Originally created 01/04/01

News Corp backs off from WedMD deal



Rupert Murdoch's News Corp. is once again backtracking away from the Internet, this time by partially unraveling its relationship with the online medical venture WebMD.

The two companies formed a series of alliances just over a year ago, when News Corp. took a 10 percent stake in WebMD for nearly $1 billion in cash and assets. The deal gave WebMD $700 million in advertising on News Corp.'s media properties and a 50 percent share of the Health Network, a News Corp. cable channel.

WebMD agreed to provide health content to News Corp. for five years for $60 million. The two companies also launched an international joint venture.

Now, each of those arrangements is being scaled back or dissolved. WebMD will get only $205 million in advertising and branding from News Corp., a 70 percent decrease from the original deal. WebMD will return its 50 percent stake in the Health Network to News Corp. And the content deal between the companies has been cut from five years to four. In addition, News Corp. is extricating itself from the joint international venture. Returning its 50 percent stake allows News Corp. to get out of providing $100 million in capital for the project.

This is the just latest move by News Corp., which had been criticized for making too few inroads into the Web, to scale back its Internet investments. In October the company laid off 13 percent of the staff at FoxNews.com and reduced its coverage of some subjects on the Web site.

For WebMD, the changes come as the company undertakes a restructuring and re-examines its strategic alliances. WebMD will take a one-time non-cash charge of about $275 million as a result of the new arrangement, at a time when it is focused on becoming profitable. Last month WebMD severed a partnership with DuPont that had been scheduled to last until 2004.