Even though cable content is sliced up into more sections than five acres of Texas grapefruit, Barry Diller sees yet another opportunity to carve out a niche. Diller, chairman of USA Networks, home of cable's USA, Sci-Fi and Home Shopping Network, said he's waiting for third-party approval on a "small" cable network acquisition that he intends to grow into a larger service to fill the mystery niche.
According to sources familiar with USA's intentions, there are a handful of networks most likely to become Barry's: GoodLife TV, Inspirational Network and Recovery.
GoodLife is a floundering 8 million-subscriber service run by the people known as Moonies, or the Reunification Church. It lost about $21 million in 1999 and trades on the Nasdaq for about a nickel. Inspirational Network is a nonprofit religious channel with some 12 million subscribers. It's provided free to cable affiliates.
The Recovery Network targets the addicted and psychologically damaged demo. Now called RnetHealth.com, its sales increased 3%, to $722,000, in the last six months of 1999, but losses rose 14% to $5.2 million.
RnetHealth has about 5 million subscribers and trades at about $1. William Moses, chairman and CEO of RnetHealth, simply said he couldn't comment on a deal with Diller "at this time."
America's Voice is certainly ripe for the taking, having filed for bankruptcy in January. The conservative political channel reaches about 11 million homes, 8 million of them full-time.
Less likely plays include Diller's taking a piece of the profitless Game Show Network, or Odyssey, which just canceled its IPO in the recent market downturn. At one point, Diller courted a deal for Ovation, the fine-artsy channel with 17 million cable and satellite homes, but sources say the asking price was too high.
A deal for Shop at Home, a Nashville-based broadcast group with six television stations and about 9 million cable subscribers, is also still alive, according to individuals familiar with Diller's doings.
Diller and SAH were close to a deal in mid February, but Diller's bid for 51% of SAH fell apart at the last minute. SAH is now reluctant to negotiate from a weakened position, a source familiar with the companies said. SAH's stock has been declining since Broadcasting & Cable broke the news of the Diller/SAH near-deal (Feb. 21), and it hit a 52-week low of $5 per share on April 17. SAH was trading last Friday at $6.125 per share.
Diller says his deal will go down in the next quarter, adding that he plans to sink "hundreds of millions" to develop programming, which will tap a heretofore untapped programming niche. One question: What's left?
Considering USA's penchant for Tarantino-esque dramedy and Sci-Fi's alien and horror leanings, action or adventure seems a complementary category.
A simultaneous deal with MGM is also possible. The movie studio has been agitating for its own channel.
Diller's remarks came during the company's first-quarter financial report. USAi lost $18.9 million, or 6 cents a share, compared with $26 million, or 3 cents a share, last year. Diller said the operational loss reflected a piece of the more than $1 billion in acquisitions USAi made last year. In terms of net revenue, the company had its ninth straight quarter of 20% to 25% growth and broke the $1 billion mark for the first time ever. USA's stock rose 10% following Thursday's earnings release but remains 26% below a January high-water mark of around $30, before the February revelation that the World Wrestling Federation might take its programming elsewhere. Diller reiterated USA's first right of refusal for the programming.
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