With a big lift from its flagship print magazine, TV GuideInc. revenue rose 90 percent and cash flow rose 34 percent in the third quarter.
But the business unit containing the flashier TV GuideChannel cable network and TV Guide Interactive electronic guide suffered a cash flowdecline of 84 percent, to $1.2 million, while revenue rose 15 percent, to $22.9 million.Company officials said the declines were due to some important investments in anunproductive current service (Sneak Prevue) and a promising newcomer (Television GamesNetwork), making the declines easier to swallow.
One investment bank, Janco Partners, said the cash-flowoutput at TV Guide Entertainment Group, which includes the 50-million-subscriber analogchannel and the 2.5-million-subscriber interactive guide, was better than the $2 millionloss forecast by analyst Stacy Forbes. Overall, the company's $52.9 million inquarterly cash flow was about 12 percent more than the $47.3 million Forbes had forecast.
Net income during the quarter fell by 90 percent, to $1.3million, because of a one-time gain a year ago and acquisition costs.
Revenue at United Video Group, which includes a 1million-subscriber C-band satellite business, declined 8 percent against the backdrop ofthe overall C-band business erosion. Cash flow at United Video decreased 52 percent, to$15.4 million, due to launch costs for TV Games, a startup horse-racing channel that doesnot yet generate revenue but which landed a 10-year affiliation deal with AT&TBroadband & Internet Services during the quarter.
TV Guide Channel is enjoying the fruits of the celebrityinterviews and other content added over the last several months. Peter C. Boylan III, TVGuide's COO, said the channel was able to increase its advertising rates by 45percent as measured by cost per thousand viewers, or CPMs.
At present TV Guide Interactive, the guide deployed byAT&T Broadband and other operators to surf through digital channels, does not run ads.But it will after a software upgrade is implemented in the fourth quarter, Boylan said.
Sneak Prevue, a non-performing product intended to be apay-per-view barker, is being revamped into Screen TV, a product designed to helpoperators sell such new services as high-speed data and telephony. The upgrade is costingTV Guide about $2.6 million per year, said Boylan, who told analysts that TV Guide wouldnot continue investing in the service if it wasn't popular enough to start turning aprofit by 2001. So far, though, the company had no affiliation agreements to announce.
TV Guide Interactive was the driving force behind the $9.2billion sale to Gemstar International Group Ltd., which sued TV Guide and other companiesfor infringing on interactive-television patents issued to Gemstar's "VCRPlus" and "StarSight" products. Boylan said the prospect of eliminatinglitigation between TV Guide and Gemstar appeals to MSOs.
"I think the general reaction is positive," hesaid. "The litigation has been a great sense of frustration for all of them."
On the other hand, Boylan said, MSOs are a little waryabout the combined guide provider's bargaining position. To assuage those fears, TVGuide has started offering operators terms and conditions that are more attractive thanthose Gemstar offered on a stand-alone basis, Boylan said.
Elsewhere on the guide litigation front, Boylan said TVGuide and Interactive Channel parent Source Media Inc., combatants in a breach-of-contractbattle, had "entered into a mutual release of any claims against the parties."He did not elaborate.
The earnings were reported late Monday. On Tuesday, TVGuide's share price lost 25 cents, to $51.63.