[NYT] USA Networks and Lycos in Merger Deal.

Adam Rifkin (adam@cs.caltech.edu)
Mon, 8 Feb 1999 23:49:15 -0800 (PST)

Hi everyone. Sorry I've been quiet again lately. The bad news is, I
was sick again. The good news is, this time is was "just the flu" and
not that nasty asthma-induced coma I had in the fall. My strength is
back, and I'm getting ready for action again. Look out, world!

Anyhow, it's amazing how much has happened since my illnesses. AOL is
now going to own Netscape and Moviefone, plus has made deals with Qwest,
Bell Atlantic, First Bank... and anyone else willing to make a deal.
@Home bought Excite, and now @Home's majority owner TCI is going to be
subsumed by AT&T, who is planning on shifting its WorldNet
responsibilities (which include the freshly acquired IBM Internet
Connection) to @Home in exchange for tighter control. AT&T also made a
deal with Time Warner for content; Time-Warner themselves are a
significant owner (along with Compaq, Microsoft, and MediaOne) of
RoadRunner, which is the only other real player in the cable modem
arena. A federal court recently affirmed the cable monopoly so
companies like AOL and Mindspring who want some broadband action are
gonna have to go the DSL or satellite or wireless route. Actually, it
seems like everyone nowadays has a wireless strategy... speaking of
which, Microsoft has undergone yet another re-org to address wireless
and other "consumer"-oriented possibilities... (bringing Brad Silverberg
back is perceived as a good move by most of the pundits I've read).
Meanwhile, Microsoft's market cap is north of $400 billion, their cash
reserves are around $19 billion, and they keep buying stuff (NTI, anyone?).

Back to AT&T. It's pretty clear Ma Bell is ticked at being kicked out
of the local telephone game, so now she's coming back with a vengeance:
local/longdistance/fax/cable/wireless/Internet all rolled into one. Say
what you want about AT&T Personal Network, it's ambitious and really
sets a new standard that should be frightening the living daylights out
of the rest of the telecom industry.

Back to the Internet. Just when you thought consolidation was
ever-so-briefly taking a breather, Yahoo goes and pays a 90% premium for
never-profitable GeoCities. This is mind-boggling on so many levels...
and yet, Wall Street punished neither company for this merger, so there
may be more to it than meets the eye. I read one Internet eyeballs
study that said the numbers went: 1. AOL 2. Microsoft 3. Yahoo 4. Lycos
5. GeoCities 6. Netscape Netcenter... Which means after the merger,
AOL-Netcenter and Yahoo-GeoCities should be roughly equal
competitors... until...

Today, when the New York Times announces a potential Lycos-USA Networks
merger. (You *knew* Barry Diller has been drooling over the potential
for an "in" to the Internet, didn't you?):


Now, this comes on the heals of a front-page LA Times article extolling
Bill Gross' latest Barry Diller-backed venture, http://www.free-pc.com/
(I kid you not, Reuters article included below). Think of the
possibilities here. They give away free PCs with Lycos as the portal
and Ticketmaster-Citysearch and The Home Shopping Network as two
favorite e-commerce sites. And then they just sit back and collect
money. It one-ups Jerry Kaplan's Onsale concept of atCost PC's... and
it beats the concept of the AOL-Free-PCs out of the gate ("AOL, forget
free floppy disks and give us free PCs already!")...

Free PCs. As of February 1999, they're here.

Okay, so who is Amazon going to buy/merge with -- Viacom, anyone? How
about eBay? Rohit, fire up the eCards, because portals are selling for
frigging billions of dollars... getting legitimacy the way Infoseek
did, by merging with one of the "big guys"... Brill's Content must be
having a field day (here we go with the CBS-CNN merger rumors, again).

FoRK definitely needs to declare itself a portal. We could get billions
for this site, if we convince people it's a "content play"... after
all, how many viewers watched that Victoria's Secret fashion show on
Broadcast.Com on Wednesday, two million? Mark Cuban is a genius -- BCST
is worth $2 billion, my bottom!

Articles included below for maximal entertainment... from the New York

> USA Networks and Lycos Said to Be in Merger Deal
> February 9, 1999
> USA Networks Inc. has agreed to take control of Lycos Inc., the
> fourth-most-popular network of Internet sites, people close to the deal
> said Monday.
> The complex deal, which is expected to be announced today, would create
> a company valued at $18 billion called USA Lycos Interactive Network. It
> would combine Lycos, which offers Internet search services, information
> and online communities, with USA Networks companies that sell goods
> online, on television and over the telephone. These include the Home
> Shopping Network, Ticketmaster Online-Citysearch and ISN First Auction.
> The transaction is a bet that the best way to profit from the huge
> audience that sites like Lycos have built is not by selling advertising,
> as they have done so far, but to sell goods directly to Internet users.
> As users of Lycos search for information about fashion, they will see
> cubic zirconium offered by the Home Shopping Network, local news will be
> accompanied by nearby concert ticket offerings from Ticketmaster, and so
> on.
> "There is a new convergence of entertainment, information and direct
> selling," said a person close to the deal. For USA Networks, the deal
> moves its shopping properties that mostly do business over the telephone
> rapidly into the Internet age.
> "Electronic commerce has enormous wind at its back," this person
> said. "And notwithstanding what people say about the crazy valuations,
> over the next two or five years, we will find something that has a very
> real base."
> Until late last week, Lycos had been in negotiations to sell a stake to
> NBC, which is owned by General Electric, in return for on-air
> promotions. However several people close to the discussions said that
> the talks had begun to falter. Talks between Robert J. Davis, the chief
> executive of Lycos, and Barry Diller, the chairman of USA Networks,
> began in earnest last week, and Lycos was negotiating with both
> companies for a while before striking the deal with USA.
> The deal is unusually complex because USA Networks has spun off a
> partial interest in its Ticketmaster-Citysearch unit to the public. Thus
> Lycos will acquire the part of Ticketmaster that USA does not own for
> 8.5 percent of the shares of the combined company. And Lycos will trade
> a 61.5 interest in return for the Home Shopping Network, ISN First
> Auction and USA Network's stake in Ticketmaster. USA Networks will have
> about 96 percent of the voting rights in the new company.
> Lycos and Ticketmaster shareholders will also receive warrants that
> would give them the right to increase their stake in the company by 6.25
> percent, but only if its stock market value soars to the astronomical
> level of $45 billion. Based on Lycos's closing share price of $127.25
> Monday, the new company would have a market value of $18 billion.
> Though the Seagram Corporation owns 45 percent of USA Networks and could
> have blocked the deal, its three board members voted for it.
> One of several sites that started by helping people search the Internet,
> Lycos has moved to keep its audience from surfing away by offering ever
> more services from news to chat rooms to electronic mail. Now known as
> portal sites -- because they serve as gateways to all sorts of Internet
> activities -- Lycos and its competitors, Yahoo, Excite, Infoseek and
> others, have become attractive to big media companies.
> Last year, the Walt Disney Company bought half of Infoseek and
> incorporated it into its new Go portal. NBC bought a stake in Snap, a
> small portal. And so far this year, Excite was bought by At Home, a
> service that offers high-speed Internet access over cable television
> wires. And Yahoo, the leading portal, bought Geocities, the largest
> collection of personal home pages.
> Lycos has been on an aggressive acquisition spree, buying a series of
> smaller Internet sites to expand its audience. In December, Lycos was
> the fourth-most-popular network of Internet sites, reaching 26 million
> people, according to Media Metrix. The most visited was America Online,
> followed by Microsoft and Yahoo.
> Yet Davis, the chief executive of Lycos, had said that the company
> wanted to sell a partial interest to a media company in order to receive
> the sort of promotion that Disney was providing to Infoseek.
> USA Networks has also been on an aggressive acquisition binge over the
> last two years, merging with Ticketmaster in 1997 in a deal valued at
> $800 million. It subsequently merged online operations with Citysearch,
> an online city guide, and sold 40 percent to the public. The
> Ticketmaster online business has a market capitalization of $4 billion.
> USA Networks is effectively spinning off assets that represent 62
> percent of its sales and retaining the Sci-fi Channel, Universal
> Television and the company's 16 television stations.
> The businesses contributed by USA Networks represent sales of $1.5
> billion and cash flow of $562 million. Lycos had 1998 sales of $56
> million. In general, media companies have moderate to high debt levels,
> while Internet companies have little debt. The newly combined entity is
> a hybrid in that it will have earnings, unlike may Internet companies,
> but will carry no debt.
> Though Davis will give up effective control of the company, he will have
> a new five-year contract and the company will keep its headquarters in
> Boston.
> The investment banking firm of Wasserstein Perella represented Lycos;
> Allen & Company and Lazard Frhres represented USA Networks, and Goldman,
> Sachs represented Ticketmaster.

> Web entrepreneur to give away PCs, make money on ads
> Monday, February 8, 1999 03:18 PM
> PASADENA, Calif., Feb 8 (Reuters) - A well-connected Internet
> entrepreneur on Monday said he plans to give away personal computers in
> exchange for consumers accepting targeting advertising on their computer
> screens.
> Idealab!, the investment vehicle of venture capitalist Bill Gross, said
> he had introduced Free-PC Inc., a company that plans to offer consumers
> a Compaq Computer Corp. (Nyse:CPQ) personal computer, Internet access
> and electronic mail -- all for free -- in exchange for viewing targeted
> advertising.
> In a statement, Idealab! said Barry Diller's USA Networks
> Inc. (Nasdaq:USAI) had agreed to invest $10 million and link its series
> of Internet-related properties to the Free PC service.
> Free-PC plans to begin offering Compaq Presario Internet PCs with a
> range of Internet media and communications services from Compaq's Alta
> Vista Internet unit. It said it will give away 10,000 units to qualified
> customers in the second quarter.
> The move is designed to capitalize on falling computer prices and
> widespread hunger among consumers for Internet links and is expected to
> be followed by a wave of similar services to be introduced later this
> year, the company said.
> It reflects the transition of consumer PCs into low-cost consumer
> electronics devices in which a new class of PC service providers give
> away their equipment and try to make money through services available
> through the boxes, just as phone and cable companies do with cell phones
> or cable-TV equipment.
> "Free-PC is the breakthrough first product to start an inevitable
> trend," Bill Gross, chief executive of idealab! said in the
> statement. "Set-top cable boxes have been free for a long time and now
> cell phones are virtually free.
> Free access to the Internet and free e-mail services will be provided by
> privately held NetZero. Consumers can apply for a Free-PC at
> http://www.free-pc.com/
> The machines to be given away include a 333 megahertz computer chip, a
> 15-inch color monitor, 32 megabytes of memory -- enough to run standard
> Windows 98-based programs smoothly -- according to the Free-PC Web
> site. The PCs come with a 33,600 bit per second modem to connect to the
> Internet.
> Free-PC plans to link to USA Networks Web sites, including Ticketmaster
> Online-CitySearch Inc., Internet Shopping Network/First Auction and the
> Home Shopping Network.
> When consumers apply for a Free-PC, they will be asked to fill out a
> detailed questionnaire that provides the company with typical
> demographic data, such as age, income and family status and information
> about personal tastes and interests.
> The information is used to determine which advertisements are displayed,
> increasing the likelihood that the ads are relevant to consumers, while
> assuring corporate sponsors that their ads are reaching highly qualified
> consumers.
> A demonstration screen on the Free-PC Web site had a range of five or so
> billboard-like ads arrayed down the right side of a computer desktop
> window.
> Free-PC is the latest business to be spun-out of idealab!, which bills
> itself as an incubator of Internet companies.
> Since 1996, idealab! has developed more than 20 businesses including
> CitySearch, an Internet-based local information service that is now
> owned by USA Networks and GoTo.com, a Web search directory, and eToys,
> the leading online toy retailer.


An object model and technology that a) runs over HTTP, b) allows methods
to be written in multiple programming and scripting languages, c)
storage of the state and behavior independently at different places
around the net, d) dyanmic switching, declaration, polymorphism,
inheritance, e) decentralized tracking, control, versioning,
composition, f) lightweight and componentized, g) fail-safe, h) fast, i)
embedded, built-in networking, j) embedded built-in access control, k)
reflexive, i.e. has the means to reason about itself and adapt,
including distributed annotation and rationale, including adaptive
interaces i) mobile, l) better than having sex in the backseat of an
Abrahm's Battle tank, i.e. better than f-ing with than CORBA.
-- Greg Bolcer