PREMIUM SEARCH Search by job title, geography and build a list of executive contacts
Barry Diller has a vision of the future of leisure. Gathered around their TV sets, consumers will check out travel shows for possible vacation spots. Before you know it, they'll become enchanted with some exotic location. Next stop: The Internet, where they'll order up airline tickets, hotel rooms, and maybe a couple of reservations to a Don Ho show via interactive TV or on their computers.
That's the basic premise behind the estimated $1.5 billion deal that Diller's USA Networks announced on July 16. In a series of complex transactions, Diller says he will buy 75% of the Expedia online travel service, including Microsoft's 70% stake. Then, he'll package Expedia together with National Leisure Group, which sold more than $200 million worth of cruises and other travel tours last year. And to make sure the message gets home, USA will launch a new TV network called, what else, the USA Travel Channel sometime this summer.
Diller has struck more than 30 deals in the last three years to build out what is rapidly becoming the media industry's leading commerce company. Already, USA controls the Home Shopping Network, which last year sold more than $1.7 billion worth of cosmetics, jewelry, and clothes. It also owns a controlling interest in Ticketmaster CitySearch, which last year sold more than 83 million tickets to everything from the Los Angeles Lakers to Madonna concerts.
THE CABLE CONNECTION. Now, USA Networks intends to put Expedia together with its other major holding, online-booking service Hotel Reservations Network. Together, that would give USA the ability to book approximately $4 billion worth of hotels, flights, and other travel, Diller believes.
Plans are still a little vague about how Diller intends to link the travel businesses to his other media holdings, which include the cable USA Network and Sci-Fi Channel. At the outset, according to Jon Miller, president of USA Information & Services, the company will air a 30-minute travel segment on its Home Shopping Network. Soon after, it expects to launch the cable channel. And, according to Diller, within three or four years, the channel will likely be seen in more than 20% of America's homes.
Diller has focused on travel because it is among the largest sectors for Internet commerce. According to Jupiter Media Metrix, consumers will order close to $24 billion worth of tickets and hotel rooms online this year, more than three times the next largest category of products -- PCs, at $7.2 billion. And by 2006, projects Jupiter, e-travel services will mushroom to a $63 billion business, roughly half the size of everything else combined that consumers will order online.
JUST THE TICKET? Last year, USA's majority-owned Hotel Reservation Network generated $327.8 million in revenues from filling online orders, booking rooms for such well-known Internet sites as Travelocity, Cheap Tickets, and more than 1,800 other sites, including those operated by Northwest Airlines and hotel chains including Hilton and Sheraton.
Under the terms of the deal, USA Networks will give Expedia shareholders the option to hold their existing shares of the company or trade them in to USA for a combination of stock that includes a 0.35 share of a new series of USA convertible and USA common stock, with a value of $35 apiece. Microsoft is converting its stock into USA shares, and will own an estimated 3% to 4% of USA Networks. USA is controlled by French conglomerate Vivendi, which owns 45%, and John Malone's Liberty Media, which owns 21%. Under a management agreement with Vivendi and Liberty, Diller votes the owners' shares and makes virtually all management decisions. If his notion of integrated vacation planning pans out, this could be a trip to remember.
By Ronald Grover in Los Angeles Edited by Douglas Harbrecht
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
