Discovery May Offer E-Sales Splits


New York -- Although Discovery Communications Inc. is still
working out the details on how its new Inc. unit will operate, CEO John
Hendricks said the company may offer cable operators a cut of the revenue generated from
online sales.

Discovery plans to sell products from categories that
comprise 40 percent of electronic-commerce revenue, which hit $1.4 billion last year, so
that revenue split could be a big windfall for cable operators.

"For years, when someone calls an 800 number on
Discovery Channel and orders a videocassette, we keep all of that revenue. If they come
online, we keep all of that revenue. Now, as you start using the cable operators'
invested plant, I think it's almost logical to expect them to say, 'Wait a
minute: If you're using what we spent billions of dollars to develop, is there some
revenue split?'" Hendricks told reporters after a press conference announcing
the formation of last week.

Discovery is moving all of its Internet assets, including,
into the new Web unit. The company plans to raise $500 million over the next three years,
possibly through an initial public offering, Hendricks said. will contain seven vertical portals tied to
categories Discovery has focused on through its television brands: discoveries, health,
animals/pets, travel, lifestyles, school and kids.

A redesigned site is set to launch today
(Feb. 7), and the company plans to add new features throughout the year.

Hendricks said the company may reveal more details about
iDiscovery -- the broadband-transaction section of the new site, which may offer MSOs
revenue splits -- at the National Show in May.

Discovery's site will compete with top Internet
portals like Yahoo!. The site will feature a "Web Express" section, where
Discovery plans to aggregate the best sites on the Web according to popularity and
editorial judgment.

"We're not going to sell placement or real estate
in Web Express. We look at it as an editorial feature," said Michela English,
president and chief operating officer of, adding that the index will also
contain the sites of Discovery's direct competitors.

English said may charge Web surfers for
access to content. "We're hopeful that as broadband comes in, there will be an
opportunity for potentially a subscription model or a pay-per-view model associated with
broadband," she added.

The site will also allow users to download a "Browser
Booster" plug-in. The tool will allow Discovery to push content or ads to users,
English said.

English was president of the Discovery Enterprises
Worldwide unit before last week. Hendricks will be chairman and CEO of the new Web unit.

In addition to spending money on partnerships and
acquisitions, will spend the $500 million it plans to raise on aggressive
marketing, content development and technology enhancement, English said.

"It will be several years before we would anticipate
breaking even. In this space, it's really hard to predict," she added.

Discovery has dedicated 200 employees to, and
it will increase its staff by up to one-third throughout the next year, English said.

The Web site will benefit from cross-promotion with
DCI's cable networks, she added.