AOL Deal Inflates Oxygen

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Finally, some good news from Oxygen: On the heels of layoffs and show retooling, Oxygen Media last week was able to announce a major financial and distribution lift from investor AOL Time Warner Inc.

The multimedia giant increased its minority stake in the women-targeted company and promised Oxygen access to 10 million Time Warner Cable subscribers by 2002. The company also pledged to boost distribution of Oxygen's online services through America Online.

Details of the deal were not disclosed, including the size of AOL Time Warner's present stake in Oxygen.

Carriage on Time Warner Cable would be predominantly analog. But in its centerpiece New York City system, the network will be on Time Warner's digital tier, which currently has 125,000 customers, system executives said.

The rollout begins this summer, Oxygen chairman Geraldine Laybourne said last week.

The deal is a major boost for the service, which has struggled to gain widespread cable penetration, particularly in major markets. Cable carriage in Manhattan has been limited to overbuilder RCN Corp.

Oxygen, which is currently in 14 million homes, now has carriage deals with five of the top seven MSOs. The pacts will put the network in front of 40 million households by fall of 2002.

"This is a great momentum boost for us and I think this makes us credible in the advertising community," Laybourne said in an interview.

But while Oxygen will gain access to Time Warner systems, it'll most likely have to compete with Rainbow Media Holdings Inc.-owned WE Women's Entertainment network for female eyeballs. Industry sources said the MSO has also inked a similar carriage deal with the Rainbow-owned service (formerly Romance Classics), also starting this summer.

WE is currently in 24 million households.

A WE spokeswoman said the network would not comment on "current negotiations"; a Time Warner spokesman said the company would not comment on "speculation."

Though Laybourne was not aware of any potential AOL Time Warner/WE deal, she said it would not trouble her if such a move were true. The women's category is underserved by cable and there's room for other players, she added.

Laybourne said Oxygen, unable to reach a carriage deal with Time Warner Cable prior to January's merger of America Online Inc. with MSO parent Time Warner Inc., benefited from AOL's influence and the company's greater focus on the convergence of cable and Internet in crafting the carriage deal.

"The fact that we are on this creative, convergent path is appealing to [AOL Time Warner]," Laybourne said.

To that end, the network will also have a much stronger presence on AOL and will integrate its Internet content with AOL TV. Additionally, the distribution of Oxygen's women-focused content — from Oxygen.com, Thrive Online, Oprah.com and Trackers.net — will be increased significantly across America Online's family of interactive brands, said the network.

Only two weeks ago, Oxygen's online unit trimmed 35 employees. Those cuts came after 65 layoffs in December, when Oxygen scaled back and consolidated its Web operations.

"Oxygen is right in the sweet spot. It's a natural thing to happen in the first quarter of the AOL Time Warner merger," America Online Inc. chairman Barry Schuler said in an interview last week. "We like the convergence play that Oxygen gives us."

As many dot-com companies succumb to the freefalling technology market, it's important for AOL Time Warner to support market "leaders" such as Oxygen through investments and strategic relationships, Schuler said.

"To be a strategic partner with AOL Time Warner and to have them recognize that 52 percent of their members are women … shows that we're poised to take off," Laybourne added. "We are close to AOL, but we think that the cable side will benefit substantially from the deal."

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