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uted books through five publishing organizations. Time-Life Books was the largest direct-mail publisher of general interest books in series, and Book-of-theMonth Club operated the largest general-circulation book club and several other book, clubs. Little, Brown and Company published trade and professional books, and' Oxmoor House published how-to and illustrated books on a variety of subjects. In 1986, Time acquired Scott, Foresman and Company, publisher and distributor of mentary, high school, and college textbooks.
Cable Television Programming (17% of revenues)
In a move hailed as visionary, Time invested in a cable television network in 1972. Analysts predicted that cable television would become a dominant vehicle for distributing news and entertainment to the general public by the beginning of the twenty-first century. In 1989, Time operated both the Home Box Office (HBO) and Cinemax networks. Only consumers with hookups to local cable franchises were eligible to subscribe to these networks. Subscribers paid monthly fees for access to programming ,. on HBO or Cinemax.
HBO's programming included feature-length films, sporting events, special enter"': tainment events, and movies commissioned by HBO. Cinemax offered a broad range of movies and special entertainment events. Experience had shown that consumers did , not often cancel their SUbscriptions to cable-television networks. Most programming on HBO and Cinemax consisted of recently released feature-length films. HBO quired programming through licensing agreements with film producers and film tributors. HBO Video distributed films and other programming on home videocassettes in the United States and Canada. Time also had a 14% ownership interest in Broadcasting System, Inc., a broadcast network.
Time, Inc. 's Entry into the Entertainment Industry (A) 685
local Cable Television Franchises (25% of revenues)
American Television and Communications Corporation (ATC), an 82%-owned subsidiary of Time, was the second-largest cable television franchise in the United States, with 3.9 million subscribers. Local municipalities awarded franchises an exclusive license to distribute cable programming, such as HBO, to subscribers' television sets
. through a network of cables.
Industry and Competitive Dynamics·
At the beginning of the 1980s, the film, television, and publishing industries had been largely independent of each other. By 1989 a series of related trends had blurred their boundaries. Figure A depicts several of the relationships that had emerged.
Several major film producers, including Paramount, MCA, and Warner (profiled below), had integrated vertically. To ensure access to outlets for their products, their activities included exhibition (movie-theater ownership) in addition to film production and distribution. Deregulation also spurred vertical integration: regulations preventing television and film producers from owning television stations were relaxed, and court decisions allowed film producers to own theaters. Exhibit 4 shows the extent in 1988 of vertical integration.
The average cost of producing a feature film had escalated from $2.5 million in 1975 to more than $2 million by 1987. During the same period, the number of feature films offered on the market had increased, elevating the. competitive stakes in film production and reducing the chances of a hit. The risk of failure at the box office had
FIGURE A The Film, Television, and Publishin