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The sky was apparently the limit when media conglomerate NBC Universal, along with private equity firms Bain Capital and The Blackstone Group, agreed on Sunday to pay the enormous $3.5 billion price tag for The Weather Channel. Available in some 96 million American homes, the Weather Channel is the country's third most widely distributed cable channel. It also runs the 14th most popular site on the web, weather.com. But observers are already questioning whether NBC, which is owned by General Electric, overpaid for the property. NBC, after all, only paid $1.25 billion for the cable channel Bravo in 2002, while CBS acquired tech news site CNET for $1.8 billion last May.

When the channel first went up for sale early this year, there were several bidders, including Time Warner (the parent company of TIME), but by last month there was just one suitor left. "I think that part of the reason the other stations backed out is because they couldn't justify paying that much," says David Trainer of New Constructs, a business valuation company in Franklin, Tenn. "If it doesn't make financial sense, the next reason to buy is ego. 'I got a new toy. My kingdom is larger.'"

But NBC may have other motivations for its new acquisition — particularly on the Web and in digital broadcasts. While consumers have little reason to type nbc.com into their browsers, The Weather Channel's site attracts some 40 million unique monthly visitors, according to Nielsen Online. The merger could help drive new traffic to NBC's other digital content. What's more, The Weather Channel, which is currently owned by Landmark Communications, has a brand-new $60 million state-of-the-art, high-definition recording studio in Atlanta, from which it can produce digital broadcasts both for television and the Web. Viewers can also look forward to long-form programming, like weather documentaries and dramas, that meld Weather Channel content with NBC talent.

With rumors running rife about General Electric planning to unload NBC Universal altogether, some analysts think The Weather Channel acquisition was an effort to spruce up NBC's online portfolio (which also includes MSNBC.com and CNBC.com) before selling the entertainment arm to a digital media company such as Google (which owns YouTube) or Apple. "The Weather Channel would add some icing to the cake," says Nicholas Heymann, an analyst for Sterne Agee & Leach. As syndication fees have evaporated and profit margins have thinned, TV companies have become less attractive assets. GE "has to start lighting a fire under its stock," notes Heymann.

Although $3.5 billion is a huge sum, NBC will foot only a fraction of the total bill. The Blackstone Group, Bain Capital, and NBC will reportedly pay just $600 million each upfront, and finance the balance. The Weather Channel's estimated $175 million annual earnings should help defray the debt.

While the forecast is still murky on exactly how NBC will leverage its new acquisition, all watchers agree that the sellers got a sweet deal. "We feel it is a very fair price," says Decker Anstrom, president of Landmark Communications, who called the sale a "bittersweet moment" for the privately owned family business, which launched the cable channel back in 1982. Initially derided as the brunt of jokes, the forecast focused channel became profitable within four years and soon had established itself as a media category killer. Sheryl Crow named a song after it in 2002, and today it has an estimated 85 million viewers, many of whom are more than happy to tune in numerous times each day. It has also successfully adapted with the times: the channel's free, ad-supported weather service for cell phones is currently its fastest growing business, according to Anstrom.

Like wedding chapels and funeral homes, The Weather Channel has become a permanent institution. For many people, "there is a sense of mystery and power about the weather," says Anstrom. Business strategist Shahid Khan of IBB Consulting in Princeton, N.J., says, "The Weather Channel has a very loyal following. It has cornered the entire market." The promise of a daily forecast may not be as sexy as, say, the new iPhone, but it is just as much a cash cow.

• Anita Hamilton