Diller, USA embark on new Travel Group

Net to use newly purchased Expedia, Nat'l Leisure

By JOHN DEMPSEY, MARC GRASER

Diller

Barry Diller's USA Networks is looking to corner the market on getting people to plan their vacations through their computers and with their digital set-top boxes.

Under the umbrella of what it calls the USA Travel Group portfolio of companies, USA Networks will launch a 24-hour digital cable network called USA Travel Channel later this year. The new network will draw on Expedia, a popular online travel agency formerly owned by Microsoft, and National Leisure Group, an online cruise and vacation-package agency, both of which USA purchased Monday. Sources put these purchases, plus the cost of creating the new network, at about $2 billion.

"We're putting our marker down," said Jon Miller, president and CEO of information and services for USA. "We have the expertise and the infrastructure to create a network that's designed as a commerce vehicle, to sell services to consumers."

Miller distinguishes USA Travel Channel, which will be part of the digital tier programmed by cable systems and satellite distributors, from the Discovery-owned Travel Channel, which is mainly an analog network, focusing on documentaries and travelogues about "the people, places and cultures of the world."

Since USA also owns the 24-hour Home Shopping Network and its America's Store sibling, Miller said he plans to start previewing individual USA Travel shows as a block of programming on America's Store. "That will allow us to experiment with the channel, tweak it and make sure we get it right" before kicking it off as a 24-hour service, he said.

USA also owns a stake in the Hotel Reservations Network, which, together with the new acquisitions, gives USA $4 billion or so in annual gross travel bookings, or 16% of the total amount for 2000. Miller said USA is looking for double-digit increases each year in both online and TV commerce starting this year.

Once the deal closes, USA will own a 75% stake in Expedia for an estimated $1.5 billion in cash. Diller will become chairman of Expedia and USA Networks will control more than 90% of the voting shares. The remaining shares would come from existing share and warrant holders. Microsoft will own 3% to 5% of USA Networks.

USA Networks said that it has committed $75 million in advertising time to Expedia over the next five years. The online venture competes with close rival Travelocity, owned by Yahoo.