Libertys Core Networks Keep Growing11/22/1998 7:00 PM Eastern
Liberty Media Group, Tele-Communications Inc.'s programming
arm, said its third-quarter revenue rose 40 percent and its cash flow rose 29 percent, led
by gains in its wholly owned Encore Media Group.
Liberty president Robert Bennett told analysts on a Nov. 13
conference call that he was "quite happy with our results for the third
quarter," as "all of our large businesses met or exceeded our
In addition to Encore, those assets include a 49 percent
stake in Discovery Communications Inc. and one-half of the Fox/Liberty Sports venture,
which, in turn, owns 40 percent of Fox Sports Net and several regional-sports networks.
Liberty said its total revenue rose to $176 million from
$125 million, and its cash flow rose to $31 million from $24 million. Liberty had a net
loss of $12 million, compared with $162 million in net income in the same period a year
ago, when the company had a $304.5 million pretax gain related to Fox Kids Worldwide
Inc.'s buyout of International Family Entertainment Inc.
Liberty also said it expected to close its merger with TCI
Ventures Group at about the same time as AT&T Corp.'s merger with TCI closes, possibly
in the first quarter of next year. If the AT&T merger is delayed, Liberty and TCI
Ventures might close first, Bennett said.
Encore Media's revenue in the quarter rose 69 percent, to
$139 million from $82 million in the same period a year ago, while cash flow rose to $30
million versus a $4 million cash-flow deficit in the third quarter of 1997.
Revenue at the Encore and Starz! networks rose sharply from
TCI and other cable affiliates, as well as from direct-broadcast satellite sales. Expenses
rose 26 percent in the quarter, both for first-run programming at Starz! and for
At Discovery, the "developed" domestic networks
-- Discovery Channel and The Learning Channel -- generated a revenue gain of 22 percent,
to $156 million from $128 million, as cash flow rose 36 percent, to $68 million from $50
million a year ago. Advertising revenue rose 22 percent and affiliate revenue increased 28
percent, due to growth in the networks' subscriber base and to Discovery raising
per-subscriber affiliate fees for the two networks.
Among Discovery's "developing" domestic networks,
Animal Planet now has 43 million subscribers, and it is beginning to generate affiliate
fees. It will continue to lose money in 1998, but it seems to be on track to have its
first breakeven quarter by the end of next year, Bennett said.
At the regional-sports networks, overall revenue in the
quarter rose to $207 million, a 19 percent gain, excluding the impact of a new network
launch in Detroit. Affiliate fees were up by 9 percent and advertising revenue rose 57
percent on a pro forma basis.
The networks bought additional baseball games, and ratings
for those games were up. Through the first nine months of the year, the
"developed" regional networks generated $106 million in cash flow, a gain of 23
percent. In the quarter, cash flow rose 8 percent, excluding the Detroit network.
Bennett pegged a rough estimate of cash-flow losses
attributed to the National Basketball Association lockout at about $10 million to $15
With programming costs -- especially for sports networks --
a controversial topic as operators look to contain rate increases next year, Bennett was
asked how that might affect the networks' performance.
"I don't expect to see a material effect from the
cable industry's efforts to hold down their rates," he said. "We have cost
increases in the sports business. There's always a tension and, in some cases, we're
looking for increases that are beyond inflation to pass along our costs, but that's
something that we have to work out on an amicable basis with our distributors."
Fox Sports Net -- the nascent national-sports network that
is using the regionals for event programming -- is probably three to four years away from
breaking even, Liberty executives said. That could get pushed back further by variables
such as the network's recent signings of Keith Olbermann and Chris Myers, Fox/Liberty
Networks chief financial officer Jeff Shell said.
But the network's centerpiece show, Fox Sports News, has
seen its average rating inch up to a 0.9 from a 0.3 at its launch in February, and the
signings of Olbermann and Myers helped to retain advertisers that might have shied away
because of the NBA lockout, Shell added.
FX, which is wholly owned by Fox/Liberty Sports, generated
$9 million in cash flow, versus $4 million in the same period a year ago, as the network's
ratings surged due to heavy promotion of new programming late in the quarter.
FX's advertising revenue rose 50 percent due to the higher
ratings and to an increase in its subscriber count to 36.9 million from 32.7 million a
Bennett said the network's ratings have since backed off,
"but we now have the credibility in the advertising marketplace, and we can sell
those ratings quite a bit better."