USA to Pitch Pair of Diginets

USA Networks Inc. will be jockeying for carriage this year not just for a crime channel, but for a second digital offering — a travel-shopping network.

The company plans to incubate the new network — USA Travel Channel — beginning this week, by airing a one-hour block of travel programming on America's Store, its 10-million-home cable shopping network, officials said last week.

By the end of this year, USA plans to spin off the travel-programming block into a 24-hour service.

Last week, USA Networks chairman Barry Diller unveiled plans for his travel channel when he announced he would acquire a 75-percent interest in online travel agency Expedia Inc. from Microsoft Corp. The deal — which gives USA control of Expedia and Microsoft a 3 percent to 5 percent stake in USA Networks — was valued at $1.5 billion.

USA is also acquiring National Leisure Group Inc., an online cruise and vacation package agency that sells many of its trips via infomercials.

Those new assets, along with USA Networks' Home Shopping Network and Ticketmaster holdings, will create the backbone for USA Travel Channel, according to officials. The new network will pitch vacations, which can then be booked online or over the phone.

During a conference call with reporters, Diller took pains to distinguish USA Travel Channel, a commerce outlet, from Discovery Communications Inc.'s offering in that category, the fast-growing Travel Channel.

"Theirs is an entertainment site," Diller said. "Ours will be very much directed toward commerce."

USA has also talked with DCI and Liberty Digital Inc. about pooling their efforts on an interactive travel-commerce channel.

"We have had conversations in the past," said Liberty Digital president Lee Masters.

Liberty Digital and DCI already have such a channel in the works, an initiative they announced last December. Liberty Media owns stakes in both USA Networks and Liberty Digital.

Regarding the status of the proposed DCI-Liberty Media travel-channel venture, a DCI spokesman said, "We are in the process of looking at this and researching it, and seeing where the technology is."

Travel Web site Travelo-city.com is also looking into creating an interactive-TV travel outlet.

"Weareactively exploring with other companies activities in the interactive-television area," a Travelocity spokesman said. "It's been on our radar for some time."

Through its Home Shopping Network and Ticketmaster units, USA already has the in-house transactional infrastructure and electronic-retailing expertise in place to hawk vacations comprising packages that include tickets to shows, hotel rooms and transportation, according to Diller.

For a number of years, and in contrast to other programmers, USA Networks opted not to launch any new cable channels. Now — in an environment in which even digital carriage is difficult to secure — USA will seek distribution for both its own travel channel and Crime, a digital network it is creating in concert with Cops creator John Langley.

Crime's lineup, which will consist of crime-related information and entertainment, is to include several original series Langley will create.

In addition to the two start-up networks, USA is also seeking to boost distribution for two digital services it acquired in May 2000, Trio and NewsWorld International.

One cable-operator source who has heard the Crime pitch said USA is offering the channel for free for roughly two years, and trying to bundle it with the revamped Trio and NWI.

USA Cable president of emerging networks Patrick Vien declined to comment on the deal offered to MSOs for the digital mini-suite of Crime, NWI and Trio, which are being touted as distinct services, rather than as spin-offs of existing networks.

Vien said that Crime's launch date, originally set for this fall, will hinge on USA's success in gaining distribution for the channel. As a result, the Crime rollout could come in the fall or be pushed back to January 2002, Vien said.

USA Information Services president and CEO Jon Miller said he is putting together a carriage deal for USA Travel Channel for potential distributors, MSOs and direct-broadcast satellite providers alike. As part of that deal, he said, USA is open to discussions about giving cable operators a share in the sales generated by the travel network, just as cable systems today get a split of the sales racked up by home-shopping networks.

"We are mindful of that precedent with shopping channels," Miller said.

Vien said that as a "commerce-driven" service, rather than a "license-fee driven" channel, USA Travel Channel will be distributed by HSN president Mark Bozek's team.

USA officials said they expect USA Travel Channel to be in 20 million homes within several years.

"I'd like to hear more about it. Like is there revenue sharing?" said National Cable Television Cooperative senior vice president of programming Frank Hughes.

NLG generates 30 percent of its gross sales from infomercials and has a large library of them, Miller said. And while USA Travel Channel would be "almost entirely" a live affair with hosts — a format just like HSN's — it could also turn to that NLG library for content, according to Miller.

"There is a tremendous library of product to draw on," he said.

DCI's analog Travel Channel has taken off. After buying a smaller stake, DCI acquired a full 100 percent of Travel Channel in 1999. It quickly moved to increase its distribution, now at 56.1 million homes, by revamping its programming and shelling out $5 per subscriber in launch fees.

Travel Channel's primetime ratings were up 33 percent in the second quarter, to 0.4 from 0.3 a year ago, according to Nielsen Media Research.

One operator pointed out that Travel Channel started out as a cable network created by Trans World Airlines and then-owner Carl Icahn, and at the time cable operators complained that it was just a promotional vehicle for the airline.