Discovery makes bold bid to lure Internet business

TV programmer creates new company and Web home page

`A family-safe way'

February 02, 2000|By Patricia Meisol and Mark Ribbing | Patricia Meisol and Mark Ribbing,SUN STAFF

NEW YORK -- Discovery Communications Inc. yesterday unveiled a new company and a bold bid to grab a major chunk of Internet business.

The Maryland-based television programmer, known for its educational cable channels, said it would invest $500 million to lure Web users away from such competitors as America Online Inc. and Yahoo! Inc.

The new company, called Inc., will build on Discovery's online services with a new home page, Discovery Web Express, to be launched Monday. Web Express will offer consumer information as well as Discovery's trademark adventure content, all linked to related shopping opportunities.

"It's a good idea, and it's somewhat inevitable, because with big media companies you have to prove you have your legs firmly planted in the Internet space," said Gary H. Arlen, president of Bethesda interactive-media research firm Arlen Communications Inc.

The Internet venture would be the largest and riskiest yet for 14-year-old Discovery. Founder, Chairman and Chief Executive Officer John S. Hendricks Jr. is exploring myriad financing options for his new Web venture, including an initial public offering.

One benefit of creating a separate, public Internet company is that shareholders would be free to bid up its share price to the same stratospheric levels enjoyed by other online companies. Discovery is privately held, with 49 percent of the company owned by AT&T Corp.'s Liberty Media Group and 25 percent controlled by Cox Communications Inc. Advance/Newhouse Communications and Hendricks also hold stakes.

Discovery's new online undertaking will be managed by Michela English, who has overseen Discovery's growing retail, home video, Internet and education units.

English said the new online service will allow users to get advice on decorating, choose pets and check stock prices from the same page.

"It's about better access in a family-safe way," she said.

Discovery, which plans to move its headquarters from Bethesda to Silver Spring, enjoys some advantages that many other Web companies lack. It has relationships with potential advertisers, and has a proven track record of bringing in audiences.

The company's two best-known networks, the Discovery Channel and the Learning Channel, are seen in 77 million homes in the United States and 88 million worldwide.

"Anyone can open an Internet site today. Having the Discovery brand name is certainly an asset," said Alan S. Gould, an analyst with Gerard Klauer Mattison in New York.

And unlike many other electronic-commerce sites, Discovery has experience with bricks-and-mortar retailing; its 160 stores attract 70 million visitors a year.

"This is not just another start-up," said Judith McHale, president and chief operating officer of Discovery Communications Inc. "It's building on content and extensive research capability," including the largest library of programming in the world, with 65,000 hours of film on science, history, adventure and technology.

Discovery, launched with a $25 million investment in 1985, was valued at more than $10 billion last year by Credit Suisse First Boston.

The company has grown quickly, offering viewers the combination of scientific, historical and cultural information first perfected by National Geographic magazine.

In the Internet realm, Discovery outstrips its much older rival.

According to Media Metrix Inc., a New York company that measures online audiences, National Geographic's Web site attracted 534,000 visitors in November, the last month for which a figure is available. garnered more than three times that many, with 1.8 million.

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