To All,
Here is the dreaded NEWS!
2/06 00:05-DJ: Three Baby Bells To Abandon Major Investment In Interactive TV
NEW YORK -(Dow Jones)- Bell Atlantic Corp., Nynex Corp. and Pacific Telesis
Group are taking steps to shut down Tele-TV, the interactive-television venture
in which they had invested around half a billion dollars in the past two years.
The three Bells had created Tele-TV as a producer of original programming
advised by Hollywood superagent Michael Ovitz and run by former CBS Inc.
broadcasting chief Howard Stringer. Now they have basically abandoned their
hopes of leading the way on development of the next generation of interactive
fare amid technical difficulties, rising costs and vast changes in the market.
The Tele-TV shutdown could ripple through the industry, possibly toppling a
billion-dollar contract that Thomson Consumer Electronics had landed to supply
the venture with set-top boxes and hurting a small "wireless-cable" company,
CAI Wireless Systems Inc., that had planned to deliver video programming for
Nynex and Bell Atlantic. All three Bells said they remain committed to entering
the video business and now will explore other options.
Tele-TV was conceived at a time of huge hype and anticipation of a new era
of interactive television. It faltered as the much-ballyhooed Information
Highway turned out to be the Internet rather than fiber-optic TV systems; as
Philadelphia-based Bell Atlantic and New York-based Nynex set plans to merge
and San Francisco-based PacTel agreed to be acquired by San Antonio-based SBC
Communications Inc.; and after Mr. Ovitz abandoned the Bells in favor of the
No. 2 job at Walt Disney Co.
The venture and its three owners had invested big sums in high-tech
facilities, programming development and personnel, hiring a coterie of former
television executives. While the original investment was pegged at $300 million
split evenly among the three Bells, some executives say actual spending
exceeded that handily.
Now the Bells are negotiating multimillion-dollar separation packages for
several top Tele-TV executives, including Mr. Stringer, chairman and chief
executive officer, and former Fox programming chief Sandy Grushow, Tele-TV's
president. Neither executive could be reached for comment last night.
The venture is being shut down rather than being merged with a programming
subsidiary jointly owned by rival Bells and several other companies. Bell
Atlantic and Nynex are expected to absorb the leftovers of Tele-TV in their
newly combined company and staff it mostly with people from their two
organizations, people familiar with the matter said.
Tele-TV started with an enviable budget, a state-of-the-art technical center
in Reston, Va., and some of the best broadcasting talent in the industry. For
their investment, the Bells got some valuable experience in Hollywood, a bevy
of programming agreements that the Bells would have been hard-pressed to
negotiate themselves and much-needed billing and customer-service systems
tailored for the video industry.
"In hindsight, maybe we were a little too aggressive a little too early,"
said Frederic Salerno, Nynex's vice chairman. Lawrence Babbio, Bell Atlantic's
vice chairman, added: "When we started Tele-TV, we had a totally different
environment."
Indeed, when Tele-TV was born in 1994, the Baby Bells were fearful of losing
local-phone customers to cable operators that would upgrade their networks to
handle telephone calls. Rushing to enter the television business seemed a
strategic way to counter that cable threat -- and one-upping cable by offering
more-sophisticated interactive fare, letting viewers order movies on demand and
other features, promised to give them an edge.
But offering telephone service over cable lines proved more technically
difficult and costly than most had anticipated, and cable operators gradually
backed away. Congress, meanwhile, passed sweeping telecommunications
legislation that encouraged local and long-distance rivals to enter one
another's markets
. That gave the Bells the tantalizing possibility of entering
the $70 billion long-distance market - a business they already knew pretty well
- and made the prospect of entering video, with all its uncertainty and steep
capital requirements, pale by comparison.
Hence their decision to bail out of Tele-TV and halt further spending, even
if it means enduring a bit of embarrassment given the Bells' bold declarations
for the venture early on. Given rampant change in the industry-deregulation,
mergers and shifting strategies - "it gets difficult to constantly move in a
straight line between point A and point B," said Michael Fitzpatrick, president
and chief executive of PacTel's new-media unit. "I don't think anybody could
have predicted all this."
Copyright (c) 1996 Dow Jones & Company, Inc.
All Rights Reserved.
Symbol(s): BEL CAWS F.TCE NYN PAC SBC
Stan |
