Allens World Keeps Expanding

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Paul Allen's latest cable investment is $54 million for a
33 percent stake in ZDTV, the young
cable network focused on computers and the Internet.

Allen -- the Microsoft Corp. cofounder, whose Vulcan
Ventures has committed more than $7 billion to buy Marcus Cable and Charter Communications
Inc. -- has been looking to invest in "related companies," in addition to more
cable systems.

William Savoy, president of Vulcan, said ZDTV fits in
particularly well with Allen's "wired-world" concept of broadband services,
especially since the network's programming highlights topics like high-speed-data services
and digital television.

"As we continue to invest in cable and look to bring
new services to customers, many [of them] net-centric, the opportunity to continue to
inform and educate our customers through ZDTV is truly synergistic," Savoy said.

Besides, the Internet has proven to be more than a
citizens-band-radio-type fad, and Allen is interested in tapping that consumer interest
through TV, Savoy added.

Savoy said Allen is still looking to buy cable subscribers,
but deals that are in the works now involve operations smaller than the two 1.2
million-subscriber MSOs that he's agreed to buy so far.

Industry analysts said Allen wants to at least double the
size of his operation, getting to no fewer than 5 million subscribers and cracking the top
five MSO list.

But the big multiples that Allen paid for Marcus and
Charter jacked up asking prices, so, Savoy said, he's had to "learn to be a better
negotiator."

The ZDTV deal is not Allen's first cable-programming
investment: He owns a sizeable chunk of USA
Networks Inc.,
beginning with stock that he got when USA bought his
TicketMaster Group Inc. stake. And in 1994, he invested in C/NET:
The Computer Network.

Allen may be learning from Tele-Communications Inc.
chairman and CEO John Malone, who will focus on programming as chairman of Liberty Media
Group after AT&T Corp. completes its merger with TCI.

Malone, who serves with Allen on USA Networks' board of
directors, has mastered the art of owning stakes in networks carried on his cable systems.

"I think that Paul is a very shrewd and prudent
investor with a lot of money," Malone said last week at a Cable Center & Museum event in
Denver.

Asked whether he thought that Allen might cobble together a
Liberty-like programming stable, Malone noted that Allen was a "founding investor in
[the studio] DreamWorks SKG, so he likes the software thing. And Paul has seemingly an
inexhaustible supply of capital. As long as Microsoft stock keeps going up, Paul can sell
a few shares from time to time and buy anything that he wants."

Allen has also sunk big chunks of his fortune into a wide
range of technology firms, including software firms Starwave Corp. and MetaCreations; and
into sports teams, namely the Portland TrailBlazers of the National Basketball Association
and the Seattle Seahawks of the National Football League.

ZDTV carries shows with titles like Computer Shopper,
Internet Tonight and Digital Avenue. Its best-known show may be Screen
Savers
, which has gotten a lot of press for allowing some viewers to appear via Netcam
video links over the Internet.

The show's hosts made an appearance at a Louisville, Ky.,
mall in June, drawing more than 200 fans, InterMedia Partners' marketing vice president
Donna Young said. That surprised her, because InterMedia hasn't promoted the network much,
she added.

"I just think that it's a network that serves an
audience that we're not serving today," Young said.

For $54 million, Allen gets one-third of a start-up network
that now claims about 8.5 million subscribers on cable and direct-broadcast satellite --
with hopes of doubling that number by early 2000 -- as well as a related Web site. The
deal appears to work out to about $11 to $18 per subscriber.

Those numbers seem close to those from one similar, recent
deal. In March, Fox/Liberty Networks paid an estimated $80 million to $100 million for
one-third of Speedvision and Outdoor Life Network, with about 14.5 million and 13.5
million subscribers, respectively.

Allen's deal did not include an option to buy control of
the network, Wangberg and Savoy said.

By the end of the year, ZDTV's principal owner will be
Ziff-Davis Inc., publisher of PC Magazine, PC Week and other computer- and
Internet-related print magazines. Ziff-Davis said last Tuesday that it will exercise an
option to buy ZDTV from an affiliate of its parent company, Softbank Corp. Ziff-Davis has
said that exercising that option will cost about $85 million to $95 million, including the
cash that it has advanced to run the network.

According to the latest Ziff-Davis quarterly financial
report, ZDTV expects to lose $55.2 million in 1998 -- about the same amount that Allen is
paying for his stake.

ZDTV said it has affiliation deals with about 20 MSOs --
the largest being TCI, Comcast Corp. and Cox Communications Inc. -- along with DBS
services DirecTv Inc. and EchoStar Communications Corp.'s Dish Network. Last week, ZDTV
announced a deal with TCA Cable TV Inc.

ZDTV is already carried on Charter systems, and Wangberg
said Charter would "obviously have a great interest" in extending ZDTV to the
Marcus systems after the merger between those two MSOs is completed.

Allen will name two members to a planned seven-member board
of directors, and Savoy will play an active role advising the network, Wangberg said.

Leslie Ellis contributed to this report.

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