Gemstar Shows Off Its New Media Side

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With the venerable TV Guide magazine continuing to lose revenue, parent company Gemstar-TV Guide International Inc. is increasingly counting on the electronic side of its business: interactive program guides and the TV Guide Channel.


Hollywood-based Gemstar-TV Guide has played to its strengths by inking new deals to bring its program guides into more homes and by adding new programming to the TV Guide Channel, including a show based on the hit series “American Idol.”


But publishing, anchored by TV Guide magazine, remains the largest segment of Gemstar’s business and the largest money loser. Last week, Gemstar-TV Guide reported first-quarter loss of $3.7 million, or 1 cent per share, compared with a loss of $39.8 million, or 9 cents, in the first quarter of 2004.


Company officials attributed the loss to TV Guide magazine, whose circulation has dropped to 9 million from its mid-1980s peak of 20 million. The magazine posted losses in the first quarter of this year in all three revenue areas: subscriptions, newsstand sales and advertising revenue.


During a conference call with analysts, Gemstar-TV Guide executives raised the possibility of eliminating the magazine, although they said it was only one possibility among many.


Still, the notion of television without TV Guide a title that dates to 1953 and was acquired by Gemstar in 2000 stunned many media observers.


“It’s so venerable,” said Zachary Rosenberg, the Los Angeles head of Horizon Media Inc., an independent media buying firm. “On the other hand, the media consumption habits are changing so much that people are going to their TiVo and they’re going to the Internet.”


Gemstar’s chief executive, Richard Battista, noted that closing TV Guide would shoulder the company with ongoing costs such as leases and printing contracts. In addition, it would deprive the company of its cornerstone brand, with effects that could ripple into other parts of the business, he said.


“We have a brand that’s been a legacy for over 40 years and we have to be very careful about what that brand means and how it affects all of our businesses,” Battista said.



Changing times


Still, Gemstar is preparing for a future in which television viewers rely on the interactive guides built into their cable boxes rather than print listings.


The company also is diversifying beyond its base of television program menus into areas such as interactive betting on horse races and televised discussions of “American Idol.”


In last week’s conference call and an April 26 letter to shareholders, Battista spelled out a number of initiatives designed to put the company’s interactive program guides in more households, launch a video-on-demand service and even expand its network that capitalizes on horse-race wagering.


“Gemstar-TV Guide is uniquely positioned to play a significant role in this exciting, rapidly changing digital media world,” Battista wrote. “At this fascinating time in the development of media, I believe our prospects for future success are great.”


Gemstar-TV Guide struggled with management problems notably a Securities and Exchange Commission action alleging fraud in reporting revenues as changing technologies threatened the company’s core business.


The TV Guide Channel now reaches 77 million homes with its scroll of basic cable listings. But many viewers are turning to more interactive program guides that have replaced the traditional “linear” viewing experience with a digital menu of choices.


“They’re surrounded by structural change in the markets,” said Bob Crosland, managing director of AdMedia Partners Inc., a New York marketing consultancy. “People are getting TV Guide primarily for the listings, but you can get listings in a lot of places these days.”


John Tinker, a media analyst for ThinkEquity Partners LLC, was even more blunt about the magazine’s prospects. “Basically, its revenue structure is collapsing.”



New ventures


In April, Gemstar demonstrated its new Java-based interactive program guide for portable devices at a trade show in San Francisco. Gemstar said the guide will mimic Internet search engines in allowing mobile phone users to search television listings and even forward program reminders to friends’ cell phones.


Gemstar-TV Guide entered into partnerships with Comcast and Time Warner cable to launch TV Guide Spot, which is expected to debut this summer and allow subscribers to view at a time of their choosing capsules of the more compelling programs on television each week.


Gemstar-TV Guide also joined with OpenTV Corp. in March to create i-Guide, which allows viewers to quickly navigate on-demand video services, high-definition television and dual-tuner digital video recorder options. The i-Guide also would be a more advanced version of an interactive program listing service that many cable providers already offer.


Meanwhile, together with EchoStar Communications Corp., it unveiled a satellite-based system allowing viewers of the TVG Network to bet on horse races using EchoStar’s DISH Network.


The network currently offers races, as well as commentaries and previews of upcoming races. However, if viewers want to bet they would have to go to off-track facilities or on the Internet, if doing so is legal in their state.


Gemstar’s commitment to new technologies won’t necessarily turn around the company’s fortunes this year, but are necessary to its long-term survival, said Marla Backer, an analyst with Research Associates-Soleil in New York.


“I think it’s still a bit of a prove-it-to-me story,” Backer said. “This quarter and the next quarter and the quarter after that, I think we’ll still see things in a turnaround mode. I wouldn’t say they’re throwing a lot of spaghetti against the wall just to see what sticks.”


Then there’s Gemstar-TV Guide’s new foray into old media with the launch of Inside TV. The full-size, glossy magazine is designed to appeal to a younger and more female readership than TV Guide, whose readership skews older and less affluent.


Inside TV’s inaugural issue hit newsstands April 21 and featured Eva Longoria, the popular “Desperate Housewives” actress. The magazine has an initial press run of 400,000.


In his letter to shareholders, Battista wrote that Inside TV and TV Guide would complement one another.


“The launch of Inside TV is the first step in a strategy that we believe will return us to growth in our publishing division, by bringing in new readers and advertisers to the TV Guide publishing family,” he wrote.

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