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CALL IT TCI GUIDE TCIs UVSG Ponies Up $2B for Magazine

In a marriage of print and programming, TCI's UnitedVideo Satellite Group Inc. agreed last week to buy TV Guide magazine and relatedNews Corp. assets for $2 billion.

As a result, News Corp. and Tele-Communications Inc. wouldshare control of UVSG, the core of which becomes TV Guide-branded magazine, cable,interactive-television and Internet products.

Among other changes, UVSG's The Prevue Channel, theleading analog-distributed guide channel, would be renamed The TV Guide Channel.

UVSG chief operating officer Peter C. Boylan III said thecombination could offer advertisers "global reach that is second to none."Analysts said the deal could juice Prevue's international efforts, through carriageon News Corp.'s satellite platforms, and it could give Prevue added clout as it triesto dominate the emerging market for electronic navigators on digital-television platformsin the United States.

UVSG and TV Guide flirted with joint ventures in thepast, but none stuck. Past attempts did not include the TV Guide magazine, though.Since then, News Corp. chairman Rupert Murdoch and TCI chairman and CEO John Malone haveforged several partnerships, including 50-50 ownership of Fox/Liberty Networks.

Some shared-power deals between strong-willed companiesfall apart, but UVSG chairman Gary Howard and News America Publishing Group chairwomanAnthea Disney said the companies were so "complementary" that they didn'tenvision any problems.

When a reporter cited the cratered News Corp.-EchoStarCommunications Corp. deal, Howard said, "With all due respect, I hope that I'm amuch more workable person than [EchoStar chairman] Charlie Ergen, who I know quite welland who I'm good friends with."

Media Group Research analyst Mark Riely noted that Murdochdidn't just forge a joint venture between Prevue Networks Inc. and TV Guide.

"He took a stake in a whole company, so it may have animpact on other ventures that they do together," Riely said.

In a related deal, News Corp. said it has a deal to buyHorsham, Pa.-based TVSM Inc., publisher of Total TV and The Cable Guide,for$75 million. The TVSM operations are part of the UVSG-News Corp. deal.

Total TV would be retooled and relaunched under the TVGuide name.

"We are very interested in growing the TV Guidebrand into areas like cable and satellite, where there is a large demand for print guides,and where we haven't fully applied ourselves," News America president Joe Kienersaid last week.

The Cable Guide, a monthly with a circulation of about4 million, will remain a stand-alone magazine, Kiener said.

The TV Guide deal emphasizes the Prevue Networksaspect of UVSG, which also distributes programming such as WGN via satellite and packagesprogramming for C-band satellite-dish owners.

Those business lines weren't what prompted TCI toboost its ownership in UVSG to 73 percent in January, though.

Howard has been weaning UVSG out of noncore operations,agreeing to sell the C-band business to PrimeStar Inc. for about $480 million in a dealthat has been held up while PrimeStar tries to get its $2.1 billion purchase ofMurdoch's American Sky Broadcasting Inc. direct-broadcast satellite assets approvedin Washington, D.C. He is also actively shopping UVSG's SSDS Inc. systems-integrationand SpaceCom data-distribution businesses.

Similarly, News Corp. has been repositioning itself awayfrom newspapers and magazines to more of an entertainment business, focused on television,films and distribution platforms like Sky Television and Star TV.

Murdoch bought TV Guide in 1988 for about $2.9billion, along with other magazines that he later sold, including TheDailyRacing Form and Seventeen. Riely said Murdoch was widely seen as havingoverpaid for TV Guide, but he has also used it effectively to promote the FoxNetwork.

The magazine's circulation and profits have fallen inrecent years, and it faced the dilemma of coping with an explosion of new listings asdigital-TV platforms proliferate.

"From our point of view, the key to this deal was thatwe wanted to look at how TV Guide would look in the future," Disney said in aconference call with reporters last Thursday. Several years from now, she said, it'spossible that TV Guide won't even run channel listings. By then, she added,"we'll have grown a full-service entertainment magazine."

By Boylan's estimates, UVSG would grow to $1.3 billionin annual revenue from $508 million last year; $325 million in annual cash flow from $104million last year; and a relatively low $650 million in debt, with minimal capitalexpenses. Analysts said there could be considerable savings by consolidatingdata-collection and advertising-sales operations.

UVSG agreed to pay News Corp. $800 million in cash andabout $1.2 million in stock, fixed at around 30 million newly issued shares. The companieshope to close the deal this year.

TCI Ventures Group and Liberty Media Group, which holdTCI's UVSG shares, would end up with 44 percent equity. News Corp. gets 40 percent,and public shareholders get the other 16 percent.

News Corp. and TCI each get 48 percent voting power, andthey would each name five directors.

UVSG chairman Gary Howard wouldn't comment on whetherthe News Corp. deal slams the door on UVSG's already-collapsed interactive-guidejoint venture with Gemstar International Group Ltd., which owns rival guide-makerStarSight Telecast Inc. But Gemstar and UVSG have resumed the patent litigation that wasto have been settled as part of the venture agreement, which lapsed in March.

Wall Street seemed to give the deal high marks, driving upUVSG's and News Corp.'s shares on a day when stocks were down overall.Gemstar's share price was down.