[PROFILE] Success and Failures of Henry Yuen
- Gemstar Ex-CEO May Face Contempt Citation
SEC wants judge to jail Yuen for allegedly violating order to
testify in accounting probe.
By Sallie Hofmeister, Times Staff Writer
The Securities and Exchange Commission asked a federal court
Thursday to hold the former chief executive of Gemstar-TV Guide
International Inc. in contempt, saying he violated a court order to
testify in the agency's investigation of the company's accounting
The SEC said Henry C. Yuen refused to testify Wednesday and failed
to show up to give testimony Thursday, though he had promised to do
so. The agency asked the court to put Yuen in jail and fine him
$50,000 a day -- and to double the fine every day until the Gemstar
"He agreed to a court order that he appear, and then he violated
that order," John B. Bulgozdy, an SEC attorney, said.
Stanley Arkin, an attorney for Yuen, said the SEC's action came as a
shock because he had informed the agency that he needed to
reschedule Yuen's testimony.
Arkin accused the SEC of seeking revenge for a lawsuit his client
filed against it last month.
Yuen and a colleague accuse the SEC of illegally freezing their
$37.6 million in severance payments. The SEC used "intimidation and
implied threat of sanction" to compel Gemstar to put the money into
escrow, according to their suit. A hearing is scheduled for Monday
in that case.
"This is retaliatory," Arkin said.
The courtroom dueling comes as the SEC is investigating whether
securities laws were violated at Gemstar from 1999 through 2002,
when Yuen ran the company.
Pasadena-based Gemstar owns TV Guide magazine and sells electronic
programming guides that allow television viewers to navigate through
hundreds of TV channels.
After disclosures of aggressive accounting practices, the SEC
investigation and a 90% drop in the company's stock value, Gemstar's
largest shareholder, News Corp., pushed Yuen out of top management a
year ago, along with its chief financial officer, Elsie Leung.
News Corp. wrested control of the board, installed a new management
team and fired the company's accountant.
Gemstar has restated earnings four times since November as part of
an accounting review.
Arkin berated both News Corp. and the SEC on Thursday. He accused
News Corp. of unfairly "beating up" on Yuen and the SEC of going
along with it.
"The SEC is being used as a cat's paw by News Corp.," said Arkin,
who also represents Leung.
He said News Corp. had been looking for an opportunity to push out
Yuen to take control of the company and had hired accountants that
disagreed with those employed by Yuen about how to calculate
advertising on the company's electronic programming guides.
"There is a terrible failure here to focus on the underlying issue
in this case, which is whether advertising on this new platform has
value," Arkin said. "We think it has considerable value. Ernst &
Young, the auditors for News Corp., have a differing perspective."
The SEC said Yuen provided testimony April 1 and was scheduled to
return this week for two more days of testimony. Those dates were in
a March court order sought by the SEC because Yuen had failed to
show up for previous testimony dates.
Arkin said that his client was not objecting to testifying, but that
he first needed time to address certain issues with Gemstar. He
added that he wasn't given a chance to reschedule his client's
A judge will set a hearing at which Yuen will have the chance to
explain why he should not be held in contempt.
Gemstar Fires Yuen, Ex-CFO
The dismissals are for failure to cooperate with accounting probes,
sources say. The two had remained on the payroll after leaving top
By Sallie Hofmeister, Times Staff Writer
One day after federal authorities sought to jail the former chairman
of Gemstar-TV Guide International Inc., the company fired him and
the former chief financial officer.
Gemstar said Friday that the two were terminated for cause. Sources
said Henry Yuen, the former chief executive, and Elsie Ma Leung, the
former finance chief, were fired for failing to cooperate with a
Securities and Exchange Commission investigation into accounting
practices when the pair were in charge.
They both stepped down from top management in November after a power
struggle with the company's largest shareholder, News Corp. But they
remained on the payroll of the Pasadena-based company, which owns TV
Guide and produces electronic programming guides. The firm said that
Yuen would step down from the company's board and that Leung would
retire from the board when her term ends May 20.
The announcement of the firings came one day after the SEC asked a
federal court in Los Angeles to hold Yuen in contempt, saying he
violated a court order to testify in the agency's investigation. The
SEC, which launched the Gemstar probe in October, asked the court to
jail Yuen and fine him $50,000 a day and to double the penalty daily
until the Gemstar founder testifies.
Yuen's lawyer, Stanley Arkin, said his client had asked to testify
on another day because he first needed to address
unspecified "pressing issues" with Gemstar.
Sources said this week's developments could make it more difficult
for Yuen and Leung to collect a $37.6-million severance package that
Gemstar placed in an escrow account as part of a settlement tied to
their ouster as top executives. On Monday, a federal judge in Los
Angeles is expected to consider their request to gain early access
to the funds.
November's settlement agreement provided for them to receive the
money May 6. The deal also set up new employment contracts requiring
them to cooperate with an internal audit investigation as well as
with the SEC. In addition, the agreement called for all patents and
inventions developed by Yuen to be transferred to the company.
Sources close to the company said Friday that the two executives
breached their new employment agreements by failing to cooperate
with the SEC and the internal audit. The audit was finished this
month, when the company posted a loss of more than $6 billion for
2002 because of goodwill write-downs, and it restated past results
dating to 2000.
The sources said their severance package was in jeopardy because
Gemstar or the SEC was likely to take action to stop any payment.
The SEC could seize the payments if it finds that the executives
improperly inflated Gemstar revenue.
Gemstar lost 90% of its stock value last year after disclosing
aggressive accounting of certain revenue. News Corp., which
controlled half the company's board seats at the time, installed new
In a move that many found surprising under the circumstances, Yuen
and Leung sued the SEC in March, accusing the agency of playing an
illegal role in putting the severance money in escrow by threatening
to sanction Gemstar. Arkin did not return a phone call late Friday
Henry Yuen Keeps Helm of $3 Billion Gemstar
Attorney/engineer/entrepreneur Henry Yuen is winning the fight to
keep the throne atop his $3-billion Gemstar International digital TV
program guide empire. Yuen is hoping to out-Yahoo Yahoo in the
internet age by having Gemstar's easy-to-use VCR-programming system
become the ultimate gateway for all video programming from sitcoms
to websites. He's under fire from major shareholders like Viacom and
Thomson disgruntled by the way he slapped away TCI's $2.8-billion
Braniac Yuen founded Gemstar eight years ago by coming up with
a humane way to program your VCR
Henry Yuen: TV Guy
The founder of Gemstar-TV Guide wants to take control of your
No self-respecting media mogul would be caught dead in these
offices. The rented space in Pasadena, Calif., is miles from the
action in Hollywood, Beverly Hills, or Santa Monica. Sitting seven
floors above a Federal Express storefront, the offices have no young
hotshots scurrying through the halls. No producers are taking
meetings. No Evian water is being hustled to the elbow of a pampered
star. As for the full-size movie posters that adorn most moguls'
offices, forget it. Scores of wood-framed plaques that could be
mistaken for awards from the local Rotary Club hang on these walls.
But the plaques represent power. As Michael D. Eisner, Barry Diller,
or any other mogul will tell you, power is getting your phone calls
taken. And no one is getting his calls taken faster these days than
Henry C. Yuen, a onetime math professor who believes he holds the
keys to the future of television. The plaques are patents for the
technology Yuen says will be needed in the next few years to
navigate the coming tsunami of TV, Internet, and other services
about to hit TV sets everywhere. And his arsenal of nearly 200
patents is making Yuen and the company he heads, Gemstar-TV Guide
International Inc. (GMST ), the hottest--and perhaps the most
controversial--player in the new world of interactive TV.
With his bowl haircut and owlish glasses, the slightly built Yuen,
52, looks more like a technology geek than a mogul. And until just a
few years ago he was just that: a research scientist who, together
with fellow Chinese-born students he had met in the game room at
California Institute of Technology, came up with VCR Plus+. That
technology, invented in 1989, is now present in nearly all VCRs,
making it easier to program the recorders. The VCR Plus+
breakthrough made Yuen a multimillionaire, but it was just a warmup.
In the early '90s, about the time cable-TV titan John Malone made
his speech predicting a 500-channel world, Yuen already was working
on ways to make the exploding TV world more user-friendly.
VAST POWER. Today, allied with Malone and News Corp. (NWS ) Chairman
Rupert Murdoch, Yuen wants nothing less than to control the first
screen you see when you turn on your TV. The game plan is to make
Gemstar's interactive program guide the portal to the TV universe,
much as America Online Inc. (AOL ) or MSN greets you as you log on
to the Internet. If Yuen has his way, you'll be paying--indirectly
through advertisements or through your cable bill--every time
someone clicks on that guide. Gemstar is counting not only on
licensing fees for the guide itself but also on a cut of all the
advertising and commerce generated.
So how can one guy amass so much power from something so seemingly
inconsequential as a programming guide? Because Yuen, Murdoch,
Malone, and everyone else in the media world believe that the
potential of interactivity via the TV, the world's most ubiquitous
home appliance, is vast. According to statistics collected by
Gemstar, U.S. TV viewers come back to the guide an average of four
times an hour and surf through at least three screens of listings.
If people watch TV an average of seven hours a day, that can mean a
lot of time logged on to the guide. With the coming barrage of
channels, they may spend even more time glued to the tube, analysts
say. And the chances are that more viewers will be clicking to sort
shows by category, record the news, buy a movie, or get on the
Internet. Right now, to do just about anything from an interactive
program guide requires a Gemstar patent. "A person can get through
maybe 60, 70 channels without some help, but not 500," says
Yuen. "And with all that confusion, we see great opportunity."
Most analysts agree. By 2005, they figure, the interactive-TV market
will be huge, with nearly half of America's 102 million TV
households using their TVs to click onto the Internet or order
products. By then, interactive TV will be a $40 billion market,
generating revnues on everything from advertising to subscriptions
to video-on-demand, calculates ING Barings analyst Spencer Wang.
With its "first-screen" strategy, Gemstar "controls the most
important piece of real estate out there," says Merrill Lynch & Co.
media analyst Jessica Reif Cohen.
No less a media figure than Murdoch, whose News Corp. owns a 43%
stake in Gemstar, has made the company a key element in his own
plans to create a worldwide satellite network. Yuen "is a brilliant
strategist," says Murdoch. "And [he] has shown to have a novel way
for thinking out of the box." For weeks, Murdoch's News Corp. has
been negotiating to merge its Sky Global Network Inc. with General
Motors Corp.'s DirecTV unit. Almost overnight, that would put
Gemstar's guides on TVs in as many as 20 million homes worldwide.
"THE SMARTEST." Other media heavyweights have signed on with Yuen,
too. William H. Gates III has licensed Yuen's technology for
Microsoft Corp.'s new Ultimate TV, while Stephen Case has signed on
for his company's just-released AOL TV. More than 100 cable
companies license the technology. In all, the interactive guide
today is seen in more than 10 million homes. "We think he may just
be the smartest guy in television," says Robert R. "Dob" Bennett,
president of Malone's Liberty Media Corp. (LMG.A ) and a Gemstar
board member. "His greatest strength is that he owns every idea he
With so much power in the nascent world of interactive TV, Yuen has
his share of enemies. And many of them he has cultivated himself.
Exhibiting a certain swagger about the coveted technology he owns,
Yuen, who holds a law degree alongside his math PhD, has a penchant
for suing his competitors over alleged patent infringement. That has
earned him a reputation for being combative; a magazine article once
described him as a "patent terrorist." To that charge, a composed
Yuen scarcely reacts. "I am no terrorist," he says. "A terrorist is
someone who breaks the law. I am only doing what the U.S. Congress
and patent law allow." Still, Yuen has been a relentless litigant,
with pending lawsuits against such companies as EchoStar (DISH ) and
TiVo (TIVO ). Once a student of the Jackie Chan style of Chinese
martial arts called Wing Chun, Yuen rarely backs off from a good
fight. And he has never lost a lawsuit.
Yuen also exacts often onerous terms from partners for huge
percentages of the advertising and commerce revenues that are
generated on the guide. That, plus his courtroom track record, has
hardened many of the TV world's players against Gemstar. "He scares
the hell out of us," says one top cable executive who, like most of
his peers, insisted on anonymity. "He can force his way onto our
system because we need the guide, and he seems to be the only way to
get one." Some cable guys, including Cox Communications Inc. (COX )
and Comcast Corp. (CMCSK ), were so turned off by the hardball
tactics that they banded together to start a rival service,
TVGateway. It's a fledgling effort so far, but the hope is that it
will give them some leverage in talks with Gemstar in the meantime.
Certain opponents, such as satellite service EchoStar Communications
Corp. and set-top maker Scientific-Atlanta Inc., are countersuing,
claiming Gemstar has a stranglehold on a crucial piece of the new
world of digital TV. Even many that have signed with Gemstar have
done so only after bruising negotiations.
The problem is that Yuen is upsetting the existing order in which
cable and satellite operators have been able to offer viewers all
sorts of choices. That's why most cable companies carry both HBO and
Showtime, or ESPN and Fox Sports. "It is the Noah principle," says
Lawrence F. Marcus, a venture capitalist with Walden VC who has
worked with cable operators and interactive-TV companies. Cable and
satellite companies "like to have two of everything so that one guy
can't hold them up." So it would seem Yuen's business plan was built
on alienating the companies he needed most as customers.
But Yuen appears to be softening his approach, realizing the
importance of signing up holdout cable companies. He needs them if
he is successfully to build a "national footprint" to sell
advertising in every major market. By offering more favorable terms
than he has done in the past, Yuen was able to ink a deal on Feb. 19
with billionaire investor Paul G. Allen's Charter Communications
Inc., once a main foe. While the deal was seen by many as a big win
for Gemstar, the cable operator is continuing to hedge its bets,
keeping its partnership stake in rival TVGateway.
Even more important for Yuen are talks now under way with AOL Time
Warner Inc., the country's No. 2 cable operator. If he can strike a
deal with Time Warner Cable, once an adversary, Yuen will add nearly
13 million households, giving Gemstar a stronger footing in New York
and other East Coast cities. Much of those negotiations are handled
directly by hard-nosed Peter C. Boylan III, a onetime dealmaker for
Malone and now one of three Gemstar co-presidents. It's no easy
task. Time Warner Cable last year stripped from several of its cable
systems Gemstar's ability to send signals that feed program
information to its guides. Those signals were reinstated to help
Time Warner win approval for its merger with America Online Inc.
from federal regulators who questioned the combined companies' power
to exclude programming it didn't own. But it's not clear what AOL
Time Warner's next moves are. Officials declined to comment on the
current talks with Gemstar.
Yet even before Gemstar was forced to become a kinder and gentler
negotiator, it had important allies. Two of its biggest investors,
Murdoch and Malone, agreed to merge their TV Guide Inc. holdings
with Gemstar after their failed 1998 takeover attempt. Gemstar is
also something of a Wall Street darling these days, winning a rush
of new fans, with eight analysts putting out "buy" recommendations
in the past two months. Richard J. Rosenstein, an analyst at
Goldman, Sachs & Co., figures that by 2005, the company will
generate nearly 80% of its projected $9.8 billion in revenues from
its interactive unit. And the company, with a market cap of $21
billion, is outperforming the broader market. Since Gemstar and TV
Guide completed their merger in July, shares are down 19%, to about
$50, but that's compared with a 43% drop for the Nasdaq composite
LOW HURDLE. Wall Street also seems to like that Gemstar clearly
overshadows tiny rival TVGateway. Unlike Gemstar's interactive
service, which is based on software contained in the set-top box,
TVGateway's service stores information about TV shows on a server
located at the cable company's central office. The company says a
new version is due out in mid-June. But it still is unlikely to
include some basic features available on Gemstar's guide, such as
searching for TV shows by title and the one-button recording of
shows. But it does have one important feature, says Hal M. Krisberg,
chairman and CEO of WorldGate Communications Inc., which developed
TVGateway. It's designed to steer clear of Gemstar's patents and
doesn't require cable operators to pay Yuen a penny. "The hurdle
that my folks set wasn't particularly high," says Krisberg. "All
they wanted was to make it Gemstar-proof."
Yuen waves off any threat by TVGateway, and Boylan suggests that
despite claims to the contrary, it probably infringes the Gemstar
patents. But Boylan says Gemstar won't bother suing because so far,
TVGateway has been deployed by only a single service, New
Hampshire's 35,000-subscriber MetroCast Cablevision. To date,
according to MetroCast President Terry Hicks, it has been installed
in little more than 100 households. Hicks picked TVGateway not so
much for the cost, since he's paying the same monthly 35 cents a
subscriber that Gemstar-TV Guide is likely to charge. Instead, he
says, he wasn't particularly eager to share the revenues from ads or
whatever new services he might add down the road to the program
guide. "It's a real problem having a gatekeeper," says
Hicks. "[Gemstar-]TV Guide is a gatekeeper."
The irony is that gatekeeper Yuen is setting out to capture a
service of which he is at best a casual user. The Gemstar CEO tunes
in his DirecTV satellite dish to take in the Fox sci-fi drama The X-
Files or an occasional soccer game. His affinity for sports is an
echo of his youth in Hong Kong, where he and his family moved when
Yuen was 2. There, Yuen rose to become a high-scoring soccer player
ranked one level below world-class. Tough-minded, he was quick on
the field and scored often, recalls Daniel S. Kwoh, a Gemstar
founder and friend who worked with Yuen at defense contractor TRW
Inc. in the late 1980s. Their project then: studying wave motions in
the ocean, useful in submarine detection.
It was that kind of scientific pursuit that seemed to drive Yuen at
an early age. The son of a lawyer turned film producer, Yuen was not
taken by the world of media. His father's films were mostly
financial bombs, although the older Yuen was nominated in 1982 for a
prize at the Cannes Film Festival for a film called The True Story
of Ah Q. At 17, Yuen left Hong Kong for the U.S., where he got his
bachelor's degree in math at the University of Wisconsin.
The turning point in Yuen's life came in 1988. A "long-suffering
Boston Red Sox fan," as Yuen calls himself, he set his VCR to record
a BoSox playoff game against the Oakland Athletics. Returning home
from a weekend trip, he found he had recorded a screen full of snow.
And so was born the idea for VCR Plus+, a nearly foolproof way of
recording shows by plugging into a VCR numbers that correspond to
the shows' listings in the local newspaper. The trick was getting
newspapers to carry the numbers. Eventually, Gemstar executives
persuaded The New York Times, then worried about falling newspaper
readership, that carrying the listings was a service TV news
couldn't offer. Other newspapers followed. VCR Plus+ also turned
Yuen into a businessman. Even as he worked a full-time job at TRW,
Yuen studied for a law degree at night. He started out by
representing Chinese clients with U.S. business interests. One such
client was Mary Lau, the younger sister of Hong Kong corporate
raider Thomas L.H. Lau. Lau gave Yuen $50,000 to start a company to
sell VCR Plus+.
Although early on it made remote controls that translated the VCR
Plus+ codes into programming commands, Gemstar's goal from the
beginning was the high-margin technology-licensing business. It
collected fees from TV and VCR makers that wanted to incorporate VCR
Plus+ into their products as a premium feature. It also got paid by
newspapers that wanted to list the numerical codes. Yuen then
realized the same model could work for programming guides. After
some experimentation, Yuen and his friends hit on the notion of an
onscreen directory, says Kwoh. Another company, StarSight, backed by
media heavyweights such as Tribune Co., Viacom, and Cox
Communications, had a two-year headstart. But Yuen went after
StarSight for allegedly infringing a patent he already owned and in
1997 bought the money-losing company. A year earlier, Yuen had
snapped up VideoGuide, which had other interactive TV patents.
In 1998, it was Yuen who was in someone else's sights, when Malone
and Murdoch launched a $2.8 billion hostile takeover of Gemstar. At
the time, TV Guide's own antiquated guide of upcoming programs was
scrolling on more than 50 million cable homes in the U.S. The
takeover bid was launched to get hold of Gemstar's patents, but Yuen
mounted a ferocious defense, arguing to his shareholders that the
company was worth far more than the bid. The market agreed, and with
the spotlight of the takeover shining on it, Gemstar within months
rose in value to nearly $10 billion. "He worked us over pretty
well," recalls Gemstar board member and Thomson Multimedia Executive
Vice-President James E. Meyer. Then Yuen turned the tables and sued
TV Guide for alleged patent infringement, forcing Murdoch and Malone
to the bargaining table. The result: a $7.9 billion stock merger.
Says Boylan: "I told Rupert and John that we could litigate for 50
years with Henry, or get half the company."
RUSHING FORWARD. Gemstar is now run through a management structure
designed to cater to all the power brokers involved. Under Yuen,
three distinct co-presidents operate across the country. In Pasadena
with Yuen is Chief Financial Officer Elsie Ma Leung, a longtime
associate who oversees Gemstar's traditional VCR Plus+ business.
Dealmaker Boylan, based in the Tulsa headquarters that once housed
Malone's United Video, plays liaison to Wall Street and negotiator
with cable companies. In New York, Joe Kiener, the smooth-talking
media exec, watches over the TV Guide operations. Among those on the
12-member Gemstar board, which is split between Gemstar and News
Corp. representatives, is Chase Carey, CEO of News Corp.'s Sky
Global Network. Yuen, who has options to own nearly 10% of the
company and is currently worth $1 billion, has the tie-breaking vote
but has to prove himself worthy: As part of the Gemstar-TV Guide
deal, Murdoch can fire the Gemstar CEO in five years.
That may be one reason why the Gemstar team is rushing to meet
expectations--and pushing hard to sign up Time Warner. With the
larger subscriber base, the upside would be potent indeed. Gemstar
says it will sell more than $20 million worth of advertising this
year and has signed up such name brand sponsors as Ford Motor,
Domino's Pizza, and The Wall Street Journal.
The eventual lure for advertisers: With a single click of the
remote, a company such as Ford, say, could send you information on
one of its new models, especially since the cable company already
has your address. By 2005, Gemstar could take in more than $8.5
billion in ad revenues yearly from its guide, estimates Goldman
Gemstar has a long way to go to match those projections. The recent
deal with Charter aside, the mistrust among cable and satellite
operators runs deep. EchoStar, which last year countersued Gemstar,
claims in court papers that Yuen and Boylan are attempting
to "coerce companies into long-term agreements, the duration of
which may extend past the life of Gemstar patents." Boylan says the
claims are untrue and are merely EchoStar's negotiating tactic. But
even AT&T, Gemstar's largest single customer, is busily scrambling
to secure its own revenue stream from digital TV. Its "walled
garden" strategy assumes that it will be able to steer subscribers
away from Gemstar's interactive guide to its own page, where viewers
can buy movies, conduct e-commerce, and send e-mail messages. "We
see this as a very robust business for us, too," says AT&T Senior
Vice-President Richard Fickle, who heads the cable operator's
interactive-TV business. "We have our own portal."
It is a delicate balancing act for Gemstar to work with its clients--
at the same time that it stakes its claim to a channel that will
compete against them. Eager to sign up new clients, Yuen & Co.
showed the first inklings of compromise with Charter. Its deal
allows the Paul Allen company to get the same advertising split it
gave AT&T--with Gemstar getting 85% of ad revenues from the guide
and Charter 15%, even though Charter, unlike AT&T, did not agree to
roll the Gemstar guide out to all of its customers. Moreover,
Gemstar agreed to reduce the fees it is charging Charter as the
cable company increases the number of subscribers with the Gemstar
guide. Boylan says he expects "a substantial majority" of Charter's
subscribers will eventually have the Gemstar interactive guide.
Boylan may have to bend even more to cut a deal with Time Warner,
which is currently covered by an earlier accord signed by Gemstar
and Time Warner's new owner, AOL. That agreement pays Gemstar almost
twice the 30 cents per subscriber that AT&T pays to use the channel,
but it doesn't let Gemstar share in any of the advertising or
commerce from the guide. Boylan will say only that the talks are
continuing. But others say Gemstar may give AOL a bigger break on ad
revenues to get a shot at the nearly 30 million AOL Internet and
Even if those talks bog down, Gemstar has what Yuen believes is an
ace up his sleeve: the TV-set makers. Thomson Multimedia is selling
more than 3 million sets a year with the guide built in, under the
RCA, GE, and ProScan brand names. Sony, Zenith, and others are
likewise incorporating the guides. Right now, Gemstar has agreements
with networks and local stations to reach those sets by embedding
program listings into their signals. But because the cable companies
can strip out such signals, Yuen signed a long-term deal with a
small paging company, Paging Network Inc., that can send the
listings over the air. By next year, some of the TV sets will be
sending--and receiving--signals from Gemstar directly. That will
enable Gemstar not only to send in commercials over the guide but
also to receive orders for any merchandise in return. Yuen also
holds key patents in the new world of e-books, which he hopes people
will ultimately be able to download from the Gemstar guide (box).
If it all works, Henry Yuen could have the makings of his own
virtual television network--a virtual empire for a virtual media
executive. Sitting in his downscale office, Henry Yuen doesn't look
very menacing, with his open-collar shirt and benevolent gaze. But
he has power. It's all around him, hanging on the walls of his
By Ronald Grover in Pasadena, Tom Lowry in New York, and Larry
Armstrong in Los Angeles
Meet Henry Yuen: The Gatekeeper for Interactive TV
The chairman of Gemstar-TV Guide owns more than 100 tech patents
that can let your TV act like a computer -- and he's ready to
Forget Barry, Rupert, and Michael. The most important guy in the
media world today may very well be a slight, one-time Cal Tech
mathematician who favors Dockers khakis and owl-shaped eye glasses.
That would be Henry Yuen, the 52-year-old chairman of Gemstar-TV
Guide. I recently had the chance to sit down with Henry, as he's
widely known in media circles, at a cable-television conference in
Los Angeles. And even a crusty old reporter like me came away
convinced that most of the media moguls in the world are going to
soon be paying Henry a nickel (and probably more) every time someone
turns on a TV, fires up their VCR, or does just about anything else
in this new world of interactive TV.
Henry Yuen owns or controls more than 100 patents that will one day
make your television act very much like your computer, giving you
the opportunity to order products or movies, or even answer your
mail with the flick of a remote control. The listing of upcoming TV
shows that scrolls across Channel 1 on your cable TV? Henry's
company owns the patents to that. If those scrolls give way to
interactive guides capable of turning your TV set into the portal to
the world, as such heavyweights as Barry Diller and John Malone told
the L.A. conference, Henry stands to clean up big-time (see See BW
Online, 5/24/00, "Will Gemstar Be Our Guide to the Future?").
COMPELLING VISION. Sitting on the floor of the L.A. Convention
Center, Henry Yuen didn't sound all that imposing. The room was
cold, and he was bundled up in a parka, mostly playing with remote
controls and other electronic gizmos in front of him. But his vision
is downright compelling -- let the rest of the world spend the
billions to lay fiber-optic cables, put satellites in the sky, or
make TV shows and films. All he wants is the toll every time someone
uses a programming guide to find the show. "We have all revenue
coming in, and no capital expenditure going out," he says. "How can
you beat that model?"
It's a model striking enough to bring media titans Murdoch and
Malone his way, collective hats in hand. The two Ms were majority
owners in TV Guide, the famed television magazine that owned a
competing technology and patents for TV program guides. At one
point, TV Guide and Gemstar sued each other, but eventually the
former threw in the towel. So TV Guide and Gemstar all merged
earlier this year, in effect locking up virtually every relevant
patent. Murdoch's News Corp. owns a 43% stake in the company, but
Henry continues to be chairman and CEO.
Put together, Gemstar-TV Guide International is one powerful
company. TV Guide brings 34 million subscribers and a brand name
unmatched in the TV business. Already, its TV Guide program is in
more than 50 million U.S. cable homes. News Corp. brings massive
ability to put that guide in front of other homes as well, with
Murdoch controlling satellite holdings in Europe, Asia, and
"ALL THEY CAN EAT." As for the rush of new electronic products:
Every time a subscriber turns on WebTV, Henry gets a piece of the
action. Same for TiVo, another company that offers interactive TV.
And next he's working on getting his program guide put into every TV
set sold. "They give us a flat fee for all they can eat," says Henry
of the TV makers. As for everyone else, it's estimated that he gets
25 cents a month for each subscriber of a cable or satellite company
in America. That comes to roughly $4 million a year now but will
jump to more than $1.3 billion annually by 2003, say analysts at SG
Cowen, which recently put out a strong buy recommendation on
SG Cowen figures about 11 million folks will have a program guide
using Henry's patents by the end of this year. And people tend to
spend more than seven hours a day in front of their tube, making it
the place for them to get on to the Net. That means a lot of trips
to the program guide, where advertising can be placed. And for every
ad, Henry gets his cut. Same for some of the merchandise that may be
sold through the program guide.
And all that jazz from interactive-TV gurus about being able to jump
from ABC Monday Night Football to the Internet to check facts on
ESPN.com while watching the game? Henry owns the patents that allow
that to happen. More nickels for Henry and Gemstar.
MOVE INTO E-BOOKS. Before long we'll all be living our lives from
our couches, some figure, and Henry is sitting there ready to
collect. His latest move is into the world of e-books, handheld
devices that can store and retrieve dozens of books.
Henry had a couple of them at the trade show, and the one I held
contained not just books from the likes of Robert Ludlum and
Patricia Cornwell but lots of magazines, too. With a wireless
connection, my TV set could update the magazines or daily
newspapers. And down the road, I can pay my utility bill as well,
using the TV as my Internet connection and the e-book Henry was
holding as my computer.
O.K., it's not imminent, and I'm not really convinced yet that's how
I'm gonna pay my bills. But what I've learned in recent years is not
to bet against Henry Yuen. His first big hit was VCRPlus, a little
gadget that allows stupid folks like me to program their VCRs by
plugging in the numbers assigned to TV shows from the newspaper.
That's worth more than $100 million a year to him in royalties right
now. Now he's negotiating with Barnes & Noble, which is likely to
become a joint-venture partner with Gemstar in e-books. And he
brought Rupert and John to their knees. That's enough for me.
Grover is Los Angeles bureau chief for Business Week. Follow his
weekly Power Lunch column, only on BW Online
Edited by Douglas Harbrecht