Bell Atlantic, Nynex and Pacific Telesis last week unveiled plans to each invest $100 million in two new companies that will bring video on demand and other TV programming to consumers next year, using Mr. Ovitz's Creative Artists Agency as a consultant to help develop the programming.
CAA is reportedly receiving a fee of $50 million-plus bonuses-over five years for its advice on finding and developing programming, as well as marketing the service to consumers. Mr. Ovitz declined to discuss the financial structure of the deal.
In short, the three telephone companies plan to combine their new-media efforts to become full competitors to cable TV providers. They hope to provide high-quality original programming, movies and broadcast network signals to consumers' TVs whenever they want it, over existing telephone lines.
Information on the user interface, set-top TV box and other details of the service's look and feel are not yet available. In fact, many particulars remain fuzzy, including what role if any advertising will play.
"We want to get rid of the proliferation of VCRs and TV remote controls and eventually provide voice recognition to simplify the process," allowing consumers to verbally request a particular movie or program, said Ivan G. Seidenberg, vice chairman, president and chief operating officer of Nynex.
The three phone companies eventually expect to reach some 30 million households in six of the nation's seven largest markets; initially, less than one million subscribers may receive video dial tone by the end of next year, with 3 million households reached by 1996.
The two new companies-one to provide a technical platform, and one to support the media and programming-will build on Bell Atlantic's Stargazer interactive TV service, now being tested in about 1,000 households in northern Virginia. The service offers movies, information and shopping information.
The new alliance's services will be priced "fairly," and will likely carry network TV signals as well as original and first-run films, said Bell Atlantic Chairman-CEO Raymond W. Smith.
The role of Mr. Ovitz and CAA will be to help secure programming and first-run rights for films and to guide the marketing and branding of the service, which has not yet been named (but isn't likely to carry the Stargazer name). CAA's Robert Kavner will play a crucial role in those efforts.
The joint-venture partners have not shut out the possibility of eventually linking up with any of the four Baby Bells excluded from last week's announcement: BellSouth; SBC Communications, formerly Southwestern Bell Corp.; U S West; and Ameritech.
Bell South, SBC and Ameritech, however, announced plans last summer to form a similar alliance with Walt Disney Co. to develop programming.