our home page every day.”

A breakup has been expected, especially since the sister cable-network MSNBC steered toward commentary, complicating’s efforts to remain a neutral, unbiased news source. News of the split surfaced several times over the last two months as it was finalized.

“The big gain here is we get brand clarity, brand alignment, and it’s easy for consumers to understand which brand does what,” Tillinghast said. “That conversation went on for years.”

The split might have come sooner if the companies weren’t busy with larger deals, including Microsoft’s attempts to buy Yahoo in 2008 and General Electric’s sale of NBC to Comcast in 2009.

Despite the breakup, it was clearly a good decision for the companies to join forces back in 1996.

Anticipating that the Internet and technology would transform the way news is delivered and consumed, they combined NBC’s news expertise with Microsoft’s technical abilities.

“We’re looking forward to our shared vision of taking news and software and integrating them together,” Bill Gates said at the time.

It was among several Web ventures Microsoft started in the mid-1990s, including the Sidewalk entertainment-listings business and shopping sites for travel, cars and real estate.

As rose to become the leading online news site in the late 1990s, other media companies partnered with tech companies to stay abreast.

Disney hooked up with Bellevue’s Starwave to build the online presence of ABC and ESPN, then bought Starwave outright in 1998. Disney’s Internet group continues to run websites and develop technology platforms in Seattle, similar to what NBC plans to do with its Innovation Center.

This coupling of old and new media reached a crescendo in 2000 when Microsoft’s online rival AOL spent $350 billion in a disastrous merger with Time Warner.

Then came the dot-com crash and bruising antitrust battles that sobered Microsoft’s leaders and reined in its experimentation. saw layoffs and a reorganization in 2001 and 2002.

The rise of search engines later reduced the influence of mega-portals such as MSN, AOL and Yahoo, and Xbox became the major focus of Microsoft’s consumer business.

Yet remained in Microsoft’s portfolio. Remnants of Sidewalk were sold off in 1999 and the car site became a feature on MSN.

The travel business, Expedia, was successfully spun off into an independent company.

Expedia veterans later revived the online real-estate concept as

Meanwhile, NBC took a larger share of the MSNBC cable network, taking it over fully in 2007. It also tinkered with the formula and moved toward commentary.

Although Microsoft’s now out of the picture, the cable network will continue to be called MSNBC.

“Part of the purchase from Microsoft is we are purchasing that name, that trademark,” Capus said. “The reason we’re doing it is because there’s a tremendous amount of brand equity that’s been built up over these 16 years.”

NBC is acquiring all of the assets, including the Newsvine and EveryBlock news startups acquired in recent years.

It will continue using Microsoft offices until a new location for the innovation center is chosen.

NBC will also continue its presence on MSN for a while. Under the arrangement, will provide news content to MSN for two years. That will give NBC time to wean itself from Microsoft’s portal traffic.

“The goal is to use the next two years to get people to come to us directly,” said Vivian Schiller, NBC News chief digital officer, who will oversee the innovation center.

The joint venture hasn’t kept NBC from developing relationships with other tech companies, Schiller said.

“The fact is we talk to everybody all the time,” she said. “We do work with Apple and Google; we’ve not been held back from that. But with this transaction we’re free to talk with whomever we like and so is Microsoft.”

Changes will come soon to The Redmond team has been working on site upgrades that will appear in coming months, including systems for publishing across all platforms and an interface that’s optimized for mobile devices, as well as desktops, Tillinghast said.

Although Microsoft no longer is the celebrated tech wunderkind it was back in 1996 when it courted the blue-blood network, NBC executives said that’s not why they’re splitting.

“They have been, honestly, terrific to work with,” Schiller said. “Everybody wants the baby that we birthed together to grow up and thrive. It’s been nothing but a good experience.”

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