CBS buying 35 percent stake in Medscape

In exchange, Internet site will provide $150 million in advertising, promotion

July 09, 1999|By BLOOMBERG NEWS

NEW YORK -- CBS Corp., owner of the top-rated U.S. television network, said yesterday that it is buying a 35 percent stake in Medscape Inc., the No. 1 Internet site aimed at doctors, in exchange for $150 million worth of advertising and promotion.

New York-based Medscape, whose Web site for medical professionals has more than 1.1 million registered users, will be permitted to use the CBS trademark and eye logo. It also will be promoted for seven years on CBS' network and TV stations, and its radio and billboard operations.

The move is the latest example of CBS' strategy of gaining a toehold on niche Web sites by swapping promotional power for equity. Under Chief Executive Mel Karmazin, CBS is working to establish a higher profile on the Internet by capitalizing on the company's widely recognized name and logo.

"They're doing what's necessary to create a total media company," said analyst Barry Hyman of Ehrenkrantz King Nussbaum Inc., who rates CBS stock a "buy." "They aren't taking outrageous positions and overpaying for many of these [Internet] portal companies."

The purchase marks the biggest Internet transaction for New York-based CBS since it bought a 38 percent stake in financial news Web site Inc. Like, CBS will integrate Medscape into CBS News.

CBS and Medscape said they'll work together to create a public Web site, The site will be integrated into CBS News, which will provide editorial content to the site along with audio and video materials. Medscape will develop online reports that complement CBS's health-related programming.

"Sports, finance and health are the three biggest areas on the Internet. Now we are well represented in all of them," CBS News President Andrew Heyward said.

CBS' other Internet interests include stakes in, an Internet directory service;, an online mall; and SportsLine USA Inc. CBS has said it plans to sell shares in its online businesses to the public this year.

CBS shares fell 62.5 cents yesterday to close at $44.25.

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