Comsat's hotel video link struggles to stay on the air


April 07, 1991|By Leslie Cauley

Two hours before he was scheduled to sit down for a interview with a reporter, Robert J. Wussler, chief executive officer of Comsat Video Enterprises, sent word through a spokesman that he had changed his mind and didn't want to talk.

"He said he has nothing to say," Richard McGraw, a spokesman, said of the CVE executive. "He said nothing's changed, that there's nothing new for him to talk about."

Unfortunately, that has pretty much been the story with Comsat Video since the unit was created by Washington-based Communications Satellite Corp., known as Comsat, in 1985. The unit, based in Clarksburg, about halfway between Rockville and Frederick, provides satellite-delivered television programming and pay-per-view entertainment to hotels.

Mr. Wussler, who agreed to talk one day after his no-show, said, "I want to stop putting those [loss] brackets around our numbers. . . . Once we stop being a $15 million or $25 million loss and start being a break-even business, that will go a long way around here."

Indeed, the news out of CVE has been depressingly consistent: Despite the best efforts of seasoned broadcasting executives like Mr. Wussler, the unit has been unable to snag any major contracts in the past year. Losses have continued to mount, topping out last year at $125 million, which included a $98 million

write-down by the parent company, Comsat.

Comsat applied a tourniquet to CVE earlier this year, restructuring the unit to slash a third of its work force and table all capital-intensive projects. That put a number of Wussler-inspired ideas for expanding the hotel business and home broadcasting on hold.

According to Irving Goldstein, chairman and chief executive officer of Comsat, the goal of CVE now is to continue to contain costs and get its video house in order. Once the unit gets to the break-even point, he said, Comsat will have some hard decisions to make.

"We are not looking at getting out of the hotel business," Mr. Goldstein said. "But beyond that, next year, or whenever, I just can't judge. If somebody walks in, makes an offer and hands us a check, we'd consider it, sure. But as of right now, CVE is not for sale."

So for now, CVE will concentrate on smaller, niche deals that don't cost much. Toward that end, the subsidiary is currently trying to acquire broadcast rights to motion pictures, sporting events and concerts.

That puts CVE in the role of being a program distributor, a middle-man role that will capitalize on Mr. Wussler's extensive industry contacts, made over a 30-year career in broadcasting and the sports business.

CVE also is working with its sister units on small deals in other parts of the world, Mr. Wussler said. That would include satellite programming jobs in Eastern Europe and Third World countries where commercial television isn't available. There's also talk of striking some video deals with cruise ships, where Comsat already has a near-lock on the communications market. "We're not moving away from the hotel business, but we want what we have to work better," Mr. Wussler said.

Wall Street apparently shares the view that a restructured CVE would work better. Since the restructuring was announced in January, the New York Stock Exchange-listed shares have climbed from $23.25 to $27.25 a share.

George Dellinger, vice president of Washington Analysis Corp., a Washington-based consultancy, said he welcomed CVE's restructuring. In fact, he said Comsat probably should have done it a year ago.

But he said the burden remains on CVE's management to turn the unit around. "They've spent three years exploring, exploring," Mr. Dellinger said. "Except for a Whitney Houston concert and a prize fight, I'd be hard-pressed to come up with anything CVE's done that has resulted in any significant contribution to Comsat's earnings during the period."

Julian Menear, senior vice president of Young Capital Group Inc. in Chicago, said he wouldn't be surprised to see CVE go on the selling block later this year if things don't improve soon.

"If they don't get a large contract by the end of summer, I wouldn't be surprised to see some further restructuring or some private attempts to sell the group," Mr. Menear said. "I suppose they could write it off, but the whole point was to make a go of things. Anybody can take care of a problem with a stroke of a pen, but Comsat is supposed to have more talent than that."

At least that's what Comsat thought when it set up the unit as a joint venture between Comsat and Holiday Inn Corp., the hotelier, in 1985. Comsat assumed full ownership of CVE the following year and set the goal of becoming the largest purveyor of satellite programming in the hotel industry. The idea was to allowom its installed base of satellites.

For the first few years of its corporate life, CVE was headed by Comsat executives who were well-versed in the satellite business but were learning on the job about the nuances of pay-per-view.

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