His Master's New Voice

By Christopher Byron

Tough challenges face a skilled manager at RCA

When Thornton Bradshaw was chosen last January as the fourth chairman of RCA in six years, the electronics and communications conglomerate (1980 sales: $8 billion) was already heading into trouble. Earnings were slipping, morale had been devastated by a decade-long succession of management fiascos, and Wall Street analysts were beginning to wonder whether the once high-flying firm would ever regain its former luster.

A year later, RCA's financial prospects appear, if anything, grimmer still. The company's once strong NBC television network remains a distant third in the ratings, behind both ABC and CBS. Meanwhile, the firm's SelectaVision video disc player units for home viewing of prerecorded video entertainment have so far failed to catch on with consumers. In addition, earnings in other operating divisions have continued to decline. One result is that overall corporate red ink in the third quarter of 1981 hit $109.3 million, the worst quarterly performance by the company since 1971.

Feelings of impending doom, however, are not in evidence inside RCA. A key reason is Bradshaw. Drawing upon a calm management style honed during 17 years as president of the Los Angeles-based Atlantic Richfield oil company, the new boss, 64, has put an end to years of boardroom intrigues at RCA and given the firm a badly needed sense of renewed confidence in its own future. Says he: "What I have been doing is spending a lot of time finding out what kind of a company this is so that we can decide where we are going to go."

Many of RCA's current woes stem from some hasty and shortsighted acquisitions that were made during the 1960s and '70s when the firm, like many other big American corporations, tried to boost earnings by diversifying into fields far outside its traditional lines of business. The entertainment and broadcasting company, for example, bought Random House publishing in 1966 and Hertz car rental in 1967. RCA's biggest acquisition of all was in 1979, when it paid $1.3 billion, or 40% over market value, for C.I.T. Financial Corp., a consumer loan and insurance firm. To raise the money, the company had to borrow heavily on the commercial paper market, where big corporations sell multimillion-dollar short-term lOUs to banks and other institutional investors.

When interest rates began to shoot up three years ago, so did the carrying costs on RCA's outstanding debt, which now totals $1.5 billion. By last October, interest payments for the first nine months of 1981 had reached $273.8 million, or nearly $78 million more than for all of the previous year. This created a major cash drain for the corporation as a whole. Said an RCA watcher: "Interest problems are the reason that company earnings collapsed in 1980 and 1981."

Bradshaw insists that he has made no decision either way about what to do with C.I.T. and Hertz. Says he: "Naturally, we will keep them as long as they pay their own way and provide funds for other corporate ventures. But we have not yet decided if they do fit into the future of RCA." Wall Street experts are doubtful, however, and believe that Bradshaw will soon unload one, or both, of these properties. It already sold Random House in 1980.

To Bradshaw, that future is back to the business the company knows best: entertainment and communications. Both are fields in which RCA was an early and proud pioneer in everything from network programming to color television and space satellites. Says he: "The strength is still there. We have enormous strength in marketing; we are a leader in satellite communications; we have strength in entertainment programming. Match all that against the communications explosion that is coming in the 1980s, and we have got some tremendous opportunities."

Although rumors persist in entertainment and news circles that Bradshaw may eventually be compelled to attempt to sell NBC, the new boss insists that the network is not on the market. Nonetheless, Bradshaw has a major and frustrating problem with his biggest subsidiary. With the exception of the critically acclaimed Hill Street Blues series, NBC has few standout offerings of any sort in its current prime-time lineup. Its market share of viewers has dropped by 8% in the past year. Says Bradshaw with grim gallows humor: "Our NBC profits are so much lower than the competition's network income that even if we became an average network there would be much profit potential."

Bradshaw is counting on Grant Tinker, a highly regarded Hollywood studio executive and onetime producer of the successful Mary Tyler Moore series, to bring back the viewers. Bradshaw appointed Tinker last summer to replace the widely disliked Fred Silverman as head of NBC. The appointment has been praised as a morale booster at the net work. Said an NBC producer: "You don't have to keep your back against a wall for protection all the time now. When Fred was around, you did." It remains to be seen, though, whether Tinker can translate good vibes among his staff to a boost in the network's ratings.

Equally unsettled is the outlook for SelectaVision, the high-tech consumer product that RCA has been counting on to grab a share of the booming $2.5 billion home video programming market. Though RCA has so far sold 60,000 SelectaVisions, the company predicted that it would sell 200,000 last year.

Unlike the very successful videotape recorders that are produced by companies like Sony and Panasonic, SelectaVisions cannot copy programs being broadcast, but only play prerecorded discs. Even so, RCA has bet that at $500 a unit, the price would lure buyers away from videotape recorders that can sell for twice as much.

Industry analysts believe that RCA's retreat from the world of conglomerates will result in a healthier company. Said R. Joseph Fuchs of Wall Street's Kidder, Peabody: "It makes sense to get rid of the diversified businesses and hop back to being a communications company." The sale of C.I.T. or Hertz would also give RCA some badly needed cash to spend on expensive new ventures into satellite communications, cable programming and broadcasting. -- By Christopher Byron Reported by Peter Stoler/New York

With reporting by Peter Stoler

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