News Corp. Gets All of Health Network

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NEW YORK -Rupert Murdoch's News Corp. will regain full ownership of The Health Network under a major restructuring-or unraveling-of its partnership with WebMD Corp., officials said last week.

Unwinding a complex pact forged in December 1999, WebMD will transfer its 50 percent stake in The Health Network to News Corp. Troubled WebMD, an online health-care company that lost $2 billion in 2000, will be relieved of all future capital commitments to The Health Network.

WebMD also won't be required to issue an additional 8.3 million shares of its common stock in exchange for News Corp.'s 50 percent interest in the cable channel.

Pat Fili-Krushel, the former head of the ABC Television Network and a veteran of Lifetime Television, will step down as the head of The Health Network. It will now fall completely under the purview and control of News Corp.'s Fox Cable Networks Group.

Fox Cable during the next 30 to 60 days will be re-evaluating what course it should take with The Health Network and looking at the health genre, said Jeff Shell, president and CEO of Fox Cable. He hopes to "reinvigorate" the network.

"We're thrilled to get an asset back that has 20 million subscribers, a lot of them analog, and has commitments for 40 million homes," Shell said. "It's a once in a lifetime occurrence."

However, Fox Cable will also look at whether it should abandon the health-format, although Shell said that would be unlikely.

"To be prudent, we have to look at all possible usages of the network," Shell said. "Now is the time to make sure there is not something out there, a genre that is so compelling and so exciting that it would make more sense to do than health."

Donna Harrison, a Lifetime programmer who Fili-Krushel brought to The Health Network this summer, is overseeing it until Fox Cable hires a permanent president, Shell said.

Fili-Krushel has served as The Health Network's president through her duties as CEO of WebMD Health, the online company's consumer unit. She was recruited in April of last year, in large part to help oversee the cable network's programming direction.

Fili-Krushel was on vacation last week and couldn't be reached for comment on whether she will remain at WebMD now that it will no longer own a stake in The Health Network. WebMD declined to comment.

The Health Network, which has 20 million subscribers and competes against Discovery Health Channel, had been slated to relaunch as WebMD Television last fall, with new programming. That plan had been put on hold.

Under their original 1999 partnership, News Corp. was to hand $1 billion of its assets to WebMD in exchange for a nearly 11 percent stake in the company, which sought to link doctors, insurers and hospitals via the Internet. As part of the deal, WebMD received half of The Health Network, which had been created through the merger of America's Health Network and Fit TV.

But in September, financially troubled WebMD announced it would lay off more than 1,000 people, cut back on marketing and streamline operations. At that time, WebMD officials said they planned to concentrate on their core business-facilitating health-care transactions and providing online health information-rather than consumer-oriented efforts.

To accomplish that, WebMD said it would modify or end several business relationships. As it turns out, the deal with News Corp. was one of them.

Fox Cable has handled distribution for The Health Network, which has shelled out $3 to $4.50 per subscriber in up-front cash launch fees to obtain carriage. The network now has commitments for 40 million subscribers by the end of 2005.

Rival Discovery Health Channel has 19.5 million subscribers at present, with commitments that would add more than 50 million by 2004, according to Discovery Health president John Ford.

Discovery Health's present programming lineup is 75 percent original and includes such series as 21st Century Medicine,
Lifeline
and Medical Mysteries. The channel's approach to health-oriented television is to create shows that both tell a story and provide solid, accurate information, Ford said,

"You've got to have both," Ford said. "Other efforts have forgot the storytelling part. It's human stories that dominate in our network."

Although WebMD and News Corp. are essentially scuttling their joint ventures, they will still collaborate on some fronts.

Under their reworked partnership, News Corp. will provide WebMD with $205 million in free advertising over 10 years, down from the originally pledged $700 million.

In addition, WebMD will provide content for use across Murdoch's media properties at a price of $48 million over four years. The original agreement mandated that WebMD provide content for News Corp. over five years, for $60 million.

The 1999 partnership also called for News Corp. and WebMD to cooperate on an international venture. Now, WebMD will gain control of News Corp.'s half of that venture.

WebMD will post a one-time non-cash charge of roughly $275 million for the quarter that ended Dec. 31.

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