Health Net Gains Another MSO Deal

News Corp.'s entrée into the health-channel field, The
Health Network, landed another key distribution deal last week, this time with top-10 MSO
Charter Communications.

Paul Allen's Charter -- which will have 6.2 million homes
when its pending acquisitions close -- will launch THN in select markets.

Charter already carries the network on a few systems, but
the channel will now be rolled out to "a substantial number of additional
homes," according to Lindsay Gardner, executive vice president of affiliate sales and
distribution for Fox Channels Group.

Gardner declined to say how many new subscribers THN will
get from Charter. But he did say that specific subscriber commitments are spelled out in
the agreement, and that it's not just a hunting license.

Charter already has THN on in 68,000 homes, and the systems
it is acquiring carry it in 45,000 households, Fox officials said. Charter officials
couldn't be reached for comment last week.

THN, which is locked in a high-stakes battle with Discovery
Health Channel for carriage, has now racked up two major distribution deals in the past
few months. In addition to Charter, it has also forged an agreement with AT&T
Broadband & Internet Services for two-thirds of its subscriber base.

The network currently reaches 18 million homes, including
5.5 million from direct-broadcast satellite service DirecTV Inc. and 3 million from
Cablevision Systems Corp.

Discovery Communications Inc. has been mum about
distribution for Discovery Health, claiming that it will announce its affiliation deals at
the end of the year.

DCI is so eager to jump-start distribution for its health
channel, sources said, that it has been talking with some distributors and giving them the
option of switching out Discovery People -- formerly CBS Eye on People -- for Discovery

DCI, which has an agreement to acquire Knowledge TV, is
also continuing to talk with operators about switching out that educational service for
Discovery Health, according to Bill Goodwyn, senior vice president of affiliate sales and
marketing for Discovery Networks U.S.

DCI is also weighing turning Knowledge TV into a nonprofit
channel, along the lines of C-SPAN, he added.

News Corp.'s Fox has several bargaining chips that give it
an advantage over DCI in terms of getting carriage for its health network.

For one, it can offer cable operators retransmission
consent for Fox owned-and-operated TV stations. Fox can also give MSOs breaks on license
fees for its regional sports services, which it did for AT&T Broadband as part of the
carriage deal for THN.

Similarly, THN's affiliation agreement with Charter is a
byproduct of a settlement that Fox and the MSO worked out to resolve their dispute in Los
Angeles this spring.

Charter's systems there were balking at paying rate
increases for Fox Sports Net West and FSN West 2, and they were also threatening to drop
FX. As a result, Fox wound up pulling the signal for its regional sports service. Fox and
Charter eventually worked out their problems.

THN -- a joint venture that is operated by Fox Networks for
Fox Entertainment Group and AHN Partners L.P. -- was formed though the merger earlier this
year of America's Health Network and Fox's Fit TV. The merged channel launched in July.

"We've got a good head start in what I expect will be
a tough battle for distribution, operator loyalty and viewer loyalty," Gardner said.

As for Discovery Health, Goodwyn said, "We're in
negotiations with all of the major distributors."

Goodwyn projected that the channel will be in 10 million to
15 million homes by the end of the year, and in 40 million to 50 million in four to five

DCI acquired full ownership of Eye on People, which it
renamed Discovery People, and it is talking with distributors about replacing it with
Discovery Health, according to sources. Goodwyn claimed that is "not a
strategy," per se, but simply one option he is broaching with distributors.

Discovery People, a digital service, has roughly 9 million
subscribers, with all but 1 million of those on DBS, according to Goodwyn.

This year, DCI also did a deal to acquire Glenn Jones'
Knowledge TV, which has 10 million full-time subscribers and 20 million total. DCI was
talking with operators about possibly converting that service to Discovery Health.

Goodwyn said no decision has been made yet about Knowledge
TV's future, but it won't just be transformed into Discovery Health, although operators
that want to replace it with the health channel can.

"You are not going to see a wholesale switch to
Discovery Health," Goodwyn said. "We're looking at a lot of options."

One possibility being explored, if enough cable operators
support the plan, is transforming Knowledge TV into a not-for-profit educational channel,
Goodwyn said. In that form, DCI could use Knowledge TV in part to promote its other

DCI rolled out Discovery Health as an analog service in
August, although it had a digital predecessor that has a berth on AT&T Corp.'s digital
platform, Headend in the Sky.

Now, Goodwyn said, the game plan is for Discovery Health to
be a widely distributed network through a combination of analog and digital carriage.

Although Discovery Health has a carriage deal with AT&T
Broadband, and it is carried in at least 1 million of its homes, the MSO has yet to
publicly make any subscriber-rollout commitments to the network.