Yuen organized GTGI into three business segments. Easily the largest of these segments
was the Media and Services Sector, which accounted for approximately 70 percent
of GTGI’s consolidated revenues. This sector produced the bulk of its revenues
from the TV Guide, the largest weekly publication in the world at the time in terms of
circulation and readership. The second business segment was the Technology and
Licensing Sector that included the former operations of Gemstar International.
Following the acquisition of TV Guide, Yuen’s principal strategic initiative was to
use Gemstar’s EPG patents and TV Guide’s brand name to establish a product line of
interactive information and navigation services for use by cable TV networks. This
product line of services was included in GTGI’s third and smallest business segment,
the Interactive Platform Sector. Advertising was the principal revenue producer for
this sector, which accounted for less than two percent of GTGI’s total revenues for fi scal
2000. Yuen was convinced that over the years to come major retailers and service
companies would allocate a large portion of their advertising budgets to ads placed
on GTGI’s electronic navigation guides, most notably the TV Guide Network. By 2000,
the profi t potential of the TV Guide Network seemed enormous since it reached more
than fi fty million U.S. households.
Despite Yuen’s glowing forecasts for GTGI’s business model, the company’s fi nancial
performance worsened dramatically during 2001, its second year of operation. In 2001,
GTGI reported a net loss of $600 million, three times greater than the net loss it reported
the previous year. Yuen downplayed this disappointing news in earnings releases and conference calls by focusing the attention of analysts and investors on the rapidly growing
revenues of the Interactive Platform Sector. In fi scal 2001, that sector’s revenues
increased by more than 400 percent. He attributed this large increase to “advertisers’
growing acceptance” of the new advertising medium offered by that sector.
Explaining GTGI’s large loss during fi scal 2001 wasn’t the only challenge that Yuen
faced in early 2002. During the merger deliberations with TV Guide, Yuen had negotiated
an incentive-laden compensation contract for himself. During 2001, that contract
resulted in Yuen earning nearly $20 million, which was three times his compensation
the previous year. Financial analysts, investors, and other parties berated Yuen
for that huge pay increase in the face of GTGI’s $600 million loss for the year. That
criticism was met with indifference and silence by Yuen. Two years earlier, several
Gemstar shareholders had also suggested that Yuen was being overpaid. Yuen had
responded to that criticism by brusquely noting that, “I deserve every bit of it.
Yuen organized GTGI into three business segments. Easily the largest of these segmentswas the Media and Services Sector, which accounted for approximately 70 percentof GTGI’s consolidated revenues. This sector produced the bulk of its revenuesfrom the TV Guide, the largest weekly publication in the world at the time in terms ofcirculation and readership. The second business segment was the Technology andLicensing Sector that included the former operations of Gemstar International.Following the acquisition of TV Guide, Yuen’s principal strategic initiative was touse Gemstar’s EPG patents and TV Guide’s brand name to establish a product line ofinteractive information and navigation services for use by cable TV networks. Thisproduct line of services was included in GTGI’s third and smallest business segment,the Interactive Platform Sector. Advertising was the principal revenue producer forthis sector, which accounted for less than two percent of GTGI’s total revenues for fi scal2000. Yuen was convinced that over the years to come major retailers and servicecompanies would allocate a large portion of their advertising budgets to ads placedon GTGI’s electronic navigation guides, most notably the TV Guide Network. By 2000,the profi t potential of the TV Guide Network seemed enormous since it reached morethan fi fty million U.S. households.Despite Yuen’s glowing forecasts for GTGI’s business model, the company’s fi nancialperformance worsened dramatically during 2001, its second year of operation. In 2001,GTGI reported a net loss of $600 million, three times greater than the net loss it reportedthe previous year. Yuen downplayed this disappointing news in earnings releases and conference calls by focusing the attention of analysts and investors on the rapidly growingrevenues of the Interactive Platform Sector. In fi scal 2001, that sector’s revenuesincreased by more than 400 percent. He attributed this large increase to “advertisers’growing acceptance” of the new advertising medium offered by that sector.Explaining GTGI’s large loss during fi scal 2001 wasn’t the only challenge that Yuenfaced in early 2002. During the merger deliberations with TV Guide, Yuen had negotiatedan incentive-laden compensation contract for himself. During 2001, that contractresulted in Yuen earning nearly $20 million, which was three times his compensationthe previous year. Financial analysts, investors, and other parties berated Yuenfor that huge pay increase in the face of GTGI’s $600 million loss for the year. Thatcriticism was met with indifference and silence by Yuen. Two years earlier, severalGemstar shareholders had also suggested that Yuen was being overpaid. Yuen hadresponded to that criticism by brusquely noting that, “I deserve every bit of it.
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