Doctoring the Health Channel

With WebMD out of the equation, News Corp. has two options

The Health Channel could be on life support now that WebMD has pulled out of its network partnership with News Corp.

Rolling the channel's 20 million subscribers into National Geographic Channel (which officially launched yesterday in 10 million homes), FX, Fox Movie Channel or Fox Sports World is probably the option of least resistance, barring contract violations with distributors.

Pumping money into health programming, which has yet to light a fire with viewers, is the other. "We're re-evaluating the business," said Jeff Shell, head of Fox cable networks. He said he doesn't necessarily need the distribution for the other channels, given the power of Fox's many regional sports channels in contract negotiations.

"Our current thinking is to remain a health network."

WebMD, an online company that links doctors, patients and insurers over the Internet, became the managing partner of The Health Network a little over a year ago in a $1 billion deal with News Corp.

Pat Fili-Krushel, the former ABC programming exec, was hired by WebMD to run the network. A name change planned for last November-to WebMD TV-never materialized.

In the meantime, the company racked up $2 billion in losses for the first nine months of 2000 and will take a $275 million charge against earnings in the fourth quarter.

Its 50% stake in The Health Network goes back to News Corp., which regains 100% ownership.

Fox had expected Health to be a huge convergence hit when it teamed up with WebMD, Shell said, but almost all Internet financial things have soured in the past year. (Fox also confirmed significant layoffs in its News Digital Media division; see page 14.)

As for WebMD, it is now relieved of all future capital commitments to the network and won't issue 8.3 million shares of its common stock. News Corp. will reduce its advertising and promotion commitment from $700 million to $205 million over 10 years.

The two parties are also dissolving an international joint venture. A News Corp. spokesman likened the developments to a "friendly divorce." WebMD is trying to refocus its business, away from consumer applications to services for the health-insurance industry. Late last week, the company's stock fell 31 cents, to $7.63. It traded as high as $71 at the beginning of 2000.