Paul Allen Sells
his cable channel TechTV To Comcast.
The acquisition will enable Comcast, the nation's largest cable network, to expand its technology and gaming channel to 44 million cable and satellite homes. G4 CEO Charles Hirschhorn will become head of the combined company.
Financial terms of the deal were not disclosed, but it was speculated that it all started when Paul Allen made his splash appearance at the annual cable- industry convention last month. And not just because the reclusive mogul arrived aboard the world's largest privately owned yacht, Octopus, a 413-foot stunner Allen docked on the Mississippi River.
Allen returned to the convention stage for the first time since 1999 to carry the flag for his new set-top-box technology, which some in the industry say could be a winner.
He was not available to elaborate on his comments. But industry executives say he could end up being part of one of the consortiums discussing a bid that would split up Adelphia, which would sell for about $20 billion.
"It's safe to assume that if Adelphia is broken up, Allen will be in there," one cable leader said.
Allen, who also owns the Portland Trail Blazers, Seattle Seahawks and a mansion in Beverly Hills, invested heavily in media and technology in the go- go 1990s, when his net worth was about $30 billion.
Last week, Allen sold TechTV, a channel on new technologies, to Comcast. Industry sources say Vulcan lost money on the sale despite the $300- million price tag.
Symbolic of the new esprit de corps at headquarters, the April board meeting was not at a hotel, as usual, but at one of the company's customer-service call-in centers. The introverted Allen didn't slip away after the meeting but shook hands, talked sports and mugged for photos with employees, according to Charter sources.
In New Orleans, Allen also was more visible than usual.
At a cocktail party for about 100 cable executives on his new ship, he showcased Digeo, his set-top-box software that integrates a host of services. He also played host to a "ladies lunch" on board for Oxygen, the women-oriented channel that Vulcan backed with $100 million.
Conventioneers, who wore plastic galoshes over their shoes to keep from scuffing the immaculate teak deck, reveled in the experience for days.
Time Warner CEO Richard Parsons, , when asked about his acquisition prospects at the opening panel, joked: "We're going for a boat."
Touring cable executives said the 8-month-old vessel cost Allen $200 million and had a permanent crew of 60 people, including several former Navy Seals. It has two helicopters, seven boats and a remote-controlled vehicle for crawling on the ocean floor.
An accompanying submarine, under construction, will have the capacity to sleep eight for up to two weeks underwater.
Allen gave a personal demonstration of the professional recording studio that is on board, playing electric guitar with his rock band and treating guests to renditions of "Brown-Eyed Girl" and "Mustang Sally."
Inside the convention center at the Digeo exhibit, Allen talked with techies as if "he were doing booth duty," one cable executive said.
Digeo, which cable operators agree has a dazzling navigational TV guide, integrates such functions as video on demand, digital video recording, HDTV content, instant messaging, photo imaging, a music jukebox, home networking and video gaming into a single box.
Allen, who founded Kirkland-based Digeo in 1999 to bring the power of the PC to the living room, engineered several of the box's features, according to company CEO James Billmaier.
"Paul is a perfectionist," Billmaier said. "He's extremely competitive. He wants to introduce a product that isn't just better but that shames the competition."
Curiously, Allen's high-school chum and Microsoft partner, Bill Gates, failed to break into the cable set-top-box business despite years of trying.
Digeo's success would give Allen a legacy all his own, deflating those who label him an "accidental zillionaire" and who downplay his role at Microsoft, where he was the chief technologist before leaving in 1983 because of a brush with Hodgkin's disease.
Skeptics say Digeo is highly ambitious and, for now, costly. It also remains to be seen whether consumers will embrace all the sophisticated gadgetry.
Yet several cable operators, including Comcast, Adelphia and Charter, have placed orders.
"Digeo impressed everyone at the show as very innovative and forward- looking," said Comcast CEO Brian Roberts.
From the Big Easy, Octopus set sail for Gibraltar with a full tank of gas that cost an estimated $300,000.
Allen left town with a full head of steam.
"Charter is moving in the right direction and Digeo is ready to be tested," said Nathanson, who sold his Los Angeles-based cable company to Charter in 1999. "Paul is on a roll."
As for Comcast purchase of TechTV, they sank millions into launching G4 in 2002, in an effort to tap into the $11 billion video game market. While Comcast has made a name for itself in TV services, it also owns majority stakes in programming stations such as The Golf Channel, Outdoor Life Network and E! Entertainment Television.
In recent months, Comcast has been looking to expand its slate of cable stations. The company in February submitted a $66 billion bid to acquire Walt Disney.
TechTV, which magazine publisher Ziff Davis Media launched as ZDTV in 1998, broadcasts technology- and Internet-related programs. Microsoft co-founder Allen acquired a majority stake in TechTV in 1999.
EchoStar Communications also will have a financial stake in the combined company, terms of which were not disclosed. EchoStar will distribute G4 on its Dish Network satellite TV service. Since leaving Microfost in 1983 Paul Allen has pretty much stayed out of cofounder Bill Gates' way. Aside from buying into cable companies and funding a small, unsuccessful foray into educational software, Allen has focused his investments on things Microsoft doesn't invest in--like sports teams, music museums and the film industry.
Now, for the first time, Allen is competing directly with Gates for the same business: set-top-box software that lets cable companies offer digital video recording, video on demand and, eventually, shopping.
To corner the market, one of the two billionaires will first have to win over Comcast, which is currently offering Microsoft's Foundation Edition software and testing the Moxi box, made by Allen's company, Digeo. With 21 million customers, as goes Comcast so goes the rest of the industry. The cable giant says it's committed to buying from more than one vendor, but industry watchers believe Comcast will chose one company to be its preferred vendor.
A win over Gates would give Allen a way to overcome his reputation as an accidental billionaire. In the past decade his cable investments in two near-flops, Charter Communications and RCN, together cost him a reported $8 billion. Since 2000 his fortune has shrunk 44% to $20 billion, while the crash sliced only 24% off Gates' bankroll, leaving him with $48 billion.
Gates badly needs a win in cable, too. Microsoft has blown through $600 million on various failed attempts at interactive television such as WebTV and UltimateTV. If Microsoft is to be a serious player in the cable world, Gates needs Foundation to succeed
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