Whittling Down

By John Elson

To his admirers, media tycoon Christopher Whittle, 46, is a visionary marketing genius whose ideas for privatizing public schools could revolutionize education in the U.S. To his detractors, Chris Whittle is an all-hat, no-cattle huckster with more talent for raising funds than making money and one Big, Bad Idea: imposing ads upon captive audiences in classrooms and doctors' offices.

Yet even some of Whittle's fans have begun to worry that their beau ideal -- who has said "few people really know me" -- may be closer to the fast- talking Barnum portrayed by critics. Last week Whittle Communications L.P. announced the latest in a string of setbacks. The company will halt development of the Medical News Network, an interactive news service with infomercials for doctors that was scheduled for a nationwide launch in October.

Earlier this year Whittle pulled the plug on two other once promising ventures: Special Report Network, a series of videos and magazines that was aimed at patients waiting in doctors' offices, and a publishing division that produced advertiser-sponsored books. To raise cash, the company is negotiating the sale to Wall Street's Goldman, Sachs of half the equity in its profit- making Channel One, the advertiser-backed TV news program currently being shown in 12,000 U.S. public schools. Also for sale is Whittle's 50% interest in the $55 million, Ivy Leagueish corporate headquarters in Knoxville, Tennessee, which he built only three years ago.

Whittle first gained national attention in the early '80s as co-owner and rescuer of the financially ailing Esquire magazine. After selling out to partner Philip Moffitt, Whittle used the proceeds to expand a mini-empire of magazines aimed at such specialized audiences as teenage girls and travel agents. The profitability of these ventures, as well as Whittle's innovative plans for moving into electronic media, enticed outside investors, including Time Warner, which now owns 33% of Whittle Communications. From 1987 through 1992, the company's revenues rose from $82 million to $213 million. The growth was due largely to the success of the controversial TV service Channel One, which is offered free to schools if they show Whittle-produced news programs with ads aimed at children.

In the past three years, however, Whittle Communications has shut down 30 of its media titles; last year it recorded a 5.8% decline in sales, the company's first such drop. What went wrong? "We overcommitted ourselves, badly," Whittle told TIME last week. "In the '70s and '80s we became extremely proficient at large numbers of small launches. Then in the late '80s we decided to move to electronic and to concentrate on education and health. We thought launching big systems wasn't different from launching small ones. We were wrong." Bad timing was also a factor. The prospect of health-care reform and drug-industry mergers made it impossible to project ad revenues for the Medical News Network reliably.

Whittle's shrunken empire now consists largely of Channel One and the Edison Project, his ambitious plan to reform American education, which operates separately from the communications company. Headed by former Yale University president Benno Schmidt Jr., the project has tentative commitments from such cities as Boston, Miami and Wichita to begin supervising up to 20 schools in 1995. Financed by tax revenues, the project's schools plan to offer a back-to- basics curriculum -- geography and history instead of social studies and an academic year of 210 days (compared with a national average of 180). At a school in Trenton, New Jersey, which signed its letter of intent only last week, officials say Edison may eventually earn a profit if expenditures are less than $9,400 per pupil annually, the amount Trenton currently spends.

So far, the Edison Project has spent $40 million in development costs without earning a dime. Whittle's partners in this venture, which include Philips Electronics N.V. and Associated Newspapers Holdings, may be reluctant to ante up much more. "At the time we invested in Whittle," says a high- level executive at one of the companies that did, "we thought that it would soon become profitable. But then we realized that Chris isn't made up that way. As soon as something is moderately successful, he's off trying to invent the next business. In the meantime, we're not getting any income from that investment. If someone came along and gave us a decent offer, we'd be out of there in a minute."

A source close to the company says the entrepreneur blames his financial partners for not coming up with the cash that could have prevented his retrenchment. But Whittle denies Wall Street rumors that his communications firm will soon seek Chapter 11 bankruptcy protection. As proof of the firm's stability, he claims that Channel One has a 99% renewal rate. Editorial comment on the Edison Project, Whittle says, has been "overwhelmingly positive." And the fact that two other firms have similar programs -- one of them, Education Alternatives Inc., based in Minneapolis, Minnesota, already has 10 schools in operation -- is "a confirmation of what we are doing." In trying to persuade investors to help him keep the project competitive, Whittle, the consummate baby-boomer salesman, faces his hardest sell yet.

With reporting by Bernard Baumohl and John Moody/New York