Match Group Inc (MTCH) 2001 Q1 法說會逐字稿

Good morning and thank you for holding. All participants will be able to listen-only until the question and answer session of today's call. This conference is being recorded at the request of the USA Network State. If anyone has any objections, you may disconnect at this time. I would like to introduce your host for today's call, Mr. Victor Kaufman, Vice Chairman of the USA Network State. Sir, you may begin.

Thank you, operator and good afternoon, everyone. Before we get started, our lawyers once again insisted that I say that we may discuss on this call, our outlook for future performance. There are of course, risks and uncertainties associated with forward-looking statements, and our results could be materially different from what we currently anticipate. Joining on the call is Barry Diller, our Chairman and CEO, Mike Sileck, our Senior Vice President and Chief Financial Officer, and Roger Clark, Vice President of Investor Relations. We had a very strong first quarter across the board. We achieved this in one of the most difficult economic environments in the last decade. Our EBITDA for our operating businesses grew by 16%, while revenue grew by 17%. Virtually, all of our operating businesses have done double-digit revenue and EBITDA growth, and many hosted record revenue increases. There were some challenges in the first quarter, but I think we dealt with them extremely well, the importance I highlight, and a point we believe that few companies can make. USA has consistently exceeded expectations. We are very proud of that continuity. This is the 20th straight quarter that we have beaten estimates; indeed our entire history. Equally important, is that we believe that we can continue this precedent well into the future. With this mind, we have reconfirmed our overall guidance for this year and next, which overall is consistent with our goals to grow at least on the EBITDA line by more than 20% well into the future.

Now for some specifics. On the entertainment side, USA Network had a record quarter in both revenue and profits. It grew EBITDA by 16%; on 10% higher revenue. Advertisement sales in USA grew in the mid-single digit, somewhat better than anticipated. We were able to use ____ 00:02:23 very intelligently to create a pricing for new cast sale. We actually turned down some cast sales because the pricing was not satisfactory to us. We are doing some business in the scatter market, which is obviously an increase from the fourth quarter. Our CPMs are flat to slightly down versus what we sold in the upfront, and down slightly to what the scatter market was last year. We believe this is basically consistent of overall with the generalized stem and cable networks. Of course, these are not levels that we find satisfactory. That said, the advertisement market overall is still very weak with only limited signs of life, and we do not expect any fast recovery. Fortunately for us, advertising only constitutes 15% of our revenues. We are essentially pleased with USA's momentum on the ratings front, inclined over a half a point over the last five months to tie for the number 1 position in February, and we think we have a really good chance to do the same for April. Our original and acquired movies like "The Teller" top rated network serials like Walker, Texas Ranger, and Jag, life sporting events like our 10 PGA Golf tournaments and the Masters, and special event programming like eco-challenge and the West Minister dog show, all performed near or above record levels during this period, which we believe goes extremely well for USA's future growth. And our prospects for developing new hit series have never been stronger. We have already announced unique new programming like Mark Brunette's combat machine, and a real cannibal run through the fall. SCIFI also grew extremely well; it grew by its EBITDA by 23% or 11% higher revenue. SCIFI's advertising revenue grew approximately at 10%, almost double the rate of increase at USA, which continues to verify the ongoing building strength of this great niche.

To give you perspective on SCIFI CPM, they are also flat versus the upfront and slightly down versus last year's scatter. We do expect SCIFI's growth will continue to outpace the market overall, because of its spectacular distribution growth, because it has some of the strongest demos in all of the television. Studio 2 USA also had a very strong quarter with EBITDA up 23% and with record revenues, due in part to the success of worn out Special Victims Unit. POP Network pricing per hit one-hour drum is truly exploding and Studio is a big beneficiary of that pricing increase. At our electronic retailing unit, Asia's end's performance was decent. EBITDA was up by 5% on 8% higher revenues in the United States. These results were maybe even good when we you think about the very difficult economic environment that we have in terms of retail where their results are deteriorating to a significant extent. But, the numbers actually could have been even much better, had it not been for extremely tough accounts from last year's first quarter when we grew at 18%, and two specifics neither of which we believe are recurring.

First, we had built up a significant excess inventory for the fourth quarter. Now, we had an extremely strong fourth quarter, but we anticipated even a stronger one, and were left with inventory that we needed to sell during the first quarter at reduced margin. Also, January sales were adversely affected by a brisk in Motor Retail discounting their product by up to 75%, probably the biggest discounting that Retail had ever gone through, which definitely and normally had an effect on impulse purchasing. We think that was a one-month event, and in fact our March and April sales increases are back at double-digit levels. As we have said many times, it is all by having the right product, and we seem to be at the stage where we really are getting to have that product right now. So overall, HSN business remains quite healthy now, and going forward and our EBITDA increase was limited by lower margins as I discussed, and by ever consistent commitment to invest a portion of our revenue growth to make our customer experience second to no one. www.HSN.com continues to do extremely well, increasing its sales by more than 300% and is on track to do over $100 million this year, which is significantly above even what we anticipated starting the year. Now, all of this is with virtually 0 customer acquisition costs. Internationally, HSN furthered its dominant position by continuing to grow in Germany by at least 20%, and expanding into three additional markets during the quarter.

Our information and services group continues to be the group in our company that is growing at the fastest pace. Its operating businesses increased EBITDA by 25% on 33% higher revenue. The ticketing business had excellent results, growing revenues 17% to a record level demonstrating how it does not track with the economy, since consumers will give up buying other goods before they will give up their entertainment activities, especially out of the house. Also showing the recession resistant nature of our businesses is HRN, which continues to prosper both growing revenue and EBITDA by almost 100%. PRC showed strong growth, while many of its competitors were faltering. Perhaps most telling of our growth prospects is the record performance of our Internet Commerce Group, which achieved 89% revenue growth, and 70% EBITDA growth in the quarter. This group is comprised of our transactional commerce businesses on the Internet - HSN.com, HRN, Ticketmaster.com, and Match.com. On a combined basis, we expect this group to generate $750 million in revenues and $120 million in EBITDA this year, placing us second in profitability behind E-Bay in this area, something that we think is quite amazing. Finally, our balance sheet is extremely clean. We have major capital available to grow and we think there are many, many opportunities in the market place to accelerate our growth even more quickly and significantly into the future. So with that, we will take the questions, Operator.

Thank you. At this time, we are ready to begin the formal question and answer session. If you would like to ask a question, you may press *1. You will be announced prior to asking your question. To withdraw your question, you may press the pound key. Once again, to ask a question, please press *1. One moment, please. Our first question comes from Mr. Victor Miller of Bear Stearns. Sir, you may ask your question.

Good morning Victor.

Good morning Victor.

Good morning, Roger. When you acquired HSN, SCIFI, even USA Networks had considerable offside than upside in terms of distribution and increased distribution seems to be an important stimulus of growth especially in slower times. Can you give us a sense of the where you have taken distribution since you acquired some of these major assets and how long it takes you to cover your initial investment in securing an expanding distribution? Thanks.

Actually, as you said, we have increased distribution quite significantly. USA's distribution has increased by over 50% in the last three years. It has been fully distributed during all that time, so all of that increase is really increased internal growth within cable systems with more and more people signing up for cables, and I think that we will continue to increase into the future. SCIFI's increase has been extraordinary in the last three years; we have increased our distribution by 50%. We still have some ways to go to before we distribute it, which we think we will achieve full distribution within the next two quarters of the year. In those areas in terms of USA and SCIFI, we will use an equation in terms of how long we have to be there, but even bigger than that, we get paid for every additional home that gets on so, we are building our revenue base and our revenue base that we think will continue to grow because we have locked in very long-term distribution arrangements with virtually all of the major MSO's to ensure USA and SCIFI's distribution well into the future at very significant increase. So, we think that goes well for the growth of those businesses. On the HSN side, we have grown distribution, I would say, over the last three years by about 25%. In that case, since we do pay cable to get distribution, the alternate retailing area is the only area that our net basis really pays cable. I mean, it probably takes somewhere between 12 months and two years to fully ramp up the value of those homes. So, I would say within 12 months, we would probably break-even on those new homes and we will get the full profitability within 24 months.

And what percent of your revenue now is derived from your subscription fees?

I would say about 20%

And how is the distribution of the newer cable assets going?

We are actually ahead of schedule. We are intending that distribution to be primarily in the digital world where over 10 million homes are in TRIO and NWI, and we are in the process of starting to get distribution on prime, which we expect will quickly get to the levels of TRIO and NWI, and we will grow significantly.

Thank you.

Mr. Peter Mirsky of SG Cowen. You may ask your question

Thank you. Victor you talked a couple of times about making opportunistic Internet acquisitions. Can you just talk where you stand on that, and secondly, on HSN, you mentioned the reasons for the margins being down, do you see that recovering through the rest of the year?

Let me address the second question first and Mr. Diller will address the first question.

I will, hopefully.

Well, I think you will.

Not so sure. Go ahead.

On HSN margins yes, we think the margins will improve throughout the year. I think we will have a slight effect in the second quarter based on the kind of continuation of the final selling worth of some of these inventories, but we think significantly less than the first quarter. The margin in April is higher than it was in the first quarter, so we do think it is a temporary event, and we will clearly as the year goes on, we think maintain the margin that we have been at. The first part of the question related to Internet acquisition.

Well, in Internet acquisitions, there is definitely opportunity out there and I would say there are 10-12 different entities that we, I would say, we are all over them with all sorts of both internal discussions and some external discussions. I would think that in the next, certainly six months, year, or so, that there were things that we would acquire for certain. It is obviously a period where the wheat separating from all the chaff, and we are in a great position obviously, because in this area, where our sensibility is as interactive retailers, and so what we look for, what we bring to it obviously is, I think, somewhat equally balanced with hopefully at the third piece being that we have got some the effectual of production sensibilities, which do play a role I think in interactivity, but the balance is really between the retailers and I think really understanding, as a core sensibility of this company just what interactivity is, so we will follow this opportunity out there and there are certainly things to acquire in big steps as well as the films and areas that we are in a little bit that we will probably be in deeper.

There is also no question that like anything, there are very few really good ideas and so much junk got high promoted during the euphoria, so we think it is a great period for us in this area for those reasons, that is a little long, but that is the mode of right now.

Okay, thank you.

Ms. Kathy Sapheni of Prudential Securities. You may ask your question.

Hi, I have two questions. First, with respect to the upcoming upfront market, I was wondering if you can give us your perspective on what your ... an update rather on what your expectations are for the cable upfront. And if you can give us some background in terms by what percent of inventory was felt about USA and SCIFI last year, and what sort of CPN increases you saw, and my second question is actually for Barry. Barry, the rumors are abound about Vivendi and Liberty Media talking about swapping their, Vivendi is swapping it's piece by piece stake for Liberty Media's has taken USA. Besides the financial benefits that USA shareholders might see with respect to the value that is put on the USA stake, what other benefits, you know, what positives or negatives could come off such a deal? Thank you.

On the upfront in general, we think that overall there is a likelihood that it will be down, to predict the level which will be down is extremely hard at this point, but we do think that we will able to hold pricing during this period, and I think in part of the level of sellout may be lower as a result of choice on our side, as it is a desire on the side of the advertiser. In terms of sellout, last year, we sold at 65-70% on both USA and SCIFI and as I said, I think it probably will be slightly down this year.

Yeah, it is difficult to follow on that. Excuse me, on the upfront, I mean there is, of course, no chance to be off front can have positive increase, it is inconceivable, the question is, the question really is probably how flat, or how down is flat, or how flat is down and I think that you have seen all our results, I mean it is not disaster, but it cannot be that there are no conditions for anything called growth or euphoria on comparable previous year or probably a flat is not going to, I would say, upswing in it for sometime to come and that the issue for us is ... as it is for other people clearly is how to manage within that, and I think actually the last quarter shows that these three USA Network and SCIFI channel, that is achievable , so this has, kind of, overall been on advertising.

As far as Vivendi Universal and Liberty Shares, there are no current conversations that are taking place for any sale of securities either way. So, there is nothing we need to talk about relative to that. The only thing that will happen in the in the future, probably dependent upon other transaction, yes, I think that both sides have looked that being really aware of their strategy on a long-term basis was right, Liberty is going through a period, over this next period now they will be detached from AT&T where it has gone probably on essentials. It is going to re-strategize its worldwide business and I think there are other tectonic moves that are taking place, as I said before, I think on a previous call in a general meeting, that a lot of things we think will happen in this next year, kind of, Geo political nature, that could have positive effects on USA and on its overhead so, you can make your specialization as easy as the next door, but you got to see some events take place before I think you will see anything else really happen as it relates that who owns our stock in terms of large pieces, and who does not.

Mr. Richard Folatey 00:22:25 of Morgan Stanley, you may ask your question.

Hi Barry. Following up from the question on the upfront, looking at a different side of this issue, for the first time, probably after 10 years, there seems to be a real schism in the entertainment industry and it seems that about half of the networks are saying we do not want to hold price, we want to maximize dollars, to get ambiguous sense of the equation. The other half are saying we want to hold CPM, we want to hold price per unit, we will sell that inventory. In your experience, have we ever had a split in the industry about how to handle the problem like that before and if we have had it, how is it generally resolved, and if not, which way do we head, I mean, after that, what you are saying down on pricing, and the internet are saying down on volume, how do you handicap which way it goes?

First of all, I do not know what has happened in this way, but you know, the issue is not what the positioning is, speculation is, _____00:23:38 upfront, it is what happens when the upfront actually takes place, and my feeling is that people will mostly take the money. They will shout whatever they shout, their position, whatever they do, in the end they are going to be, I think hard pressed not to take the dollars. Now, it would be lovely to say it the other way round, but I just do not think that is reality. The result of that, of course is, that well, they will be of course, these efforts made to quote whole price line. As you know, we get into that market place which is supposed to push that and probably drawn out, which is going to make them draw out this period of _____00:24:23 from now, until when it actually takes place, later than usual. So, that is all going to happen very fast and I think in the end, people will run for the money, I mean that is just my prediction.

Thanks.

Mr. Niraj Gupta of Salomon Smith Barney. You may ask your question.

Hi. Good afternoon. Two questions, I guess, first, looking at the USA Network's number, which was pretty impressive of your topline, it looked like advertising is up, I guess, by more than mid-single digit. Can you just talk about this, I guess Barry, you identified your concern, I guess probably earlier than anyone else in the Ad market. Can you talk about, perhaps, what techniques, you guys use to get out there, and target advertisers to get the kind of rating that you were able to get. And, two, assume it is three questions, when do you see some kind of benefits from, I guess Vivendi on the international side. And then number three, any current thoughts on share repurchases? Thanks.

I will go backwards. We have no thoughts on share repurchases. Sorry, but there it is. Second, on Vivendi International, we are in lots of conversations with them. I mean, as you know, Vivendi has a great footprint outside the United States and that is the first screening in about 80 million homes or so. So, we are very active talking with them about joint venturing various things and ticketing and in the CD search and in the personal side, and on the retail side, obviously we are very strong in interactive retailing, electronic retailing outside the United States, and growing furiously. But there are lots of opportunities, we think, with Vivendi, we are a very North American Center and have been, and it is only recently, about a couple a years, that we have begun to step out, so to speak. And in that area, you all know the results of how well we have done with electronic retailing and how aggressive we are, but all the rest of the years, we really do need, it is great to have an international player to come in with interest in the company ... that compared to what we do, they do not do in terms of e-commerce services, interactive and basic businesses. So, that is all relatively near in the future. As far as the advertising, the truth is that I do think we anticipated that there will be an off and I think that we have done a good job in managing it, I do not think we have gotten, so to speak, huge increases. I think we have held up _____00:27:18 line in this area, and I think that is what we do for a living. I mean we hopefully anticipate problems and pour into them before they can develop. But, I do not have anything else to really say about, I mean, if there was some precise question on advertising. There is nothing really left else to say that I know about USA Network unless you want to add something.

I just want to add that Niraj we did have some programming that was highly sought after, like Eco Challenge and our PGA Golfing Event. So, we had some very strong competitive situation from advertisers on specific events then. I think that does speak to the strength of some of our kind of regional programming on USA. Niraj Gupta. Then just to follow up what you just discussed. So Barry, do you think something with Vivendi, you think might be announced before yearend?

What do you mean, something with....

Any of these joint ventures.

Oh! Yeah. We start developing things. We are not too announced, too promotional in this area. But, I think our numbers in joint ventures are a border lift, a few have already begun, and probably two or three others will be underway by summer. I do not know if there is going to be any big time significance and also what really is for us is the establishment of our businesses outside the US in areas where they have influence.

And just a followup to Peter's question about the potential Internet acquisition, just to quantify the kind of things we are looking at. These kinds that are South of $15 million, North of $50 million, and will these be done at TMCS levels or would they be done at the parent company levels?

The South, North, Northeast, and West, and they will be done, we do not know which levels they will hold, I mean, we do not know which entity they will be joining. It will I mean, it is future engineered.

Okay. Thanks guys.

Thanks. Next question.

Mr. Vincent Victor of JP Morgan, you may ask your question.

Good morning, a couple of questions here. Just following up on Jason's question. It does look like if you just do the math on USA Networks, the split between advertising and other revenues and affiliate revenues, it looks like advertising and others was actually up about 12% or so. I just want to know, is it the other that is driving the 12% growth and what are your comments before Victor about 5% or mid-single digit placing growth.

Yes, it is the other category. It is programming like the farm team, where we get paid just a fee that we do not put into either of the other category.

Okay. Thanks. And then on home shopping, I know that clearly the discounting that you have been doing in the first quarter probably had some impact on the average revenues per customer. I just want to try to understand if you are seeing a hit there and as things pick up in April, are you still seeing a hit relative to six months ago, or are people much more price sensitive in terms of the items they are buying from you?

I really do not think that the price is actually somewhat higher in the first quarter and that really has to do with mix. It has to do with whether you are selling more home goods rather than other categories like jewellery. I think we clearly need to be within a very kind of, close narrow range for our customer base. And that is true in good and bad economies and we will stay within that range, and that range will be in overall, probably in the mid-40s; sometimes it will be a little higher and sometimes it will be a little less.

Okay.

I think the answer is, I mean, they also anticipate that the customer is certainly price sensitive. I mean, in all varieties, which has been that they are price sensitive, until they absolutely want something, given this is an impulse business. There is enough want out there, but it is a tough entertainment as you all know, is electronic retail business turns on a dollar and is run by the minute, and the hawkishness with which it is being currently operated is, I think, is appropriate to the environment. The work off of the fourth quarter inventory in the first quarter and continues to a lesser degree, will continue through the second quarter, probably until June. That being very carefully blends through their system, both to get it gone, at decent terms, at the same time, open ourselves up to new products, which is the thing that has been related to the customer. But, I think actually that the execution has been pretty good by just them, and I think that the lines of business that will create us taking share away from our larger competitor, and the merchandise expertise that does keep growing as I have been talking to critical mass, and we are hopeful that in the second half of the year, it is going to make that more account. By the way, I am not thinking that second half of the year that the economy is getting better, because I don't think it is going to. I think it has already been demonstrated that this businesses are somewhat resistant about, not completely but somewhat. In terms of our market share and where did you take it from, and it has nothing to do with market conditions, but has got to do with whether or not, we will change better than our competition.

All right and just a quick followup, if I can to your point before Barry, about expanding into new markets. I see here that you guys have stepped up home shopping, expansion in Puerto Rico, Mexico, etc., Could you just talk a little bit about the opportunity in those markets. How long will be the investment and how quickly do you expect a pay back from those investments?

We think that expanding in Europe is a fantastic opportunity. We put real capital in there and we have put 50 somewhat million dollars of an investment in Es Spaniel during this year. And part of it was to buy, close to $20 million distribution in television station in Puerto Rico. But, this is a great surface, I mean, most of you on this call don't get it, but you look at this surface on the air, you just look at a piece out there. And if anybody wants to, we will send you a little tape of it because it is really interesting. It is full of energy. It has got great product. All it needs is distribution. And we will inspire to get more distribution. This one out here has 1450 Spanish-speaking people around, and the ability that we have got, we think about this 24 hours a day, right next to our agents in Florida, I mean we have got Home Studio. It is this surface that has all of the resources of HSN's merchandising operations and that is all little Spanish spin on it, and it is a really solid surface, it is going to be a very large, worldwide business for this. It is going to be a really unique thing. This is the signal put up out of Southern Florida that is going to be distributed thousands of miles away and the sale and the good ____ 00:35:43 there, even with all sorts of country issues, current issues, etc., It speaks to, once you get into being a worldwide retailer and we are pretty much, we are certainly on our way. I mean, we are a retailer and you find me a retailer in China, in Japan, in Italy, in Benelux, In the US, in Mexico, in South I mean, it is really an interesting thing that we are putting together here under most people's rate order. When it comes back, I do not know, probably Asia will break even in about a year, something like that, not much longer than that. Although, by the way, we will use more investment if necessary, because the growth is, I expect, the growth great.

In the remainder of our international markets, the turnaround estimate is quite, quite huge. Because, we are able to go in there with partners, we have distribution guaranteed when we go in to a territory; when you combine that distribution with our expertise in this electronic retailing area, and the similarities between what you sell throughout the world, we are almost getting as close to a sure thing of being able to operate these things profitably, as you can get, and it is just a tremendous business. Our business growing in Germany at a very rapid rate and if you just saw any kind of matrix of value, we have almost an infinite return on our investment in Germany, already.

Great. Thank you very much.

Mr. Christopher Dickson of _____00:37:31. You may ask your question.

Two questions, if I can. First, Victor the followup on the extraordinary opportunities in the international retailing, I think you saw HSN doing a $6.4 million EBITDA loss for the quarter; we had been losing about $20 million a year. Is that still kind of the budget you are looking forward, do you see that accelerating, going forward, and where are we given the opportunities? And secondly, perhaps, Mr. Diller could talk a little bit about the potential upcoming strike: one, what his views are from a historical point of view and two, how it might the impact the various USA profits?

On the first question, I do think the numbers we have are what we anticipate we are going into premium markets. We pretty much know what it costs to start up in these markets, to the extent that we can enter other markets more quickly; that number potentially could go up, but it will only go up if we believe the return is there quickly. I think we can, as with HSE, reach profitability probably within two years in almost any country. That is our goal and it adds to our returns.

As far as the strike is concerned, if a strike really happens, it does not really affect us, I mean, it does not in any material way, affect us. The ones it will affect, of course, the sole area that I think it affects is the broadcast network, no it affects the cable networks particularly. Will there or won't there be? I have thought, kind of, for the longest time, when everybody said that there was absolutely going to be a strike, that there would not be one. I still do not think there will be one, though there is a bit of bad timing in the recent release of last year's pay packages to senior media executives that has stirred things up a bit, there have been comments that they are just of the politicization of that process - management against unions and vice versa, but to have the statements made that pay packages of actually one, if not a second, senior executive in one of these companies is greater than the entire guild over the entire period of the new contract, does not exactly...that is a nice rallying cry. Despite that, I think, in the end there is just not the grounds for strike, but we will know fairly soon, I think in a couple of weeks, probably about the first stage of the strike. You know, people are thinking that this is the writer's start...the writers in fact are locked in the same _____00:40:31. They are decidedly not, and you may have a settlement of the writers and still forget a SAG stoppage because the SAG internal operation is such a mess. The management of the Screen Actors' Guild is not very savvy. Or vice versa, although I do not think vice versa will not probably happen. In any event, I do not think so, but we will know soon enough.

Mr. Gordon Haas of Thomas Riffle Partners, you may ask your question.

Good morning, just two questions, one on the USA films. I am a little surprised you did not show some profit there; obviously you had a terrific success with Traffic, and may be you can just comment on that? I know you spend some time marketing around the Academy Awards. Could you discuss that a little bit and then also, if could give us an update on the innovation transaction. Just whether you get any regulatory Stags or just what is the timing on that and how that is progressing. And then lastly, as related to that, how the move from broadcast to cable distribution is going?

Okay. First on Traffic, last year the accounting rules where changes related to the movie business, which requires you to write off all prints in advertising upfront, not spread that cause over the life of your revenue stream. So, in some ways, the more successful the movie you have, the less you earn in the beginning. And it becomes somewhat back and loaded and that is true to a much greater extent on a starter company that does not have the flow of other revenues to the build-up of the films going to the pipeline over a long period of time. So, Traffic was in distribution for a long period. We obviously spent a considerable amount on marketing, we think less than others will spend.

Sure, more than anybody else would spend on a picture of comparable size probably by 20-25% less than any cost that strikes me.

I think that is true. So, the results of that become a little bit misleading. But you will see the profits of Traffic flow through and the future quarters, remember as we release new movies, we are going to face the same issue relating to releasing costs. So, one of the main reasons that we have USA films in our merging business operation is that regardless the performance, it is probably virtually impossible for it to make money for the next two to three years.

Just right by the way you are not going to see us release any movies.

And then on the innovation work?

In Innovation, we are optimistic in terms of where it stands on the overall basis. We think it probably will close in the third quarter. Gordon what was the third question?

Just the parting of Home Shopping from Broadcast must carry distribution to your cable.

That as you know is a complex question as you ....

He is not going to answer.

Okay.

We all know, I mean, I am certainly not going to answer this completely so, I am going to answer simply.

Okay.

As you know, we switched over from broadcast distribution to cable distribution and we will be able to effectuate that switch over the cable, you still lose homes of people who do not have cable. The people, who have only a broadcast signal and no cable, however spend significantly less than those that have cable in terms of dollars per home. We have estimated that will have probably a 6% effect on our sales line at HSN, and net, probably our EBITDA will be affected around $10 million in that area. We will break our numbers out in a way that everyone can look at it on a comfortable basis, because we think it is a one-time effect; that we will be able to show those numbers without affecting the long-term growth of the business, and obviously we hope that we can replace that with additional cable distribution. Is that all?

Thank you.

Okay, next question.

Mr. David Goldsmith of Buckingham Research, you may ask your question.

Hi. Thanks. Is the restructuring of the capital structure of the company kind of dependent on the Univision deal? And when do you think you might accomplish that?

Well, the Univision deal obviously puts us in a position to be virtually out of the broadcast business, which does allow us we think to eliminate our complex structure and make our operations presented on a more simplistic basis eliminating our subsidiary and all of our minority interest issues that we would have. All of our shares at the parent level. And I think you will come in at a very good time, because as the world changes with the new accounting rules that will not have the ride off goodwill. I think people will be able to see next year a much more simplistic approach to the way we present our numbers.

Thanks.

Ms. Sharon Williams of AT Edwards, you may ask your question.

Thank you. I recognize that you are merchandising for _____00:46:34 and customer service skills position you for direct selling very differently from early e-commerce companies like Amazon. But is there any thing about the Amazon business that you admire or would benefit from replicating?

What Amazon did? Look Amazon did one thing great, which is their relationship with the customer, has been personally on every level. And they have the customers to show for, the accounts, package accounts to show for. So, there is no question, but that is to emulate as you can. And I think we do that in our own interactive commerce sites etc, but the real question for Amazon is one thing to do it for book tapes and music, and music and it is another if it is more complex retail category beyond that, and I think that will be the test for the coming year. I do not have anything else to say about it than that.

Thank you.

Next question, operator.

Mr. Victor Miller of Bear Stearns.

Just as a followup, Barry a couple of things. Could you contrast really the demise of NVCI & GO relative to your vision for the Internet? Is the demise of those entities good for USA, and then I have one other issue...

I never demonstrated that the margin of anything that NBC is good for us, purely but, god knows ________ 00:48:21. I do not think it is good or better in different look. It is the difference between us, and I think the thing to really pay attention to about this and Victor you have, I think understood it for a while is the relationship between at base, a long time interactive retailer when, so to speak, along comes the internet, which is somewhat midline from the materiality of those businesses, which have been around for 10 years previously. And so, I think what we do about that is really unique, and the thing is, I we are utterly convinced, I mean, we are on this path we began some time ago, which is ever closer to getting in to evidence, which is that there is a relationship between direct selling our version of electronic or ____ 00:49:21 version, but inner active electronic commerce, which has got true various kinds of obviously wind in its back in the development of all this technology, which is going to continue to develop and inner activity in terms of ____00:49:43, and the relationship between the sky and the ground, particularly if Mr. Murdoch ends up with DTV, which I still think is the likely scenario. Those developments are all getting now in somewhat train with each other and as they do, the relationship between direct selling and entertainment programming, and advertiser-based revenue streams from such programming, all are beginning to converge. And that is what we do for a living in every part of it. As you look for the things we have done recently, the stuff we have not talked about today, which is in our electronic services business, and our database marketing businesses and all things we are doing in that area that will lay direct selling to all of these abilities to serve in terms of all these different areas, all that stopped _____00:50:45 in the part. So NBC, I, or ABC, GO, or any of these media companies that got into the area because the flag came of, and they said, oh! My god we better dive or ____00:51:01. All these people who traded equity blocked it, but equity in terms of revenues and things in terms of trading it for advertising cuts, all of that ripple is all washed away. We never thought of it in the first place. We never played it. But for us, we just kept doing what we are doing and I think in the last period, people have come to say, Oh! Well, Yeah, look at that most important thing on the cover page of this thing, is this Internet commerce group of ours, which has got bigger revenue. And I think that is damn good real earnings and growing and growing. So long ended, I do want to keep everybody, kind of, on point on that about this company's unique perspective and it is why our growth over a period of time, is going to, so to speak, transcend and confound those people who said a second tier, "media player" can survive and is going to get marginalized. Not only equity is going to get marginalized but also I actually think that we are making roads that will really focus half ____00:52:31.

Just a follow on what you said in the middle that, that you talked about the GM and Murdoch. What could the sale of GM stake in the DBS business set in motion in terms of acquisitions, consolidations, and divestitures? Do you see anything that might come out of swirl that you would be interested in or would benefit your company?

That is the last thing that is going to happen. We are all speculative. You can make your list just as easily as we can make ours. And, they probably would be similar and there is nothing more about at this stage, because it is just speculative. I do believe that these Tech electronics shares are going to take place in probably this calendar year. I could be of course, wrong in my timing, I am certainly not wrong over a period of couple of years. But that is kind of ... you get points for that, so much for that, if you get points for any others, other than to see what place we are in this ...if this speculation proves true and what the opportunities are.

Thank you.

I think we are out of time.

We are definitely out of time. Thank you to all participating. We are available to any of you who want to get additional information. Call if you would like. Thank you.