Skip to main content

Discovery Health Cites New MSO Deals

Discovery Health Channel has finally unveiled a number of
digital and analog carriage deals -- with MSOs such as Time Warner Cable, Cox
Communications Inc. and Adelphia Communications Corp. -- which it said will take it to 40
million subscribers during the next four to five years.

In addition to the aforementioned MSOs, Discovery Health
has reached an affiliation agreement with the National Cable Television Cooperative. In
the list released last week, the network added that it had a pact with DirecTV Inc. -- a
deal that had previously been disclosed. Discovery Health replaced Discovery People on
DirecTV.

Discovery Health, however, has yet to name any of its
equity partners. Paul Allen's Vulcan Ventures Inc. is reportedly looking to take a stake
in the service, according to sources.

In its affiliation announcement last Wednesday, Discovery
Health said it had a carriage deal with AT&T Broadband & Internet Services. But
that agreement is essentially an extension, or expansion, of a contract Discovery already
had in place with AT&T Broadband.

Discovery Health is currently carried on transponder 11 of
AT&T Broadband's digital platform, Headend in the Sky. But the network will now be
moved to one of HITS' first three transponders, the so-called Three-Pack, which all
AT&T Broadband digital-cable systems carry, according to AT&T Broadband
spokeswoman LaRae Marsik.

That's a much better position for Discovery Health, since
HITS pod 11 is only carried by about one-half of the MSO's digital systems, Marsik said.
The new pod position means the difference between the network being on a digital tier
versus being on digital basic, she added.

The MSO now has between 1.8 million and 2 million
digital-basic subscribers. Last week's deal does not include analog carriage for Discovery
Health, according to Marsik.

AT&T Corp. subsidiary Liberty Media Group owns a big
stake in Discovery Communications Inc., Discovery Health's parent, but the MSO has also
done a major carriage deal with the programming service's major rival, News Corp.'s The
Health Network.

John Ford, president of Discovery Health Media Inc.,
wouldn't offer any specifics about the individual rollout commitments MSOs had made to
Discovery Health. In the past, Discovery said it would talk to operators about launch
fees, equity in the network or ad-revenue splits.

Discovery Health's announcement said, "Many of the
deals commit virtually the entire subscriber base for the distributor." According to
Ford, the carriage deals "are not just hunting licenses."

But he wouldn't say which MSOs were rolling out Discovery
Health to all of their homes. Ford also declined to comment on whether any of the MSOs
that had done affiliation deals for Discovery Health were getting equity in the
programming service.

The Time Warner agreement will give Discovery Health analog
and digital carriage.

Sources said Paul Allen, through Vulcan, plans to take a
stake in the programming service. Allen owns MSO Charter Communications Inc. Vulcan said
it doesn't comment on any deal before it's final, and Discovery declined to comment.

Discovery Health's affiliation deal with Cox -- which is
for analog carriage to an undisclosed number of subscribers -- should come as no surprise,
since Cox owns a sizeable stake in DCI. Cox's launch of Discovery Health in markets such
as Phoenix and Las Vegas in December helped the network to reach its goal of roughly 10
million subscribers for the end of 1999. The Health Network ended the year with between
17.5 million and 20 million subscribers.

Cox's recent decision to add Discovery Health to its
Phoenix systems ruffled some subscribers' feathers, because it is replacing The
Independent Film Channel on expanded basic. Cox is moving IFC to its digital package,
which means subscribers will now have to pay extra to get it.

"A lot of IFC fans here were disappointed," a Cox
spokesman in Phoenix said.

But he said Cox felt that IFC -- which has been publicly
attacked by one vocal subscriber because of its content -- was more appropriate for a
digital-movie tier that also includes Sundance Channel, Flix and Starz Encore Media Group
LLC services.