Discovery has Eye on People
Deal stops cable net's red ink flow
Discovery signed a letter of intent to become Eye on People's managing partner and half owner in July, and company officials at that time expected to close the deal in 30-60 days.
The delay in completing the deal fueled speculation that Discovery and CBS could not come to an agreement on terms, and the deal was in danger of falling apart.
Officials from CBS Cable and Discovery could not be reached for comment Wednesday.
The original July proposal called for Discovery to fund Eye on People until Discovery's investment equaled the amount CBS has already spent on the channel, believed to be about $50 million.
Eye on People, which focuses on people and personalities, launched on March 31, 1997, and has faced an uphill battle in trying to grow its distribution. The web has only about 12 million subscribers, which has caused the red ink to flow.
The cable network's operating cash flow, according to Paul Kagan Associates, was estimated at a loss of $20 million in 1997, a loss of $21 million in 1998 and a loss of $18 million for 1999.
CBS' recently anointed chief executive Mel Karmazin has been said to be unhappy with Eye On People's losses, and the Discovery deal looked to be a good way to cut the cable net's fiscal hemorrhaging.
The Bethesda, Md.-based Discovery has a good track record in taking over struggling cable webs and turning them around. Discovery bought the moribund Learning Channel in 1991 and turned it into a 68 million subscriber asset that analysts value at about $2 billion. Last year Discovery purchased a majority stake in the Travel Channel from Paxson Communications and has begun to increase both distribution and the quality of its programming.
In both the Learning Channel and Travel Channel situations, Discovery moved their headquarters to Bethesda and kept very few of the employees it inherited.
Eye On People is based in Stamford, Conn. Geoffrey Darby serves as the web's president.
