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EchoStar and Vivendi Universal Team For VOD

14 Dec, 2001 By: Hive News

EchoStar Communications Corp. and Vivendi Universal (VU) have struck an eight-year video-on-demand (VOD) strategic alliance in which VU will develop and provide content and interactive services for EchoStar's Dish Network satellite TV customers in theUnited States, the companies announced today.

VUwill make a $1.5 billion cash-for-stock investment in EchoStar to provide a portion of the funding for the pending merger with DirecTV parent company Hughes Electronics Corp., provided that deal wins Federal Communications Commission approval. In that case, DirecTV customers would also receive the new programming.

The deal gives VU a major U.S. distribution opportunity that could expand its brand recognition.

"Entertainment content is a fiercely competitive market," said Jean-Marie Messier, chairman and CEO of VU. "With today's announcement, Vivendi Universal is securing key access to consumers, as this `multi-dimensional' transaction provides us with an important distribution system for our broad array of assets - from content to technology. This agreement is a foundation upon which we all intend to build even more value-creation opportunities for the benefit of our customers."

As part of the bargain, VU plans to offer Dish Network customers five new channels of basic and niche programming including action, suspense, music, youth-oriented channels and interactive game channels, with one channel in Dish Network's "Americas Top 100" programming package and two in "America's Top 150" programming package.

VU will also offer expanded pay-per-view and video-on-demand movies from current and catalog VU films. The services are expected to begin next fall.

EchoStar will pay "customary" fees per subscriber to VU once the channels become available.

VU and EchoStar will also work together on a new programming initiative to develop new satellite-delivered broadband channels featuring interactive games, movies, sports, education, and music to be launched within a 3-year period following the consummation of the agreement.

Also as part of the agreement, EchoStar will integrate Vivendi Universal's interactive middleware technology, MediaHighway, a Canal+ Technology, as a non-exclusive middleware solution that will provide Dish Network customers using personal video recorders (PVRs) unique interactive TV services, such as movies from VU and music from Universal Music Group. Such movies and music can be downloaded, stored on a hard drive replayed at any time.

"This alliance is very exciting news for our Dish Network customers as they will have access to more smash-hit box office movies, niche sporting events and the ability to order more movies or their favorite music at the touch of the remote," said Charlie Ergen, chairman and CEO of EchoStar. "This agreement will provide EchoStar with more options and will better enable EchoStar to compete in the multichannel video programming distribution (MVPD) market. This alliance is also part of our vision to compete against the cable companies while providing consumers, no matter where they live in the U.S., more channel choices and the latest technologies, all at nationwide, competitive pricing. Also, this equity investment would give us a stronger financial footing and provide the combined company additional financial flexibility."

"Vivendi Universal 's content includes movies, music, games, education and sports, each of which has leadership positions," Messier continued. "The EchoStar agreement provides Vivendi Universal distribution of up to 15 channels, including interactive services, over the entire EchoStar footprint. When EchoStar's pending merger with Hughes Electronics is approved,

EchoStar subscribers will reach nearly 15 million households. In line with our alliance strategy, this deal does not put us in a position of directly buying or controlling cable or satellite distribution. Rather, it offers us critical distribution access through a leading distributor, with tremendous opportunities to build upon our partnership."

The investment also buys Messier a seat on EchoStar's board of directors.

Completion of these transactions is subject to regulatory clearance under the Hart-Scott-Rodino Act and other customary conditions. These transactions have received requisite corporate approvals of Vivendi Universal, EchoStar, Hughes Electronics and its parent company General Motors. However, the transactions don't depend on the EchoStar-Hughes merger and,executives assured, will remain in effect whether or not the EchoStar-Hughes merger is approved.

"We are pleased that EchoStar is moving quickly to put together the financing for our pending merger," said Jack Shaw, president and CEO of Hughes Electronics. "We also fully support this strategic alliance with Vivendi Universal, which demonstrates the commitment to introduce innovative, new service offerings on a non-exclusive basis."

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