No longer content to offer merely an information pipeline, Bell Atlantic Corp. has forged an alliance with two other phone companies and a leading Hollywood talent agency to produce the programs that will flow through it.
Philadelphia-based Bell Atlantic, the company that provides telephone service to most Marylanders, announced today that it will link up with NYNEX and and Pacific Telesis Group to create a "virtual network" covering six of the nation's top seven media markets, including the Baltimore-Washington area.
In their Halloween morning announcement, the three formerly staid utilities said they will create a new media company to produce and acquire programs for their emerging video systems. Like other telephone companies, the three partners hope to go trick or treating on the cable telephone industry's home turf.
The three Baby Bells have enlisted veteran Hollywood wheeler-dealer Michael Ovitz's Creative Artists Agency as a consultant to their newly formed entity called The Media Co.
The Bells said Creative Artists will work with that company to develop a recognizable brand for the new entertainment service, which will have to compete with other prospective programmers on the new video systems.
Under Federal Communications Commission rules for "video dial tone" services, the phone companies will have to provide access to their systems to other entertainment packagers on an equal basis with their affiliates.
In addition to creating a new media powerhouse, the three regional Bells also launched a separate company to develop and integrate the technology needed to provide advanced entertainment, information and interactive services over their networks. The three are equal partners in both new companies, each of which will be led by a management committee including executives from all their owners.
The partners said they will each contribute about $100 million to launch the new companies' operations over the next three years.
The media company will have its principal locations in New York and Los Angeles, while the technology and integration company's activities will center around the San Francisco Bay area and Reston, Va., headquarters of Bell Atlantic's video services subsidiary and the site of its expensive new video production facilities.
Bell Atlantic Chairman Raymond W. Smith said the alliance will help position the three companies to compete in a new line of business.
"By joining forces, we speed the process of delivering new video information services to the marketplace, reduce the risks associated with this new technology, accelerate the development of standards and lower costs to each company," said Mr. Smith, the company's chief executive officer.
The new alliance accomplishes some, though not all, of the objectives Bell Atlantic envisioned when it announced last October that it would merge with Tele-Communications Inc., the nation's largest cable network, and Liberty Media, a TCI-controlled programming affiliate.
The new media company will be competing directly with Liberty Media and such entertainment heavyweights as Viacom, Time Warner and the Walt Disney Co.
According to the announcement, The Media Co.'s role will be to "license, package, acquire, invest in and create both traditional and new interactive entertainment and information services."
It will also have the job of developing an attractive "navigator" -- a program that will let viewers find their way around in an unfamiliar video environment.
While the three phone companies' video systems will not merge, the new media company has been charged with developing a unified marketing strategy.
The company hopes to begin offering entertainment such as "video on demand" by the end of next year and interactive services such as on-line games, shopping and personalized news and advertising in following years.
While its main job will be to supply programs for the new telephone-video networks, the new company will also try to sell its offering in non-competing regions and in the international market.
The three phone companies in the alliance control only about half the national market, but a disproportionate share of its major media markets.
Bell Atlantic serves the mid-Atlantic states from New Jersey through Virginia, while NYNEX dominates New York and New England. Pacific Telesis serves only two states, but one of them is California.