NEW YORK – Howard Stringer, former president of the CBS/Broadcast Group, and Sandy Grushow, former president of the Fox Entertainment Group, are now officially out of work.
In May 1995, they both signed on at a brand-new program distribution company called Tele-TV, Stringer becoming chairman and CEO and Grushow becoming president. The setup looked good at the time, because three telephone companies – Bell Atlantic, Nynex and Pacific Telesis – had agreed to fund it to the tune of $100 million apiece.
High price of failure
Now Tele-TV is going out of business, and one insider says the company will pay through both nostrils. Stringer, this insider says, was making $3.2 million a year and still has 2-1/2 years to go on his four-year contract, so he’ll pocket a cool $8 million. Grushow’s salary was $2.5 million a year – his settlement will come to $6.25 million, according to the insider.
Another source says Grushow may go back to Fox to fill the job of president of 20th Century Fox Television, a post occupied by Peter Roth until three months ago, when the Fox supremos Chase Carey and David Hill tapped him to become president of the Fox Entertainment Group.
Tele-TV’s roster encompasses a total of about 250 employees, all of whom will be put out of work by the shutdown.
When it first came into being in 1994, Tele-TV’s goal was to create a service that would be directly competitive to a cable system. Stringer and Grushow and their staff spent the last 20 months engineering deals with many of the nationally distributed cable networks and TV stations throughout the country to carry them in a package of channels.
Tele-TV planned to deliver this package to potential subscribers first through wireless cable (via specially built set-top boxes). Then they’d start adding new services like near-video-on-demand movies and sports and interactive videogame platforms. Finally, the telcos would overbuild cable systems in their areas and offer what they hoped would be a better programming package to customers than the cable operators do.
But costs of the technology began to escalate, and, through legislation, Congress in 1995 opened the doors to an even more lucrative area for the telcos to invade: the long-distance-telephone business. Bell Atlantic and Nynex signed a deal to merge their companies, and SBC Communications announced that it would take over PacTel.
Ovitz says sayonara
And Mike Ovitz, who brought the telcos together in the fall of 1994 as head of Creative Artists Agency, serving as their chief strategist in the early months, walked away from the venture when he signed with the Walt Disney Co. as second-in-command to Michael Eisner.
Last summer, Tele-TV began scaling back its master plan of making its service available to more than 25 million homes in six of the seven largest cities by the year 2000. Bell Atlantic was soon talking about a digital program service that might reach only 2.5 million households by 2002.
Rumors started spreading that Tele-TV was negotiating with the competing Baby Bell programming venture Americast to merge the two businesses. Americast is a $500 million operation owned by the Walt Disney Co. and five telcos: GTE, Ameritech, SBC Communications, Bell South and Southern New England Telecommunications.
A spokesman for Americast acknowledges that there were talks with Tele-TV but says the discussions never got to the merger stage. Another insider said Tele-TV had ordered different set-top boxes than Americast’s, and each company had developed a separate, incompatible technical platform, so “there was nothing to merge.”
Asked how the collapse of Tele-TV will affect Americast, the spokesman said, “We’re staying the course. Our owners have a number of trials scheduled in 1997, and that’s only the beginning.”