March 15, 1999

Discovery's Health Offers Ops a Shot at Equity

Mike Reynolds

Looking to secure the cure for gaining basic analog carriage, Discovery Health Media Inc. is offering MSOs an equity stake in the company in return for distribution as it prepares for the Aug. 2 launch of its network.

John Ford, president of Discovery Health Media, said that Discovery Health Channel is willing to offer up to a 40% stake to major MSOs and DBS providers in exchange for carriage. Ford said the equity gambit marks a first for a Discovery network and he expects to close initial deals soon.

"We've been in discussions with all the major MSOs. We hope to sign our first deal within a month or so, and have several others to follow shortly thereafter," stated Ford, who said Discovery Health Channel had not yet set a specific distribution goal for its launch. "We don't know yet when contracts will expire, or if networks are folding, or the timetable for rebuilds and whether Discovery Health would be part of those rollouts."

Ford, who also emphasized that Discovery Health Channel is interested in securing pacts with satellite distributors like DirecTV, said the network was pursuing agreements with "MSO of substantial size, serving 1 million homes or more, and is also open to deals with cable cosortias that add up to that level, if they can make the equity deals work for their members."

DCI announced late last year that it would invest up to $350 million to create Discovery Health Media, which will not only include the network, but a Web and the potential for such other multi-media vehicles as books, video and CD-ROMs. Ford said equity partners would share in the revenue streams generated by all of those platforms. Last summer, Discovery launched a digital health network. Ford said current plans call for that channel to continue operating as a distinct entity.

In addition to offering equity positions, Ford said Discovery Health also has "a cash component" to spur distribution. One inducement not on the table: discounts against other Discovery Communications Inc. networks. Overall, Ford said the network is proffering financial and equity incentives with the hope of "getting the channel on air, sooner, rather than later."

DCI and others believe that health remains one of the few remaining major under-served categories for cable. Currently, America's Health Network is the only network dedicated entirely to this burgeoning category, one being fueled by the nation's interest in keeping tabs on continuing advances in medicine and a senescent baby boomer population concerned with maintaining healthy and fit lives.

Discovery Health will also serve up new episodes from sister network TLC's Ford said Discovery Health is talking to a number of medical facilities about a real-life series in which a crew would follow the "activities in a hospital for as long as a year," and is in discussions with broadcast news divisions about producing "short-form, evergreen pieces."

Overall, Ford said research suggests that Discovery Health Channel will skew between 55-65% female, save for certain shows aimed at men's fitness and health issues.

As for advertising sales, Ford said Discovery Health will be sold as part of package across DCI networks, but he expected the network would find a solid core of dedicated advertisers within core health/fitness/medical categories. Similarly, he anticipates that systems will be able to attract buys from local/regional drug stores, hospitals, HMOs and fitness clubs. Local systems will receive three minutes of ad time per hour.