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And Allen's not the only one betting cable systems will be the backbone for converging media, communications and computing technologies.
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Paul Allen Sees Cable as Key to Wired World
JOHN LYONS
c.1999 Bloomberg News
BELLEVUE, Wash. -- Billionaire Paul Allen spends money almost as fast as former partner Bill Gates makes it for him.
Since 1984, the co-founder of Microsoft Corp. has paid some $20 billion to buy the Portland Trail Blazers and Seattle Seahawks, construct a Jimi Hendrix museum, invest in Internet and technology companies, and build his Charter Communications Inc. into the No. 4 U.S. cable-television company.
''He's motivated by things that personally interest him,'' said former Trail Blazers President Marshall Glickman, who worked for Allen at the team from 1988 to 1995.
Allen's latest interest is cable. The 46-year-old bachelor, whose Microsoft stake has swelled to $22 billion since he left the company in 1983, bought Charter and Marcus Cable Co. for $7.7 billion last year. Then he spent an estimated $10.5 billion on a string of acquisitions capped by the May 26 purchase of Falcon Communications LP and Fanch Communications Inc.'s cable systems.
Allen's cable properties will reach 5.5 million subscribers after completing the purchases, giving him almost half the 12 million viewers claimed by No. 1 cable operator Time Warner Inc.
Cable is at the heart of a so-called wired world Allen envisions, where everyone is connected to a network of new entertainment, communication and data services.
The 60 separate investments he's made in companies like film studio Dreamworks SKG, Internet service provider High Speed Access Corp. and Web sites like Go2Net Inc., are the pieces Allen hopes to sew together with cable to make his vision a reality.
''The Internet businesses, the portals, the entertainment, these investments in one form or another are all strategic,'' said Bill Savoy, president of Vulcan Ventures, Allen's Bellevue, Washington-based investment company. ''Cable represents the best way to develop a network consumers can connect to.''
Allen's far-flung holdings, however, have drawn critics who say his grand vision lacks focus.
Detractors point to disappointments like software startup Asymetrix Learning Systems Inc. as evidence Allen's fortune is mainly the result of the savvy of his old partner, Gates. Wired magazine once dubbed Allen the ''Accidental Zillionaire.''
Allen has a long way to go before all his systems can handle new digital media, like interactive television and phone service. Falcon, for instance, said it's spending $200 million a year through 2001 to upgrade its network.
And Allen's not the only one betting cable systems will be the backbone for converging media, communications and computing technologies.
The U.S. cable-TV industry is consolidating as Time Warner, AT&T Corp. and Comcast Corp. buy up systems to spread the cost of new channels and roll out interactive and telecommunications services like high-speed Internet access.
''This industry in 14 short months has gone through a tremendous landscape change,'' Savoy said. ''Where there were 10 players there are now five or six.''
Allen, who travels in his own Boeing 757 jumbo jet, increasingly moves in a celebrity crowd. He counts tennis star Monica Seles and rock musician Peter Gabriel among his friends. He recently shaved off his beard and shows up at the Trail Blazers NBA games in tailored clothes.
Acquaintances, though, say he hasn't lost the unpretentious style of the shy programmer.
''He seems very low-key, and unimpressed with himself,'' said Falcon Communications Chief Executive Marc Nathanson. ''I was the only one in a suit the day we met.''
Allen says he's been pondering the wired world longer than most. In 1975, he saw a glimpse of the future in an early prototype of the personal computer on the cover of a magazine. He shared his vision with Gates, who dropped out of Harvard University so the pair could start what became the world's largest software maker. ''He's the first one who's articulated to me a theory that is much more encompassing than what's commonly written,'' said Nathanson, who took a stake in Allen's Charter Communications when he sold his company. In 1983 Allen was diagnosed with Hodgkin's disease, which he has said prompted him to chart a new path for his life. He left Microsoft that year, three years before it went public.
While Gates built Microsoft into the most valuable company in the U.S., Allen's route has led to some disappointments.
Asymetrix, which he founded in 1984, hasn't been a big hit. The company, which develops online training courses, went public in 1998 at 11. The shares recently traded at about 4.
He invested $10 million in SkyPix Corp., which developed an early digital satellite-TV system for delivering 80 channels of entertainment to homes. That investment ended in a highly publicized fiasco when unpaid creditors forced the company into bankruptcy in 1993.
Allen's also given money to an eclectic mix of causes: a theater group, AIDS research and funding for SETI Research & Community Development Institute, an Australian outfit searching for signs of extraterrestrial life.
''He's invested over the years in things that have pushed the technology forward, but you can't always tell if there is a business there,'' said David Coursey, an editor at large at Upside Magazine, who's covered the computer industry since 1985. ''His primary motivation may not be as an investor, but as a technologist.'' One thing is sure. The number of desirable cable systems is dwindling. That means Allen likely will be on the prowl for more cable acquisitions, analysts said.
''Charter is positioned to be one of the four or five survivors'' in the rapidly consolidating industry, said Aryeh Bourkoff, a CIBC Oppenheimer analyst.
Savoy, Allen's strategist, said Allen's vision will come together as more inexpensive computing power is put into personal devices, like phones, pagers and hand-held computers.
The vast transmission capabilities of cable lines will spawn a host of new appliances and services, just as electricity spawned light bulbs, radio and television, he said.
Allen knows how to buy his way into the cable industry. What's left to be seen is how -- and if -- his wired world will fit around his new cable properties.
''It's not clear to me what his goal is, and if he has one, what's the timetable?,'' editor Coursey said. ''Here is a rich guy who is spending his money, and only he knows what he wants.''
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