The Observer from London, Greater London, England • 33

SUNDAY 19 MARCH 1995 BUSINESS 5 Gg)G ksKJ floe OBSERVER Entertainment giant Walt Disney grosses year but is suffering an alarming outflow of top talent. MarkTran in New York reports but he has a reputation for being a straight-shooter. In leaving, Frank hinted at his dissatisfaction with the new Eisner approach. 'We were a team. The four of us were close, but all doing what we wanted to he said.

With the new situtation, 'there were two fewer people and it made more difficult' to get the job done. Frank is said to have been unhappy at being second-guessed by Eisner's corporate associates. In keeping with his new style, Eisner appointed Dennis Hightower to succeed the popular Frank. Although a veteran of the consumer products division, Hightower has no televison experience. That could he a drawback for a man taking over a division whose activities embrace the Disney Channel, hew technology and home video.

Executives at Disney's television unit, which created the top-rated shows Home Improvement and Ellen, were stunned when they heard the who. are continuing to desert the buses in their thousands, but in the potential for acquisition as bus industry. The Monopolies and Mergers Commission has conducted 14 investigations into Henry McLeish, shadow transport minister, says: Tn many parts of the country four or five bus operators are carving up areas and there is no competition. 'We are not seeking to return bus services to public ownership 'Where large and small opera- tors have squabbled over markets the outcome has been Greater Manchester suffered chaos while Leeds fared well. Parts of South Wales were plunged into turmoil but have now improved while passenger numbers in Exeter and Bristol have increased significantly in the AFTER years of stability and success under the team assembled by chairman Michael Eisner, Walt Disney faces a period of uncertainty as it increasingly becomes a one-man show.

In the latest high-profile exit from the Magic Kingdom, Richard Frank, chairman of the Walt Disney television and telecommunications unit, left last week to become a multimedia entrepreneur. His departure spells the end of the talented team that took charge of Walt Disney in 1984, then a pale shadow of the company that once delighted audiences with classic animation such as Bambi and Snow White, Eisner and his colleagues transformed a company with revenues of $1.45 billion into an entertainment titan earning more than $10bn in 1994, thanks to animated films, television, theme parks, video sales and merchandising. Only Euro Disney marred the picture of corporate health. The present turmoil was triggered by the death of Disney president Frank Wells in a helicopter crash last April. That prompted a bid for power by Jeffrey Katzenberg, the head of Disney's film studio, for the job of president.

But rebuffed by Eisner, Katzenbierg walked away and has since- formed the DreamWorks enteitainment company with director Steven Spielberg and former record mogul David Geffen. So with the death of Wells and the departures of Katzenberg and Frank, only Eisner remains from the quartet that guided Disney to its present success: No friend ofi8neprpeffen compares 'the current shake-up at Disney tpthe: exodus at Paramountijes in the 1980s, when Martin Davis, chief executive of its then parent Gulf Western, brought in a new broom. One of those who left was Eisner. 'In losing all these incredibly talented people at Disney, Michael Eisner has now become the Marty Davis of his Geffen said. Wall Street analysts think Geffen's criticism overblown, but concede that there is cause for concern.

Larry Pattella at JP Morgan said of Frank's resignation: 'We believe this is a fairl significant departure because he is the second senior executive to leave the company's Filmed Entertainment division following Jeffrey Katzenberg last Pattella believes Disney's 1995 earnings will be strong, with a rise in operating income of nearly 25 per cent. But he does not see Disney's share price, now $56, rising above $58 because of ques tions oyer long-term growth. Part of the uncertainty lies ann-competitive practices and acquisitions and is also examining two mergers and the bus services of the North-east of England. The House of Commons Transport Select Committee is to review the industry. Meanwhile, Labour pledges to re-regulate the industry, which it believes has been torn apart by unbridled, ideologically-driven competition, change -50 -60 Far from creating lasting competition, deregulation of the buses has simply spawned new monopolies, writes Joanna Walters NATIONAL Express, the coach operator poised to break into bus services with the purchase of West Aiidlands Travel, is convinced it has its timing, and target, just righL Adams Mills, deputy chief executive of the expansionist National Express, believes that the market has stabilised' after a long period of turmoil and disarray since the industry side London was deregulated 1086.

This will come as a surprise to bewildered passengers in towns where rival bus-companies continue to battle-for -supremacy in their streets. The overall effect of cur-throat competition has "been disastrous. Mills blames the Government. But he declares: we are now seeing an industry which has got over its traumas and is making enough money to renew old buses after many years of paying for rationalisation, redundancies and high levels of debt. 1 mink it has stabilised and we are seeing a reasonably funded industry "which is making profits, upgrading its fleets and looking for further That is one side of the story, which accounts for the fair degree of enthusiasm in the City for the four quoted TiK bus companies Stagecoach, Badgerline, GRT and the Go-Ahead Group.

The City likes the prospects for further growth in the sector not in the number of passengers. utws ioai wcck. wiusiaaiu uicy had never heard of him and grumbled at having an outsider thrust upon mem. Several including at least one prominent international executive, have already talked about leaving. Still, Eisner; One-man band.

Frank: Departure. Disney is renowned for its depth of talent. 'Below the top guys; there is a strong cadre of middle managers)' says Paul Marsh of NatWest Secu rities in New York. Certainly, there are no worries about the immediate future, with many promising projects in the pipeline. Two thousand theatre owners who attended a recent Broadway-style extravaganza to trumpet Disney's new films came away impressed by trailers for Crimson Tide, a submarine King.

If Pocahontas hves up to expectations, the current con- nt Ml l- 1 cerns over uisney.wui uv allayed. If not, Eisner will come under even more scrutiny. 3 last 10 years Glasgow, Oxford and Sheffield have, at different times, been turned into bus war zones and the most recent high-profile case was in Darlington, where Scottish predator Stagecoach barged into a market already in turmoil, offering free rides and poaching drivers, Mills of National Express adds: 'The Government wanted and that is what they have got. But a bus territory is a natural monopoly because the margins are such that it is difficult for two operators to make money on one route, except the busiest ones. So the whole concept is directly in contrast to the original philosophy of competition on every street.

"The industry will go towards further consolidation in the next three or four years and there will be somewhere between six and 10 major, groups and perhaps some smajl niche The latest of the big seven groups is Stagecoach, which was floated two years ago. It controls around 12 per cettt of the market with 5,000 buses and owns 17 companies from the Highlands to Kent, including two of the 11 Dandon bus companies, which have been privatised but will not be subject to deregulation. Stagecoach has done 10 deals in the last two. years to acquire com-paiies or stakes in other bus operators and the other three floated bus groups and top players have also expanded relentlessly. West Midlands Travel dominates1 the Birmingham conurbation and has made important acquisitions in the.SouuVeast and North-east, showing' growth in turnover and profits.

It is a valuable acquisition for National Express, whose presence in the market will do nothing to slow the pace of change or reassure the opponents of deregulation. Major grsdSeS Management owned 19.39 Smaller groups Municipally; owned 894 'This industry tends towards monopolies arid if that is the case we need regulation. The creation of a bus industry regulator would require primary legislation but the first priority is The Transport Act 1985 pro- vided for the deregulation of bus services outside London, and the privatisation of the National Bus Company which ran virtually all bus services in England and Wales outside of the metropoli tan authorities in Merseyside, Yorkshire, Tyne and Wear, Greater Manchester and the West.Midlands. In 1986 National Bus Company subsidiaries began to be sold off, many in management or employee buy-puts. Metropolitan and municipal bus, were trans- ferried independent pubJtic, transport companies, owned by local authorities but put at arm's length and made eligible for privatisation.

The industry was effectively chopped' into' units with a few hundred buses each and thrown to the free market where it was hit by two forces. First, there was the drive to consolidate into larger units of several thousand buses in order to achieve economies of scale, pay debts and raise capital. And then there was the tendency for newcomers to move in on ex-National Bus Company and local authority incumbents in an attempt to comer the market especially where they were seen as vulnerable! Chris Cheek, of public transport consultant TAS Partnership, says: 'The effect has been patchy. Where companies emerging into a deregulated, private-sector environment have been strong and well-run, with stable networks and cash to invest, they have prospered. 3 and how it was going to change the way we use computers.

Today, we've got chips that can recognise a hundred words. 'There are some interesting VR applications, such as virtual surgery and flight simulators, but the technology is not yet good enough for the mass Most of the latest video games systems use CD-Roms, but some industry observers believe that these will soon be superseded by electronic delivery systems, which bring games into the home via telephone and cable systems. Deering disagrees: 'Look at the progression of cinema to TV and to video. What did video bring that the others didn't? It married the concept of visual entertainment with the fun of shopping. 'Lots of people like shopping from their PC, but I still don't see the traffic on the High Street melting away.

It's fun to go shopping for records, videos or games, and to meet other people. Today's types of entertainment systems will exist alongside electronic delivery systems for the foreseeable future. 3 Technology is edited by Robin McKie Email messages should be addressed to ObsscienceGuardian.co.uk the process of consolidation continues. After nine years of deregulation and progressive privatisation the biggest seven bus groups in the UK control 60 per cent of the market, via. their home bases and subsidiaries dotted around the country.

There is a consensus that within four years the entire market will be under the control of six groups, run by executives with levels of aggression more usually associated with the package holiday and used car industries than public transport services. The Government has smashed the grip of the trade unions, plugged, the flood of public mohey into the system and produced a much more efficient industry. This has happened against a background of change which, at one end of the scale has seen towns engulfed in bloody bus wars between cut-throat companies vying for supremacy, and at the other areas where state-owned monopolists have successfully turned into smooth operators with huge benefits to passengers. But between the examples of shining success and abject failure, the overall national picture is at best indistinct some would say chaotic. Since deregulation in 1986, fares have gone up, many unprofitable routes have been abandoned, the number of passenger journeys has fallen and the average age of vehicles is 12 years, with 30-year-old buses not uncommon.

A quarter of all complaints made to the Office of Fair Trading since 1986 have related to the been weftVplaced to use its considerable music and movie resources for game development. Christopher Deering, president of Sony Computer Entertainment Europe (SCE), which was formed in January to bring the PlayStation to the European market, describes this latest leap in games technology as probably the biggest so far. 'You've now got 3D objects and the ability to change the perspective on he says. 'You can listen to the music of your choice while playing and customise a game's output to your But will the content of video games progress with the technology, or do the new generation of 'beat 'em ups' simply mean that players will be presented with acts of violence that look more realistic? Deering says: 'Hardware technology is progressing faster than software technology because it takes longer to write programs for the new toys. So a lot of the creative energy in the interactive area 2 or local authority control, but we need regulation and we want to speak to the mam companies and the trade unions and authorities and focus on the excesses of "bus-bunching" in city centres and "dirty WWMWWCMMtmwWMWWHW since deregulation 10.29,: could transform video games.

what has come out in the broadly defined area of interactive entertainment, there have been new areas of exploration such as "edutainment'' games with educational activities. The new types of systems have not been with us long and it takes time for the software community to learn how to ride the bicycle and get the most out of a Deering doesn't see virtual reality making much impact on the home games market for a long time: 'Ten years ago, there was a lot of talk about voice-recognition technology in the fact that Disney is be- thriller starring Denzel coming much more of a one- Washington and Gene Hack-man operation under Eisner, man, the Scarlet Letter with with all the attendant perils Demi Moore, and Pocahon-especially as he underwent las, an aiiimated film. Disney heatt surgety hopes for Pocahon-Eisner i putting cotporate Va, perhaps this year's Lion mMmm odd Source: The TAS Partneipup Sus: TECHNOLOGY Box of tricks: The PlayStation is being consumed by just trying to keep He adds that the challenge for the games software industry is to broaden the definition of interactive entertainment in a way that consumers find more relevant. Even so, Deering thinks that beat 'em ups are here to stay: 'There are certain types of games that seem to be genetically infused into the youth of the world, and new technology will always make these types of games perform better. 'But I think if you look at executives people unlikely to make waves and challenge his authority into key positions.

The notable exception is Joe Roth, who took over Walt Disney motion pictures, ffilUlfllliliftMafflrani mm George Cole JUST as the Walkman took stereo out of your living room and put it in your ears, Sony's latest innovation brings a whole amusement arcade into thehome. The PlayStation, a powerful CD-Rom games system, will be unveiled at an electronics trade show in London next weekend. It promises super-fast animation, three-dimensional graphics, full motion video and CD-quality sound. Sony has spent more than 300 million developing the product, and so far the gamble appears to have paid off, with more than 500,000 units sold in Japan in less than three months. When the company best known for TVs, camcorders and personal stereos announced a move into the games hardware business, eyebrows were raised.

But since buying CBS Records, Columbia Pictures and Liverpool-based software company Psygnosis, Sony has Virgin Direct Personal Financial Service Ltd is regulated by the Personal Investment Authority and IMRO. The price of units and any income from them can go down as well as up. You may not get back all the money you invest. Virgin Direct docs not offer investment advice or make any recommendations about investments. We only market Virgin Direct products, for your security, all telephone calls to Virgin Direct will be recorded..