Marc Nathanson flies with Falcon; cable TV operator interacts with heavy profits and sees more coming with technological advances.

Marc Nathanson is an eclectic collector. His Westwood office has shelves replete with toy soldiers, and his office walls are covered with museum-quality black-and-white photographic art.

And since 1975 Nathanson has also assembled one of the most profitable cable television systems in the U.S.

Nathanson, 48, is founder and chief executive of Falcon Holding Group, Inc., the 12th largest cable company in the U.S., with 1.1 million subscribers in 27 states.

In California, Falcon is the biggest independently owned cable operator and has systems in Malibu and Northern California. In Southern California, Falcon has 150,000 customers in Malibu, Lancaster/Palmdale, Lake Arrowhead and in San Bernardino. Falcon's 1992 $171 million operating profit on overall revenues of $300 million is among the highest in the industry.

Despite recent government regulations that are having a dramatic impact on cable rates and programming, Nathanson is confident his business and the cable industry will only get more profitable in the next decade.

Among other things, the new regulations forced cable companies to stop charging consumers for multi-hookups in their homes. Approximately 70 percent of Americans have received lower cable bills during September as a result of the rollbacks.

Many cable executives have complained about the recently activated guidelines which have cut rates for more than 70 percent of the nation's cable consumers but Nathanson says he thinks cable firms also will benefit.

"Strangely, the timetable for seeing the fully integrated home entertainment center has been enhanced due to the reregulation," he says. "What would have taken us at least five years will now happen in three to five."

Nathanson predicts new technology will enable cable companies to offer viewers 60 to 70 channels of pay-per-view entertainment, video games and the ability to tie into computer networks. These will all be new revenue streams for cablers, he said.

Due to the technological changes that are rapidly bringing the cable industry together with movie studios and phone companies, Nathanson says he has become increasingly involved on the software side of the entertainment business.

Falcon has been a behind-the-scenes player in the current acquisition battle for Paramount Communications Inc.

Falcon owns 10 percent of QVC Network's class B stock. QVC Chairman Barry Diller has made a $9.8 billion bid for Paramount, upping the stakes on Viacom Inc.'s original $7.8 billion offer.

"We were with Diller last week but we also have friends at Viacom," Nathanson says. "We spent a lot of time with Barry discussing many issues and we helped him on his way to explore this deal. Whatever happens, happens."

Nathanson is also working on joint ventures with various software giants and computer companies to bring their software to his cable systems, which are being rebuilt with fiber optic cable to provide subscribers with a choice of 500 channels in the near future.

Nathanson says Falcon is in negotiations with movie studios that own film libraries and with computer game manufacturers in Japan. To fill 500 channels, Falcon is going to need a host of new programming and channel options, he says.

These options and increased pay-per-view services, such as video on demand, will allow Falcon to grow, Nathanson hopes. He says that he envisions that in five years Falcon will double the number of subscribers, and the company should have $4 billion in assets and $2 billion in debt.

"Our current debt ($1 billion) is substantial but we have a lot of assets ($2 billion). Our lenders aren't concerned, but my mother is," he jokes.

Nathanson was born into a media family. His father, Don, was a struggling Hollywood screenwriter who left L.A. for a successful advertising career in Chicago with Grey Advertising. Nathanson studied communications at Denver University and went to his first cable convention in 1962.

"There were 300 people there, all wearing white socks, and I said this was a good field to get into," the conservatively attired Nathanson recalls.

In the late 1960s, he ran a small, 2,000-subscriber operation in Malibu for Harriscope Broadcasting Corp. but his career took off when he headed marketing and programming at Jack Kent Cooke's TelePrompTer Corp., the largest cable operator in the U.S. during that era with 1 million subscribers.

After spending two years at TelePrompTer, Nathanson was ready to start Falcon in 1975. Spurned by Security Pacific Bank for a $1 million loan, Nathanson convinced the Bank of Boston to come up with enough financing to get Falcon flying.

"After getting rejected by Security Pacific, I got a call from Steve Dodge at the Bank of Boston who I had known from my TelePrompTer days. I asked him for $1 million and he said, 'I don't think we could do that; we will lend you $6 million,' and with that we were able to start acquiring systems," he relates.

Falcon has avoided large urban centers but has clustered its operations in fast-growing suburbs and rural areas. It built most of the cable system in the San Gabriel Valley but sold out in 1989 for $377 million because the margins had slipped, Nathanson says. Urban markets produce 30 percent cash flows whereas suburban/rural situations throw off 50 percent to 60 percent cash flow, he notes.

International expansion is currently taking up much of his time. Falcon is pioneering a cable-phone linkup system in Great Britain and is partnering with NYNEX, the New York phone company to build a fiber-optic phone cable system that will link cable and phone service in people's homes.

Falcon is also taking a 10 percent stake in the fourth largest cable system in France and recently took a 40 percent position in Mexico's largest cable operator.

Nathanson's travel schedule has cut into his golf game but he remains an active player in the modern art world and Democratic politics. His wife, Jane, was one of the founders of the Museum of Contemporary Art and they frequently visit galleries, buying works by well-known photographers such as Bruce Webber and Robert Mapplethorpe.

Nathanson points out that the extensive print collection at Falcon's posh offices in Murdoch Plaza is his personal collection and not a corporate one.

Snapshot

Marc Nathanson

Native of: Cheviot Hills Resident of: Holmby Hills Age: 48 Education: B.A. in mass communications, University of Denver, 1967; M.A. in political science, University of California at Santa Barbara, 1969