A Suggestion for Those Who Missed Investing in TV


Truth is, the greatest secret to successful investing is that you should buy common stocks you never want to sell. And the best way to accomplish that is to buy into an industry that is creating wealth, attracting investment and about to change lives--an industry, in short, like the one looming largest today, interactive media.

Tele-Communications Inc.--the nation’s largest cable television operator--sent you a message recently when it announced a $2-billion investment to install fiber optic cables in 250 cities and towns nationwide in the next four years.

With that large bet, Denver-based TCI--$3.7 billion in annual revenues--promises to bring a new level of communications to homes and businesses, and to enter partnerships with telephone companies.


The move is a key step in the emergence of an industry, loosely termed interactive TV or multimedia, that will grow to trillions of dollars in business in this decade and open immense possibilities for employment, investment, social change and business opportunity.

Most of those possibilities are only dimly understood today. TCI’s President John Malone speaks of the fiber investment as hastening the spread of 500-channel television and shopping at home, a prospect that sounds like a bad joke in a time of uncertain employment.

But the full impact of new industries is seldom foreseen, and language is often inadequate. By home shopping Malone means the combination of entertainment and merchandising in a system of video communications, instant production and regional warehouses that will transform retailing. You can buy Vanna White’s outfit right off the screen--and cable operators and TV programmers, rather than mall owners, will get a percentage of the sale. “This will be a substantial industry,” Malone says.

True interactive media, when it develops fully later in the decade, will allow automated industrial assembly to be controlled at several locations simultaneously. It will allow developments beyond present imagining in medicine, education and many other fields.

Capacity is key. The ability of glass filaments to transmit information in pulses of light is incredible--1,000 times greater than the frequencies of all the radio and television stations now operating, according to author George Gilder who has a book coming out on new media.

This is the information highway on which Vice President Gore sees a student in Arkansas having access to a book in a Boston library. Even Gore doesn’t realize that the student will be able to own the library’s entire contents because interactive media will massively reduce information costs.


Great wealth and giant companies will be produced by such change, as wealth and giants grew out of the last communications watershed--television in the 1940s and ‘50s. Leonard Goldenson, an entrepreneur running a theater chain, bought ABC in 1951 for $25 million. He sold it to Capital Cities in 1986 for $3.5 billion--140 times the original purchase price. That’s when contemporary investor Warren Buffett put $517,500 into the new CapCities/ABC firm, an investment now worth $1.5 billion.

Television transformed industries. It brought enormous growth to advertising; it created national markets for the branded products of companies like Procter & Gamble and Anheuser-Busch. A $1 investment in the St. Louis brewery even 25 years ago is worth 80 times that much today.

It’s worth noting that television, which was a wrestling sideshow with no standing in the national economy when World War II ended, created millions of jobs as well as billions in wealth in the postwar decades.

The new interactive media will do the same. “Information technology will be remade before the year 2000,” says Peter Bernstein of Probe Research, a telecommunications consulting firm.

That’s why Malone is making a move now. TCI’s plan is to extend fiber optic capabilities to residential and business customers, with regional hubs for routing programming--and telephone calls. It makes sense for cable companies, in a $20-billion business that is being re-regulated by the government, to get into telephone service--a $80-billion-a-year industry.

With fiber optics in place, Malone will have the regional Bell phone companies, MCI and AT&T; bidding to be his partner in local phone service. The phone companies will bring to the bargain a knowledge of customer service and capabilities in switching and billing for services, explains Paul Saffo of Institute for the Future, which has been studying multimedia’s implications for telephone clients.


The 500 channels may come as early as 1994, but full development will take years. Technical breakthroughs are still needed; to compress a single movie into digital video now requires a day-long effort by a supercomputer. That’s why computer firms such as Silicon Graphics and Broderbund Software are listed along with movie studios, cable companies and phone giants as participants in interactive media’s pioneering stage.

What will we do with all that television? Don’t think 500 channels, think one. Interactive video essentially will provide each individual the ability to order up what he or she wants--a development that may undermine the national brands that broadcast television built up.

Which companies will be long-term winners? Too early to say. Smart money now is going on providers of programming. Malone of TCI, for example, has invested his money in Liberty Media, which owns stakes in channels for home shopping, sports, video games, movies and other programming.

Andrew Kessler, managing director of Unterberg Harris, an investment bank, lists a dozen firms you may want to see in your mutual fund--TCI, Time Warner, Comcast and Viacom among cable operators; General Instrument and Scientific Atlanta among cable suppliers. Tandem, Sequent, Silicon Graphics and Sun Microsystems in computers; Reuters and Dow-Jones in information services. Plus, Kessler lists all the movie studios and a host of software firms, while cautioning that interactive media profits for any company exist only in the future.

But, as TCI’s investment shows, that future is coming fast.