News Corp., Healtheon/WebMD ink $1 billion deal
Media giant News Corp. forms a partnership worth more than $1 billion with online health service Healtheon/WebMD.
News Corp. will be a 10.8 percent minority stakeholder in Healtheon/WebMD, the company said. The financial terms of the partnership include $700 million in branding services, $400 million domestically and $300 million internationally, provided by News Corp. over 10 years; $100 million purchase of Healtheon/WebMD stock at $50 per share; a $100 million cash investment by News Corp. in an international joint venture; and a $62.5 million five-year licensing agreement for syndication of WebMD daily broadcast content.
The deal also calls for a transfer to Healtheon/WebMD of a 50 percent interest in the Health Network, a health-focused cable network, and 100 percent ownership of Thehealthnetwork.com.
"Today we announced an ideal partnership to help us achieve our goal of establishing a multimedia, multirevenue generating business in the trillion-dollar health care industry," Rupert Murdoch, chief executive of News Corp., said in a statement.
In a reversal of the usual trend to place traditional media content on Web sites, Murdoch plans to distribute Healtheon/WebMD content across New Corp.'s television and print outlets, according to the company.
Although the pairing of News Corp. and Healtheon/WebMD represents a powerful combination, the alliance still faces stiff competition from other players including television network CBS, which is in the process of being acquired by media giant Viacom. CBS earlier this year bought a 35 percent equity stake in online site Medscape. The Discovery Channel this year also launched a health cable channel with an Internet component.
Still, analysts said that News Corp. and Healteon/WebMD are poised to strike it big given that there is yet no established brand name for health content online and especially offline.
"Healtheon/WebMD is really well-stocked with cash to outspend its competitors," said David Restrepo, a health analyst with New York-based research firm Jupiter Communications.
Formed by the $5.4 billion merger of Healtheon, WebMD and two other U.S. companies, Atlanta-based Healtheon/WebMD competes in the $1 trillion U.S. health care industry with Drkoop.com, Mediconsult.com and Medscape by providing medical information on the Internet.
The online consumer health care market is expected to grow to $1.7 billion by 2003, according to research released earlier this year by Jupiter Communications. Jupiter estimates that the total online-offline market for consumer health goods will be $205.2 billion by 2003.
Restrepo also noted that Healtheon/WebMD has a leg up by providing both business-to-business and business-to-consumer e-commerce offerings.
Healtheon/WebMD "is also going after the doctors, hospitals and [laboratories], which is highly unlike other sites, making them unique," Restrepo said.