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A new business helps high school students produce video yearbooks.

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VideOvation is betting that today's TV generation will want even their school yearbook in video form

Back in 1985, while working as an investment consultant to the Rockefeller family in New York City, Paul Gruenberg got a phone call from an acquaintance in California. The friend had recently invested in a young company that needed money. Did Gruenberg have any interest -- or did he know anyone who might be interested -- in video "yearbooks"?

Gruenberg agreed to look over a package of material. But nothing he saw suggested that it could become much of a business. "There was no market information. No financial or operating information either. It was a couple of pages of seat-of-the-pants stuff." The tape was like a home movie. "A kid from Duke had taken a video camera and shot a bunch of friends wrestling and drinking."

He put the idea out of his mind. But a few months later a funding proposal crossed his desk that cast it in a different light. By coincidence, the proposal involved a publisher of high-school yearbooks. Gruenberg, who'd spent four years evaluating investment opportunities, was impressed with the characteristics of the industry, how steady and profitable it was. Three or four publishers, he learned, controlled about 90% of a $350-million market, much as they'd done for 20 or 30 years. As he saw it, "it was like an annuity." So long they produced a good product, they were set.

The yearbook deal didn't materialize. But it got Gruenberg scratching his head. Was there a similar annuitylike opportunity in video yearbooks? With the right product and the right approach to production and marketing, his gut told him, there was. "I remember going home one night and telling my wife that somebody was going to figure it out." By January 1986 Gruenberg had quit his job and was working out of his Manhattan apartment, mapping out how he would be that somebody.

Four years and $3.3 million later, Gruenberg, a 40-year-old father of three, thinks he has a grip on what it will take to be a leader in what he believes may be a $500-million industry within a decade. In many ways Gruenberg Video Group Inc., doing business as VideOvation and located in Philadelphia, is modeled after the print yearbook businesses he'd once marveled at. First, it tries to sell middle- and high-school principals on the curricular and promotional benefits that video yearbooks can bring to students and schools. Once a principal has signed on, a field producer works with a faculty adviser and a team of students, who are responsible for shooting the raw tape. With VideOvation supplying equipment, training tapes, and field support, the goal is to produce a 30- to 40-minute video that brings back the school year's memories: the faces, the sights, the sounds. VideOvation sells the edited tape (which includes a "time capsule" of world events) to students and their parents for $29.95 plus a $3 handling charge.

Last year the company generated $134,200 by selling an average of 100 units at 43 schools; it lost about $1 million. But Gruenberg believes things will change dramatically over the next two years as VideOvation signs more schools, sells more tapes, and fine-tunes its operating methods. In the 1991-92 school year, he hopes to sell an average of 286 tapes at 833 schools. If he does, he'll earn $1.1 million on $7.9 million in revenues.

More than 95% of the country's 18,000 high schools produce printed yearbooks, and this year some 11 million students (about 65% of the U.S. high-school population) will spend in the neighborhood of $20 to $30 to buy a copy of the 1990 edition. But Gruenberg doesn't think he'll have to siphon business away from any of the traditional yearbook publishers to be successful. Rather, he believes there's a new category of high-school memorabilia taking shape -- one that takes advantage of the unique characteristics of video.

Already, Gruenberg notes, video has become part of the daily diet of most U.S. teenagers; they watch videotapes of entertainers, sporting events -- you name it -- for several hours a week. Up to now not many high schools (fewer than 1,000) have produced video yearbooks. But as more and more do, Gruenberg thinks that significant numbers of students -- upward of 20% -- will want to own both print and video yearbooks. It's only a matter of time, he says, before the numbers are truly interesting.

From his office on the 54th floor of Rockefeller Center back in 1985, it was raw numbers that caught his eye: 3 million Americans finishing high school every year, mushrooming sales of home VCRs and other video products. His first business plan described three different scenarios for how fast the market would develop. The most conservative of them anticipated revenues in the third year of $13 million. As Gruenberg saw it, he'd be producing his new-style yearbooks in 1,475 schools, shipping more than 440,000 tapes, earning more than $1.6 million.

On the basis of his projections, Gruenberg managed to raise $1.2 million of initial financing from 15 contacts in the investment world. Originally, he had approached the top two print yearbook companies, Jostens Inc., in Minneapolis, and Taylor Publishing Co., in Dallas. But neither was interested in providing seed money. This left Gruenberg with some obvious challenges. How was he going to get things rolling? And how was he going to differentiate VideOvation from the folks who were already in the market as well as those who would follow?

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