Ross, Steven Jay
Ross, Steven Jay
(b. 17 September 1927 in Brooklyn, New York; d. 20 December 1992 in Los Angeles, California), corporate executive who played a lead role in development of cable television and home video and created the Time-Warner entertainment and telecommunications giant.
Ross was born in the Flatbush section of Brooklyn. His father ran a successful home building business, but the Great Depression left the family virtually penniless. They moved from their home on Carroll Street to a small apartment on Newkirk Avenue. To get a job as an oil burner salesman, Ross’s father changed the family name from the Semitic Rechnitz to Ross in 1932. Ross attended the neighborhood school, P.S. 152, then Erasmus High School. When his father had recovered sufficiently from the depression years he moved the family to Manhattan. There Ross won an athletic scholarship to attend the private, largely Jewish Columbia Grammar School. Over six feet tall and athletic, he played varsity football, basketball, and baseball, and managed the swimming team. He was elected president of the student council, served on the junior prom committee, and was co-winner in the senior class vote for “most popular.”
Immediately on graduating in June 1945 he enlisted in the U.S. Navy. He later liked to tell friends he lied about his age to get in; in fact, he was eligible to enlist, though not yet subject to the draft. Similarly, he later claimed his hearing problems came from participating in combat, but his service on the USS Hopping included only seven days at sea, most of those spent taking the ship to Florida, where it was decommissioned. (Ross often embellished stories about his accomplishments, though he was reticent about elements of his life: for example, nowhere does he provide the names of his mother and father.) He was discharged from the navy in 1946.
On the advice of the headmaster at Columbia Grammar, Ross used the college tuition offered by the GI Bill of Rights to enroll at the newly opened Paul Smith College in Lake Placid, New York. It offered only a two-year program. While playing football in the fall of 1947, he badly broke his arm, requiring the insertion of a steel plate to set it properly. Ross later claimed that the arm injury ended his professional career with the Cleveland Browns.
Graduating in 1949, Ross landed in New York’s garment district, working first as a stockroom boy and then as a salesman for a sports slacks manufacturer. He then went to work for an uncle selling children’s bathing suits. In 1954 he married Carol Rosenthal, whose father owned The Riverside, an expanding funeral home on Manhattan’s Upper West Side. The couple had two children. Ross refused an initial offer to work for his father-in-law, fearing he would have to do embalming. But when it turned out the offer was to work in administration, he accepted.
Ross soon recognized that the funeral home did not make good use of one of its principal assets, the limousines used to drive mourners to and from burial sites. He began to rent out the limousines. With five partners, he soon created Abbey Rent-a-Car. And because cars require a place to park, Ross soon formed an alliance with New York’s largest parking lot operator, Kinney Service Corporation, by giving it a quarter ownership in Abbey in exchange for free parking. In 1961 he merged with Kinney, envisioning development of a broad service company. Under the Kinney umbrella, he brought together parking, car rentals, funeral homes (now a chain), and his brother-in-law’s office-cleaning service. In the first year under his leadership, Kinney had revenues of $17 million; Ross took it public after just five months.
In 1966, reflecting his ambition to make Kinney into a one-stop service company, Ross changed the name to Kinney National Service, Inc. He brought in a new cochief, William V. Frankel, the son of the founder of National Cleaning Contractors. He then went on an acquisitions spree, including a top talent agency, Ashley Famous Agency, in 1967, Panavision and National Periodical Publications (distributor of Mad magazine) in 1968, Warner-Seven Arts in 1969, and the Elektra record label in 1970. He also acquired along the way a bank in New Jersey, a printing business, a painting and plumbing contractor, a comic book publisher (Superman, Batman, Wonder Woman), and a data processing firm, among others. Ross put Ashley in charge of Warner; it was soon turning out hit films (such as Klute, A Clockwork Orange, and The Exorcist) and thus restored the legendary Warner Brothers name. Ashley also expanded Warner Brothers production and distribution of television programs. Characteristically, Ross gave Ashley extraordinary autonomy in running the studio. Ross combined this with a pattern of paying his managers average salaries but stunning bonuses—sometimes only loosely linked to performance.
The Warner investment (which included the successful music labels Reprise and Atlantic) led Ross to consider the opportunities in entertainment and telecommunications. By 1973 he had sold off profitably most of the pieces of Kinney (though he retained part ownership), investing the monies in two cable television companies. He refocused Kinney as a “leisure and entertainment company” in 1972 he had renamed the company Warner Communications Inc., and he remained president of the company for eighteen years. Recognizing the potential markets in both video and cable, he launched Warner Home Video in 1979 and began a joint cable venture with American Express. In the meantime, he had failed with a New Jersey animal park, Jungle Habitat, and acquired Knickerbocker Toys, Ralph Lauren perfume and cosmetics, Music Television (MTV), Nickelodeon, and a major interest in the Pittsburgh Pirates. He also bought the New York Cosmos soccer team, reviving it by paying millions to the incomparable Pelé to join the roster.
In 1975 on a family trip to Disneyland, Ross observed that the new Atari video games got much attention from youngsters. In 1976 Warner acquired Atari for $28 million. The timing was perfect; it caught the huge wave of popularity of Pac-Man and other video games. By 1982 Atari accounted for half of Warner’s $4 billion in revenues. But Ross’s hands-off management style meant he failed to see a catastrophic deterioration of Atari sales; by the end of the year the company was hemorrhaging. Atari would cost Warner more than $1 billion before Ross could sell it off. In 1983 he buried tons of discarded Atari games in the desert near Alamogordo, New Mexico.
Atari was one of only three crises—personal and business—that Ross faced in the early 1980s. In 1974 he had separated from Carol. In 1978 they divorced. In November 1979 Ross married Amanda Mortimer Burden. The marriage was short-lived: they divorced in 1981. In October 1982, with 300 guests looking on in the Plaza Hotel ballroom, he married Courtney Sale; they had one child.
Typical of his lavish style, the guest list included Quincy Jones, Cary Grant, Barbara Walters, Steven Spielberg, and a roster of other stars. Even as he celebrated his marriage, Ross was wrestling with another serious threat: he and other Warner executives were being investigated for bribery and fraud in conjunction with a minor investment in the Mafia-controlled Westchester Premier Theater in Tarry-town, New York. Ross avoided indictment, but two other Warner executives were convicted.
Ross recognized that Warner, struggling with Atari losses and legal threats, was a potential takeover target, its share price having tumbled from $60 to $21. Rupert Murdoch began buying up shares; by December 1983 he owned 7 percent of Warner, making him its largest shareholder. Ross feared Murdoch’s advances; he turned to Herbert J. Siegel, president of Chris-Craft Industries. They soon constructed an intricate deal, giving Warner a big stake in Chris-Craft’s television stations. The deal thwarted Murdoch, but Siegel was not the compliant ally Ross had anticipated. Siegel challenged Ross’s leadership. Ross turned on Siegel, eventually stripping him of most representation on the board of directors. But Siegel’s presence forced Ross to divest the miscellaneous businesses in the Warner portfolio (such as Eastern Mountain Stores, the Franklin Mint, and Showtime) and fire some of Ross’s closest cronies. Soon Warner was focused on its critical components: the Warner Brothers studio, its cable television systems, and its music labels. Siegel was particularly outraged by Ross’s employment contract, which made him the highest-paid American business executive, averaging $14 million annually.
By the mid-1980s the core assets at Warner were rapidly gaining value. Ross again looked to acquisitions for growth. In 1986 he joined with Time to invest in Turner Broadcasting. In 1987 he added Chappell & Company, the world’s largest music publishing company, to the Warner stable. In 1989 he bought Lorimar Telepictures, a leading television production company. His company was now worth more than $4 billion and had ended 1988 with net income of $423 million. At about the same time he began discussing the possibility of a merger with Time, Inc. Worried about the potential decline of print media, Time was looking for a merger partner but had already failed in several earlier efforts. And Ross had the brilliant insight that made the merger so exciting: differing media platforms could be brought together within one company, permitting the same content to be used in different ways and the different platforms to be used to promote the others. After lengthy, tense negotiations, a deal seemed to be set, only to fall apart literally at the last moment. Ross could not accept language that implied Time was “acquiring” Warner; nor would he accept the implication that he would be only a transitional chief executive. He clearly intended to run the merged companies. But in January 1989 the negotiationsresumed. At a critical meeting in Ross’s apartment in February the agreement was largely worked out, and the $14 billion merger went forward. Remarkably, Time never looked closely at Ross’s background and never asked to see an 800-page assessment of the Westchester Theater investigation. Perhaps even more amazing, the merger gave Ross a guarantee of the chairmanship for ten years, an immediate payout of $193 million plus salary, options for at least 1.8 million shares, and bonuses that could have reached hundreds of millions of dollars. Even his stunning success of producing annual returns on investment of 24 percent from 1973 to 1990 seems an insufficient basis for such compensation.
Ross’s leadership of Time-Warner was cut short by prostate cancer that was diagnosed in November 1991. Doctors were unable to control the disease. Though he would not visit his Manhattan office for more than a year because of the illness, Ross still exercised remarkable influence. Most importantly, in February 1992 he engineered the firing of his heir apparent, Nicholas J. Nicholas, Jr., and had his own candidate, Gerald M. Levin, installed as president. Ross died in University Hospital in Los Angeles and was buried at “The Springs” in East Hampton, New York.
Steven Ross was a remarkable individual. Six feet, two inches tall, with a broad smile and a mane of silver hair, he loved socializing and, many thought, helping people. Yet he had a volcanic temper and was unable to share authority. He had a remarkable circle of famous friends, particularly in the entertainment industry, and he loved to live—and entertain—lavishly. He owned a Park Avenue duplex, a tasteful home in East Hampton, an estate in Ac-apulco, and a residence in Los Angeles. He treated guests and business associates to lavish entertainment and gifts. Even his funeral, described in great detail by Connie Brack for the New Yorker, was a lavish affair. Yet he seems never to have received an honorary degree, and his civic participation was limited, serving only on the board of directors for sports medicine of Lenox Hill Hospital in New York City, for the New York Convention and Visitors Bureau, for the Museum of Television and Radio, and for the New York State Alliance to Save Energy.
Richard M. Clurman, To the End of Time: The Seduction and Conquest of a Media Empire (1992), provides much of Ross’s business history, focusing on the process that led to the Time-Warner merger. Connie Bruck, “The World of Business: Strategic Alliances,” New Yorker (6 July 1992), and Brack’s “The World of Business: A Mogul’s Farewell,” New Yorker (18 Oct. 1993), cover the merger, the ousting of Nicholas, and the lavish funeral for Ross. An obituary by Kathryn Harris is in the San Francisco Chronicle (21 Dec. 1992).