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TCI gets into new media

Thanks to the convergence of TV and computing, the company increasingly is marrying its cable network with Net content.

Is TCI becoming a new-media company?

That may seem farfetched to those who think of the Denver-based conglomerate as a conservative cable television operator founded by an Oklahoma cottonseed salesman in an effort to bring decent TV reception to the rural Midwest.

But thanks to the convergence of the TV

Rupert Murdoch
Rupert Murdoch
set and the personal computer, Tele-Communications Incorporated is increasingly marrying its giant cable distribution network with new television and Internet content. It owns a controlling stake in @Home, which provides Net access and multimedia content via cable networks; an online music business, Sonicnet; and now an interest TVGuide online.

In the latest deal, a unit of TCI--United Video Satellite Group--today said it bought TV Guide properties from Rupert Murdoch's News Corporation for about $2 billion. In return, News received a 48 percent voting stake in United Video--the same as TCI's.

The TV Guide properties include the magazine, the nation's largest selling weekly, and the TVGEN Web entertainment site. The deal also calls for privately held TVSM, a cable and satellite television program guide publisher, to become part of United Video.

"They're trying to use the media that's available to proliferate their product," James Hern, an industry analyst with Olde Discount, said, noting that the strategy is being driven by TCI's plans to offer digital entertainment via set-top boxes.

To those familiar with the cable industry, today's deal signals another move by TCI to expand its business beyond stringing

John Malone
John Malone
television cable across the United States--the business founded by late chairman Bob Magness. Although cable TV service has been and remains the company's mainstay, the convergence of television and computing is presenting new opportunities for companies such as TCI.

It also presents new challenges and intense competition: Companies such as Walt Disney and Time Warner are pursuing the same strategy, and they are much bigger. In addition, Internet companies such as Yahoo, and telecommunications carriers such as MCI, are teaming up in new-media ventures. America Online is on the list as well.

TCI's long-depressed stock price also has made it vulnerable, though the shares have bounced back during the past year.

The deal marks an increasingly close relationship between TCI chief executive John Malone and News Corporation's Murdoch. Last year, News agreed to combine its satellite broadcasting operations with Primestar, a satellite company owned by TCI and other major cable operators.

The Justice Department has sued to block the Primestar deal, arguing that it is anticompetitive.

Today's TV Guide deal also requires regulatory scrutiny. Both companies, however, said they remain optimistic that it will close in the fourth quarter.

"The combination of these trusted brands will create a global entertainment TV guidance company for all media--print, onscreen, and digital online," said Anthea Disney, chief executive of News America Publishing Group.

One of Murdoch's sons, James, is involved TCI stock chart in the management of TVGEN. He is president of News America Digital Publishing, News Corporation's electronic publishing operations, reporting to Disney. A spokesman said today that management of the TV Guide properties under the new ownership structure hasn't yet been determined.

Through its Liberty Media subsidiary, TCI is no stranger to TV programming. But more recently, the company also has been ramping up its plans to provide Internet access and online content.

It remains a controlling stakeholder in @Home. The company's mission is to not only provide high-speed Net access, but to offer online content. @Home has a new interface, it provides CD-like audio, it has struck a video streaming deal with CNN, and it has forged e-commerce partnerships as well. The surge in the stock of @Home, which went public only last year, has been a boost for TCI as well.

TCI also has been building an online music business. This year, one of the company's units closed a deal to buy Sonicnet. Since then, the site has relaunched, taking on the likes of Rolling Stone and MTV in a hotly competitive market.

The company's foray into programming has not been without controversy. Some customers have accused the cable giant of being too conservative in its programming selection, and the company's music presence on the still-somewhat wild Web has raised concerns as well.

TCI counters that it chooses the programming based on demand from its customers, not on its own tastes.