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Disney buys stake in Web site operator and launches ABC online service

April 3, 1997

NEW YORK (AP) _ Walt Disney Co. said Thursday it had taken control of Starwave Corp. and will team the Web site operator founded by Microsoft Corp. co-founder Paul Allen with ABC News to launch an online news service.

In a competitive twist for Allen, the ABCNEWS.com service would become an immediate rival to MSNBC, a joint online venture of NBC and Microsoft.

It’s another aggressive move into the Internet for the Burbank, Calif.-based Disney. The company announced Monday that it will launch a Web service for children and families called Disney’s Daily Blast.

Disney said it had bought a ``significant″ stake in Starwave and would run its daily operations. Financial terms were not disclosed. Starwave, a privately owned company that doesn’t disclose profits, has been praised for its creativity in designing Web pages but criticized for loose management.

Among the Internet sites operated by the Bellevue, Wash.-based company are ESPNet-Sportszone, NBA.com pro basketball site, NFL.com pro football site, Nascar Online auto racing site, and Mr. Showbiz, a site focusing on celebrities, movies, and television shows.

The deal gives Disney additional distribution outlets for its online contents. ABCNEWS.com will be available to America Online and Netscape users. Netscape will create a special ABC News headline element on its home page.

``We’ve heard about the Disney synergy and this is a really good example of this at work,″ said Steve Mitra, an analyst of online content at Jupiter Communications.

Disney had its eye on the Internet when it decided last year to pull the plug on ABC’s plans to launch a cable television news channel. It will compete aggressively on the online side against MSNBC, which has both online and cable news components.

ABCNEWS.com also will go up against news services from USA Today and CNN. ``It’s going to be a very interesting battle,″ Mitra said.

``We don’t want people to just read about the news. They can do that anywhere,″ said ABC News chairman Roone Arledge. ``We want them to be able to hear it, feel it, interact with it and use the technology to help them understand how it applies to their lives.″

ABC named Jeff Gralnick, an executive most recently in charge of the network’s election coverage, to run ABCNEWS.com.

A day before its rival’s launch, MSNBC announced changes to its Internet service that would allow computer users to create a personal news report and have news sent by electronic mail.

Disney and Microsoft may now be competitors in the online news market, but that hasn’t stopped them from working together in other ventures. The Microsoft Network was given an exclusive deal this week to offer Disney’s Daily Blast for free to its members over the next 10 months.

Allen will remain Starwave’s largest shareholder and will be represented on the company’s board. He holds an option to sell his interests in Starwave to Disney after five years.

Starwave’s revenues are believed to be $15 million and analysts assume it is losing money.

Allen’s other investments include the Portland Trailblazers basketball team, most of Ticketmaster Group and a large stake in DreamWorks SKG, the start-up studio formed by former Disney studio chairman Jeffrey Katzenberg and two other moguls.

Allen helped found Microsoft with Bill Gates in 1975.

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