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NetChannel price tag revealed

America Online paid about $29 million for its acquisition of Web-enhanced television company NetChannel.

America Online paid about $29 million for its acquisition of Web-enhanced television company NetChannel, government documents revealed.

The total purchase price for the NetChannel deal will be about $29 million, comprised of about $17 million in cash and $12 million of net assumed liabilities, according to a filing with the Securities and Exchange Commission.

As a result, AOL will record a $20 million charge during the quarter ending June 30, 1998, for acquired in-process research and development, the filing said.

The $29 million price is a fraction of the amount that AOL and NetChannel had negotiated last December.

Sources previously told CNET's NEWS.COM that AOL made NetChannel a $65 million offer in December 1997 to buy the company outright.

Negotiations began to break down, however, and the deal was delayed, sources said.

The price AOL paid to get into the emerging Net-TV business is a sliver of the cost that software giant Microsoft paid to get its foot in the door last year, through its WebTV Networks acquisition.

Microsoft coughed up $425 million to buy WebTV, along with its suite of Internet access software and a lightweight operating system for set-top boxes.

AOL announced earlier this month, along with its most recent quarterly earnings report, that it had acquired NetChannel in a move to expand its service into the world of television. Terms of the deal were not disclosed at the time.

The transaction will be accounted for under the purchase method of accounting, whereby the purchasing company (AOL) treats the acquired company (NetChannel) as an investment and adds the acquired company's assets to its own at the fair market value.

Analysts applauded AOL's acquisition, noting that it will aid AOL's move into both interactive TV and broadband connectivity markets.

AOL's acquisition of NetChannel fits into the company's efforts to deploy access via high-speed xDSL and cable TV-based connections, a Prudential Securities report said.

"Proactively addressing the non-PC interfaces to the service clearly indicates AOL's preparedness to dynamically repurpose content, structure, and forms for non-PC, 'non-traditional' venues," the report said.