Fox, TCI Expected to Form Sports Network : Television: The new channel would compete against ESPN. Fox could take a substantial stake in Liberty Media under the deal.

Fox Broadcasting Co. and Tele-Communications Inc. are expected this week to form a joint sports cable venture to challenge the successful ESPN network, people close to the negotiations said Monday.

As part of the agreement, Fox could take a substantial equity stake in Liberty Media, TCI’s programming arm, which has interests in about 15 regional sports networks. A strong cable outlet would give Fox leverage in bidding for sports rights against the three stronger networks, especially ABC, which can offer a cable package through its sister network, ESPN. For Liberty, Fox brings financial firepower to its longstanding ambition to use its far-flung regional networks to take on ESPN.

Both Fox and TCI are eager to capitalize on one of the fastest-growing businesses in cable--and one with broad international appeal. “Sports are a must-see for men who are otherwise hard to reach,” said Michael Wolf, a partner at Booz, Allen & Hamilton. “Sports are driving the sales of small [satellite] dishes and other alternatives to cable. People are willing to pay top dollar for sports.”

Fox would not comment and Tele-Communications did not return calls seeking comment.

Weakening ESPN’s stronghold could be difficult. With about 67 million subscribers nationwide--about 70% of viewers--ESPN is the top-selling cable network and perhaps the most profitable, with a value of about $4 billion. Worth nearly as much as its sister network, it is arguably the crown jewel Walt Disney Co. was examining when it bid $19 billion in July to buy ESPN’s parent company, Capital Cities/ABC Inc.

Fox has enviable international distribution through parent News Corp.’s Sky Television in Britain and Star TV in Hong Kong; it has been aggressively buying up sports rights overseas. But ESPN already beams sports programming to 150 countries. Analysts say its international infrastructure is so well developed that Disney plans to use it as a foundation for selling cartoons. No entertainment travels better than children’s and sports programming.

What’s more, Disney’s entry--and the subsequent proposed merger of Time Warner Inc. and Turner Broadcasting System Inc.--could make it more expensive for sports newcomers such as Fox. Turner’s TNT and TBS networks derive handsome chunks of revenue from sports programming, as does Time Warner’s HBO pay service.

Fox has been aggressively building its presence in sports since it acquired broadcast rights to National Football League games in December, 1993. While critics said Fox overpaid for those rights, widely outflanking CBS with its offer of $1.5 billion over four years, the winning bid helped the struggling network lure a group of stronger affiliate stations from CBS.

Fox has since signed deals with the National Hockey League, and this week is expected to announce that is will share baseball with NBC. CBS and Fox had been front-runners, but sources said Monday that NBC had emerged during the final hours and that the Fox-NBC package could be worth more than $800 million over four years for Major League Baseball. Sources have speculated that the deal will also call for coverage of the games on cable through Fox and Liberty, although ESPN’s contract with the league runs through the 1997 season and the network has the rights to match any competing offer.

Liberty has been trying to build a competitor to ESPN for some time, although its collection of regional sports networks has been no match for the international network in bidding for sports rights.

“They got some funny looks when they tried to bid, because they just don’t have the coverage,” said John Mansell, an analyst at Paul Kagan & Associates.

In an attempt to improve coverage, Liberty Media has had intermittent negotiations over the years with Cablevision Systems Corp., another cable operator, which through its Rainbow Programming arm owns several regional sports networks under the SportsChannel banner, including one in New York. It owns several jointly with Liberty, which early this year imposed the Prime Sports name on more than half its regional networks to unify their identity.

But the two parties could never resolve the issue of control, and talks dissolved again in September.

In addition to Liberty’s spotty national coverage, there are other impediments to superimposing a national network onto a regional sports infrastructure as Fox and Liberty intend to do. For regional sports networks, the bread and butter is in airing games that local viewers would otherwise not find on a national network. For example, it is unclear whether the Prime Sports channel in Los Angeles would have to drop a Dodgers game if Liberty and Fox felt a New York Yankees game could draw more national viewers.

Sources close to the company say those questions are still being worked out, as is the configuration of the partnership.