Filed by Expedia, Inc.
                                            Pursuant to Rule 165 and Rule 425
                                            under the Securities Act of 1933
                                            Subject Company:  Expedia, Inc.
                                            Commission File No.  000-27429

This document contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, including statements regarding our expectations, beliefs, intentions or
strategies regarding the future.  Forward-looking statements can be identified
by terminology such as "may," "will," "should," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential" or "continue" or
the negative of such terms or comparable terms.  These statements are based on
management's current expectations and are subject to uncertainty and changes in
circumstances.  Actual results may differ materially from these expectations due
to changes in global economic, business, competitive market and regulatory
factors or failure of the transactions described to be completed for any reason.
We have based all of our forward-looking statements on information available to
us as of July 16, 2001 and we are not obligated to update any of these forward-
looking statements.  You should note that our actual results could differ
materially from the forward-looking statements.

USA Networks, Inc. ("USA") and Expedia, Inc. ("Expedia") will file a joint
prospectus/proxy statement and other relevant documents concerning USA's
acquisition of Expedia with the Securities and Exchange Commission ("SEC").
DOCUMENTS CONTAIN IMPORTANT INFORMATION.  Investors will be able to obtain such
documents free of charge at the SEC's website at  In addition, such
documents may also be obtained free of charge by contacting USA Networks, Inc.,
152 West 57th Street, New York, New York, 10019, Attention: Investor Relations,
or Expedia, Inc., 13810 SE Eastgate Way, Suite 400, Bellevue, WA 98005,

USA and its directors and officers may be deemed to be participants in the
offering of securities by USA, and Expedia and its directors and officers may be
deemed to be participants in the offering of securities by Expedia as well as in
the solicitation of proxies from Expedia shareholders to adopt the agreement
providing for USA's acquisition of a controlling interest in Expedia.  A
detailed list of the names and interests of USA's directors and executive
officers is contained in the definitive proxy statement on Schedule 14A filed by
USA with the SEC on April 9, 2001, and a detailed list of the names and
interests of Expedia's directors and executive officers is contained in the
definitive proxy statement on Schedule 14A filed by Expedia with the SEC on
October 11, 2000.  Copies of those filings may be obtained free of charge at the
SEC's website at

                                    * * * *


Operator:          Ladies and gentlemen, thank you for standing by. Welcome to
                   the Expedia conference call. During the presentation, all
                   participants will be in a listen-only mode. Afterwards, you
                   will be invited to participate in the question and answer
                   session. At that time, if you have a question, you will need
                   to press the one followed by the four on your telephone. As a
                   reminder, this conference is being recorded today, Monday,
                   July 16, 2001.

                   I would now like to turn the conference call over to Marj
                   Charlier, Director of Investor Relations for Expedia, Inc.
                   Please go ahead, ma'am.

Marj Charlier:     Thank you, Operator.


                   By now, you should all have seen the press release that went
                   out this morning. If you have not, you can find it
                   immediately on the web at

                   A couple of reminders. This call is being recorded and
                   broadcast live over the Internet and will be posted on our
                   website at, shortly after its
                   conclusion. The contents of this call are copyrighted by
                   Expedia and may not be reproduced in any way without written
                   permission from Expedia.

                   Some of what is said in this call may include forward-looking
                   statements, as defined by the Private Securities Litigation
                   Act of 1995. Any statements about future events and trends,
                   including steps the company plans to take to improve the
                   financial results or financial conditions should be
                   considered as forward-looking statements. Such forward-
                   looking statements may differ from actual results and are
                   subject to risks and uncertainties, which are detailed in our
                   filings with the SEC and in the press release.

                   On the call with me today is Richard Barton, President and
                   CEO of Expedia, and Greg Stanger, Senior Vice President and

                   I would now like to turn the call over to Richard.

Richard Barton:    Thanks a lot, Marj.

                   I'm sure you all have seen the press release this morning,
                   but to recap quickly, USA Networks has announced that it has
                   entered into an agreement with Microsoft that will enable USA
                   Networks to purchase a majority interest in Expedia. We'll go
                   into some detail about that agreement in a few minutes.

                   First, let me say this is a great day for Expedia, and I say
                   with absolutely no humility whatsoever, it's also a great day
                   for USA Networks. We can't imagine a better parent for us at
                   this stage in our growth, and I can't imagine that USA
                   Networks could find a better company, in a better industry,
                   to help prove its exciting vision -- one that's about the
                   convergence of entertainment, information, and direct

                   Back in 1994, when we first began exploring the travel
                   business inside of Microsoft, we recognized the huge
                   opportunity that this category offered, and the tremendous
                   value that technology could bring to business of making and
                   taking better trips. We've proven that potential. In the past
                   few months, we've seen how our commitment to cutting edge
                   technology has led to marketshare gain and the creation of a
                   whole new consumer experience.

                   At the beginning of the year, we introduced our ESP, or
                   expert searching and pricing platform, after four years and
                   $30 million of development. This advanced technology has
                   enabled us to boost our marketshare and win over consumers.
                   Our customers don't think of it as technology. They just see
                   a great shopping experience and great deals, and that's fine
                   with us.

                   Today, we announce a deal that will allow us to take the
                   advanced technology foundation that we gained in our genesis
                   at Microsoft and move on to leverage that with a broad array
                   of media, commerce and travel assets, our new majority
                   holder, USA Networks has at its disposal. We think that this
                   move is going to turbo charge our efforts, extending our
                   reach both on line and on television, bringing our best in
                   class travel service to more and more customers. With this
                   sale, we get the best of both worlds. We get to keep the
                   value of our Microsoft relationships through a four-year
                   extension in our MSN contract, our


                   dot-net and XP involvement, as well as our Microsoft genes.
                   And now, we get the benefit of being a part of one of the
                   world's largest media and commerce networks, that reaches 81
                   million homes in the U.S. and 155 million homes worldwide,
                   and has a bold vision for the convergence of entertainment
                   and commerce that is year ahead of anyone else's vision.

                   With Expedia at the center of a portfolio of travel oriented
                   assets, USA Networks will have amassed a travel group that
                   can take advantage of this electronic convergence. This group
                   includes some very interesting travel-oriented assets that we
                   can leverage to help drive the next wave of our growth. As of
                   this morning, those include National Leisure Group, a leader
                   provider of cruises and vacations, which also provides
                   Expedia with our cruise content. Ticket Master and City
                   Search, two other USA holdings, present many intriguing
                   possibilities for both sourcing and bundling, event tickets
                   and to Expedia packages, as well as distributing our travel
                   products through Ticket Master and City Search.

                   And by the end of the year, USA expects to launch it's new
                   USA travel channel, which gives us access to a new
                   advertising and direct sales vehicle, as well as an
                   opportunity to leverage travel content production. The USA
                   travel channel will be in addition to the USA network, one of
                   the top cable networks, Studios USA, which produces Law &
                   Order, USA Films, which released the academy award winning
                   movie Traffic, and the Home Shopping Network and its
                   affiliated Internet commerce site.

                   As some of you probably know, USA Networks also owns 70
                   percent of Hotel Reservations Network, our leading competitor
                   in the merchant hotel space. With HRN, we will continue to
                   compete as independent companies.

                   There are a couple of things I'd like to highlight in all of
                   this. First, Expedia will be the flagship property within USA
                   Networks' travel group. We will continue to operate as an
                   independent company and we will continue to follow our vision
                   to create a travel superstore that makes us the largest
                   seller of travel anywhere, on or off line. We will also carry
                   our technology focus with us. That DNA is inside of us and we
                   won't change in our determination to stay years ahead of our
                   competitors in using technology to improve our product and
                   the customer experience.

                   Second, I'd like to tell you something about how this deal
                   came about. Our spin-off from Microsoft was the first step in
                   our eventual weaning from the mother ship. At that time, we--
                   both Expedia and Microsoft -- recognized that we were not a
                   core strategic holding for a company in the software
                   business. Since our IPO, we've explored strategic
                   relationships at many different levels with many potential
                   partners. We have been on the lookout for strategic partners
                   to be owners that had as much to offer us as we had to bring.

                   I met Barry Diller about seven years ago when we were first
                   starting up Expedia -- then known cleverly as "Microsoft
                   Travel." I became immediately intrigued with his vision for
                   the convergence of content and commerce, and the passion with
                   which he pursued despite many not really understanding. I
                   understood, and it resonated with me. Clearly, he has a
                   strong belief in our Expedia and the interactive travel
                   industry. Over the years, he has kept up a drum beat of
                   interest in strategic partnering to purchasing of equity in
                   Expedia, even prior to our IPO in 1999. We are very pleased
                   that USA has reached an agreement with Microsoft, and we look
                   forward to both keeping a strong relationship with the parent
                   that brought us into the world and extending our reach and
                   influence with a new


                   parent who has a great set of weapons to bring to bear on our

                   Now, I'd like to ask Greg Stanger, our CFO, to detail some of
                   the specifics of the agreement between Microsoft and USA
                   Networks and the opportunities this transaction offers to
                   Expedia shareholders.

Greg Stanger:      Thanks very much, Rich. The agreement is fairly complex, and
                   I'll be glad to take a few questions after our remarks to
                   help fill in some of the blanks for you. But the basics are
                   as follows:

                   USA is offering Expedia shareholders the opportunity to
                   exchange shares of Expedia stock for a bundle of three
                   securities. The first is USA common stock. We're at $17.50,
                   or 0.666 shares of USAI, assuming at closing USA stock is at
                   $27.00. The second is 0.4199 USA warrants, also assuming at
                   closing USA stock is at $27. These entitle holders to
                   purchase shares during a seven year period at $35.10 -- a 30
                   percent premium over market. The third is USA preferred
                   stock, which has a face value of $17.50. The preferred has a
                   1.99 percent coupon and is put-able to USA at the holder's
                   election, at years five, seven, 10 and 15, and is callable by
                   USA beginning in year 10. It converts to common at a 25
                   percent premium, except that it prices USA above $35.10, it
                   converts it as a kind and conversion price, thereby
                   accelerating return in the event that the stock appreciates
                   significantly. The specific terms, such as callers and the
                   like, are more fully described in the press release. Going
                   forward, we will provide more data to shareholders to assist
                   them in analyzing the securities offered by USA.

                   The offer is for up to 37.5 million shares of Expedia.
                   Microsoft has agreed to exchange all of its 33.6 million
                   shares for the USA securities. Other shareholders of Expedia
                   will have the option of exchanging their shares for the same
                   consideration Microsoft is receiving, or keeping them and
                   receiving 0.192 warrants to purchase shares of Expedia at $52
                   per share.

                   To elaborate on the offer to our shareholders, in our carve-
                   out for Microsoft, we negotiated a provision entitling our
                   minority shareholders to participate on equal terms in any
                   sale of shares by Microsoft. In our deal with USA and
                   Microsoft, we will provide a further benefit to shareholders
                   and option holders who do not exchange their shares for the
                   USA securities. These warrants will create additional value
                   for our shareholders if we succeed in executing our strategy
                   for growth, and they represent an up side expressly for those
                   shareholders who retain their Expedia shares.

                   In addition, Expedia will be receiving additional
                   consideration from USA that we believe strengthens our
                   competitive position, and will create value for our
                   stockholders over time. USA will provide us with $15 million
                   a year for five years of advertising on USA Networks'
                   properties. That is as much as we have spent in TV
                   advertising in any year in the past. We have also negotiated
                   a two-year option to purchase one-third of the travel channel
                   at USA's cost.

                   A couple of words about our press release this morning on the
                   fourth quarter. As you saw, we had another terrific quarter
                   with tremendous growth. Our gross bookings for quarter were
                   $802 million and we believe we were on pace to have calendar
                   year gross booking of over $3 billion.

                   Gross revenue grew 62 percent sequentially in the quarter to
                   $178 million from $110 million, and net revenue grew 37
                   percent sequentially, to $78 million from $57 million. In
                   addition, we also expect to report net income before non-cash


                   items of $12 to $14 million, or 24 to 29 cents per basic
                   share and 20 to 23 cents per diluted share for the June
                   quarter. On a GAAP basis, the company expects to report a net
                   loss of $5.5 million to $7.5 million, or a loss of 11 to 15
                   cents per basic share.

                   The key drivers of growth in the quarter were in the merchant
                   business, with phenomenal results in Expedia bargain fares,
                   merchant hotels and packages. Expedia bargain fares and the
                   unbranded opaque fares launched in March with over 20
                   airlines, and this business got off to a fast start in the
                   quarter. Our hotel business, which is primarily merchant,
                   grew 45 percent in the quarter sequentially. Much of the
                   hotel revenue was imbedded in our packages business, which
                   grew about 70 percent sequentially in the quarter.

                   We also reported that we will change the method of
                   recognizing revenue for our merchant business in our
                   quarterly and fiscal year statements as we adopt a new
                   accounting standard for fiscal year 2001. As a result, we
                   will report merchant revenue on a net basis, which represents
                   the amount charged to the customer less the amount paid to
                   the supplier. When we compare our results to prior periods,
                   we will also adjust the way we report prior period merchant
                   revenues to reflect the new accounting method. It's important
                   to note that this accounting change does not affect gross
                   bookings, gross profits, net earnings, or earnings per share.
                   Further, we think this apples-to-apples presentation of
                   merchant and agency revenue should help all of you better
                   track our business -- and help all of you better track our
                   progress in building our merchant business.

                   With that, I'll turn the call back to Rich.  Rich?

R. Barton:         Excuse me -- I was on mute. Greg and I are in different
                   locations, so we're playing a little tennis back and forth
                   here. Thanks a lot, Greg.

                   Again, we're really pleased to have USA Networks, with its
                   broad arsenal of entertainment information and interactive
                   weapons as our new majority shareholder. And no we would be
                   glad to take a few questions. Suffer us a few logistical
                   issues as we bounce questions back and forth between the two
                   of us, as we are in different locations. I'll open it up with

Operator:          R. Barton: Thanks. Again, we're very pleased to have USA
                   Networks with its broad arsenal of entertainment,
                   information, and interactive commerce weapons as our new
                   majority shareholder. And now, we'd be glad to take a few

Operator:          Our first question comes from Anthony Noto, of Goldman Sachs.
                   Go ahead, sir.

A. Noto:           Thank you, and hi, Rich and Greg. If you guys could bear with
                   me, I have a couple of questions. The first one is in regards
                   to the Board. I noticed the Chairman will be changing. Are
                   there any other changes for the Board?

R. Barton:         Hey, Anthony, this is Rich. There certainly will be other
                   changes, and they will be announced in the coming weeks and
                   months. It has not been finalized yet.

A. Noto:           Okay. Can you give us any sense of the detail in terms of how
                   many seats USA Networks will get versus Expedia or how that
                   will actually work, why you may not have the specific names?

R. Barton:         Yeah. Barry Diller will be the Chairman, and USA Networks
                   will have a majority of the seats on the Board.


A. Noto:           Okay. And in regards to the Microsoft ownership, Rich, you'd
                   said that, you know, they are clearly a software company that
                   Expedia wasn't a core holding for them. Was there any value
                   that you saw in trying to get them to hold some stake in the
                   company? Because now my understanding is that they have no
                   holding whatsoever in Expedia once the deal closes. Is that
                   correct? And if you could just comment on what you think the
                   value of adding a holding stake would have been versus just
                   having the relationship with MSN?

R. Barton:         Well, it's a complex answer, but there are a few things I'll
                   say, and then I'll turn it over to Greg. The first is, no
                   matter what, we maintain a really strong relationship with
                   Microsoft and MSN at multiple levels, given the extension of
                   the long-term contract of the MSN distribution relationship
                   that we're announcing coincident with this announcement.
                   Also, we are right on the cutting edge of adoption of leading
                   edge Microsoft platform technologies like the XP-oriented
                   technologies and the technologies, as well
                   as Hailstorm, which is part of that. Expedia is always
                   featured as perhaps the top or one of the very top partners
                   in terms of aggressiveness as we adopt these new platforms by
                   Microsoft, and that will not change. The second thing is
                   Microsoft will maintain an indirect -- a significant indirect
                   ownership stake in Expedia via its resultant ownership in USA
                   Networks resulting from this transaction, so there will be an
                   ownership stake there regardless. And, third, there could
                   actually be some direct shares at the end of the day that
                   they own, depending on how many of the Expedia shareholders
                   opt to offer their shares in the tender offer that is part of
                   the transaction. I should -- if I didn't say that right,
                   Greg, you should chime in and fix what I just said.

G. Stanger:        Sure. As a subsidiary merger, this is not technically a
                   tender offer. (Inaudible) But the way that it will work is
                   that USA is offering to purchase up to 37.5 million Expedia
                   shares. Microsoft holds 33.7 million. But to the extent that
                   more than 37.5 million Expedia shareholders choose to
                   exchange their shares for the USAI securities, then Microsoft
                   and everyone else will be cut back on a pro rata basis. So
                   that's the mechanism by which Microsoft could wind up with an
                   ongoing position in Expedia.

A. Noto:           Great. And then one question in terms of the value.
                   Obviously, it's a complicated structure and we have to make
                   assumptions using black shoals to value pieces of it, which
                   involves, you know, assumptions on volatility. And, you know,
                   I'm coming out with a certain range, and I was just wondering
                   if you could provide for us what range in terms of stock
                   value you came out with and how you valued the purchase

R. Barton:         Well, I think the best way to approach that would be perhaps
                   to talk a little bit about each of the three securities.
                   Obviously, the common stock is worth what it's worth, which,
                   you know, assuming the midpoint of the range, which is the
                   $27 per share, is 17.50 per Expedia share. The preferred
                   stock has a face value of $17.50 per Expedia share, but until
                   it trades, it's impossible to know how investors will value
                   that security, and it could trade higher or lower than that
                   number. Similarly with the warrants, the warrants are based
                   on a number of different assumptions, could be valued in the
                   range of $5, and, again, how they trade will depend on a
                   variety of factors relating to both the underlying security,
                   USAI stock, and also how the warrant itself trades relative
                   to the underlying security.

A. Noto:           Right, great. And I pretty much know that calculation in
                   addition to the net present value of the dividend, so I come
                   up with about $44. So I may be wrong in terms of the
                   volatility that I'm using there, but I guess my question
                   would be, when was the deal struck relative to the close as
                   of Friday since the stock had, you know, obviously closed at

R. Barton:         You can imagine that a deal of this complexity takes a little
                   bit of time to put together.


                   And we have been in discussions with both parties for a
                   fairly extended period of time. You know, the deal itself was
                   signed yesterday. The value was -- that's an exchange, and
                   primarily this was a transaction that -- as a financial
                   transaction, it was a transaction to a great extent between
                   Microsoft and USA, and the parties were very comfortable with
                   the --with the valuation -

A. Noto:           Great.

R. Barton:         -- or the exchange of value.

A. Noto:           Guys, thanks very much. I appreciate your patience with all
                   my questions.

R. Barton:         Sure thing.

Operator:          Our next question comes from Mark Mahaney, with Morgan
                   Stanley Dean Witter. Go ahead, sir.

M. Mahaney:        Great. Thank you. Rich, Greg, two questions. One, how should
                   we think of this on the broader competitive environment, and
                   particularly relative to Travelocity and Orbitz? What are the
                   pluses and what are the minuses in terms of how you've
                   structured the deal and -- relative to those two companies?

R. Barton:         Hey, Mark. This is Rich. Yeah, I'm not -- I've spent the last
                   now five seconds trying to think of what the negatives are.
                   I'd start, but I can't find any. The positives are numerous.
                   USA Networks is going to enable us to extend the reach of
                   Expedia into new and interesting places, both on TV and on
                   the Internet. You can imagine a potential very interesting
                   partnership with Ticketmaster City Search where we begin to
                   ultimately sell Ticketmaster vacations, products that include
                   event tickets in -- inside of Expedia. How about the Dave
                   Matthews Las Vegas package with two nights at the Belagio,
                   round-trip airfare, and two tickets in the 10th row to see
                   Dave Matthews? Really interesting stuff can ensue there.
                   Also, the new USA Travel Channel-- this dedicated new cable
                   channel that USA Networks announced its starting up today and
                   will launch by the end of the year -- is a whole new way to
                   utilize TV to sell travel. And we have a front-row seat, an
                   option to buy a portion of that -- of that property. So
                   there's just a whole arsenal of weapons that USA and we can
                   use to gain continued advantage and continue to accelerate
                   our growth as we look forward. From a negatives perspective,
                   you know, I really don't see any negatives. It's just a great
                   benefit for us.

M. Mahaney:        Okay. And then on the extension of the MSN deal, can you
                   provide any more terms on that? Or are the terms of the
                   extension similar to the terms you've had to date? Thanks.

G. Stanger:        I think they're broadly similar, Mark. This is Greg now.
                   We've had-- as you may know, when we carved out for
                   Microsoft, we entered into a five-year deal that had pricing
                   to be re-negotiated after two years to the mutual
                   satisfaction of the parties. We have recently successfully
                   completed that negotiation and actually extended the contract
                   out until June of '05, which is a slightly longer period than
                   the initial five-year term. The terms themselves, I would
                   say, are similar economically. We believe that the promotion
                   we have on the site will be -- or I should say, the site for
                   the promotion across the network will be even more powerful
                   than it has been in the past.

M. Mahaney:        Thank you.

G. Stanger:        Sure.


Operator:          Our next question is from Bob Simonson, with Wm. Blair. Go
                   ahead, sir.

B. Simonson:       Good morning. Two questions. What services do you still
                   receive from Microsoft, and is there any impact on them? And,
                   secondly, I think you've kind of been asked a little bit
                   about it, but can you talk about any implications or
                   understandings of how this changes the competitive area in
                   the -- you're going to remain a competitor with HRN. How does
                   -- can you speculate on how that kind of shakes out?

G. Stanger:        Why don't I tackle the first one, which is what services we
                   get from Microsoft. Obviously, we just alluded to the
                   distribution deal. We also have a services agreement, under
                   which our information technology infrastructure sits on top
                   of the Microsoft IT infrastructure. And so we have, you know,
                   all of the employee's Internet access and e-mail. We also
                   have access to -- it can sit on top of the Microsoft SAP
                   system for our general ledger and have a host of related
                   systems. We, as part of this deal, entered into an agreement
                   with Microsoft to continue for a period of time those
                   services, but we are also well underway in migrating off of
                   the Microsoft services in developing our own infrastructure.

B. Simonson:       Thank you.

R. Barton:         Much of that migration -- I mean that migration has been in
                   process for the 20 months since we spun out, and so it is
                   well underway and it will continue on the normal schedule,

B. Simonson:       Okay.

R. Barton:         Relating to the -- your HRN question, you know, we remain an
                   independent publicly traded company. HRN is a competitor of
                   ours in one portion of our business and will remain a
                   competitor of ours in that portion of the business. There is
                   nothing beyond that is contemplated right now. There could
                   be, down the road, some opportunities for cooperation, and
                   certainly USA Networks has left the door open for that down
                   the road. But for now and for the foreseeable future, we will
                   continue to compete as we have in the past.

B. Simonson:       How? Could you elaborate at all? How would you, what would
                   you get from, what was that corporation, what form would the
                   corporation take?

R. Barton:         You know -

B. Simonson:       Possibly.

R. Barton:         I really think it's impossible to say until we get further
                   into discussions.

G. Stanger:        Yeah. We negotiated this arrangement with USA as opposed to
                   with any of its other entities.

B. Simonson:       Okay.  Thank you.

R. Barton:         You bet.

Operator:          The next question comes from Henry Harteveldt, with Forrester
                   Research.  Go ahead, sir.

H. Harteveldt:     Thank you. Rich, Greg, congratulations on this. Quick
                   question. You had said this would be a whole new way to use
                   TV, but Travel Channel was started by Icahn to dump excess
                   TWA inventory and then Preview Channel -- Preview Travel
                   started on


                   this. How do you think you're going to be able to do things
                   in a different or better way? And, frankly, do you not see
                   this as a way to drive off-line, on-line and, conversely,
                   online to offline to appeal to the technology pessimists out

R. Barton:         Hey, Henry. A complex question. I'll circle back here on the
                   second half of it. But the first half is, why do we think
                   this one's going to work?

H. Harteveldt:     Or work better than ...

R. Barton:         I mean we've got the best guys in the business, basically
                   running it. USA Networks is an absolute pro, very -- it's a
                   pro at starting up new cable channels. And broadcast
                   channels. Barry was the inspiration, you know, behind the Fox
                   Network before its network.

H. Harteveldt:     Right.

R. Barton:         This guy -- these guys know how to program. They know how to
                   create successful channels. I am incredibly thrilled to be
                   able to draft off of that, and we're being given a huge, a
                   very valuable option to be able to draft off of that as well
                   as wonderful geographic position in the kind of USA holdings

H. Harteveldt:     Um-hmm.

R. Barton:         So, I'm very excited about it. You know, you and I have
                   talked about it a lot. I am a real bull on what happens as TV
                   and travel commerce converge. I think really amazing things
                   happen because TV is such an inspirational medium for travel.

H. Harteveldt:     Um-hmm.

R. Barton:         You know, one of USA's new successful programs is the Eco
                   Challenge. You know, I can imagine sitting watching Eco
                   Challenge as well and thinking, wow, that's taking place in
                   -- somewhere in Indonesia, and I want to find out about that
                   place. Now I don't want to go do the eco challenge, but, you
                   know, maybe I'll go to Bali. Let's find out more. Click.
                   Okay? So there's just a very interesting future here around
                   that. The second half of your question, I think, was about -

G. Stanger:        Rich?

R. Barton:         Yeah?

G. Stanger:        Before answering the second half of the question, it's
                   probably worthwhile also mentioning that in addition to the
                   cable properties and expertise that you mentioned, the one
                   that speaks most directly, I think, is the Home Shopping

R. Barton:         Oh, yeah.

G. Stanger:        Which is widely understood to be sort of a very key and core
                   asset in television retailing, and there's an enormous amount
                   of expertise and experience in the company surrounding that

R. Barton:         Yeah, these guys are merchandisers extraordinaire.

H. Harteveldt:     Right.

R. Barton:         I mean Diller started up QVC and created a new category with


H. Harteveldt:     Um-hmm.

R. Barton:         And then started up HSN. I mean these guys are -- these guys
                   are the pros.

                   Now, the second half I didn't quite understand. I mean this
                   extends our reach, so, of course, we're going to be able to
                   pull what we hope will be able a lot more people from
                   television, from offline, to online, to interact and get our
                   brand out that much more broadly as well. Vice versa, as we
                   work on interesting, we talked about that Ticketmaster/Dave
                   Matthews/Expedia vacation package...

H. Harteveldt:     Right.

R. Barton:         ...we should be selling that. We'll be selling that on the
                   USA Travel Channel, as well. And we may be pointing people
                   towards that production from the Website.

H. Harteveldt:     Okay. Does this impact any of your other media activities
                   like your radio program, the magazine, anything like that,

R. Barton:         No, it doesn't.

H. Harteveldt:     Okay.  Great.  Thank you.

Operator:          The next question comes from Steve Weinstein, with Pacific
                   Crest Securities. Go ahead, sir.

S. Weinstein:      Great, and thanks. In the revenue-related metrics that you
                   released, everything looked, you know, obviously better than
                   expected there. It was a great quarter. But as you drill
                   down, like the growth rates between your gross bookings, your
                   gross revenue, net revenue number were quite divergent. Can
                   you give us a little more background so we understand what
                   was really driving it? I mean what was happening to sort of
                   like average transaction price, the number of transactions,
                   (?) booking, and how were those things playing out in the
                   metrics you gave because we don't know the full detail there.

                   And then, second, just to sort of hit a point that was
                   already brought up, this is a complex transaction. It's
                   really hard to figure out what value is being put on Expedia.
                   Would you be willing to venture throughout a range that you
                   guys came up with?

G. Stanger:        Let me take those one at a time. In terms of why the merchant
                   revenue growth is slower than in the gross presentation,
                   essentially, it's as follows.

R. Barton:         Wait, wait.  I think you said that wrong, Greg.

G. Stanger:        Oh, let me back up then.

R. Barton:         Yeah.

G. Stanger:        All right. The gross presentation shows faster gross growth
                   than the net presentation, and that is because our growth has
                   been much faster in the merchant business.

S. Weinstein:      Right.

G. Stanger:        Which is a lower margin business. And so that margin, when it
                   is translated back into net revenue, forms a smaller
                   proportion of the overall revenue picture. Does that make


S. Weinstein:      Well, yeah. I mean I understand the relationship between sort
                   of the net and the --.

G. Stanger:        It's a -- let me take another stab at it. Merchant revenue is
                   growing very rapidly.

S. Weinstein:      Okay.

G. Stanger:        And so in the gross presentation, the impact is that the
                   overall revenue number growth is quite high. On a net basis,
                   the merchant fees shrink to a much smaller proportion of the
                   overall revenue, so its impact on the growth is smaller.

S. Weinstein:      Okay.

R. Barton:         It's completely a mix issue that plays right into our
                   advantage and talks to our strategy. Our merchant businesses
                   are growing at a very rapid pace, a more rapid pace than the
                   rest of the business. And, so, as we -- as we move to an
                   `apples-to-apples' comparison between our merchant businesses
                   and our net and our agency businesses, you know, that --
                   that's a -- that mix issue gets filtered out.

S. Weinstein:      Right.  If I look at it from a -

R. Barton:         I don't know if I helped, Steve.

S. Weinstein:      Yeah, well, if I looked at it from just like a gross billings
                   -- or gross bookings number -

R. Barton:         What's happened to -- like what was growth in or change in
                   average transaction amount and the number of transactions?

G. Stanger:        For right now, Steve, we're doing a high-level release of a
                   few metrics and not really drilling into the operating

S. Weinstein:      Okay.

R. Barton:         An interesting way to maybe look at this is to maybe not get
                   caught up in all of the gross revenue and -- or the net
                   revenue stuff and just take a look at cash earnings as a
                   percent of gross bookings. And that is -- that's where the
                   story is, in my opinion. And I don't have those numbers at my
                   fingertips -- Greg, maybe you do --but we saw a very large
                   expansion in our cash earnings as a percentage of gross
                   bookings. And we will be looking to continue that trend.

G. Stanger:        Sure. If you take the midpoint of the range of the cash
                   earnings we announced, that's about 1.6 percent of gross
                   bookings last quarter. We were well under 1 percent. So -

R. Barton:         And that is -- that growth is driven by the shift in gross
                   bookings towards merchant business which generates a higher
                   cash earnings percentage per gross booking than the other

S. Weinstein:      All right.  Okay, thanks.

R. Barton:         Yep.

Operator:          The next question comes from Mark Rowen, with Prudential
                   Securities. Go ahead, sir.


M. Rowen:          Thanks. A couple questions, first of all, HRN's deal with
                   Travelocity, I believe, would preclude a merger between HRN
                   and Expedia so -- for three, three-and-a-half years, so I'm
                   assuming that that's the reason that you plan to compete
                   aggressively with them. But the question is, are there any
                   out clauses to that agreement? Do you think that cooperation,
                   as you said, might happen sooner than 3-1/2 years? Or what
                   are the plans going forward? And, also, both you and HRN
                   compete for some of the same inventory. So the fact that
                   you're now both owned by the same parent, what does that do
                   to pricing as far as supplier pricing? And then I have a
                   couple other questions, if I could.

G. Stanger:        If I could jump in, it's probably not entirely appropriate
                   for us to comment on the confidential arrangements between
                   HRN and its partners.

R. Barton:         It's just not appropriate; it's not possible.

G. Stanger:        Um, you know -

R. Barton:         We don't know.  We don't know what they are, so -

M. Rowen:          Okay. So if you could just comment then about both having the
                   same parent and what that might do to pricing as far as
                   supplier pricing in the industry?

R. Barton:         You know, we haven't had -- you know, we haven't had these
                   discussions about cooperation, Mark. So it's really -- it
                   would be purely speculative. Certainly, there is an
                   opportunity to do stuff down the road, but we really haven't
                   given any -- put any flesh on that idea yet. In the meantime
                   and for the foreseeable future, we'll compete. And we'll
                   compete at every point in the business. And we have been
                   competing effectively then, very effectively.

M. Rowen:          Well, it just seems that one of the big potential synergies
                   of the merger would be doing something with HRN. So to say
                   that you haven't thought about, you know, that you're just
                   going to compete as always seems a little confusing to me.

G. Stanger:        We're certainly going to be within the same USA family. We
                   will get to know these people. We'll talk to them. Who knows
                   what could develop over time.

M. Rowen:          Okay -

R. Barton:         But, Mark, you know -- Mark, let's be clear. We're not
                   merging with HRN. There's no merger. There's no, you know --
                   there is the --certainly the opportunity for, you know,
                   partnership down the road with those guys in cooperation.
                   But, you know, the point of this --the point of this
                   transaction is not, you know -- HRN is not involved in this
                   transaction; put it that way.

M. Rowen:          Okay, Greg, a couple of questions. You put a value on the
                   warrants for USA. I wonder if you could give us a range of
                   value for the warrants on Expedia?

G. Stanger:        Yeah, it tends to be clear. I'm being careful not to put a
                   value on those securities because they are not yet in the
                   market, and it's impossible to know how they will trade. So
                   they have theoretical value -

M. Rowen:          Right, right.

G. Stanger:        -- and trading value may be materially different. Again,
                   depending on the assumptions that you make regarding the
                   Expedia warrants, they're in the -- in the range of $4.60 per


M. Rowen:          Okay. And then I wonder if you could tell us of the revenue
                   that you reported for the quarter? How much of that came from
                   the licensing segment?

G. Stanger:        License revenue in the quarter was $8.3 million.

R. Barton:         No.

G. Stanger:        Excuse me.  Excuse me.

R. Barton:         That was, that includes advertising.

G. Stanger:        No, I'm off base, and I'm -- I've been up all night working
                   on this transaction. I apologize for that. I think what I'd
                   prefer to do is not break out revenue further than we already

M. Rowen:          Okay. All right. And then one final question if I could.
                   Rich, you mentioned a couple of times some combinations and
                   things that you could do with Ticketmaster and City Search
                   with the Dave Matthews Band. Do you think down the road that
                   it makes sense for you and Ticketmaster to be one company? Is
                   that where this is going? Or does that remain to be seen?

R. Barton:         You know, I haven't even contemplated that, Mark. Perhaps
                   that is something that is contemplated down the road by Barry
                   Diller and USA. It's not something we've had discussions
                   about. The businesses are very complementary, but they are
                   different businesses. So, it doesn't seem immediately
                   apparent to me that they naturally belong together, from my
                   perspective. Having them be brother and sister is terrific,
                   and we should be able to leverage what each other's done.
                   They have an amazing market position, and we have an amazing
                   market position, and we should be able to leverage that. But,
                   beyond that, I don't see much.

M. Rowen:          Okay, great.  Congratulations.

R. Barton:         Thank you.

Operator:          Our next question comes from Tom Underwood, with Legg Mason.
                   Please go ahead with your question.

T. Underwood:      Congratulations, guys. I like the change in ownership. My
                   question is really regarding just some of the numbers that
                   you put out today, the $100 million that was done in terms of
                   merchant business, up from about $53 million a quarter ago.
                   Whereas, your hotel business is up 45 percent sequentially.
                   How fast of a start is Bargain Fares off to, and how
                   important a component of your merchant business is that?

R. Barton:         The Expedia Bargain Fares have become a -- they've come out
                   of the gate very quickly. We have not yet broken them out.
                   However, I think it's fair to say that it has become a
                   material portion of our overall transportation business and,
                   in fact, a material portion ... did get sold.

T. Underwood:      Okay. And then, finally, just a little bit different. In
                   terms of going forward, are you seeing any trends from
                   consumer travel spending, or any impact from more that would
                   lead you to believe that the environment is getting more
                   challenging for travel bookings on the Internet?


G. Stanger:        You know, it's an interesting -- it's an interesting dynamic.
                   As the market for travel has become weaker over the past
                   period, the availability of merchant inventory and other
                   inventory has increased. And so, we found that growing our
                   business has been easier in this environment than in past
                   environments. And so, I think that has been a net positive
                   for us.

R. Barton:         Though we've been historically successful growing our
                   business in other environments as well.

T. Underwood:      Okay.

R. Barton:         I think you'd agree. I think it's probably numerically

T. Underwood:      All right. It is numerically obvious. I was very impressed
                   with your net revenue as a percentage of growth in
                   transaction value.

R. Barton:         Right. In terms -- in terms of impact from Orbitz or what
                   have you, you're looking at some of our results right now.
                   Business is obviously good. So I think that there may be an
                   effect of, because of the marketing arrangements that Orbitz
                   has with its carrier owners that they utilize soft marketing
                   to drive people from their own sites and their own planes to
                   Orbitz' site. I think probably there is a cannibalization --
                   a heavy cannibalization going on from the airlines' own
                   direct sites to Orbitz.

T. Underwood:      That's consistent with what I'm hearing from others. Thank
                   you, guys.

R. Barton:         Which, you know -- I don't know what you think about that,
                   but from an airline perspective, that doesn't necessarily
                   seem to me to be the most long-term strategic thing to do.

T. Underwood:      Probably not.

Operator:          The next question is from Jack Pitts, with Steadfast
                   Financial. Go ahead with your question.

J. Pitts:          Hi, guys. Two questions. One, is the $15 million over the
                   five years with USA in marketing -- how is that -- how does
                   that affect income statements? Is that going to be charged as
                   an expense? Or is that free? And, if so, does it work like a
                   coupon that you can, you know, buy time at any time for $15
                   million a year? Or, how do they price it? Considering if you
                   have to buy it, then they could just price it at a higher

G. Stanger:        Sure. We will be purchasing media with that $15 million
                   annual credit on the same terms as a cash buyer. So this will
                   be, you know, the same sort of place that we would get if we
                   -- if we were to simply buy through our agency, our ad
                   agency. In terms of the accounting question, still a little
                   bit of work to be done before we have to make that decision,
                   but it is likely that we will put it on the balance sheet and
                   expense it as we use it.

J. Pitts:          Is it showing as a donation to the balance sheet of $75
                   million or is it coming out of your current balance sheet?

G. Stanger:        It would be a contribution of assets.

J. Pitts:          Okay, thanks. And then the other question is, in terms of
                   your number of shares, it's -- I'm just trying to figure out
                   from Microsoft basically the offering to USAI - what the


                   total number of shares is outstanding and, you know, how many
                   -- how many options are priced above today's stock price,
                   which could further dilute it?

G. Stanger:        Well, in the -- in the quarter ended, the diluted shares
                   outstanding was 61 million. We do have a number of
                   outstanding stock options, and so you're correct that on a
                   fully converted basis, these share counts are somewhat higher
                   than that, approximately 68 million shares.

J. Pitts:          And is that 68 million at or below -- was that exercised by
                   either at or below today's price of $44?

G. Stanger:        Yes.

J. Pitts:          Thanks. And then is there a recommendation by Expedia
                   management for which option to choose the Expedia warrants or
                   the USAI deal? Because that -- as I understand the deal, it's
                   not really a merger. It's just basically a transaction
                   between Microsoft and USA.

G. Stanger:        Yeah, but technically it is structured as a subsidiary
                   merger. Our board has recommended the transaction, but has
                   not taken a viewpoint on which election shareholders should
                   make. So shareholders who are looking for exposure to the
                   media world with increased liquidity might choose the USAI
                   securities. Shareholders who continue to see the future and
                   the upside in Expedia and Internet travel obviously will be
                   attracted to the situation they already have, in combination
                   with the additional warrant that will be distributed to each
                   of our shareholders and option holders as well as the
                   strategic assets that are being contributed into the company.

J. Pitts:          And is there any indication of what you guys are going to do
                   as managing Expedia?

G. Stanger:        I -- I'll speak for myself personally. I have a significant
                   proportion of my personal wealth in the company, and I'm very
                   glad that I do. And I expect that that's going to be the case
                   for the foreseeable future. I do not expect that I will be
                   exchanging my shares in the transaction.

J. Pitts:          Thank you very much.

G. Stanger:        Sure thing.

Operator:          The next question comes from Michael Moriarty, with MJM
                   Partners. Go ahead, sir.

M. Moriarty:       That was the exact question I had. And, if Rich can talk
                   about what his intentions are regarding his options in the

R. Barton:         I would answer the exact same way that Greg just did.

M. Moriarty:       Thank you very much.

G. Stanger:        I would add, just as a matter of completeness, that, you
                   know, my --while I will remain very invested in Expedia for
                   the long term, I also, as a prudent individual, will, over
                   time, also have the goal of some liquidity, and from time to
                   time, take actions towards that end.

R. Barton:         And actually, we should just make that as a blanket statement
                   for all senior management of Expedia. You know, for all the
                   senior management of Expedia, the vast majority of their net
                   worth is tied up in Expedia stock, which is a great thing.
                   But, you know, from time to time historically and into the
                   future from time to time, you're


                   going to see natural diversification efforts. I don't
                   anticipate anything abnormal or such, but, it will occur.

M. Moriarty:       Just a follow-up question if I could. Given that
                   consolidation is clearly happening in this space, and with
                   USA having a number of different public entities in which you
                   can use as currency, how should we view and how are you
                   viewing and how does USA view the Expedia currency going
                   forward in terms of further acquisitions versus, let's say,
                   HRN's currency versus USA? How do they determine which entity
                   will participate?

R. Barton:         I think the different opportunities will present themselves
                   to different entities. And certainly, we'll continue to have
                   strategic conversations with a lot of potential partners, and
                   our sense is that USA would be very open to those
                   conversations and the use of Expedia equity to the extent
                   they were interesting transactions.

M. Moriarty:       Was that the same consideration at Microsoft?

R. Barton:         Well, we did, do -- we did complete two acquisitions in our
                   20 months or so of being public. So, it was the same kind of
                   -- same kind of situation, you know, at Microsoft, though I
                   think it's pretty clear that USA Networks and Barry Diller is
                   making a really big bet and bold move in the interactive
                   travel space, and I think we can see some even more stepped-
                   up progressiveness.

M. Moriarty:       Thank you very much.

Operator:          Ladies and gentleman, if there are any additional questions,
                   please press the one, followed by the four at this time.

                   Our next question comes from Matt Gottlin, with Chesapeake

M. Gottlin:        Hi, and congratulations. Can you -- I think before you said
                   the range for the warrants. Could you just repeat that? And
                   also, could you go over the timing of the transaction and
                   what approvals are necessary?

G. Stanger:        Sure. You know, again, the warrants, just to reiterate,
                   trading markets will be uncertain. We believe that the
                   theoretical value on the USA warrants is in the range of, you
                   know, depending on your assumptions, $5 per Expedia share. On
                   the US -- excuse me -- on the Expedia warrants, the value is
                   theoretically (inaudible) a little bit lower than that on the
                   order of about $4.60.

M. Gottlin:        Okay, and then the timing of the transaction and closing?

G. Stanger:        We expect to complete a proxy that will be mailed to
                   shareholders in a -- let's say, a four-week period. The
                   transaction will be subject to both SEC review, and also, the
                   antitrust review and should be completed, in our view, by the
                   end of this year.

M. Gottlin:        The transaction will be completed by the end of the year?

G. Stanger:        Yes. I should note that both Microsoft and USA Networks have
                   irrevocably committed to the transaction, and so the
                   likelihood of its completion is quite high.

M. Gottlin:        Thank you.

Operator:          Ladies and gentleman, once again, if there are any additional
                   questions, please press the one, followed by the four at this


                   Our next call comes from Lorraine Sileo, with PhoCusWright.
                   Please go ahead, ma'am.

R. Barton:         Let me interrupt you first, Lorraine.

L. Sileo:          Okay.

R. Barton:         This is the last question for me. This is Rich. Greg, I'll
                   leave it up to you to decide if you want to continue, but I
                   have a press conference I've got to dash off to.

L. Sileo:          Rich, I wanted to ask about the National Leisure Group. Now,
                   I know you already work with them, but how might this
                   facilitate this --having the same parent company facilitate
                   the sale of cruises and vacations to Expedia?

R. Barton:         I mean it's nothing -- it's nothing but goodness. You know,
                   we're close partners with NLG right now. They are just top
                   of, best in class in terms of selling cruises, especially
                   online. This is a business that you know we're very
                   interested in, and being able to be really geographically
                   close by -- I guess that's the wrong term -- but kind of
                   organizationally close to them, is a terrific opportunity for
                   us to figure out if we can do more together. I think there's
                   a lot of good -- a lot of good potential upside from further
                   cooperation there.

L. Sileo:          Sure. How much of Expedia's bookings now come from that area,
                   the cruise and vacation packages?

R. Barton:         I don't think we released that. It's -- Greg, have we done

G. Stanger:        We have not. We have talked about the fact that on the
                   packages front we believe that we are now one of the larger
                   packagers, either online or offline.

R. Barton:         These (inaudible) businesses have done very well for us,
                   Lorraine, and they're fast growing. I think a datapoint that
                   Greg talked about in his script, in his portion of the call,
                   was that our package business grew 70 percent sequentially.

L. Sileo:          Thank you.

R. Barton:         It's on a nice trajectory.

L. Sileo:          Okay.

R. Barton:         Greg, You and I aren't sitting next to each other, but if you
                   want to keep going, please do.

G. Stanger:        Okay.

R. Barton:         Because it is complex, and so maybe it's worthwhile. I know
                   you're getting tired, and I don't want to push you into that,
                   but -

G. Stanger:        That's okay. Maybe we'll take one more question, if there are

Operator:          I am showing no questions at this time.

R. Barton:         Okay. All right. That's good. I'll take that option quickly
                   then. I'm sure we'll have a -- there'll be lots more to talk
                   about in the coming weeks as we, you know, announce the
                   quarter, as we file a proxy for the deal, etcetera. So
                   there'll be plenty of opportunity to gain clarity. Let me
                   kind of close by saying this is a great win for all the


                   companies involved. It's a great win for Microsoft. It's a
                   terrific buy for USA Networks. And for Expedia, it just takes
                   us to the next phase. You know, it takes us from our
                   technology-oriented software roots, where we thrived and
                   where we were born, and moves us into a world of media assets
                   and commerce assets that are unrivaled. And we're very
                   excited about the opportunities that this is going to present
                   to all of us and to all of our shareholders. Thanks a lot.

G. Stanger:        Thanks very much.

Operator:          Ladies and gentlemen. That does conclude our conference call
                   for the day. You may all disconnect, and thank you for

(End of Call)