Liberty Media, ACTV Ink Web TV Deal
By Justin Dini
TheStreet.com/NYTimes.com Staff Reporter
4/14/00 2:14 PM ET
Liberty Livewire, a unit of Liberty Media (LMG.A: - news - boards), and
interactive television company ACTV (IATV:Nasdaq - news - boards)
announced an agreement Friday to jointly develop and promote Web
television, a deal analysts said could establish the technological standard for
interactive TV.
Under terms of the agreement, dubbed "HyperTV with Livewire," the
companies will provide convergence services, including Web hosting, data
mining and e-commerce, to Hollywood studios.
"The next generation of digital cable set-top [boxes]
will begin deploying over the next several years," said
David Beddow, Liberty Media vice president, in a
statement. "In the meantime, ACTV's HyperTV
platform has the potential to create a major
marketplace for interactive television services right
now, prior to the 'one box, one screen' platform's broad availability."
What could heighten the deal's long-term significance is the fact that Liberty
Media, a subsidiary of AT&T (T:NYSE - news - boards) and ACTV's
single-largest shareholder, has acquired outright or controlling stakes in three
of the largest post-production houses in Hollywood in the last 10 months
through Liberty Livewire. These post-production houses provide sound and
visual effects as well as editing to the studios that produce TV programs and
movies.
By joining ACTV with Livewire, Englewood, Colo.-based Liberty is giving
ACTV the opportunity to link its patented HyperTV technology, which
facilitates interactive TV, with the biggest players in post-production. "We
think it is going to give ACTV the ability to accelerate the rollout of HyperTV a
lot more quickly than we expected," said Stacey Forbes, analyst with
Denver-based Janco Partners.
And C.A. Recouso, an analyst at Bear Stearns, said in a note Friday,
"Considering Liberty Livewire's post-production dominance, this agreement
should result in wide-scale promotion of HyperTV technologies as the de facto
standard for TV-Internet convergence programming."
Recouso upgraded his rating on ACTV to buy from attractive on Friday in part
because the deal "increases the likelihood of ACTV becoming a technology
licensing gateway for TV-Internet convergence programming." Bear Stearns
has done some underwriting for ACTV.
Until now, much of HyperTV's revenues had come from one-time projects with
networks and movie studios. This deal will give ACTV a much more constant
source of revenue by giving the company ready access to the Hollywood
clients of the post-production houses, Forbes said. Liberty Media's equity
stakes in a panoply of cable networks will likely aid HyperTV as well, she
said.
Forbes initiated coverage of ACTV with a buy rating in March. Her firm helped
underwrite the company's secondary offering in February.
The deal also relieves New York-based ACTV of the cost of Web hosting and
server provision and maintenance. As part of the agreement, AT&T will provide
Web hosting and Sun Microsystems (SUNW:Nasdaq - news - boards) will
provide the servers going forward. Forbes forecasts that the deal will increase
ACTV's cash flow by 50% by 2005, from $69 million to $103 million, and add
another 60 cents to its earnings per share by that same year.
Liberty Media's position as a large stakeholder in ACTV and as a recently
minted big player in the post-production world allows the company to give
several of its holdings a step up on their competition, said David Card, an
analyst at Web research firm Jupiter Communications.
ACTV is not alone on the interactive TV stage. Liberate Technologies
(LBRT:Nasdaq - news - boards), Wink Communications (WINK:Nasdaq -
news - boards) and Worldgate Communications (WGAT:Nasdaq - news -
boards) are just three of the other big players.
ACTV shares declined 2 3/16, or 11%, to 18 1/2, in afternoon trading Friday
amid a broad stock market selloff. Liberty Media fell as well, dropping 3 1/4,
or 6%, to 48 5/8.
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