Oprah cabler to get funding boost

Net will receive additional coin from Discovery

Oprah Winfrey’s cabler is about to get a big influx of startup funding.

Discovery Communications disclosed in a regulatory filing Friday that it has agreed to put up another $89 million in financing for the Oprah Winfrey Network, set to bow Jan. 1 on what is now the Discovery Health channel.

Discovery already had been committed to putting up $100 million in financing for OWN through Sept. 30, 2011.

The new coin comes in exchange for Winfrey agreeing to increase her “on-air commitment to OWN, including hosting or starring in a show to air on OWN,” according to the Discovery filing.

Sources close to the situation said that a good chunk of the $89 million will go to fund the “Oprah’s Next Chapter” hourlong weekly series that has already been in the works for months. OWN unveiled the show as part of its first upfront presentation to advertisers in April. It’s described as featuring Winfrey conducting interviews with notable people in exotic locales like the Taj Mahal and Great Wall of China.

Although OWN remains a 50-50 joint venture of Discovery and Winfrey’s Harpo Inc., Discovery has assumed the sole responsibility for funding the 24-hour lifestyle and self-help channel. In Friday’s filing, Discovery said the additional funding may come from a revolving loan from Discovery or a third-party lender. With the funding increase, the joint venture now has the right to distribute OWN in the U.K. and Canada, which could be lucrative markets for the cabler.

Discovery hinted that an adjustment to the funding agreement with Harpo was coming in its second-quarter earnings announcement on Aug. 3. At that time, Discovery said that $74 million of the initial $100 million in OWN financing had been committed.

OWN has been in the works for more than two years, and it has undoubtedly incurred costs from the exec turnover that the venture has experienced during its pre-launch phase, including shuffles among execs in key programming, marketing and digital media posts.

In addition to paying for the production of “Oprah’s Next Chapter,” it’s likely that the additional coin will help cover marketing and promotional costs for the launch. To date, Winfrey has plugged OWN heavily on her Oprah.com website, but there’s only been a little on-air promotion on the Discovery Health channel.

Winfrey’s arrangement with Discovery includes a safety net that gives her the right to require that Discovery buy out Harpo’s 50% stake in OWN starting on the fifth anniversary of the channel’s launch, after which the right can be exercised at 2 1/2-year intervals, according to Discovery’s second-quarter earnings filing. The agreement allows that if Harpo triggers a Discovery buyout, the price would range from a maximum of $100 million on five-year anniversary of the launch to up to $400 million on the 12 1/2-year anniversary.

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