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Company Town : 3 Baby Bells, CAA Promise Results From Joint Venture : Media: Michael S. Ovitz will advise the firm, developing a marketing strategy for new programming.


Three regional Bell companies and Hollywood's Creative Artists Agency on Monday confirmed their plans to jointly develop the programming and technology that will allow consumers to receive video by phone, a move the businesses contend will accelerate the construction of the much-delayed information superhighway.

Pacific Telesis Group, Bell Atlantic Corp. and Nynex Corp. said they will invest $100 million each to form two companies: one to generate programming and one to develop the technology to deliver it. Each firm will have its own chief executive and about 100 employees.

The ventures will become part of the Bell companies' independent strategies to compete with cable companies in providing video services to consumers, an undertaking expected to cost each company billions of dollars annually through the end of the decade.

CAA, headed by Michael S. Ovitz, will advise the media firm, developing a marketing strategy for the new programming and guiding the phone companies as they begin to explore the culture of the entertainment industry.

As they enter a competition that pits them against the $12-billion U.S. cable industry--and perhaps against a separate coalition of three other Baby Bells now in negotiations with Walt Disney Co. to start an interactive venture--the phone companies hope Ovitz will be their trump card.

As they joined the powerful talent agent Monday to conduct press interviews at the Four Seasons Hotel in Beverly Hills, top Bell executives--in light of the collapse of various other ambitious schemes to develop the information superhighway--took pains to say that Monday's announcement would have tangible results.

Among the principals are Pacific Telesis Chairman Philip Quigley, whose plans to roll out a video network in California are nearly a year behind schedule, and Bell Atlantic Chairman Ray Smith, whose planned acquisition of cable giant Tele-Communications Inc. became synonymous with the infobahn until the acquisition fell apart earlier this year.

"This is not smoke and mirrors," Quigley said repeatedly during a brief interview.

"This is a definite agreement. The deal is done. The search is on," echoed Smith.

The three phone concerns said their collaboration will enable them to avoid duplications and achieve economies of scale in purchasing equipment and developing software, notably the "navigator" that will help consumers find what they want in the world of infinite numbers of channels.

Pacific Telesis, Bell Atlantic and Nynex serve more than 30 million households in six of the top seven media markets in the country: Los Angeles, San Francisco, New York, Boston, Philadelphia, and Washington.

"What we would hope to happen is that the scale will accelerate all of this much more quickly," said Nynex President Ivan Seidenberg, who began talking with Ovitz two years ago. Assuming federal regulatory approval, the initial programming will be available late next year, Bell executives said.

For his part, Ovitz said the deal will provide more opportunity for existing and new talent.

"In our business, talent has such a rough time getting a start," he said. "Nothing could be better for this business than new outlets like this."

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