USA Networks is hatching plans for a travel channel as part of its $1.5 billion deal to buy a majority stake in Microsoft's online travel company, Expedia. The USA Travel Channel will be a shopping network, selling tours and travel packaged by Expedia and National Leisure Group, a tour- package company, which USA is also taking over.
USA will now own about 75% of Expedia stock and control about 90% of voting power. In turn, Microsoft will own up to 5% of USA Networks, which includes USA, SciFi, three digital networks and two shopping channels.
Expedia and National Leisure Group will join Hotel Reservations Network, Ticketmaster and local online entertainment guide Citysearch under the umbrella of USA's Travel Group.
"On the backs of Expedia and HRN, this is a really smart deal," said Bear Sterns broadcast analyst Victor Miller.
He says USA's model for the travel-net idea is well- designed because it ties together its existing television, Internet and direct-selling assets.
USA started incubating its proposed cable travel network in hour-long segments on its America's Store network last week and plans to add blocks on its Home Shopping Network later this summer. USA Travel will launch as its own 24-hour network in the fourth quarter.
USA Networks is seeking both digital and analog carriage for the new channel and wants to grow to 20 million subscribers in 12 months. Executives there believe USA Travel is better-positioned than other start-up networks because it offers cable operators two revenue opportunities. Shopping channels pony up MSOs' launch fees and also remit a portion, around 5%, of their sales proceeds to operators. Other emerging networks pay only launch fees, which are typically $5 to $9 per subscriber.
USA will draw on its direct-selling experience with HRN and its shopping channels, Home Shopping Network and America's Store, to fulfill customer-service needs.
USA Travel should look very different from Discovery Network's Travel Channel.
"We're a selling- and commerce-driven channel, not a travelogue," explained Jon Miller, president and CEO of USA Information and Service, who oversees the Travel Group. "It's going to be live, in-studio selling combined with upscale presentation of travel opportunities."
Lavish travel productions won't be enough to turn viewers into paying customers, USA's Miller added. He said the channel will provide top-notch customer service online and over the phone. "Cruise packages can be up to $2,000. You'll want to talk to someone and ask a lot of questions before you book," he said. "It's not the same as buying a $40 item [on HSN]."