USA Networks Reports Smaller 2Q LossUSA Networks Reports Smaller 2Q Loss

Microsoft's newest partner, USA Networks Inc., reported Wednesday a smaller second-quarter loss than last year and cited growth in its Ticketmaster and Home Shopping Network divisions. That's likely good news for Microsoft chairman Bill Gates, who last week traded his 70% share in Expedia Inc., the online travel site, for about 6% of the TV network that also owns the USA Channel.

For the quarter ended June 30, USA Networks reported a loss of $7.5 million, or 2 cents a share, compared with last year's $26.9 million, or 7 cents a share, excluding exceptional items. Vice chairman Victor Kaufman told analysts that the company's strategy is to pursue transactions through its Home Shopping Network and Ticketmaster, whose revenue grew 15% and 11%, respectively.

In an interview last week, Erik Blachford, Expedia's senior VP of marketing and programming, said he believes Microsoft's early investment in Expedia involved a vision of both expanding the online travel channel and of building customers for its technology--a strategy it's now following with an investment in TV-set-top boxes to sell products. Microsoft execs were "willing to fund the effort because they saw the potential of having a team work on something that could really show off what the technology could do. They did pretty well on their financial investment, too. We're still a 100% Microsoft shop, and we're locked in with all the .Net initiatives. [Now] they know Barry Diller is a guy who gets things done, and they see another opportunity to take part in a broader vision."

Blachford believes the ability to order something that catches your eye on a TV commercial by clicking a set-top box is not far off. "All the pieces exist. There have been enough trials to show it makes sense; the travel infrastructure is extended to the point that makes sense; and people are willing to step up and make the investment," he says. "And I know there are people at Microsoft working on the technology to actually buy through the TV itself."

But in the meantime, teaming with new sister companies Ticketmaster and CitySearch will let Expedia customers build travel packages that include not just airline tickets and hotel rooms, but also tickets to events and attractions when they arrive at their destinations.