Military Net in Retreat Mode

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The Military Channel's cash-flow problems led to a 50
percent staff reduction last week following the suspension of on-air operations July 14.

But the fledgling network claimed that it has not
surrendered to its troubles yet.

The Louisville, Ky.-based niche channel -- aimed at
military personnel and veterans, as well as other military enthusiasts -- launched last
year on the Fourth of July, but it has had difficulty stirring up a groundswell of
patriotic support from cable operators, garnering limited carriage.

Company spokesman George Wright said management hopes that
the channel will soon resume normal operations, including a staff recall of some 50
employees. If current negotiations with four potential investors go well, the network
could return to the air as early as this week, he added.

Wright would not identify the potential backers, but he
said two of the four were firms with a "significant presence in the cable-TV
industry." He described the other two as "independent investment groups."

The channel hopes to reel in $250 million to cover overhead
and keep it operating until it picks up advertising and electronic-commerce revenue with
increased carriage.

Military claims 8 million subscribers in 26 states through
a combination of basic carriage and leased access. With cable and satellite penetration,
the network aims for 20 million households by the end of this year. Wright said the
company was close to closing deals recently that would have gotten it to that level.

For now, the company must also clean up the consequent mess
from its cash crunch while it looks for both resources and distribution. This includes
dealing with unhappy vendors, as well as a Department of Labor investigation into a recent
payroll disruption, which occurred before the layoffs last week.

"We continue to be sensitive to our obligations to our
vendors and creditors, and it remains our sincere intent to resolve these matters as
quickly as possible," Wright said.

The company has built its triangular programming strategy
around "Heroes, History and Hardware." This is embodied in programs about war
heroes like Admiral James Stockdale, the decorated Vietnam prisoner of war and bewildered
running mate of H. Ross Perot in the 1992 presidential election. Stockdale has also been
used in some of the channel's tune-in promos.

The network also features shows and documentaries about war
and weapons.

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