Malone's Hotel Digital Test Bed - Company Business and Marketing

Liberty Media Corp. wants access to the nation's hotel rooms and nothing, it seems, is going to stop it.

Dredging up memories of the circus-like atmosphere that surrounded Liberty's first play for Ascent Entertainment Group Inc., John Malone's company said last week that it was bidding roughly $460 million in cash for the company's outstanding stock, plus the assumption of $295 million in debt.

"This is a validation of Liberty's desire to get into the hotel space," said Denver-based Janco Partners Inc. analyst Ted Henderson. "The eyeballs in those hotel rooms are underutilized. It's a strong affirmation Liberty thinks it can make hay in those hotel rooms."

This time, though, in stark contrast to the cratered deal that was struck last summer, liberty agreed to take on ownership of Ascent's Pepsi Center sports and entertainment arena in downtown Denver, and the National Basketball Association's Nuggets and the National Hockey League's Avalanche.

Based on the number of potential headaches that a sale of the teams and an arena could entail, industry watchers said the deal only underscores Liberty's desire to have a presence in the 950,000 hotel rooms fed by Ascent's On Command video and information services.

While most of the focus in the multichannel video industry has been on households, satellite and cable providers are looking for growth potential in other areas like lodging, which provides a captive audience, who at present, are offered a slim entertainment selection of video games, soft-core pornography and some movies.

Liberty could use those hotel rooms as a test bed for new digital services. Liberty Digital is working on a number of interactive services. Liberty's taken ownership positions in several wireless data companies that could provide high-speed Internet service to hotel rooms. And the company owns Encore and Starz!, which unlike other Liberty-owned networks, isn't carried widely in hotels.

"Other people are looking at this space," Henderson said. "It's all about eyeballs. What can you put in front of people to generate more revenue out of the living room or the office? The hotel room is the same thing."

But the deal could also be a broadcast television play -- Ascent's network services division provides the National Broadcasting Company with satellite distribution support for its 181 affiliated stations nationwide.

However, that's not the story that Liberty wants you to hear, as Liberty EVP/COO Gary S. Howard highlighted the in-room programming opportunities over everything else.

"From a corporate perspective, Liberty has had a long-term interest in the consumer access offered through On Command Corp.'s service," Howard said. "Given our extensive relationships in video programming, interactive television and high-speed data services, the acquisition of On Command will position us perfectly to offer even better and more comprehensive services for business and recreational travelers."

Howard also said that Liberty was committed to finding an owner for the Pepsi Center and the sports teams but would continue to run the operations with its current management until that time.

Liberty's latest deal, expected to be tendered Feb. 28, is an offer for all shares of Ascent at a net cash price of $15.25 per share of Ascent common stock. According to a statement by Liberty, if a majority of Ascent's shares are purchased in the tender offer, the merger will commence, with any remaining shares of Ascent converted into cash at the same price as offered in the tender offer. Since this is a cash deal, the merger is expected to close in the second quarter of 2000.

But the deal isn't done yet. On Feb. 24, Alan Snyder of Snyder Capital Management, Ascent's second-largest shareholder, was quoted in the Denver Post as saying that the price was too low.

"Liberty has now set a floor price on the company," Snyder was quoted in the Post. "We will see if anyone else comes in with a better bid."

RELATED ARTICLE: Liberty's Interactive Assets

* Liberty Digital Inc. * AT&T Access Agreement * ACTV Inc. * CarsDirect.com Inc. * Digital Health Group * DMX LLC * Drugstore.com Inc. * HomeGrocer.com Inc. * iBeam Broadcasting Corp. * Village Inc. * The Lightspan Partnership Inc. * MTV Online Inc. * NetLibrary Inc. * Online Retail Partners * priceline.com Inc. * Quokka Sports Inc. * Replay Networks Inc. * Sportsline USA Inc. * TiVo Inc. * UGO Networks Inc.

SOURCE: Liberty Media Corp.

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