NEW YORK — Rupert Murdoch’s medicine cabinet is looking better stocked than John Malone’s.
Murdoch’s Health Network, a part of the Fox Channels Group, has scored a coup by landing a carriage deal with AT&T’s cable systems, the second-largest operation in the U.S. (behind Time Warner).
An AT&T spokeswoman said the company will deliver an unusually high two-thirds of its subscribers to the Health Network by the first quarter of 2004. AT&T reaches more than 10 million subscribers, and if pending deals — like the proposed takeover of Media One — get approved by federal regulators, that total could rise to close to 15 million over the next year.
“In our duel with Discovery Health, we’ve drawn first blood,” says Lindsay Gardner, executive VP of affiliate sales and distribution for the Fox Channels Group. Gardner is gloating because Health Network has struck gold in its competitor Discovery Health’s backyard: AT&T owns John Malone’s Liberty Media, which in turn owns 49.2% of Discovery Communications. (Liberty operates independently of AT&T, which trades it as a tracking stock.)
But Health Network had to pay launch fees for carriage, which could funnel upwards of $40 million to AT&T’s coffers over the next five years, according to sources. AT&T’s monthly license payment to Health Network, one source said, will start off at 5¢ a subscriber, a figure that will grow slowly each year until it reaches 10¢ a month per sub by the end of the contract.
The transaction included a renegotiation in just about all of the contracts between AT&T cable systems and Fox’s 22 regional sports networks.