Liberty Digital to Buy Half of Game Show Network

Alex, I’ll take 50% of the Game Show Network for $275 million.

AT&T; Corp.’s Liberty Digital and Sony Pictures Entertainment agreed Monday to a deal that could turn the Game Show Network into the first fully interactive television network, allowing viewers and Web surfers to compete in game shows against each other and in-studio contestants.

“Our entire reason for being is to create interactive TV channels, and we think games as a category is the best place to start,” said Lee Masters, Liberty Digital’s president and chief executive.

Liberty Digital, the Los Angeles-based interactive television and Internet arm of AT&T;’s Liberty Media Corp., purchased half of the 5-year-old Culver City-based network from Sony for $225 million in cash and $50 million in stock.

Most of the Game Show Network’s lineup consists of reruns of classic shows such as “Jeopardy,” “Family Feud” and “Wheel of Fortune.”

But the Game Show Network, currently available to 28.7 million cable subscribers throughout the country, has built a considerable amount of interactivity into its programming. For instance, on the network’s original series “Inquizition,” viewers can compete for prizes by playing along in real time on the show’s Web site or by punching in answers to questions on their touch-tone telephone keypads. Fans with Microsoft’s WebTV Internet access device can use their remote controls to input answers on their TV screens.

Sony Pictures Entertainment, a division of Tokyo-based Sony Corp.’s Sony Corp. of America, picked a strong partner to accelerate the deployment of interactive TV shows, said Robert Routh, an entertainment and media analyst with Ladenburg Thalmann in New York.

Liberty has partnerships with a host of companies that develop technology for interactive television, such as OpenTV Inc. and ACTV Inc. In fact, as Liberty “was out making many of these strategic investments, they’d continue to run into companies that had some relationship with Game Show Network,” said Michael Fleming, the network’s president. That led to the partnership talks, which lasted about five months, Liberty’s Masters said.

The tight synergies allowed Liberty to get “a great price” for its half of Game Show Network, Routh said. The deal, which is expected to close in the fourth quarter, values the network at $550 million. By then, the network expects to have more than 30 million subscribers. That values the deal at $18.33 per subscriber, below the industry average of about $20.

In addition to Liberty’s technology savvy, Sony also gains a partnership with AT&T;, the country’s largest cable provider, Routh said. AT&T; plans to deploy roughly 13 million digital set-top boxes, which will allow TV networks to greatly expand their interactive features.

Game Show Network employs 155 people, most of them at its Culver City headquarters. Fleming would continue to run the network after the deal is completed.

In Nasdaq trading Monday, Liberty Digital’s stock fell 75 cents, to close at $23.25. Sony’s American depositary receipts dropped $1.44, ending at $96.44 on the New York Stock Exchange.