The Patron Saint Of Channel Surfing

John Malone grew up watching television, but it obviously didn't ruin his attention span. He holds four college degrees (including a Ph.D. in operations research) and is now president and CEO of America's largest cable company, Tele-Communications, Inc. Friends describe him as a beneficent visionary, competitors as a steely-eyed businessman bent on extracting concessions from programmers. Future TV viewers might have their own name for him: the 500-channel man. Malone wants to turn the tube into an interactive smart box that functions much like a computer. But with one big difference-the TV will continue to entertain us.

His plan is audacious. Next year TCI will start installing new cable boxes that will offer upwards of 500 cable channels and, eventually, a plethora of random-access services-movies on demand, video telephony, expanded home shopping, scores of sports events and interactive programming. "The opportunities are boundless," says Malone. Over the next four years TCI will spend $2 billion replacing most of the trunk cable in its systems with capacious optical fibers, which carry huge amounts of data as pulses of light. The optical network will help create an "information superhighway" into subscriber homes. Malone joined TCI in 1973, when it was a young, struggling company. Today it has 18 percent of the cable subscribers in the United States. "He's the master of this business," says Alan Hirschfield, former cochief executive officer of Financial News Network, now owned by CNBC. "'Unlike others, Malone saw cable as an integrated whole and recognized that the key to the business was to control the seats. Once that is done, you can direct the programming that people receive."

Doing business with the square-jawed Malone is not for the fainthearted. Because his company has so many cable "seats," Malone demands low prices for programming. "If TCI doesn't buy your show, you don't have a business," explains one former programming executive. " When an 800-pound gorilla wants to kiss you, you stick out your mouth."

If Malone has his way, TV will be transformed into a large collection of niches. Channels will be tailored to narrowly defined groups: game-show addicts, golfers, fashion groupies and many others. In effect, the television will become as highly segmented as the magazine business. Not surprisingly, cable executives are especially keen on pay-per-view programming-what they call A la carte TV. Did you miss "60 Minutes" last Sunday? No problem: in the future the show might run continuously on its own channel. Pay $2 and watch it when you want. Video games will also be avail able: "One more generation of improvement in microprocessor speed and you'll be able to do anything," says Malone. "There is an army of software creators building services for this platform." Though subscribers pay an average $19 a month for basic service, research suggests they're ready to spend an additional $30 on specialized programming.

TV retailing may be another bonanza. Liberty Media, TCI's sister company, controls the Home Shopping Network and holds a large stake in QVC, now run-and partly owned-by former Fox Inc. chairman Barry Diller. The two shopping networks already rack up $2.2 billion in annual sales, but Malone considers that mere glitter. In the future, shopping channels will also be targeted to individual tastes: designer gowns on one, camping gear on a second, zircon baubles and copper pots on a third. Sound fanciful? Catalog sales totaled $48.8 billion last year.

The coming integration of computers, phones and TV will spark territorial wars. Cable companies are already in the phone business and phone companies are spoiling to own and offer video programming. "I predict that at some point all the [regulatory] fences will come down and everybody will be able to provide anything they want," says Malone. New pricing regulations will set back the cable industry financially, but that won't matter in the long run, asserts Malone. "The cable business won't be based on our ability to raise prices, but on our ability to deploy new technologies and optional pay-per-view services. That's where future values will be created."

Do Americans need the confusion of 500 TV channels? Of course not-no more than they need 20 different types of toothbrushes. "People need whatever frees them to focus on their real interests," insists Malone. "People don't care about technology; they care about services." There are doubters-and also a raft of muscular competitors with their eyes on the same prize. Malone is undaunted: "I believe that I can be the low-cost provider and the earliest implementer of two-way, broadband communications," he says. "I believe I can win that race." If he does, he will become richer still, and perhaps the patron saint of channel surfers yet unborn.