Reader's Digest pulls back from TV strategy

Originally published in Current, Jan. 19, 1998

By Karen Everhart Bedford

Reader's Digest Association is backing away from its recent venture into the television business under interim chief George Grune, a retired RDA chairman who was brought in this summer to stablize the faltering company.

Tom Simon, a veteran producer hired in 1995 to lead RDA's expansion into television and build a $75 million program alliance with PBS, left the company Jan. 9.

"I'm very proud of what we were able to accomplish with PBS," said Simon, citing especially The Living Edens and "America in the Forties"--programs that will air on PBS as planned.

"Given the changes in management at Reader's Digest, and the changes in strategic direction of the company, the move into television is not something that they're going to pursue now as vigorously as they have," he said.

Simon and his wife, Jeanne Shanahan, have established a new production company, Working Dog Productions, and they plan to continue working with PBS on nonfiction and children's programs.

In a memo to top managers, Grune explained Simon's departure: "As we continue to focus our efforts on our core business, we have shifted our strategic focus away from developing an in-depth television presence at this time and are putting greater emphasis on video product flow."

"We are reexamining everything that isn't directly related to our core business," said Lesta Cordil, RDA spokeswoman. "We want to continue some sort of arrangement with PBS, but we have to see what benefits it will have both to us and to PBS."

The company's plan was to recoup investments in PBS programs with mail-order sales of videocassettes and related books.

PBS, which pledged to increase its program budget dramatically through strategic partnerships such as its alliance with RDA, has taken a wait-and-see stance on its future relationship with the company, according to Kathy Quattrone, chief programmer.

"If anything, we've been giving them room to do analysis and think through" their future business strategies, she said.

Several projects initiated during the last two years are continuing, Quattrone added. RDA backed 20 episodes of The Living Edens, a widely viewed natural history series that debuted last year. "America in the Forties," a three-hour nostalgic history doc produced by RDA, will air next month. Incredible Journeys, a three-part series looking at "incredibly visually stunning places," also is in the works.

PBS's budget plan to boost National Program Service income by 50 percent between 1997 and 2001 relied upon a $15 million annual investment from RDA, but Quattrone said that amount was not set in stone. "We never had a commitment for $15 million a year from RDA. We worked toward the goal of achieving $15 million." The companies thought through the level of business they did together with "project-by-project decisions on which both companies agreed."

As it turned out, RDA did invest $15 million in fiscal year 1997, she said. For the current fiscal year, the association committed $2 million to $3 million.

PBS projected investments totalling $19 million from strategic partners in FY 1998, with $3.5 million from Devillier Donegan Enterprises; next year, the figure climbs to $21 million. Quattrone said PBS aims to achieve those goals through "a range of partnerships."

Unhappy investors

One big uncertainty about RDA's future continues to be who its next leader will be. Stockholders aggressively challenged Grune at a Dec. 13 annual meeting, and reportedly were unhappy with his responses.

Grune told stockholders that the company's major mistake was "straying from its long-held strategy of testing products before marketing them," according to the New York Post. He said he plans to stabilize the association by focusing on its core businesses--magazines, books, videos and music--and changing or dropping alliances with several companies, PBS among them.

Investors have accused Grune of having a conflict of interest as RDA's chief executive, because he also chairs the charitable trusts that hold about 71 percent of RDA's stock. And they grumble that he is settling into the interim job when they want someone else to lead the company.

"Taking so long to install a new c.e.o. is ridiculous," one investor told the New York Post. "He's tapped his own cronies to run the firm."

Grune told the Wall Street Journal that RDA will appoint a new leader this summer, but he may remain chairman for an indefinite transition period.

One major shareholder, Corporate Value Partners, issued a public letter to the RDA trusts Dec. 22, pressing for "new, better governance and executive leadership of the company" or "sale of the entire company to a strategic buyer who is better equipped to maximize the value of the company."

RDA stock hit a high of $52 a share in fiscal 1996, but had fallen to $28.25 by last August, when Grune took charge. On Jan. 14, it closed at $23.43 a share.


To Current's home page

Earlier news: The Living Edens, first product of the RDA-PBS alliance, debuts on public TV, February 1997.


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