RealTime IT News

Firms Are Game For 24-Hour Interactive Network

Interactive TV player Liberty Digital Inc. Monday grabbed a 50 percent stake in Sony Pictures Entertainment's Game Show Network in a partnership to create a round-the-clock gaming network.

Liberty Digital, the Internet unit of Liberty Media Group will shell out $225 million in cash and $50 million in Liberty Digital stock in the investment. The transaction is subject to execution of definitive agreements, as well as other customary conditions to closing and is anticipated to close in the fourth quarter of 2000.

In a conference call Monday, Liberty Digital President and Chief Executive Officer Lee Masters said games is "one of the top categories we have identified" in terms of its potential for growth and success in the interactive sector.

"Games is a category we are fascinated with," Masters said. "We think it is the single best way to get people involved in interactive TV. In the United Kingdom, 18 percent of B-Sky-B's 3.5 million subscribers go to gaming site once a month and 4 percent use it 80 minutes per day. Subscribers are 2.5 times likely to make a purchase. It's a wonderful opportunity for people who enjoy games of skill."

"From a technology standpoint there is a full range of interactive technology options," Masters continued. "All new shows will be fully interactive and developers are excited about creating interactive capabilities."

Masters, who said his firm and SPE will jointly manage the Game Show Network, said Monday's deal came after 18 months of strategic partnerships with or investments in ICTV, Open TV and Mixed Signals. Liberty Digital has also found placement with the younger Generation Y crowd by aligning itself vis-á-vis a 10 percent stake in MTV Networks in May 1999 and a $54 million investment in Alloy Online Inc. last March.

"This deal signals our beginning as an operating business, which will grow and experience a cash flow increase," Masters predicted.

Studies from Forrester Research Inc. would seem to bear this out.

The online research firm estimates that smarter devices will create $25 billion in new revenues from viewers interacting with their TV screens.

Josh Bernoff, principal analyst at Forrester Research, said "smarter TV is good news for companies in the TV industry -- if they prepare for it now."

"Smarter TV will solve the cash-flow problems of cable and satellite operators and free broadcast networks from ratings fixations. But companies wedded to the metrics of plain old TV -- audience sizes and prime-time schedules -- will see these new revenue streams pass them by," Bernoff said.

Len Grossi, president of SPE's Columbia TriStar Television division, which oversees GSN, said Sony is a device company that has also expanded to the music, television and film business."

"Sony has always understood that content drives device interest," Grossi said. "Game shows offer the best opportunity for advanced interactivity. Why Liberty Digital? Their commitment to interactivity fits nicely with our game plan."

"We have grown an unprecedented 9.9 million households in the past year, reaching over 29 million subscribers via cable and satellite," said Michael Fleming, president of SPE's Game Show Network. "With Sony Pictures Entertainment's continued support and Liberty Digital's experience, we will bolster Game Show Network's leadership in interactive entertainment."

Liberty Digital was spun off from Liberty Media Group in September 1999 when it completed the swap of its Internet and interactive TV assets with TCI Music for a 95 percent stake in the company. TCI's name was changed in favor of Liberty Digital after issuing 109.5 million shares of Series B c