The deal may be the best example yet of the convergence of entertainment and shopping that has long bewitched global media companies. USA Travel, as the new venture will be called, will combine Expedia with a 24-hour cable channel and the National Leisure Group, a new acquisition that provides private-label vacation packages. USA Travel will rely on Home Shopping Network's sales and production muscle; customer service and fulfillment will be handled by other units of USA's empire.
In Diller's world, customers will book airline tickets using Expedia, find lodgings with the Hotel Reservations Network, peruse restaurant choices on CitySearch and buy their concert and sporting events tickets through Ticketmaster.
This is not, of course, the ultimate convergence that media visionaries have in mind. TV viewers won't be able to click a button, flip over to a Web site and buy everything from a blouse to a boat. Diller isn't waiting for that day to arrive. Instead, he's using today's technology - old-fashioned cable TV, call centers, and dialup Internet connections - to cobble together a more-practical convergence. "It's just coming into view for other people to understand," Diller says. "People aren't as likely now to say that these are unrelated assets."
Investors are already buying in. Even as media and Internet companies struggle with the worst advertising market in a decade, USA Networks has sailed along, buoyed by the 65 percent of revenues that come from direct sales. (Another 20 percent flows from subscriptions and production fees.) Accordingly, USA's share price has jumped nearly 50 percent since January, climbing from $18 to $26.96 last Thursday. Since 1996, the company's revenues have risen from $41 million to nearly $5 billion, and its market cap has exploded from $235 million to just under $19 billion today. USA Networks reports earnings this week, and analysts expect it to lose 13 cents a share on revenues of $1.3 billion. "Considering how crappy the market has been this year, it's clearly done extraordinarily," says Bear Stearns analyst Victor Miller. "It's my No. 1 pick." Miller's not the only one cheering. "Barry Diller rocks," says Credit Suisse First Boston analyst Laura Martin. "And you can quote me on that, baby."
The latest growth spurt came after a much-needed housecleaning in June 2000. In that restructuring, Diller organized USA into three divisions: entertainment, which encompasses the cable channels and film production; electronic retail, consisting of HSN and its international offshoots; and information and services, combining everything from Ticketmaster and the Hotel Reservations Network to call center powerhouse Precision Response Corp. and back-end technology infrastructure unit Electronic Commerce Services.
ECS is the "glue that ties together these disparate assets," Diller says. With ECS in place, for example, HSN was able to land deals with major sports leagues including the PGA, NBA, NFL, Nascar and, last week, the U.S. Tennis Association to sell sports merchandise during game broadcasts.
The deals with the sports franchises are known inside USA Networks as "short shopping," a strategy that the company has vowed to duplicate with media companies hungry for additional revenues in the depressed advertising climate. Diller says one major broadcast network has already tapped USA to help it sell its licensed schwag on the air and online. (He declined to name the network.)
