Geographic Net Could Take On Discovery

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In what could turn out to be a real dogfight, the National
Geographic Society, NBC and News Corp.'s Fox Entertainment Group plan to invade
Discovery Channel's home turf by launching a U.S. version of National Geographic
Channel.

Fox joined NBC and National Geographic by taking a 50
percent stake in NGC, which they plan to expand globally, as well, officials said last
week.

Fox declined to say exactly how much cash it was
contributing to become a half-owner of all of NGC's worldwide operations except
National Geographic U.K., in which News Corp.'s British Sky Broadcasting Group plc is
already a partner.

NBC and National Geographic Television will each retain 25
percent of the NGC operation, which reaches 54 countries and nearly 40 million households.

During a phone press conference, officials offered few
details about the proposed U.S. channel. They weren't able to say exactly when they
plan to launch the venture, which they will offer to cable and direct-broadcast satellite
operators.

"The U.S. plans are really still plans that need to be
refined," Fox Television chairman Chase Carey said.

Officials said that although they'd like the U.S. NGC
to be basic, they expect distribution to be a mix of analog and digital carriage.

In creating the U.S. outlet, National Geographic would be
competing as a nature-oriented documentary service against Discovery -- which is fully
entrenched, with 76 million homes -- as well as with Discovery Communications Inc.'s
Animal Planet, with 48.6 million homes.

"You've got to be crazy to go against Discovery
domestically," one cable-industry source said, describing the NBC-Fox alliance as
"strange bedfellows." But, he added, "As a worldwide play, it might make
sense."

Creating a domestic cable channel is also costly. DCI
chairman John Hendricks has said that it takes at least $300 million to launch an analog
cable channel.

Last week, National Geographic and its partners declined to
say how much they'll spend to launch their U.S. cable network.

Tom Rogers, president of NBC Cable, and Rick Allen,
president of National Geographic Ventures, said that despite Discovery's dominance in
the documentary genre, cable operators expressed a strong interest in having a competing
service in that niche.

Rogers also noted that NBC successfully launched CNBC
despite initial competition from Financial News Network, and MSNBC despite Cable News
Network's dominance in that field.

But Rogers didn't point out, sources said, that NBC
had retransmission consent as a bargaining chip when it relaunched America's Talking
as MSNBC.

"When we started CNBC, a lot of people hooted,"
Rogers said. "But you can start second and end up with a formidable business. Sure,
Discovery Channel has done a spectacular job for the cable industry. But cable operators
had said to us, 'We're worried about having one player in a category.' They
want another player."

Nonetheless, several operators last week questioned the
need for more nature-documentary services.

"Between Discovery and Animal Planet, and all of the
things on PBS, there is not an overwhelming cry from our customers for more," said
Barry Rosenblum, president of Time Warner Cable of New York City. "How much is
enough?"

Rosenblum also saw NGC as a digital service.

At Prime Cable, director of marketing and programming Pam
Burton asked how much of NGC's programming would be "new and different" and
how much would be reruns. She added that the network would have to truly differentiate
itself in the nature category to succeed.

Discovery officials said they view NGC as one of a number
of networks they must compete against for digital carriage, not analog carriage.

"In terms of distribution, I see them going
head-to-head with our Discovery Civilization digital channel," said Bill Goodwyn,
senior vice president of affiliate sales and marketing for Discovery Networks U.S.

"I view it like an Ovation [The Arts Network], or DIY
[Do-It-Yourself], or BET on Jazz," Goodwyn added. "Overall, operators are
looking for opportunities in the digital world, rather than adding on to analog."

News Corp. bought carriage for Fox News Channel by paying
cash launch fees in the range of $10 per subscriber. Carey declined to comment on what
cash incentives might be offered for NGC.

Allen said, "We're fielding a highly competitive
launch package. And clearly, Fox presents resources around the world that are very
significant."

He pointed out that Fox has successfully launched U.S.
cable networks, and that Fox's sports networks also give it "clout in the U.S.
market" that can help NGC in its quest for distribution.

National Geographic will contribute 200 hours of
programming per year to the U.S. channel, with the rest of the lineup made up of
acquisitions and co-productions that are new to the states, NGT president Tim Kelly said.

"It's a strong brand, but a slim library,"
one cable-industry veteran said.

Taking Fox on could help NGC to expand in Asia and Latin
America, where News Corp. has considerable pay TV investments in both programming and
distribution.

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