Time Inc. said yesterday that Frank J. Biondi Jr., the head of its troubled Home Box Office pay-television unit, has left following what the company said were "policy differences with Time Inc. management."
The company, which declined to describe the differences, said HBO President Michael J. Fuchs would succeed Biondi as chairman. Fuchs, Biondi and other Time Inc. officials were not available for comment.
The move startled television industry insiders, Wall Street analysts and HBO employes.
"I'm very surprised," said a top network television executive.
"This certainly wasn't expected," said Ken Noble, who follows Time Inc. for Paine, Webber.
Biondi's departure, which reportedly occurred Monday night, comes in a year that has seen far slower growth and failed expectations for the country's largest and most profitable pay cable-television service.
"Here's a company that started out the year with glowing expectations," said Paul Kagan, a Carmel, Calif.-based cable industry analyst. "They were even bullish in March at an analyst's meeting. But the year has been anything but bullish. Profits are down and the subscriber levels are flat. This has been a year of casting about and trying to figure out how to continue subscriber growth."
HBO and its companion Cinemax programming service had close to 16.6 million subscribers at the end of 1983. The two services are expected to have a combined subscriber base of 18.1 million at the end of this year, "which is half the original expectations," Kagan said.
Last year, HBO earned an estimated $130 million on roughly $630 million in revenue. Time's Video Group, which also includes American Television and Communications (ATC), the second-largest cable systems operator, contributed nearly 63 percent of Time Inc.'s operating profit and generated $1.09 billion in revenue. Those profits are widely expected to decline as a result of HBO's diminishing growth.
Much of that decline can be attributed to a slowdown in the construction of new cable systems. Moreover, the phenomenal rise of videocassette recorder sales and rental movie shops also is believed to have had an impact on the pay-television market. Movies are the major staple of HBO, Showtime and the other pay-television services.
Under Biondi's chairmanship, HBO also had branched out into producing original programming to reduce its dependence on movies. The ventures have proven costly and have been trimmed back as HBO's subscription base has leveled off.
Some analysts said that part of the policy difference between Biondi and Time management was over whether the company should continue to invest more to expand and capture market share in the increasingly competitive pay-television marketplace, or should emphasize a cost-containment strategy.
Biondi reportedly lobbied for continued expansion.
Fuchs, who succeeds Biondi, is widely regarded as a tough negotiator.