Masters logs on to Liberty Interactive

E! chief investing time in set-top boxes

NEW YORK — Exiting E! Entertainment CEO Lee Masters will head a new company spun off from Liberty Media Corp. called Liberty Interactive.

The announcement sheds light on what Liberty Media will do with at least some of the $5.5 billion in cash it will receive from the planned sale of its interest in Internet service @Home and several other businesses to AT&T.

The subsidiary of Liberty Media will include the company’s 85% interest in TCI Music and will focus primarily on creating content for advanced set-top boxes, said Masters, who earlier announced he will depart E! at the end of 1998.

Liberty Media is Tele-Communications Inc.’s programming company with investments in cable networks; Masters, who will become president and CEO of Liberty Interactive on Jan. 1, said the new venture would be to “online, new media and convergence (what) Liberty Media was to cable programming.”

Masters announced his resignation from E! on Sept. 14 after leading the cable web from launch to more than 50 million subscribers. Masters chose not to renew his five-year contract with E!, the culmination of which will pay him a $20 million bonus.

Ravenel tapped

Bruce Ravenel, formerly TCI’s executive VP of interactive ventures, will join Liberty Interactive as executive VP and chief technology officer. Ravenel will assume his position immediately and will serve as Masters’ second in command when Masters joins Liberty Interactive.

“(Ravenel) understands the technology better than anyone,” said Masters, noting he was involved with the creation of @Home, the cable Internet service provider, and TCI’s advanced set-top box strategy.

“Bruce is a key that people shouldn’t underestimate,” said David Koff, senior VP with Liberty Media. “His skills are compatible with Lee’s. Lee’s the creative programming guy, and Bruce is the tech and deal guy.”

Sources close to Masters said one of the reasons he chose not to reup with E! was that his fortune was not tied directly to the performance of the cable web. Koff said both Masters and Ravenel’s compensation will be directly tied to the asset value they create at Liberty Interactive.

“It’s primarily based on equity appreciation,” Koff said. “There’s no fancy country club membership and no huge salary.”

Liberty Media will transfer its 85% interest in TCI Music to Liberty Interactive. The publicly traded TCI Music includes the musicvideo channel the Box, the 95-channel digital audio service DMX and a music Website group called SonicNet. The New York-based Tom McPartland is the CEO of TCI Music.

On the news, common shares of TCI Music jumped 69¢ to $3.75, a 22.45% increase. Liberty Media’s stock declined 25¢ Monday to $36.38, a decline of 68%.

Set-top boxes

One business that will not fall under Liberty Interactive will be Liberty’s planned venture to lend funds to cable operators to expand the rollout of advanced digital set-top boxes. That function will fall under a division called Liberty Capital, a planned venture that will become formal when the planned AT&T purchase of TCI closes.

Longtime TCI exec Gary Howard will head Liberty Capital.

Neither Masters nor Koff would detail how much capital Liberty Interactive will have at its disposal, but both said access to funding for deals and acquisitions will not be an issue.

“With all the cash Liberty has, funding will not be a problem,” Masters said.

Added Koff, “They’ll have a line of credit to start out with and then it will be deal by deal.”

Masters said the main reason he decided to join Liberty Interactive was the tremendous business opportunities he believes advanced set-top boxes will present.

“When I talk to my friends in other businesses about the set-top boxes, their eyes glaze over,” Masters said. “But I believe it’s going to provide an unbelievable opportunity, and no one has focused on created content for them. That’s our mission.”

Masters said conservative analysts predict that 40%-50% of cable homes will have these advanced set-top boxes in five years, and more bullish analysts believe they will reach 90% penetration in that time. The set-top boxes will be able to transmit hundreds of cable channels and a multitude of interactive services, or so the theory goes.

Masters envisions Liberty Interactives’ products as “heavy on information, entertainment and transactions.”

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