Last week, Cox Communications signed a letter of intent to exchange our 25% stake in Discovery Communications for the stock of a company that owns the Travel Channel business, Discovery’s Antenna Audio business and cash. We thought this would be the perfect time to start a new feature on Digital Straight Talk called Five (or so) Tough Questions For…. The first person in the hot seat is Cox’s President, Pat Esser.

1. Pat, Cox is a cable distributor. Why in the world are you interested in owning and operating a cable network like Travel Channel?

Yes, Cox is a cable distributor, and distribution will remain our core business. But I’m always interested in opportunities that can make our business even stronger. We’ve been very pleased with our interest in Discovery, but it's a financial asset that doesn’t hit our bottom line. Converting it into an operating asset like Travel Channel on our balance sheet that will generate revenue and cash flow is a good move for Cox. But beyond that, Travel Channel is a phenomenal brand with powerful content that I’m confident can be leveraged in multiple ways across the businesses and services of Cox Communications and our parent company, Cox Enterprises. That would include our wireless service, as well as newspapers and broadcast stations. There seem to be unlimited opportunities to make the most of Travel’s amazing content. I’m extremely impressed by Pat Younge (general manager of Travel Channel) and his team. My plan is to provide them all of the support they need from me and my team to continuing growing the Travel Channel brand, and to let them do their jobs.

2. Can a stand-alone network be successful? Doesn’t it require the leverage of multiple networks?

I think an independent network CAN be successful, assuming it has a strong brand and delivers highly valued content to its viewers and distributors. Travel Channel is that kind of asset. I’m very excited about the opportunities it would provide us to deliver content across multiple platforms.

3. Does Cox have any experience in owning a programming network?

We currently operate several local and regional cable networks, including local news stations and sports networks (like Channel 4 San Diego and Cox Sports Television in Louisiana). We’ve also owned interests in other networks over the years—including E!, Outdoor Life and Speedvision. We've also been actively involved on the shareholder board of Discovery for many years and have gotten to know much about the Travel Channel through that association. I realize having 100% ownership of and operating a national channel would be a new venture for Cox. But it’s a very exciting prospect for us—one that we think makes a lot of sense.

4. Are you going to just flip Travel Channel and sell it to another programmer?

Oddly, there was a bit of media coverage about that today—speculation that we’d flip the network to another programmer. While I understand the tendency of the media to explore every possible angle of a major transaction like this, we definitely aren’t planning to flip the Travel Channel. We’re absolutely committed to bringing this great asset into the Cox portfolio, holding it indefinitely, and letting Pat and his team demonstrate to us what a powerful, strong, growing asset it is. The bottom line is that when we make the decision to acquire new businesses, we do it for the long term. We thought long and hard about these businesses and believe that they are great opportunities for Cox to expand our activities in the programming area.

5. Does this deal signal a change in Cox’s business strategy?

No. Distribution will continue to be our core business. But at the same time we welcome opportunities to enhance the services we provide our customers and to continue strengthening our long-term business outlook. By exchanging our Discovery interest, we’re gaining strong operating assets in Travel Channel and Antenna Audio, which produces mobile audio and multimedia content at museums and attractions around the world. And the transaction will enable us to pay down some of the debt that we incurred when we took Cox Communications private in 2004.

6. Cox has been an investor in Discovery Channel for more than 20 years. Why sell your interest now?

Again, while we’ve been very pleased with our Discovery interest, we’ve been interested for some time in converting it into an operating asset that generates revenues and cash flow. Our partners, Discovery Holdings and Advance Newhouse, have recently become more interested in exploring such a deal, so we welcomed the chance to sit down with them and evaluate how to make it happen. Last week we announced our letter of intent to execute a deal, and now we’re working toward finalizing it. When it's completed, I look forward to welcoming Travel Channel and Antenna Audio into Cox Communications!