Discovery, BBC Finally Ready to Roll

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New York -- As part of a long-awaited $660 million global
alliance, Discovery Communications Inc. will spend $100 million to launch BBC America in
the United States.

The network will debut March 29 on Tele-Communications
Inc.'s Headend in the Sky, officials said last week.

During a joint press conference in London and here, DCI and
the British Broadcasting Corp. outlined the details of their new complex partnership,
which includes the creation of the BBC wholly owned network in America and other channels
worldwide. BBC America will showcase a mix of BBC drama, contemporary comedy, live world
news and arts and lifestyle documentaries.

Discovery Networks U.S. will handle the distribution and ad
sales for BBC America, which is available for digital and analog carriage. DCI isn't
providing any subscriber figures for BBC America's debut, but it expects the
fledgling network to reach 20 million to 25 million homes over the next five years. And at
this point, DCI doesn't plan to pay upfront launch fees to get carriage for BBC
America.

DCI chairman John Hendricks voiced high expectations for
BBC America, even though it will have minimal distribution initially and it is facing a
real uphill battle for any analog space. So far, the only cable operator committed to
carry BBC America is TCI via HITS, the digital platform that the MSO is rolling out to its
systems.

"We feel very confident that it [BBC America] can go
beyond digital," Hendricks said. "The first carriage will be on emerging digital
cable, but there will be some analog as word spreads of its quality. We think that DBS
[direct-broadcast satellite] will take a serious look, as well. We expect a combination of
analog, digital and satellite [distribution]."

In total, DCI will be plowing a minimum of $660 million
into its three-pronged joint venture with the BBC, which has been in the works for roughly
18 months. About $175 million of that will go toward co-producing programming with the BBC
during the next five years, and DCI will spend $100 million over four years to distribute
and market BBC America, according to Hendricks.

The BBC and DCI started their effort to launch nonfiction
channels globally, with 50-50 ownership, this past fall, when they rolled out Animal
Planet and People & Arts in Latin America.

DCI doesn't own any part of BBC America, but the BBC
is getting a 20 percent stake in Discovery's U.S. Animal Planet, a 37
million-subscriber network that Hendricks said is now valued at $500 million to $600
million.

"And we think that we have the potential to build a
tremendous asset with BBC America," Hendricks said.

At Thursday's press conference, Hendricks and BBC
director-general John Birt signed the final joint-venture contract, which actually
involves 60 different deals, in London.

"We are declaring that nonfiction television is a big
business," Hendricks said.

Until the joint venture was signed, DCI could only
informally talk to MSOs about carrying BBC America, said Johnathan Rodgers, president of
Discovery Networks U.S. Now, Discovery can produce a rate card for the network and take it
to operators.

Time Warner Cable has had preliminary talks with Discovery
about BBC America, an MSO spokesman said.

Dave Andersen, a spokesman for Cox Communications Inc.,
said, "I'm sure that we'll look at it [BBC America]. But unless that
network is available in digital, we're full [on analog]."

Cox and TCI's Liberty Media Group are shareholders in
DCI. By not owning a stake in BBC America, Discovery escapes laws regarding vertical
integration, and it can offer the network exclusively to cable if it wants to. A DCI
spokesman said the company would offer the network to "all forms of
distribution," but he did not specifically address telco video providers.

A "preview" of BBC America -- four hours of
programming repeated daily -- is already being carried on HITS' so-called three pack,
which is in front of 10 million TCI homes, as well as some non-TCI HITS affiliates. The
full-scale, 24-hour channel will go up March 29.

TCI isn't revealing what percent of its subscribers
are ordering digital. But digital "take" rates have been estimated at 15 percent
to 20 percent, meaning that BBC America could wind up reaching only 1.5 million to 2
million TCI homes when it premieres.

For affiliate sales, Discovery doesn't plan to package
BBC America with either its grouping of six digital networks or with its analog channels,
Rodgers said.

"We believe that BBC America can stand on its
own," he added.

But Discovery will probably bundle in BBC America, which
will have East Coast and West Coast feeds, with some of its other networks for ad sales.
Operators will get three minutes of local avails per hour.

Some BBC shows that will make their U.S. premieres on BBC
America include: Hamish Macbeth, a Scottish police drama featuring The Full
Monty
's Robert Carlyle; regular newscasts from BBC World; and current
episodes of soap opera EastEnders.

Discovery officials said their preliminary research had
found that 37 percent of U.S. cable subscribers would have a strong interest in BBC
America.

There's been speculation about whether the
BBC-Discovery deal will cut off the supply of BBC programming to A&E Network and the
Public Broadcasting Service. Under the joint venture, Discovery will have the right of
first refusal to co-produce nonfiction programming that the BBC does. An A&E spokesman
noted that his network has aired BBC fictional programming, but not nonfiction.

Ron Neil, CEO of BBC Production, said, "A&E still
has the license to broadcast BBC programs for some years to come."

For example, the A&E spokesman said, his network has
the right to renew its license for Pride & Prejudice.

"A&E has been around almost 15 years, with over 70
million [analog] homes and a slew of awards," he said. "Their network isn't
even in the same league in terms of competition."

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