TV Guide, Inc.

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TV Guide, Inc.

7140 S. Lewis Ave.
Tulsa, Oklahoma 74136-5422
U.S.A.
Telephone: (918) 488-4000
Toll Free: (800) 477-7388
Fax: (918) 488-4637
Web site:http://www.tvguideinc.com

Wholly Owned Subsidiary of Gemstar-TV Guide
International Incorporated: 1965 as United Video
Employees: 2,700 (2000)
Sales: $1,150.3 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: GMST
NAIC: 511120 Periodical Publishers; 513210 Cable Networks; 513220 Cable and Other Program Distribution; 513340 Satellite Telecommunications; 551112 Offices of Other Holding Companies; 541519 Other Computer Related Services

A wholly-owned subsidiary of Gemstar-TV Guide International, TV Guide, Inc. (formerly United Video Satellite Group) oversees a diversified group of companies that provides information and communication services to cable television systems, home satellite dishes, radio networks, data communications networks, and private business and government agencies.

TV Guide, Inc.’s United Video Group is a conglomeration of companies operating satellite delivery services, including SNG (Superstar), which provides programming services to some 60 percent of the direct-to-home satellite dish market. UVTV, the oldest company in the United Video Group, is a domestic and international marketer, distributor, and deliverer of television networks, including WPIX in New York, KTLA in Los Angeles, and CBS, NBC, ABC, PBS, and affiliated stations. TV Guide, Inc.’s 70 percent ownership of SSDS, Inc. adds that company’s expertise in designing, building, and maintaining information infrastructure services, such as corporate networks, intranets, and Web sites, with an emphasis on electronic commerce capabilities. SpaceCom Systems is TV Guide, Inc.’s satellite transmission technology and services arm, providing satellite services to paging companies, financial data networks, radio networks, weather information services, and private business networks.

TV Guide, Inc.’s Entertainment Group is perhaps the fastest growing and changing branch of the company. With its merger with Gemstar in 2000, TV Guide became the leading provider of electronic programs guides and pay-per-view promotional services, including TV Guide Interactive (available in 2 million households in 2000, and growing by 5,000 homes per day), TV Guide Channel (reaching 54.5 million U.S. Nielsen households), TV Guide Online, Sneak Prevue, and TV Guide International. TV Guide, Inc.’s Magazine Group, which includes the flagship TV Guide magazine, the most widely read weekly publication in the United States (35 million readers and a circulation of 10.8 million), also publishes The Cable Guide, TV Guide Ultimate Cable, and DirecTV TV Guide, among other publications. Through TV Guide Distribution, TV Guide, Inc. represents 85 major consumer magazines like Business Week, Seventeen, Reader’s Digest, and Soap Opera Digest.

TV Guide, Inc.’s merger with Gemstar gave Gemstar shareholders 55 percent of the combined company. In 2000, TV Guide, Inc. had sales of $1,150 million, and a one-year employee growth of 18.2 percent (to 2,700), reflecting the company’s fast-growth and dominance in the fledgling interactive program guide (IPG) industry.

A Cable Pioneer’s Offshoot in the 1960s

The history of TV Guide, Inc. begins with the history of United Video Satellite Group. Founded in 1965 as a division of United Cable Television Corp., United Video could already trace its roots back to the origins of cable television. United Cable was started by Gene Schneider, who had pioneered the industry in 1953 when he helped his brother design and build the country’s first cable television system in Casper, Wyoming. In the mid-1960s, Schneider moved to Tulsa, Oklahoma, to start his own cable company, United Cable. Tulsa was wired for cable by 1973, but Schneider had also formed a second division of the company—later United Video—to build a larger microwave-based television distribution network. Roy Bliss, a family friend who had known Schneider as a child, joined United Cable in 1969, and took charge of building the United Video division.

United Cable began building its microwave network to bring programming to its own and other small cable systems. As Bliss, who became president of United Video, explained to Tulsa World, in many rural locations throughout the U.S., “[Y]ou either had cable or you didn’t have television.” Cable television found less success in larger cities, where broadcast television was more readily available. The addition of high-profile cable programming, such as the then new movie network HBO, was essential to cable systems—especially those in larger urban areas—for signing up subscribers.

In 1975, HBO began sending its signal via satellite transmission. Other programmers shortly followed suit, including Turner Broadcasting, which began satellite transmission in 1977. This new availability of programming prompted cable television’s first boom, but the satellite technology also quickly replaced microwave networks as the primary means of transmission. Bliss saw the technology’s potential early as well as the need for a company that could distribute the satellite signals to cable systems. In 1976, Bliss, backed by financing from Lawrence Flinn, bought out the United Video division of United Cable. Flinn, who had previously worked for the Morgan Stanley investment firm, became United Video’s chairman and chief executive office and the owner of more than 90 percent of the company. Bliss was named president.

United Video sought to enter the satellite transmission market, but the expenses were too high for the newly independent company. The cable television industry was strictly regulated by the Federal Communications Commission (FCC). However, when deregulation of the cable industry took place in 1977, the cost of building an antenna, as well as its size requirement, dropped. In 1978, the company rented a satellite transponder—the last one available on the only commercial satellite in orbit at the time—at a cost of $100,000 per month. FCC approval came a month after the company’s transponder lease began. Another month later, United Video began transmitting WGN and its Chicago Cubs coverage. The company struggled for its first year as a satellite transmission company as cable systems were slow to add satellite reception capacity. By 1979, the company had begun to recoup its investment, building revenues to $2 million per year.

Growth and Change in the 1990s

Led by the popularity of superstation WGN, United Video rapidly expanded its number of cable system customers during the 1980s. The company early on began to add other satellite-based services to complement its transmission capacity. Bliss and Flinn saw a need for more services in order to fuel cable television’s future growth. As Bliss told Tulsa World, “My vision of cable television has always been more—more services, more entertainment, more technology-driven.” United Video formed as a holding company, called United Video Holdings, Inc. and began the in-house development of new services. The first service added by the company brought United Video into providing content, in the form of the on-screen cable program guides. Originally named Trakker, Inc., the unit later became known as the Prevue Network, which proved to be a foreshadow of things to come.

By the mid-1980s, as the launching of more commercial satellites opened up more opportunities, the company expanded into two new areas. Prior to 1986, owners of large-dish (C-band) home satellite dishes could pull in any satellite signal. But HBO began scrambling its signal in 1986, and soon other satellite-based networks followed suit. United Video recognized a new market for its distribution services, and formed Superstar Entertainment, which packaged programming and sold it as subscriptions to home satellite dish owners. Superstar quickly became profitable and proved a strong engine for United Video’s revenue growth, despite the fact that the scrambling technology employed at the time was relatively easy for dish owners to defeat. United Video’s SpaceCom Systems brought the company into a new area: providing audio and data transmission for radio stations, government agencies, corporations, and others.

By 1990, the company’s Cable Video Services Group distributed superstation WGN, which lagged behind only Turner Broadcasting, New York’s WPIX, Los Angeles’s KTLA, and the Dallas/Ft. Worth station KTVT in subscriber numbers, as well as radio stations, including WFMT of Chicago and KKJZ of Los Angeles. Meanwhile, Prevue Networks had expanded onto 800 cable systems, reaching more than 20 million homes, and soon added a sister channel, Sneak Prevue, which offered an on-screen program guide for pay-per-view programs. Together, United Video’s companies reached more than 41 million homes through some 14,000 cable systems. The company’s sales had reached $46 million, and United Video showed a strong profit of $4.5 million.

By 1993, the company’s revenues had more than doubled, to $114 million. In November of that year, United Video reorganized as United Video Satellite Group. The following month, United Video went public, selling 4.1 million shares and raising $60.4 million in the offering. Flinn remained in control of 90 percent of the company. The company was branching out again, now into the promising arena of interactive services, which offered the home viewer, among other potential services, the ability to search the company’s on-screen program guide. The United Video group added another service, Prevue Interactive, in 1993.

Company Perspectives:

Generations of television viewers have turned to TV Guide magazine to learn what’s on television, transforming the magazine into a trusted American icon. Now viewers can trust TV Guide, Inc. to guide them into the future of television entertainment and beyond. From print media to the Internet to electronic program guides, TV Guide tells viewers what’s on across multiple platforms —in print, on the air, online, and on demand.

Meanwhile, United Video was receiving a big boost on another front. In 1993, satellite transmitters implemented a new scrambling technology that made it more difficult to pirate satellite transmissions. Paying subscriptions quickly tripled, to some 1.9 million homes, and United Video picked up a strong share of the new subscribers, building from 150,000 to 540,000 and surpassing Tele-Communications Inc. (TCI) as the number one provider of C-band satellite transmission services. Superstar’s growth helped boost the company’s 1994 revenues to $196 million.

In 1994, United Video purchased a 10 percent stake in SSDS, Inc., a Colorado-based systems integrator whose clients included First Data Corp., Sun Microsystems, and the White House. By 1995, United Video had exercised its option to increase its share in SSDS, raising its stake to a controlling 70 percent interest. SSDS, a fast-growing company with $33 million in revenues, offered United Video enhanced technological and, most importantly, software-development capacity. United Video’s revenues continued to grow strongly, reaching $263 million with net earnings of more than $23 million in 1995.

United Video was facing pressures from within the cable and satellite industries, not only from the growth of the direct broadcast satellite market—which threatened to make C-band satellite dishes obsolete within a few years—but also from recent startups, particularly TCI, rival to the company’s Prevue revenue engine. In June 1995, United Video announced an agreement with TCI that gave the cable giant control of United Video. The transaction, completed in early 1996, formed United Video as a separate, publicly traded subsidiary of TCI. It also involved an exchange of stock, giving shareholders the more marketable TCI stock. Prevue Networks survived, as TCI dropped development of its own on-screen program guide. Later that year, TCI merged its own C-band satellite programming arm, Liberty Media’s Netlink, into Superstar, and moved Netlink’s operations to Tulsa.

In late 1996, after disagreements with TCI about plans to drop transmission of WGN (which the company ended up keeping), Bliss left the company he had founded. Lawrence Flinn, who still retained 36 percent of United Video’s stock, remained chairman and chief executive until he retired in 1997, relinquishing the helm to Gary S. Howard and taking on the title of Chairman Emeritus. In early 1998, TCI increased its ownership of United Video by buying an additional 12.4 million shares of stock held by Flinn. These shake-ups within United Video were just a sign of even bigger changes to come before the dawn of the new millennium.

TV Guide, Inc. Created in 1999

In 1999, United Video Satellite Group saw the opportunity to purchase TV Guide. Founded in 1953 by publishing magnate Walter Annenberg, TV Guide magazine had established itself over the years as an icon of American pop culture. A mix of TV listings, reviews, gossip, and industry news, it quickly became the largest circulated weekly digest in the world, reaching more than 19 million readers at its peak in the mid-1970s. But by the 1980s, like many established magazines, TV Guide began to flounder. In 1988, Rupert Murdoch’s News Corporation Limited acquired TV Guide (along with other properties) for an astonishing $3.2 billion. However at that time, readership had already begun to fall. With the dawn of the 1990s, the magazine seemed stuck on autopilot, as younger, hipper magazines grabbed the spotlight, and Internet Web sites began to thrive. By 1999, circulation had dropped to 10 million.

By buying TV Guide from News Corp., UVSG brought the magazine into the lucrative interactive high-tech world, and brought UVSG the brand recognition of the country’s most-read magazine. With the 1999 merger (for $800 million in cash, and a 44 percent interest in the resulting company), the new combined company was named TV Guide, Inc.

When all the dust had settled by June of 1999, Joe Kiener (former president and COO of News America Publishing Group) was appointed chairman and CEO, and Peter C. Boynlan III (former president and COO of United Video) became president and COO of TV Guide, Inc. Gary Howard, former CEO of United Video, remained as a director of TV Guide, Inc.

Key Dates:

1965:: United Video is founded by Gene Schneider as a division of United Cable Television Corp.
1969:: Roy Bliss joins United Cable and is placed in charge of building the United Video division.
1976:: Bliss, backed by Lawrence Flinn, buys out United Video from United Cable.
1993:: United Video reorganizes to become United Video Satellite Group (USVG).
1995:: UVSG becomes a subsidiary of Tele-Communications Inc. (TCI).
1996:: Bliss leaves the company.
1997:: Flinn steps down as chairman and CEO of UVSG.
1998:: UVSG acquires TV Guide, and the new company becomes TV Guide, Inc.
1999:: Rupert Murdoch and The News Corporation Limited acquires TV Guide magazine for $2 billion.
2000:: Gemstar acquires TV Guide, making the company a subsidiary of the new Gemstar-TV Guide International.

Acquisition by Gemstar in 2000

The acquisition of TV Guide Inc. created legal disputes with Gemstar, owner of the VCR Plus product, which was fiercely defending its many patents in the interactive programming guide (IPG) industry. United Video had actually made an unsuccessful bid to purchase Gemstar two years before acquiring TV Guide Inc. Gemstar had been started a decade earlier by Henry Yuen when he created VCR Plus, a product intended to make it simple for customers to program their VCRs. Although Gemstar was a relatively small company, Yuen wielded an amazing amount of power in the IPG industry, holding 90 key patents that made it virtually impossible to build an electronic program guide without crossing legal paths with him. In 2000, U.S. News and World Report called Yuen “the Bill Gates of TV” and stated that cable executives referred to Gemstar’s mastermind as a “patent terrorist.” A deadlocked legal battle with Gemstar over patent disputes finally enabled Gemstar to turn the tables and purchase TV Guide, Inc. for $15 billion in 2000.

The merger between Gemstar and TV Guide, Inc. formed Gemstar-TV Guide International and created a behemoth in the communications industry. With the patent wranglings between Gemstar and United Video/TV Guide finally settled with the merger, the two companies combined for a virtual lock on the IPG industry. TV Guide, Inc. retained its dominance in the TV listings industry, now spanning print, online, and broadcasting markets. With the combined properties and a growing international presence, the company’s marketers estimated in 2000 that TV Guide reached some 79 million viewers in the United States alone, easily the dominant contender in the lucrative battle for the attention of TV viewers everywhere.

Principal Divisions

Entertainment Group; Magazine Group; United Video Group.

Principal Operating Units

TV Guide Interactive; TV Guide Channel; TV Guide Online; Sneak Prevue; TV Guide International; TV Guide Magazine; TV Guide Ultimate Guide; The Cable Guide; See; MMDI; UVTV; SNG [Superstar]; TVG Network; SpaceCom; SSDS and Knowledge Workers; TV Guide Enterprise Solutions; TV Guide Affiliate Sales; Technology Ventures.