Mercury News Wire Services

LOS ANGELES -- It's a battle that's likely to change the face of television, pitting giant phone companies against cable TV companies and satellite operators in an epic struggle for the electronic allegiance of the American consumer. And the heaviest hitters in Hollywood are choosing up sides.

Tuesday, Walt Disney Co. and three Baby Bell telephone companies announced plans to invest $500 million over the next five years in a new type of television programming venture. The partnership is very similar to one formed late last year between Creative Artists Agency and three other Baby Bells.

Both entities aim to do nothing less than revolutionize the way Americans receive television programs -- and possibly change the nature of those programs as well. Newly freed from regulatory constraints, the telephone companies are racing to convert their old-fashioned voice communications networks into lightning-fast information highways carrying hundreds of television channels and new interactive services.

But they need partners steeped in the ways of the entertainment world if they're to end up with programs worth watching.

The Disney deal, which has been in the works for two years, joins the Burbank company with Ameritech Corp., BellSouth Corp. and SBC Communications Inc. Sources said GTE Corp. is in talks to take part as well, though the company declined to comment.

The four companies are equal owners of the venture, but they declined to discuss how they would divide the $500 million in capital costs.

Creative Artists Agency and its powerful chairman, Michael Ovitz, are aligned with Bell Atlantic Corp., Nynex Corp. and Pacific Telesis Group. The other Baby Bell, US West, has an equity stake in Time Warner Inc.'s entertainment businesses.

For all of these entities, though, forming the ventures was the easy part. Now, they must show that they can deliver television better than battle-hardened cable television operators, better than Hughes' new but highly successful DirecTV service, better even than the local video store -- or at least more cheaply.

Disney, with its legendary brand name, marketing ability and ownership of characters like Mickey Mouse, is supposed to be in a good position to help invent that elusive new medium known as interactive television.

The Disney venture's first task will be to design a navigator, a souped-up program guide that will help viewers figure out what they want to watch and when.

Some industry experts say Disney's participation in the venture could complicate matters because it ties the venture so closely to one entertainment producer.

Published 4/19/95 in the San Jose Mercury News.

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