Liberty Media Corp.'s new interactive unit, led by E!
Entertainment Television veteran Lee Masters, won't have to look far for potential
programming partners for its efforts.
Liberty owns stakes in a stable of networks and companies
that offer sexy interactive programming opportunities, from The Travel Channel, to TV
Guide, to USA Networks Inc., to Ticketmaster.
Liberty insiders were abuzz with ideas for offerings that
Liberty Interactive can explore, from arranging for viewers to buy cruise packages from
Travel, to ordering compact discs and concert tickets from an interactive spinoff of The
Box.
"We like the kiretsu of relations that exist
within our family," one official with a Liberty-owned company said.
Last week, Liberty unveiled its plan to form Liberty
Interactive, with Masters as its president and CEO effective Jan. 1, when his contract
with E! expires. Bruce Ravenel, formerly Tele-Communications Inc.'s vice president of
interactive ventures, is joining the new unit immediately as its executive vice president
and chief technology officer.
Liberty, armed with a $5 billion cash war chest from its
sale of certain assets to AT&T Corp., will finance Liberty Interactive, the first
mandate of which is to create enhanced-video content tailored to advanced-digital
set-tops.
Liberty will also transfer its 86 percent interest in TCI
Music which owns The Box, DMX and the SonicNet Web sites to Liberty
Interactive.
"Liberty Media has an incredible amount of cash, and
this is a priority for them," Masters said. "[Liberty Media president] Dob
Bennett and [TCI chairman and CEO] John Malone know that for this to be successful, we
can't wait until the [set-top] boxes are out there. Our mission is to develop content and
have it up and running. Our intention is to be ahead of the market."
According to sources familiar with the deal, under TCI's
merger deal with AT&T, Liberty Interactive will get one 6-megahertz analog channel on
each of the MSO's former cable systems that it will program with roughly one dozen digital
channels video channels with interactive capabilities.
The source said those interactive video channels are
expected to have a strong advertising component a point that Masters also stressed.
"We're not talking about coming out of the gate with
just one or two channels," Masters added, although he said there is no timetable yet
for the rollout.
Liberty Interactive will also offer its
interactive-programming content to non-TCI cable operators right out of the gate,
according to Masters, and to Internet-oriented new-media platforms possibly
services such as @Home Network later on down the road.
"Liberty has many ownership stakes that it can exploit
in Discovery [Communications Inc.], USA Networks [which owns Ticketmaster], Fox
Sports, TV Guide [which is being acquired by Liberty's United Video Satellite Group
Inc.], BET [Black Entertainment Television] and Telemundo," said Pat Keane, a senior
vice president at Jupiter Communications.
Masters acknowledged that he will explore partnering with
Liberty's programming stable, but he maintained that he doesn't have a special inside
track with those networks. Masters said those companies must be sold on the commercial
viability of Liberty Interactive's plans, especially since many of them, like Discovery,
already have interactive components, such as Web sites, in place.
Ravenel said, "Liberty will be one of the creators,
but not the only creator, of content in this area." He added that any content
developed by Liberty Interactive will be made available to "every digital
customer."
A source inside a Liberty affiliate company said the
natural preference will be to work with Liberty Interactive, and not with an outside
vendor, such as Wink Communications Inc. or ICTV.
"I wouldn't want to be a shareholder in any one of
those companies," the source said. "Why would TCI, for example, work with them
when they have Lee Masters building them something specific to their needs and working in
concert with companies like us?"
Several weeks ago, in an apparent prelude to creating its
interactive unit, Liberty acquired a 10 percent stake in interactive-program company ACTV
Inc. for $5 million.
Referring to Liberty Interactive's plans, Greg Clark, vice
president of Wink, said, "Much of this is still very unclear," adding that he's
not all that concerned about potentially not being included in TCI's or AT&T's
"friends and family" because "the companies that provide the most value
will be the ones that will get to play in the AT&T and TCI world."
He noted that Wink's first U.S. deployment was with
InterMedia Partners, part of TCI's "family."
Wes Hoffman, president of ICTV, seemed similarly
unconcerned, saying that Liberty's plan appears to be largely digital, and that analog
will remain a large opportunity for suppliers for many years hence.
Plus, he said, many interactive services "just don't
lend themselves well to a multiplexed environment," although ICTV's does.
TCI president and chief operating officer Leo J. Hindery
Jr. last week offered some insight on the interactive-digital tier.
"Initially, it will be natural extensions of
basic-cable channels," Hindery said. "You will see, over time, a migration into
the more traditional kind of retailing, video retailing and Internet retailing ... [but]
we initially are just going to focus on brand extension of existing channels."
In line with Hindery's remarks, Masters also stressed that
Liberty Interactive's primary focus will initially be on creating "enhanced video.
Web content will follow."
Masters cited his expertise in building a video network
like E! as a large reason for his hiring.
"It's meant to be, first and foremost, compelling
video," Masters said. "But there will be more behind it. We will create
businesses that generate additional sources of revenue, be it advertising or transactional
opportunities."
For example, a viewer watching a show on a car could click
and order more information about that model, or be directed to a Web site where such data
are available, Masters said.
Ad-agency veteran Bill Airy, president of Liberty's
digital-health group, has been working on concepts for interactive networks with strong ad
opportunities, such as auto and real estate channels, which Liberty Interactive will
follow up on, sources inside Liberty said.
One of the first things that Masters said he will look at
is TCI Music and interactive opportunities involving music, such as selling CDs.
"We've been working in the last year very much in line
with the vision of Liberty Interactive," The Box president Alan McGlade said.
For example, The Box now allows viewers to register on its
Web site and order videos to air on the network.
"The set-top is the next logical environment," he
said. "And adding the commerce factor is an obvious extension."
Jay Feldman, general manager of Travel, said there have
been preliminary talks with Liberty about interactive transactional applications for the
Discovery-owned service.
When asked about Liberty's plans to get its one dozen or so
interactive services onto cable systems run by TCI and AT&T, Ravenel said distribution
will combine TCI's Headend in the Sky for the video element with the cable infrastructure
for the interactive elements.
He added that General Instrument Corp.'s forthcoming
DCT-5000 set-top box of which TCI has a blanket order for 15 million or more units
"brings the pieces together: It is technically possible."
The GI DCT-5000 will include a built-in cable modem, which
automatically opens the field for Internet-based and IP-based (Internet protocol)
applications, from TV Web to videoconferencing and electronic commerce.
HITS currently uses compression rates of 12-to-1 to squeeze
one dozen cable channels into a single, 6-MHz cable channel, so Liberty's plan for 12 or
so channels, aided by compression, would appear to logically fit any plans that AT&T
has to allocate Liberty one channel for its content.
When asked whether TCI's arrangement to work with
BankAmerica Corp. and Intuit Inc. for interactive banking would shift over to Liberty,
Ravenel said he was "caught by confidentiality agreements, as well as quiet-period
restrictions," and therefore, he could not comment.
But observers, including two TCI sources, said it would be
"unlikely at best" for that project to move to Liberty. That's because the
arrangement is partly a set-top-subsidy package, under which BankAmerica pays TCI cash in
the range of $20 to $50 per box to be an "anchor tenant" in TCI's future
"walled garden" of interactive services, to use the lingo coined by Malone.
"Moving [the BankAmerica/Intuit] project over to
Liberty would make the financing part pretty sticky," one TCI source said. MCN
States News Service contributed to this report.
