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[PROFILE] Success and Failures of Henry Yuen

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  • madchinaman
    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,
    Message 1 of 1 , Apr 19, 2003
      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
      http://www.latimes.com/business/la-fi-gemstar18apr18,1,6651277.story

      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
      practices.

      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
      founder testifies.

      "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
      testimony.

      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
      posts.
      By Sallie Hofmeister, Times Staff Writer
      http://www.latimes.com/business/la-fi-gemstar19apr19,1,7241103.story

      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
      management.

      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
      seeking comment.

      ===========

      Henry Yuen Keeps Helm of $3 Billion Gemstar
      http://goldsea.com/Personalities/98/yuen.html

      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
      buyout offer.
      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
      television
      http://www.businessweek.com/magazine/content/01_11/b3723001.htm

      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
      has."

      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
      index.

      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
      analyst Rosenstein.

      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
      cable subscribers.

      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
      office.


      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
      collect
      http://www.businessweek.com/bwdaily/dnflash/dec2000/nf2000124_470.htm

      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
      elsewhere.

      "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
      Gemstar.

      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
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