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

           USAI LOGO              EXPEDIA LOGO              NLG LOGO

                          CONTROLLING STAKE IN EXPEDIA,


         Los Angeles, CA - July 16, 2001 - USA Networks, Inc. (NASDAQ: USAI)
announced today an agreement to acquire a controlling interest in Expedia, Inc.
(NASDAQ: EXPE), a leading online travel agency, through the purchase of up to
37.5 million shares, approximately 75% of the currently outstanding shares.
Microsoft has agreed to transfer all of its 33.7 million shares and warrants in
Expedia(R), subject to pro-ration. USA also announced today an agreement to
acquire National Leisure Group, Inc., the foremost online cruise and vacation
package agency. In addition, USA said it would launch the USA Travel Channel, a
new cable television program service that will offer a full range of travel
products. Upon completion of the proposed transactions, USA will generate
approximately $4 billion in annual gross travel bookings, becoming the new
leader in interactive travel.

         These acquisitions, in addition to USA's interest in the Hotel
Reservations Network (NASDAQ: ROOM), will form the USA Travel Group portfolio of
companies, which collectively handled approximately 16% of the $14 billion worth
of online travel transactions in 2000. For the calendar year 2001, the group is
expected to generate approximately $4 billion in gross bookings. In calendar
year 2002, gross bookings are expected to grow by approximately 40%. The
companies had virtually no debt and a combined cash balance of approximately
$340 million as of March 31, 2001.

         Expedia and NLG will expand USA's estimated share of retail
transactions conducted over the Internet and via television in the United States
from 5%, to approximately 9% in 2001. Expedia and NLG anticipate leveraging
USA's massive transactional infrastructure which is expected to process 1
billion minutes of inbound customer calls, 83 million orders, and ship 40
million items over the next twelve months. The newly combined USA database of 33
million customers will include purchasers of everything from live music event
tickets - to a wide array of home products - to cutting edge electronics - to
complex travel packages, and are all products available from USA through either
a television or computer screen.

         "For some time we have believed travel to be a key building block in
offering goods and services in interactive formats. These announcements make
that belief a reality: Expedia and its superb management, led by Richard Barton,
will be at the heart of our activities. Together with the National Leisure Group
and its leading array of travel packages, and the development of a broad-based
commerce travel channel, I can't think of a better knitting together of the

convergence of entertainment, information and direct selling," said Barry
Diller, Chairman and CEO, USA.


         Known for its technology and its comprehensive, integrated travel
services, Expedia is a leading full service online travel agency with
dedicated sites in the United States, Canada, the United Kingdom, Germany and
soon France., now the seventh largest travel agency in the United
States, on or off-line, according to TRAVEL WEEKLY, first launched in 1996.
Expedia, Inc. became a separately traded public company through its Initial
Public Offering in 1999. Prior to its IPO, Expedia, Inc. was a wholly owned
subsidiary of Microsoft.

         Barry Diller will become Chairman of Expedia. Richard Barton will
continue in his role as President and CEO of Expedia. "By joining USA Networks,
we access an unrivaled array of media, direct selling and travel assets that
will enable us to continue the strong growth momentum we currently carry," said
Mr. Barton. "Expedia will be ideally positioned to extend its reach both online
and on television."

         "This is a great deal for all three companies involved and most
importantly for consumers," said Rick Belluzzo, President and Chief Operating
Officer, Microsoft Corporation. "Expedia will continue to be a strategic partner
for MSN and Microsoft, while USA Networks can provide the breadth and depth in
the travel and media industries that will help spur Expedia's future growth.
This means Expedia can continue to provide the leading travel services they are
known for to consumers and suppliers worldwide."

         Under the terms of the definitive agreement, Expedia shareholders will
have the option to elect to exchange in a tax-free merger transaction each
Expedia share for:

     o    $17.50 in USA Common Stock (subject to a collar between $23 and $31
          per USA share);
     o    between 0.3873 and 0.4524 of a 7-year warrant to acquire shares of USA
          Common Stock at an exercise price of $35.10 per USA Common Stock
          share, with the exact number of warrants depending on the USA Common
          Stock price in a pricing period ending two business days before the
          Expedia shareholder meeting. If the average USA Common Stock price in
          the pricing period is $27, each exchanging shareholder will receive
          0.4176 of such warrants for each Expedia share exchanged; and
     o    0.35 of a share of a new series of USA Convertible Redeemable
          Preferred Stock, with a $50 face value.

Expedia shareholders who do not elect to exchange their shares for USA
securities will retain their Expedia shares and receive for each Expedia share
held 0.1920 of a new Expedia warrant with a seven-year term and an exercise
price of $52 per share.

         If holders of more than 37.5 million Expedia shares elect the USA
consideration, there will be a pro rata reduction among all of those electing
shareholders. Microsoft, the majority shareholder of Expedia, has agreed to
exchange all of its 33.7 million Expedia shares and warrants for the USA
consideration, subject to pro-ration. As a part of the transaction, Expedia
will create a new

class of high-vote shares, which USA will receive from Expedia shareholders
electing the USA consideration.

         At closing of the transaction, USA will own 67% to 75% of the
outstanding equity and over 90% of the voting interest in Expedia, depending
on the number of Expedia shares exchanged for the USA securities, with the
remaining Expedia equity held by the public and potentially Microsoft, depending
on pro-ration. Microsoft will own approximately 3% to 5% of USA equity,
depending on pro-ration.

         USA will also contribute to Expedia $75 million in media time over
five years and an option to participate in the newly started USA Travel Channel.

         As outlined above, the package of securities received by Expedia
shareholders who exchange their shares for USA securities will consist of:

       o   0.5645 to 0.7609 USA shares valued at $17.50 if USA closes within
           the collar range of $23 to $31 per USA share;

       o   between 0.3873 and 0.4524 (subject to a collar between $25.75 and
           $28.25 per USA share at a pricing period before closing) new USA
           warrants with a 7-year term and at an exercise price of $35.10 per
           USA Common Stock share; and

       0   0.35 shares of a new series of Convertible Redeemable Preferred
           Stock with a $50 face value, 1.99% annual dividend, an initial
           exercise price of $33.75 (which may be adjusted downwards per the
           paragraph below), a 20-year term and a 10-year hard no call
           provision. The USA Preferred can be put to USA at face value plus
           accrued and unpaid dividends in years 5,7,10 and 15. Any
           dividends, puts or calls can be paid in cash or USA common stock,
           at USA's sole election.

         The conversion price of the USA preferred will start at $33.75, and
will decrease according to a set formula (as more fully described in the
transaction agreements) to the extent that USA's average closing price 10
days prior to conversion is greater than $35.10. The rate of decrease in the
conversion price will decrease as USA's stock price increases.

         For example, at the following USA stock prices, the conversion price of
the USA preferred will be:

USA Conversion Price --------------------------- $35.10 $35.10 $40 $32.46 $50 $30.78 $75 $28.80 $100 $27.89
Completion of the transaction is subject to customary conditions, including approval of Expedia shareholders. Microsoft, now Expedia's controlling shareholder, has agreed to vote all its Expedia shares in favor of these transactions. It is expected that the transaction will close by year-end. Separately, Expedia, Inc. today announced it expects to report that, on a net basis, revenue for its fourth quarter of fiscal 2001, ended June 30, more than doubled over the year-earlier quarter and rose approximately 37% over the third quarter. Gross bookings rose to $802 million, up 78% year-over-year and up 19% from the third quarter. Expedia also expects to report income before non-cash items of $12 million to $14 million, or $0.24 to $0.29 per basic share and $0.20 to $0.23 per diluted share, for the June quarter, which is substantially above earlier guidance and analyst estimates. On a GAAP basis, Expedia expects the net loss to be $5.5 million to $7.5 million, or a loss of $0.11 to $0.15 per basic share. The per share amounts are calculated using an average outstanding basic share count for the quarter of 49 million and average diluted shares of 61 million. NATIONAL LEISURE GROUP USA has also agreed to acquire National Leisure Group, Inc. (NLG), a leading provider of technology and fulfillment services to world class affiliate partners engaged in the sale of vacation packages and cruises. NLG has long-term affiliate agreements under which it sells vacation packages and cruises though its multi-channel marketing activities (retail, direct marketing, television, and internet). NLG's affiliates range from leading travel web sites including to major offline retail partners. NLG's 2001 gross bookings growth of over 100% make it one of the fastest growing distributors in the leisure travel industry. Terms of the transaction were not disclosed. Aaron Gowell, President, will continue in that role. "USA brings National Leisure Group a wealth of opportunity to accelerate our pace of growth, broaden into new areas and continue investing in the best technology platform in the industry for the sale of high margin cruise and vacation packages," said Mr. Gowell. "Contributing our industry leading technology and services to the USA Travel Group, we expect the combination to deliver extraordinary growth for USA shareholders and deliver an even more compelling product to our network of affiliates." USA TRAVEL CHANNEL With Expedia as its online foundation and NLG's contribution of unparalleled vacation and cruise packages and the service infrastructure to manage travel sales, USA's Travel Group will launch the USA Travel Channel, completing USA's multi-platform approach to sales in the travel industry. The digital television commerce channel, expected to launch this year, will be produced by 24-year electronic retailing experts at the Home Shopping Network and will be supported by both the Entertainment and Interactive Groups within USA Networks, Inc. USA Cable's production and storytelling skills, HSN's merchandising expertise, Precision Response Corporation's contact centers and Ticketmaster and Citysearch's depth of local information and transaction capabilities will all contribute to the channel. More than just an entertainment and information vehicle, the USA Travel Channel will uniquely bring destinations to life, as all travel packages viewed will instantly be available for purchase. HOTEL RESERVATIONS NETWORK In addition to becoming the instant leader in interactive travel, through USA's majority stake in the Hotel Reservations Network, the Travel Group will have access to one of the strongest stables of hotel rooms available for sale at discount prices. HRN is a leading provider of discount hotel rooms, offering accommodations at more than 3,000 properties worldwide, as well as access to vacation rental properties, including condominiums, vacation timeshare properties and other managed vacation properties. HRN's services are available through multiple distribution channels including,,, and, its toll-free 24x7 phone number, and over 18,600 Internet and call center affiliates. "Through our portfolio of interactive commerce companies and the capabilities within, we are confident we have the most diverse, healthy and robust industry examples of convergence in the key categories of travel and access. At this point these are more than killer applications, they are accomplishments which improve the reality of real interactive businesses, in proven segments with tangible results," said Jon Miller, President and CEO, USA Information and Services. "These businesses thrive through their autonomy as well as their place in this world-leading group." PRESS CONFERENCE USA, Expedia and NLG will hold a press conference today to discuss the new leader in interactive travel. The press conference will begin promptly at 10:30 a.m. Pacific Time (PT) at 8800 Sunset Boulevard in West Hollywood, CA. Photographers please bring your own battery packs and arrive early for set-up. For media unable to attend, there is also the opportunity to participate via conference call. In the United States interested parties can call (800) 450-0786 and use pass code "USAI." International parties should call (612) 332-0530 and use pass code "USAI." ANALYST CONFERENCE CALL USA will audiocast its conference call with analysts and investors on Monday, July 16, 2001, at 12:00 p.m. Eastern Time/9:00 a.m. Pacific Time (PT). The live audiocast is open to the public at A replay of the audiocast will begin approximately one hour after its completion at In addition, Expedia will webcast its conference call with analysts and investors on Monday, July 16, 2001, at 12:00 p.m. Eastern Time/9:00 a.m. Pacific Time. The webcast is open to the public at and a replay will be available at the same location approximately one hour following the live event. ABOUT NATIONAL LEISURE GROUP National Leisure Group, Inc. (NLG) is the leading provider of high-quality, high-value vacations and cruises sold directly to consumers through world-class affiliate partners. NLG provides technology, operations support, and private label fulfillment solutions to many of the major online and offline retailers of vacation packages and cruises. The result has helped make NLG one of the fastest growing distributors in the leisure travel industry. NLG is headquartered in Woburn, MA and has sales centers in Virginia Beach, VA and Phoenix, AZ. ABOUT EXPEDIA Expedia, Inc. (NASDAQ: EXPE) operates, an independent leading online travel service in the United States with localized versions in Canada, Germany and the United Kingdom. Expedia is the seventh largest travel agent in the U.S. provides air, car and hotel booking, vacation package and cruise offers, destination information and mapping. is also available under Travel on the MSN(R) network of Internet services. For more information visit ABOUT USA USA Networks, Inc. (NASDAQ: USAI), a company focused on the new convergence of entertainment, information and direct selling. The Company is organized within two groups, the Entertainment Group and the Interactive Group, comprised of interrelated business divisions which include the following assets: USA Entertainment's USA Network, SCI FI Channel, TRIO, NWI, Crime, Studios USA, and USA Films; and USA Interactive's HSN, HSN International, HSN Interactive, Ticketmaster (NASDAQ: TMCS), which operates Citysearch and, Hotel Reservations Network (NASDAQ: ROOM), Electronic Commerce Solutions, Styleclick (NASDAQ: IBUY) and Precision Response Corporation. LEGEND AND FORWARD LOOKING STATEMENTS USA and 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"). INVESTORS ARE URGED TO READ THE JOINT PROSPECTUS/PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED IN THE FUTURE WITH THE SEC BECAUSE THOSE 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, Attention: Investor Relations. 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 This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information relating to possible or assumed future results of operations of USA after giving effect to the acquisitions discussed in this press release, including those preceded by, followed by or that include the words "believes," "projects," "expects," "anticipates" or similar expressions. These statements reflect the current views of USA with respect to future events. The following important factors, in addition to those described in USA's filings with the Securities and Exchange Commission, could affect the future results of USA, and could cause those results to differ materially from those expressed in the forward-looking statements: material adverse changes in economic conditions in the markets served by our businesses; future regulatory actions and conditions in our businesses' operating areas; competition from others; successful integration of our divisions, including recently acquired and to be acquired businesses; product demand and market acceptance; the ability to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms; and obtaining and retaining key executives and employees. These forward-looking statements are made as of the date of this press release, and USA undertakes no obligation to update or revise them, whether as a result of new information, future events or any other reason. FOOTNOTES Online retail market data per PhocusWright (2001). Internet and television retailing market information sources include, but are not limited to Boston Consulting Group / (May 2001), Jupiter (August 2001, December 2000, August 2000, December 1999), Forrester (July 2000), and various other published industry and Wall Street analyst research. Operating metrics in this press release are pro forma for the pending transactions. Expedia,, and the airplane logo are either registered trademarks or trademarks of Expedia, Inc. in the United States, Canada and/or other countries. Microsoft and MSN are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries. Other products and company names mentioned herein may be trademarks of their respective owners. CONTACTS EXPEDIA, INC.: NLG, USA TRAVEL CHANNEL AND USA NETWORKS, INC.: Darcy Bretz, Laura Rubin Edelman Public Relations USA Communications 312/240-2619 212/314-7327 Marj Charlier Adrienne Becker Investor Relations USA Communications 425/564-7666 212/314-7254 MICROSOFT: Roger Clark Katy Fonner USA Investor Relations Waggener Edstrom Public Relations 212/314-7400 503/443-7000 Carla Lewis Investor Relations 425/936-3703