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Peter Barton

Peter Barton

Interview Date: Tuesday March 23, 1999
Interview Location: Denver, CO
Interviewer: Jim Keller
Collection: Hauser Collection

KELLER: This is the video history of Peter Barton and it is made possible by a grant from the Gustave Hauser Foundation as part of the oral history program of The National Cable Television Center and Museum. Peter Barton is a cable programmer, extraordinary dealer maker, a catalyst in every respect and to a lot of people, a great visionary in the area of cable programming. He's been involved in the business since approximately 1980 or 1981 and has made a major, major impact on the development of cable programming throughout the entire industry. The interviewer is Jim Keller. Peter, to get us started, would you please give us a little bit of your background prior to the time you joined TCI in 1981?

BARTON: Well, gosh, I'm not sure I can do this and have it PG rated but I'll try. Immediately prior to joining TCI, I was busy trying to launder my career. I went to the Harvard Business School on the theory that it would mask the fact that the prior eight or nine years I'd spent in the government. The prior nine years I was in the Hugh L. Carey administration in New York State. I ran a bunch of campaigns, national and local campaigns, in addition to that. I ran 14 state agencies for the governor including, mostly the commerce and revenue agencies. The "I Love New York" campaign was one of my creatures. Everything from the National Guard to the Driver's License Department of Motor Vehicles, these were all my agencies. Prior to that, I was working for Common Cause in Washington DC and there are many other priors, including being a professional skier. I was an exhibition skier for a few years and a croupier at a casino in Las Vegas, I mean Lake Tahoe.

KELLER: What happened from Common Cause to TCI and Liberty? It will be interesting to see how that transition was made.

BARTON: Well, so there I was in government and I was about 30 years old and I was still unmarried, which was very distressful to my grandmother. She was positive that it was all over for me and that I would never amount to anything, because you don't make much money in government. But I liked public service and I made my self a pledge at that point that I would leave public service and go make some money so that I could get back in to public service and money is an instrumental component of being useful in public service because it gives you enough financial independence that you are by definition incorruptible. You cannot be influenced to do something that's not right for fear of losing your job. So there I was in the Carey administration and I asked the governor if he'd write me a recommendation. I only knew about one business school, so we applied to Harvard, he and I, and I went there mostly because I figured if I went there people would think on the other side that I was a businessman. I only had one item in my resumes: Harvard Business School. That was hard. It was a tough couple of years because I was way older than the next group of kids. I was 30-31 and everybody else was 23-24 and the technological difference between them and me was amazing. I went to Harvard with a slide rule. I was really good with the slide rule. I mean, we did the city bailout and the New York State bailout with slide rules. These other guys had the 12 C's and computers and were very conversant with it. That technological difference made me relatively uncompetitive and it taught me a lot. It taught me about not getting out of sync with technology and the evolution of technology. I worked doubly hard at a school where you have to work pretty hard just not to flunk out because I had to catch up. Anyway, I was done and my Harvard Business School sweetheart and I decided, this was a woman I'd met at school and we were pre-ordained to get married, so we decided we'd look for jobs in three different markets. We liked the markets just because of geography. She liked Boston, she was from Boston. I liked Denver because the mountains have always been my spiritual home and we both liked San Francisco. Unfortunately, she didn't like New York, which would have been a useful place for me to get a job, having just come out of it. As it worked out, we went and job-hunted in three different markets. It wasn't easy for me because the types of people the recruiters at Harvard wanted to hire were not the likes of me. They were looking for quants and droids and creatures who would sit in investment banks and consultancies and intermediate – not make anything, not do anything and just run numbers.

KELLER: You were more of an entrepreneur than the rest of them?

BARTON: By a long shot. So I had to invent a way to find a job. I ended up doing the largest direct mail campaign of my life where I went to the business school library, which is a very adequate library and I made a list of the 235 people in this country who are really interesting to work for. The only people I would work for were people who I felt were smarter than me and they were in businesses that I thought would go someplace. Among the 235 were people like John Malone, who was at that point a footnote in a blurb that was in the nth magazine about yo-yo's that think that they can make money in the cable industry. But I found his name and he was one of the 235 people and I wrote all these people the same letter. Because I had become technologically proficient at that time, I had realized that the word processor was yet another contrivance of the devil. You could write one letter to 235 people, but by using global changing and so forth, you could make it appear to be a personal letter. As it was, my direct market campaign was very successful. I got about 106 responses back. The big factor in this, the famous factor, that people talk about all the time is that I offered to work for free for 90 days.

KELLER: To all 235?

BARTON: Everybody. I said, you don't know me, I don't know you. I might not like working for you. You might not think I'm worth a damn. At the end of 90 days, I'll work for nothing – you can decide if you want to fire me and I'll decide if I want to fire you. That's my business proposition. In the meantime, I betcha I can prove to you that I'm worthwhile.

KELLER: 90 days is quite a short time.

BARTON: Well, I had no money. I was completely broke! 90 days on spec was a lot and if I blew out of a job, I'd have to go start over again someplace else. So this wasn't easy and it was a huge investment on my part. Well, anyway 106 people sent me back, you know, "I'd be interested in talking to you" and then began probably the three most interesting months of my life where these people would send their private jets to Logan Airport to pick up this impoverished kid – I needed to get them to give me the cab fares and things to get to Logan because I honestly didn't have a penny because the school wouldn't give me any loans or anything because I was too developed economically they thought – and I visited with 80 or 90 of the most interesting people in commerce in the United States. One of them was Malone and the other was this character, Bob Magness, who is no longer with us and I'm sorry he's not because I really wish you could interview him.

KELLER: I'd have like very much to. He's on audiotape for the library, but not on videotape.

BARTON: Well, I have some video, which I did, which I think I gave to the library so you do have some now, but not enough. If you can imagine this interview, I'm still really trying to find the right place and also trying to get some job offers and I went in to visit this company that had really no office to speak of. It was kind of an office warehouse in what's now the Tech Center which is well-developed real estate now, but at the time it was just a cow field and this office didn't look like much more than a cowpie in the field and there it was. My interview with John Malone was on day 1, just go sit in his office and listen to what he did. He had a few meetings, some of which were notorious. Actually one was with a person who is currently in prison and it was very interesting to see the traffic going through his office and how he responded to it, then at the end of the day we kind of had our interview at about 5:30 or 6:00 at night. We had a cocktail and sat around his desk and talked about the business and I liked John and I thought he was an interesting guy and at the end, I said, so, what's next? Do you want to do this? He says, "No, I want you to meet Bob, my partner, Bob. My boss." I'll say for the record: to his dying day, Bob Magness was John Malone's boss.

KELLER: I don't think there's any doubt about that.

BARTON: Some people missed that. So, the next day, I'm to meet this guy Bob Magness and I'm suitably and appropriately nervous and obsequious and I go into his office. I had a 3:00 flight and I couldn't miss it because I couldn't afford the 4:00 flight and Bob didn't even want to get together until like 10:15. So, I'm wondering what I'm going to do – I'm on Eastern Time, I was up at 5:00 in the morning anyway. I had time to kill and I drove around. I love, just love the foothills. I went out to the foothills and did a little climb and came back out and there was Bob and he was particularly intrigued by the fact that I was thrilled with agri-business. The reason I was, was one of my first jobs in the Carey administration was deputy commissioner of agriculture. So I knew all about equine infectious anemia and things like that and that's what Bob wanted to talk about. So that went on until about noon when he said, let's go have lunch. I'm looking at my watch, three o'clock, how long does it take to get to the airport? Oh, don't worry about the airport. Okay, well we'll go have lunch and we went to Bob's place and he ordered one double martini for both of us. Okay, I figured this was just the macho thing and two, three... I was in pretty good shape. You know, I'd just come out of New York State politics and I could hold my own even with three double martinis, but we hadn't started the interview yet. We go back to the office and I'm looking at my watch and it's quarter of two. I'm wondering if there's going to be an interview at all or if I'm going to make the flight. So Bob reaches down into his desk and he pulls out a cigar and I die a little bit, because I'm allergic to cigars. I'm thinking, oh God, he's got me on alcohol and he's going to pull out a cigar and he's going to do a "Colombo" thing on me. He's going to ask me this one question and I'm going to blow it. So he pulls out the cigar, and I wasn't too far off, instead of lighting the cigar, he put it in his mouth and he bit off an inch of it and started chewing it. He goes, "So, Pete, why do you want to come work in the cable industry?" I had a pretty good reason and then two or three more questions and he's still chewing the cigar. I am just focused on the fact that this man is chewing the end of a cigar. Then he asks me the big question which is, so, how much money do you want, or I don't remember what the big question was, and he swallows this stuff in his mouth and I think, wow! This is a tough guy! This is tough. This is about as tough as a human being can be! (Laughter) I don't know, it made me very insecure. I wondered if I could this tough but I liked it. I liked this guy. So I said, I want to come work for you guys, I want to work with you guys and I like the business and I told him why, you know, I liked the tax leverage in it. I loved the fact that the government was creating all kinds of barriers.

KELLER: Had you done some homework and some background in the cable business to find out a little bit about it? Enough to talk about it?

BARTON: Yes! I mean, it was a big deal because I was looking for a job in Denver, just in case my fiancé wanted to move out there and this looked like one of the best prospects. I mean, the other prospect was Celestial Seasonings, where everyone was running around in muu muus and hand filling bags of tea and licking them and then there was ATC... There were different, but this one looked like the kind of place where I would enjoy working, so I wanted this to work out. Anyway, to make a long story short, I made the plane and got back. I got 12 job offers out of my direct marketing campaign from people I wanted to work with and only one was from Denver and then my affiance, whatever, my fiancée decided if it's not Boston, it's not San Francisco, let it be Denver. We'll move to Denver. So there I was. I wrote or called back to Malone and said, I want to take you up on my offer. I want to come work there and I'll do the 90 day thing and he goes, okay, or something like that, see you then. That was it. I finished school, school ended, and I rented a Ryder truck that was big enough where I could actually put my car in, a small Porsche convertible that I'd build, and all my furniture and then I drove out to Colorado. It occurred to me, I was in Iowa and Malone loves to tell this story, I called up, I stopped at a pay phone and I called Malone and said, you're still expecting me, right? And he says, who are you? And thus began an 18 year relationship. Oh yeah, oh yeah, you. Yeah sure, fine, come. By the way, I forgot to tell you, I'm leaving for five weeks tomorrow, so I won't see you until I get back, but you can sit at my desk and just do the papers that come in and take care of the work there. Click. So I get to TCI and I sit in Malone's office for five weeks and try to make myself generally useful. We were buying little teeny cable operations at the time, so guys like Don Fisher and John Draper and the people who were there started teaching me the ropes and the cookie cutter formula. That's how I ended up at TCI.

KELLER: What was your first job at TCI?

BARTON: I was the executive – get this, well first of all I was a 90-day wonder. After that I was the executive assistant to the president.

KELLER: Had Dave Schultz already departed at that point?

BARTON: No, he was in departing.

KELLER: In departing? Didn't he also share that title at one time?

BARTON: I think so. It was a little awkward, but Dave wanted to go and run a cable system and I think, didn't he go from there to Chicago?

KELLER: I don't know. I lost track of him.

BARTON: Well, anyway, he wanted out of the corporate scene and he moved on and I became the sole executive assistant, which transmogrified itself into a vice presidency in a few months. There I was at this little tiny company with a windowless office, deprived of the sun and waiting for my fiancée to move out and she never did. One of the first jobs I had was to count the number of subscribers we had and then lie about them. (Laughter) Well, to the banks we had to have a lot of suppliers. To the program suppliers we had to have very few, but we wanted to look like we had the most.

KELLER: And you also wanted to know how many you had sometimes?

BARTON: Well, detail.

KELLER: It was an average between the two. (Laughter)

BARTON: Our billing systems were so bad. To be quite honest with you, even though that was one of my jobs, we never knew the answer. We never knew. It was like trying to count chickens. You get a pretty good idea, but they move around while you're counting them.

KELLER: Well, at that time, no one really had a definition of what a subscriber was, either. How was a multiple-unit high rise building counted?

BARTON: It was very difficult.

KELLER: We all went through that same thing. Except when you tried to buy them, then you had to try to define how much you were going to pay for a subscriber.

BARTON: Correct, and then you go into all the nitty gritty, but you still didn't know what the hell you were really doing or what you were buying. Remember, you were just buying passings at that time, franchises. So it helped to have just one person doing it because at least I could never be wrong. It's like the person that has two watches, you know, you never know what time it is. Well as the sole proprietor of this information, we steadily climbed from a million subs at the time to 12 or 14 million at the one point. We paid for about 400,000 at the time to the program suppliers and then we just went on a buying binge. There weren't many people then, there were four of five executives, and John was always really, variously, the strategist and the quarterback. Certainly in all strategy he was calling the plays. We had these weekly meetings that were called our staff meetings and we'd sit around Monday mornings and they went from 8 or 8:30 in the morning until noon every Monday morning. They were a combination of a pain in the neck because you had so much to do and you hated to spend the time on Monday morning in a staff meeting, and at the same time, the most interesting classroom for the development of cable. It was there that Malone would sit around and think out loud. He thinks out loud. He hears himself talking, he hears how that sounds – does it make sense? He hears what the feedback is, he hears what other people contribute and he iterates toward strategy and decisions in that kind of a format and forum. So we would make policy and make strategy.

KELLER: Who were some of the other people involved in those meetings?

BARTON: Don Fisher, John Draper, J.C. Sparkman, and then variously, less permanent members.

KELLER: But that was the nucleus at that point?

BARTON: Yes. Me, Blair was in and out for awhile. It got bigger and smaller depending on... I can't even remember why it got bigger and smaller, but it was good because we focused on a strategy that everyone understood, which was we've got to get big.

KELLER: Would Bob sit in on those meetings?

BARTON: Occasionally, but not often.

KELLER: You were going on about how you set the strategy for getting bigger?

BARTON: That was all about looking at the characteristics of what this industry is and could be and saying, well gosh, you could be awfully successful in this business if you could buy equipment and programming and management – by management, I mean productivity per employee and per customer – by achieving scale economics. It was one of those businesses that was scalable. To test it we started buying systems. We bought at least a system, a company, every four days and they weren't all cookie cutters as you just pointed out. You go and you buy some of them that are just newly received franchises and the franchise is this thick. So you know there's a lot of "gotcha's" in there and the guy who's selling it to you either doesn't know that he got got or knows and he ain't going to tell you and he's built three or four homes and he wants to sell it and he's going to sell it to you on a per passing basis and he's already screwed up what he's built. It was hard to be awfully formulaic about it. On the other hand, you couldn't do that kind of velocity of transactions without coming up with a relatively sophisticated formula, which we did. I think for at least four or five years we were hitting that pace – one company closed every four days.

KELLER: Where were you getting financing for these acquisitions?

BARTON: Well, you used the same dollar over and over again, basically. Every dollar we would put into somebody's pocket we'd pull back out and just borrow it for a moment to buy the next transaction so we could buy that cash flow so that we could get him his dollar back and leverage the thing up. But at the time the banks were giving you 6, sometimes even more, times cash flow and you were buying these things at 8 times.

KELLER: This was in '81 through about '85?

BARTON: Yes. It'd pay 8 to 10 times - well it was still at the 8. Sometimes you'd buy them for 7 sometimes you'd buy them for 9 and you could get the equity from the previous acquisition you had just made, sometimes. But you could also pick up a multiple or a multiple and a half, day one, just by applying some of these scale factors to the asset. So in a sense, it was a bootstrap acquisition theory where you'd keep rolling debt, keep accumulating debt. We were joking earlier before the cameras turned on, we well learn the tired axiom that there are two kinds of debt in this world: the kind that you intend to pay back and the kind that you don't. If you owe the bank enough money, you owe them. So our theory and our strategy was to keep laying debt into our friends banks and the banks that were friendly to us and keep getting them more and more tied to us. The stock wasn't very much help. It was meandering and the industry hadn't really developed very much at that point, other than it was beginning to consolidate as all fragmented businesses do. So that was early in the strategy. I haven't let you ask me a question in about 20 minutes.

KELLER: You're doing fine.

BARTON: So the strategy in place meant that Malone would restlessly think about, well, what's next? He is about the truest intellectual I know. He is always unwilling to accept any status quo or any conventional wisdom. He's always exploring challenges. We invented ways of doing business that were strategic in terms of what kinds of capital decisions we'd make. In the meantime, J.C. Sparkman was developing the technology of acquiring and assimilating one company every four days and making it work as a relatively cohesive nationwide operation. No small feat and something that J.C. has not been given enough credit for accomplishing. But I know that's hard to do. In more recent times, I've acquired a number of companies and I keep thinking about how well J.C. did that. So he was always wringing a little bit more efficiency out of the creature. We were always trying to wring a little bit more efficiency out of our purchasing unit. Then, somewhere in the '84, '85 timeline, another on of those sit around in John's office, which was one of the only two offices that had a window, that's why I'd go over there and sit.

(Transition in videotape)

KELLER: This is the second 30-minute Beta videotape. Peter, about the time we ended that last tape we were talking about the developmental stage of TCI in acquiring companies. You said they were doing about one every four or five days, at that point, or roughly one a week. J.C. Sparkman was integrating the operations at that point, folding one into the other and developing procedures to go along with that. What were you doing then? Making the deals?

BARTON: Yes, I was doing a lot of deals and I was also one of the only people there with any sort of patience for politics, and maybe any skill in politics. Politics wasn't widely appreciated or respected in that cast of characters, which meant, I was the only guy with any alacrity to go out and deal with the cities. Remember, they were doing their franchising at the time. In addition to that, we also had had some guy working for us who was kind of, at best I would say that he was a loose cannon. He had gotten us into a number of franchise situations that were frankly uneconomic by making promises that were either economically unwise to keep...

KELLER: Or impossible to do.

BARTON: Or impossible to do, or just plain stupid. So, besides my little running around the country and looking at these systems and looking at passings, remember, you had to drive around – we'd do something called the windshield tour. So we'd go to this little town someplace, and God knows where it is, but it sure wasn't close to an airport and you'd have driven all night to get to this little town and you only have four days to do this deal, so you had to kind of look at it and do the deal and then, jeez, I've got to be over in Pittsburgh tomorrow to deal with this other franchise issue. So, I was doing a lot of working out the franchises, mostly fixing them. I didn't really get into too many new franchises but we had at one point 22 applications in of which we made the decision to stop bidding right before it ended and we lost maybe 18 or 19 of those 22, because it would have been economically imprudent to win them. I don't want to name names but...

KELLER: I know what they are. I've been involved in most of them.

BARTON: So you know that whole story, the people watching this of course don't, so you can explain it to them later. That was full employment. That was 7 or 8 day a week employment, 24 hours a day. Lots of rental cars, lots of snowstorm driving, lots of that kind of stuff. Interestingly, our strategy with losing the franchises paid off because of the 18 or 19 that we lost, we bought 16 of them for less than 50 cents on the dollar when they all failed. So, believe it or not, it takes a lot of work to actually lose a franchise. When we ended up buying them back, they were so bad that you'd have to re-negotiate them. So, I said, Barton, at least you can put up with those turkeys, and I'd go in... Like the Chicago franchise had to be re-negotiated because we ended up buying three of the five. I think we owned one and we bought two of the others. Three of the five pieces of Chicago, but the franchise was ridiculously uneconomic and it took me nine months besides doing everything else to re-negotiate that franchise. Including getting a bill passed that made it illegal for any elected official or a representative of any elected official, or anybody tangentially associated with a relative of a representative of an affiliate of an elected official to talk to me without one of two people who were designated as witnesses present.

KELLER: You knew Chicago politics all right.

BARTON: This was tough. But at the end of the day, we got a great franchise out of Chicago and it and Pittsburgh really turned the company tactically.

KELLER: You won Pittsburgh outright though, didn't you?

BARTON: No, we bought that through Lewis when he was offloading it from Warner-Amex.

KELLER: I thought you won that, but apparently I was wrong.

BARTON: We paid 93 million dollars for it, which was a bargain and then dealt with Brother Amenecker. Now the funny thing about that was it was...

KELLER: Brother Amenecker was the communications officer for the city of Pittsburgh at that time. He negotiated the franchise and franchise deals and stayed on top of those to make sure the companies complied.

BARTON: Correct, and he was a big devotee of the cube system and two way interactivity and the all important, to him, second cable line, which was impossible to maintain with the technology of the time and completely uneconomic. The funny thing, I mean, they're all funny stories about these things, and we could go on about it, but the thing that killed the second cable and two way interactivity in Pittsburgh, was me standing up at the city council meeting – and by the way, John Sie finished this negotiation, he came in around that same time – but what I told everybody was, looking at Brother Amenecker, saying I'm sure that Brother doesn't want you this, but did you know that the little speaker inside your television set that's in your bedroom – that speaker is also a microphone. And what we could do with this two way, and we don't want to do this, we could compromise every bedroom in Pittsburgh and is that what we want? That was the end of two way cable and let that be a lesson to all those people that are still out there trying to make two way cable work. It's not necessary. Customers didn't want it. Interactivity is a great thing but the industry a long, long time ago started veering of course, not interpreting correctly what customers really wanted out of cable television - which is a few really good programming services that they can't get anywhere else. Not millions and millions of programming of which a third of them stink. Less is more with cable.

KELLER: A great segue into the next section of this interview – the programming aspect of your career.

BARTON: So there we were. We were sitting around. I started saying in the last tape, it was one of those sunset conversations in John Malone's office, probably a cocktail in hand and we were talking about, I wonder how we wring the last nickel out of programming. You know, we ought to own the programming. We make the market for it and wouldn't it be interesting, and then John immediately took off on this whole strategy of yes, wouldn't it be interesting if indeed we owned the same percentage, or more, of the programming service that we represented in the industry. We don't need to own it all and we certainly don't want to manage it because - I'll get into that strategy later.

KELLER: That was a conscious decision not to manage it but to own pieces of it?

BARTON: The theory was, why not own - because we had the leverage to own - why not insist on owning a piece of programming service and not only pay the programmer for the purchase of that, which will help the programmer, but will also be less price sensitive to what we pay the programmer because it will be us. We're paying ourselves. Now one of the other problems that this was solving at the time was my less is more problem, which is there really wasn't a lot of great programming to sell. We laughed. We called it the hookers' lament. How are we going to get customers to pay for something they can already get for free and at the time, the free was off their television and cable was now expanding into areas where off-air television was widely available, easily available. It had left its genesis, its roots where it was providing off-air programming to people who couldn't get it because of the rural nature of where they lived or because they were blocked by hills or trees.

KELLER: Yes, it had come into the major markets by this time.

BARTON: So we needed some good programming to sell and the programmers were terrible price constrained. Cost constraints. It's very expensive to do programming, and it's real hard to start a programming service with just a few cents per subscriber and your advertising hasn't built up yet. So we figured we could prime the pump by giving them a lot more money than they were asking for and thereby build our offer so that as we walked down the street, heading cable, that more people would say, yeah, I want that because you have – we didn't have them yet – but you have this brand and that brand and this other brand and I've got to see them. Just the way people want to see ESPN or Fox Sports now. Cable has evolved into the definition of television. It used to be that the three networks were television. Cable was something else. Oh, you have cable! Well, now if you don't have cable, you don't have television and the reason for that is that by and large, the substantial value of cable is the stuff you can't get off the air. So we were thinking about how to prime the pump and how to be price indifferent and I can't really remember whether the horse led the cart or the cart led the horse but again it went into the Malone staff meeting intellectual Rubik's cube deal and it was very interesting to me. So I stayed very much involved in the programming and thinking about programming because in my heart, I'm a programmer. Fortunately, there aren't many programmers in the cable industry, so I had very little competition. That's always good for me because it makes me look good. So, we thought about it and thought about it and we'd already made an investment in a guy named Bob Johnson's little idea.

KELLER: Black Educational Television.

BARTON: Black Entertainment Television. But that would have been a better name, given us more panache and we'd been flirting with other small investments but this became a conscious decision. Let's go out and acquire interest in these programming services and let's get two things out of it. Let's prime their pumps so they can put a lot more great programming on the screen earlier, and then let's buy for TCI optics on what the programming will cost and essentially in real dollar terms, reduce programming costs way out in the future. So when a programmer would come to me and say, and they're meek at this time, they're very meek. Gee, I sure wish, maybe, you could please see your way to please carry us just a little bit. We only want two cents, three cents subscribing... We'd say, to hell with that. How much is your programming service worth? They'd go, 10 million dollars – the numbers weren't big at the time. We said, all right, we'll buy 25% of it for two and a half million dollars and I'm going to give you 12 cents a sub, but I want 12 cents a sub flat for 15 years. It didn't take very long for them to think about and go okay!

KELLER: You hadn't made any capital investment into the service at that time?

BARTON: The two and a half million.

KELLER: So you did put something into it.

BARTON: Well you didn't always have to put that in right away, you could put that in maybe as a loan against your affiliate fees – there are a hundred ways of skinning every cat but the point is that we found the raw nerves but there was a catch. The catch was we had to put our money on the screen. You couldn't just put it in your pocket or squander it. It had to go on the screen.

KELLER: That is in the form of program costs. Upgrading your programming.

BARTON: Yes. Buy better programming and that was relatively successful so we started taking positions in a half a dozen companies.

KELLER: Name some of those that you took, if you can remember.

BARTON: The problem I'm going to have talking about programming with you is a lot of these deals are still subject to confidentiality agreements.

KELLER: I understand.

BARTON: The confidentiality agreement is one of those default mechanisms where if you breach it, it cancels the entire deal, which at the outset was a lot of leverage for TCI because the programmer didn't want to lose the distribution but at this point in time, where TCI is paying a fraction of what everybody else is paying, the programmer would love to have a breach! And I don't know who is going to look at this tape, but suffice to say that some of the programming services that were in the Liberty portfolio were acquired, the interests were acquired at that point.

KELLER: I don't want to know how much, just some of the names of some.

BARTON: Yes, that's what I'm avoiding telling you.

KELLER: You can't even tell me that. It's not public knowledge then.

BARTON: It might be, but I make a living out of discretion still. It's not that important. You could look at the Liberty portfolio because there are only two times when this happened. It happened before I went to Cable Value Network and after when I was running programming for TCI.

KELLER: Tell me how you got into cable marketing of goods.

BARTON: So, there we were thinking maybe we're going to do cable programming and my load on buying services, buying systems, was still heavy as ever and there were less franchises to do so I could spend more time on programming. One guy came in, the very, at that time, famous and infamous Erwin Jacobs. Erwin had this razzle dazzle idea - there was this thing home shopping, he said, I own this thing called COMB and we could turn it into a big programming service. I've got all the stuff you need to make it happen. I have buyers. I have warehouses. I have an order processing system. I have.... I have everything. Come up and see us. Please come up and see us. So some February day, John and I fly up to Minneapolis - God, Minneapolis, it stinks – and we land and Ted Dykel who is Jacob's partner picks us up in his Rolls Royce. He drives us to this little warehouse and sure enough they're selling COMB products which are essentially closeouts for guys. Tools, generators, guy stuff – stuff you'd find in a hardware store. Mail order – relatively inexpensive because it's closeout purchases and Ted had come into this business prior from selling live green monkeys by direct mail.

KELLER: Ted?

BARTON: Dykel. Most of which died in transit and then he married into the Fingerhut family and now he was a direct marketer. So we go and look at this operation and we didn't know enough to say no so it looked alright to us and yeah, we could probably get into the home shopping business and Pete, why don't you go see if we can make this happen. This was one of those things that... (tape ends)

END OF TAPE 1, SIDE A

START OF TAPE 1, SIDE B

BARTON: ...kinds of examples, you make investments and they work out and you make investments and they don't work out and the ones that don't work out you need to make work out, so you need to have some skill as a programmer and as a manager just in case. Even though what you're trying to do is have everybody else manage all this stuff so you don't have to worry about it. By May, I was running - they had no idea how to get distribution, how to get people signed up and I figured, well okay, what I'll do is I will go and get subscribers signed up, we'll find a manager and they'll run it. They'll take care of it. This had become now almost my full time job getting distribution for this thing because it was very hard at that point to get people to sign up.

KELLER: How much did TCI own of that operation?

BARTON: At the end of the day, TCI owned maybe 18 or 20 percent.

KELLER: But you were effectively managing it?

BARTON: Well, at that time it was a 50/50 venture. We invented this thing - this was the first equity participation deal for affiliations. So I ran around the country introducing the concept of carry it, you get equity and you'll get money. You'll get money from selling goods. How much money? Well, we'll pick 5%. I hope that's right, you do a model but you really have no idea. 5% was 100% of your profits but I figured it looked like a 10% pre-tax business. God be with us, we'll do a 5% deal, and we'll split it with you guys. That was probably the first very successful affiliation grab in the history of cable. I was fairly confident about it and Dykel and Jacobs weren't but I was confident enough where I bet Dykel his stupid Rolls Royce that by September I would have more than 5 million subs on which is where we planned a launch. He said, are you sure? I mean, you'd have to buy me another, this is a very famous Rolls Royce. I said, Ted, I'll bet you. So we invented this equity thing and I went around the country and I pitched it and at the time, 53 other people said they were in the home shopping business. We made the big mistake – and I'm going to get to this because this is a lesson – my lesson was we announced it before we had it done. People knew what I was doing so they copied it and it created a huge amount of traffic in the rest of the marketplace. So I would show up at a place, I remember going to Pilot House when Continental had their headquarters there. They were having - what I called the killer C's had gotten together at that point, which was Comcast, Continental and Cox and they were bidding as a group. They had Roy Spear from Home Shopping at 11:00, me at 11:30 and they had fifteen guys before and fifteen guys after and I had to make a pitch why they should go with our shopping service. It was very demeaning. On the other hand, it's how commerce gets done and it's the last time I'll ever make that mistake of coming out early. So we did our equity deal. We all ended up with a very dramatic moment where I got enough people to say they'll do it but they don't want a different deal than anybody else. So I got to be sure, so we invented the Most Favorite Nations clause. If you're in the cable business, these are very famous bits of technology, the equity and the MFN. Everyone said, well, with the Most Favorite Nations, you're pretty clever and you're going to figure out a way around it and I had to do something because we had to launch in September, so I took the calculated risk at one of these shows, the NCTA show. I can't remember where it was but it was in late May. I had a breakfast meeting in my hotel room where all the MSO heads came and I was going to present to them on the spot a one deal for everybody deal, but if they wanted to sign it they had to sign it within an hour. It would be identical to everybody else's. After that they were on their own. Now this could have gone very badly or it could have gone very well. To make a long story short, we ended up with really all the subs that QVC has now, which is most of the industry, 40 or 50 million subs signed up that morning. I went up and picked up the Rolls Royce about a week later and then thinking I'm done – it's like walking away from the craps table, the dealer always has to clear their hands to show the mirrors that there's no money in their hands or chips – I thought I was able to just walk away from this thing and go back to Denver and keep doing this. Well, it turned out that we really didn't have a really good order capture system and we didn't have any stuff that we bought to sell on TV and how are we going to do this on TV? We have this idiot running it who we don't even think he's very good so I ended up going to live in Minneapolis and we launched on September 1st still using their order capture system, which was a batch processing system run by big, big blue boxes. The first day we had sold so much that we had to shut the computer off to process the batch at 8:00 at night and the orders were still coming in, so we were taking it by hand. The overnight wasn't done until 10:00 the next morning. So we were taking orders from 8:00 to 10:00 by hand that we had to then put in when the computer turned back on and then carry all the other stuff... Obviously a batch processing system was not going to work. So in flight, I was lucky to be pretty smart about it for the wrong reasons. I figured I would time the rollout so that everyone didn't launch all at the same time so we started out maybe 5 million subs on day one and every two weeks another 2 or 3 million subs would be rolled out. In other words, they'd flip the switch in their headends and CVN would come on the air. So between these waves of new customers, we had to fix the computers. I brought in Arthur Anderson and we ended up having to buy 90's or whatever the hell those big IBM's were called. Every single thing at COMB that we had thought was a useful back office turned out to be useless and not only useless, an encumbrance because it was in the way. That was about the worst stress time in my life because in flight we were now taking orders at the rate... I had predicted this could be maybe a 50 million-dollar business and less than 30 days into the business it was running at the rate of 250 million dollars and we only had infrastructure and goods for 50 million. So we were literally sending guys down the street to K-Mart and to Target to buy goods to put on the air so we'd have something different and new to sell. Of course we didn't make any money on any of that and trying to quickly learn how to buy in sufficient quantities and building a warehouse that could handle those quantities. Whew! So many things to do. We went from about 30 or 40 employees at launch date to 4,600 employees a year later and all new equipment, all new infrastructure, all new warehouse, all new everything and that was almost done as a little boy.

KELLER: (Laughter) Gave you a lot of experience though.

BARTON: Yeah, it taught me I never want to run anything again.

KELLER: We're going to wrap up the second tape now.

(Transition in videotape)

KELLER: Peter, when we ended the last tape, you had just completed the turn around of the Home Shopping Service out of Minneapolis. Then as I understand it, you came back to Denver and took on more programming chores at TCI?

BARTON: Well, yes. There's a little interval between those two things. The Shopping Network was a big success about 2 ½ years after. It was running at the rate of about a billion dollars a year in sales, 4,600 employees and I was looking for a graceful exit because I didn't want to continue running this, A. B, being in Minneapolis is, God forbid somebody should ever say to you, you only have two weeks to live, but if you want it to seem like forever, go to Minneapolis. It's just the worst. So I wanted to get out of Minneapolis and the only elegant way of doing that was to essentially merge CVN out of existence and we merged it into QVC. I went back to TCI after that to go run programming. John Sie had just finished running programming, I took over and...

KELLER: Now, had John Sie at that point formed Encore?

BARTON: He was just quitting running the programming department to form this wild hair program called Encore. STARS wasn't even in the picture yet, but Encore made a lot of sense and John Sie had a lot of foresight about where the world was going in pay television. And yes, indeed, the world could use an Encore and he had a good strategic plan, which we can talk about later if you want. So as he was leaving his seat as the purchasing agent for programming at TCI and I was coming back, it was logical that I pay my penance for having made a lot of money and had a good time in Minneapolis and go into programming. That was a huge job because what we did at that point was we essentially rewrote the technology of the relationships between TCI and all of its program suppliers. What we did was we essentially converted every basic programming service relationship from a short-term deal. The state of the art at that point had been one and two or three year deals that renew and then at the end of three years you have no idea what you're going to pay and what the deal is going to be.

KELLER: But didn't you say that many of the deals that TCI had made were upfront with a 15 year set amount?

BARTON: A few of them were. The ones we had bought into.

(Interruption for readjustment for videotaping)

KELLER: So you were back redoing all of the programming content of the TCI contracts?

BARTON: Right.

KELLER: That's where we left it off when we were interrupted a bit.

BARTON: And you just asked me whether or not we hadn't had a lot of long-term arrangements.

KELLER: Yes.

BARTON: I'll just pick up so the editor will know that I'm answering the question that we left off at which is actually very few of the deals were long-term at that point. The ones we had equity investments in at that point had long-term affiliation deals attached to it but that was still a handful. I went after all the rest of them. In particular, we looked for programming services that could very well make us vulnerable to very large increases in the future and focused on those first. The number one on my list, the first deal I dealt with was Nickelodeon. We were deathly afraid of Nickelodeon. At the time it was still a start up but it looked to me like Nickelodeon could become one of the most powerful programming services on the air and the power that I'm talking about is a franchise with the consumer, not with us. Which meant that a new paradigm was developing and we were enabling it, not only allowing it, but enabling it, by giving distribution to a good programming network we took ourselves out of the control position, it got popular with the consumers and when it was time to renew that programming service, they could charge whatever they wanted practically. Because if we said no and we lost the right to carry that service, we'd have a lot of very unhappy customers which was relatively untenable and became extremely untenable when satellite technology actually became manifest. So, our idea was to pick off the ones that would give us the biggest vulnerability first and do very long-term deals with them.

KELLER: Would those include equity also?

BARTON: Not necessarily. For example, when we did the deal with Nickelodeon, it was a three in one deal – it was an MTV, VH-1 and Nickelodeon deal – and there was no interest, zero interest, on MTV's part to have us be in equity. So that was fine, we just wanted to have a very long-term deal, which that deal is still in effect and it still has many more years to run that we did back, I think, in 1989. And then we went down the list. Along the way, a very shattering event got us focused on sports. Paramount, at that point, was the owner of the MSG network.

KELLER: Madison Square Garden?

BARTON: Madison Square Garden, and Art Baron was representing Paramount at that point. He came down to tell us, he wanted to just meet with John and myself, a very private meeting but he had just bought the 10 year rights to the Yankees for an extraordinary sum. I can't remember if it was 500 million dollars, or something, and he just wanted to let us know that he intended for us to pay for it. His rates, which at the time were ranging... Sports is paid for less and less, the farther you get away from the arena, the less you pay for regional sports. So the range that we paid for Madison Square Garden was something like 5 cents to 40 cents within all the TCI systems and he just wanted to let us know that the rates were going up to a dollar and he'd like to get a deal from us within an hour and here's the one that will catch. One of your managers has been caught on tape conspiring with some of the other managers to boycott this price increase. What would you like us to do about that? Well, that's not a great situation to be in if you're a negotiator and we went to work on that and we ended up with a deal where our price range was something like 10 cents going to 65 cents and then everything shifted to a maximum of 98 cents before we could unbundle. That's where we invented unbundling in that particular deal under duress in 4 hours before Art had to catch a plane back.

KELLER: How many systems were you carrying the Yankees on?

BARTON: Lots, because we had TKR systems in northern Jersey and then a bunch of upstate New York systems and maybe a Connecticut system or two. I know we had one outside Westchester and ????

KELLER: How many total subscribers did TCI have at the time we're talking about right now?

BARTON: On the order of 10 million, maybe.

KELLER: Enough to give a pretty good swat.

BARTON: Well, no, it wouldn't have affected all 10 million subscribers. It would have effected just the ones in the metropolitan area, which might have been 800,000 subscribers, but that changed the economics of those systems dramatically and it was a major eye opener. It wasn't very many moments after Art had left that we sat down and decided, you know what? We're not going to let anybody do this to us in sports again because reckless intermediation in sports is only going to hurt us. We're going to be the intermediaries. So I got out the checkbook and we started a regional sports business, which was another one of these things like CBN. It was just hundreds and hundreds of thousands of miles, in steerage by the way, we wouldn't fly first class at TCI and we didn't have a plane at the time, and so it was hundreds of thousands of miles of running around the country inventing, creating, putting together and buying regional sports networks. We ended up with 14 or 15 of them after this massive flurry of activity and we called that Prime Sports and it became a substantial investment, but I'll come back to that because I digress. So we were trying to pick off programming services one by one to get long-term affiliation deals so that we would lock in the scale economic advantage that we had built up by having this many subs into the future. Hopefully our scale would continue to build because we'd have more and more of a delta between what we pay and what everyone else pays as time went on. So we negotiated hard for that and in some cases we took equity, in other cases we didn't. The balance of the equity investments we had in the initial Liberty came from that era. John Sie had done a few sorts of equity deals, maybe one or two equity deals, while he was doing it. So maybe there's a couple there. He did a deal with CNBC where it wasn't equity but we have a percentage of their profits, for example. It was a lot or work. It was a huge undertaking but at the end of it, around 1990, the end of 1990, so it was about 18 months, we had long-term deals with everybody or we had installed ourselves as intermediaries in every single business that could possible effect us with the exception of ESPN. We had built a hedge in the pay business by starting Encore and then STARS was about to come along which gave us pricing power in the pay area.

KELLER: Had you been talking to Turner up to this point?

BARTON: About?

KELLER: About the possibility of some equity in what he was doing?

BARTON: No, actually we owned 26% or 24%, I think it was 26%, of Turner as a result of, I think the 1986 or '87 deal that Malone did to bail him out.

KELLER: That's what I wanted to get to.

BARTON: Well, I was gone. I was up at CVN during that but John went in and basically, Ted had hawked himself beyond the top of his nose. Ted was comfortable with the water level right below his nostrils, but when the waves and the chops started and the water level rose about another inch or two... had it not been for John Malone, CNN would have been called the KNN, the Kekorian News Network because he single handedly organized a cable equity bailout. Cable and fusion of equity into Turner to essentially save it for cable and Time Warner and TCI stepped up for the most and Continental was a third, I think. Some other people had dribbles in there but not a lot. So by that time, TCI had a substantial equity position in the Turner products. Then in the fall of 1990, I remember describing this to somebody else; I was sitting on a Saturday morning, in John Malone's poolhouse, fetid poolhouse. It was too hot and it was closed and it was too chloriny and it was hard to sit in there but it was quiet and we could talk. I had done the research preparation for this meeting, which was research to get a list of every one of the miscellaneous assets that TCI had in its portfolio and let's talk about that. So I took it over to the pool house and we had, from years and years of buying stuff, we had years and years of, oh yeah, this is what the company owns and what the hell, let's just take it. I mean, at one point we were the largest shareholders of Resorts, International because one of the cable companies we bought was the largest shareholder in Resorts. So there were buildings and cars and little pieces of cable systems. You know, we had pieces of US Cable, pieces of Lenfest, a very long list of stuff and pieces of programming services and what could we do with all that. Do you think, since the markets not giving us any value for this, if you were to take all that stuff and toss it in the rubbish, the stock price of TCI wouldn't have changed a bit. So you come to the conclusion, well the markets not giving us any value for it, let's sweep it all up, let's clean out the attic and basement and let's see if we can't organize a separate little company here and take it public and see whether or not we can't manifest value for these dogs and cats one way or another. That was the beginning of the Liberty Corporation. At that time it was called, wisely, cleverly, New Co.

(Laughter)

KELLER: New Company.

BARTON: So, New Co. took form while we were doing, it was my Saturday, Sunday job while we were still hurrying to get programming deals done before anyone really caught on to what we were doing or could resist it or whatever we were afraid of. We were hurrying to start sports businesses. We were hurrying to start other new businesses. We wanted to now own cable equities so if somebody wanted to start a second channel, well we'll help them start it. We'd like to own it and we'll help you with distribution and we'll help you with this and we also have something to say about what the service ought to look like and how it ought to capitalize itself.

KELLER: Didn't somebody sic the Justice Department on you sometime along the formation of these companies?

BARTON: I don't think there was a period in the second half of my life at TCI where I wasn't in deposition or about to be in deposition for something. And interestingly, we were never even reprimanded for our behavior. Most of this was politically motivated by either our detractors, or at the time, don't forget, the cable legislation was going on and Al Gore was busy trying to get a lot of personal political capital out creating a populist, anti-cable sentiment. The ultimate manifestation of that was to stand up on the senate floor and call John Malone the Darth Vader of communications, which John did not refute or deny and it was great for Al and history has proven what a genius he's been at steering communications policy, which is to say, I'll be quite clear, he's been very, very wrong about his public policy in communications. Anyway, during that whole time, TCI became a convenient villain, so it was convenient to sic the Justice Department on us or the Federal Trade Commission and as you may know, every time you do a deal of any size that's more than 15 million dollars, without getting into all... There's a rule called the Hart, Scott, Rodina Law which says that a deal of any substantial size that's not a partnership has to be reviewed prior to consummation by either the Department of Justice or the Federal Trade Commission. So every single time we did a deal, it got reviewed by the anti-trust people, which was convenient for the politicians because they'd scream and yell, well, you should take a harder look at that. It got to the point where I would show up for my depositions and there would be on the wall in the conference room at whichever agency I was at, you know computer printout paper, this thick but 40 feet long, with all the acquisitions and all the holds and tele holds and equity and things and my name at the top with all the tentacles. They had done a lot of homework, but nothing we did, not one thing, was ever ultimately killed because we had run into a fundamental anti-trust problem. Some things we just withdrew. We were going to buy ShowTime at one point, and then they sat on it so long, refusing to make a decision that the deal just got... A deal is like a fish. If it's out of water too long it starts to smell. You have to do a deal when it's fresh and after 18 or 20 months of sitting on it, the ShowTime deal stopped making any sense and we withdrew. Ultimately they approved it. Of course, the next time we wanted to do it they had to go through the whole process again. So with very few exceptions, and there were some exceptions, they asked us for consense and thises and that's, we never really ran into any anti-trust issues. But we were busy. We were accumulating any time a programming service was for sale, or even wasn't for sale, I was out running around trying to buy it. We had gotten very aggressive as TCI to try and acquire things and we bought – the FNM was for sale at one point. Unfortunately we did that through Turner and unfortunately we didn't buy it because of the politics of the Turner board, but we bought the Appalachian Network and put that into Discovery as a contribution, which Discovery ended up turning into The Learning Channel. One by one we built up what has become a massive portfolio.

KELLER: Now as we're looking at these various pieces, some of them were obviously more profitable than others, would you just put the profitable ones into Liberty and discard the others?

BARTON: Well that was not Liberty. I haven't even gotten to that.

KELLER: Well, whatever the company was – New Co. You're still talking about New Co.

BARTON: But still, there was no form. New Co. turned into Liberty and Liberty was formed on March 30, 1991.

KELLER: You said you were accumulating all of these assets...

BARTON: That was in TCI.

KELLER: ...and bits and pieces and trying to pull them together to make some sense or to make some value out of what you had.

BARTON: I'm talking about two concurrent events. We had all these assets and I was trying to hodge podge them together so that we could maybe form a company, but at the same time, simultaneously, we were very aggressively now trying to acquire programming assets.

KELLER Well, I want to focus on those bits and pieces that you were talking about. As you would combine those into whatever corporate entity it was, or whatever your plan was to combine those, was it to put all of them in or only those that were profitable and discard the others?

BARTON: Well, no. We couldn't be that cute about it. In order to have a reasonable story, we had to take all the wheat and all the chaff and make it into one pile. I don't recall, we might have left a few things out, but the problem is if you left them out and they were clearly dogs, then the question is as a TCI shareholder why shouldn't I feel like you've taken advantage of me, Liberty, and sue you. So to do the right thing, to be solemnonic about it, we took the better and the worse and put them all together. Now, the genius of Liberty is not mine. The genius of Liberty was the structure, was the conception of it and that was vintage, 100% Malone. That was my post graduate course in financial engineering. It was all unique, all original and obviously, all very smart.

KELLER: And doable.

BARTON: Well, it was barely doable. I mean, we had to ask the SEC to consider forms of equity that were entirely original and we had to do a lot of educating and to this day, there are still a lot of people who, and this has of course been litigated now and thrown out, who claim that it was intentionally done in a way that was so complicated that we would bamboozle investors and to not invest it somehow. And all of that is poppycock. The problem was it was just so complicated to comply with all the federal reporting requirements that we ended up with a prospectus that was this thick and I recall that we had an analysts meeting before we went public, days or weeks prior all of which has been the subject of a great, great many depositions, and John and I stood up and we tried to explain Liberty to a packed house of analysts.

(Transition in videotape)

END OF TAPE 1, SIDE B

START OF TAPE 2, SIDE A

KELLER: Where were we?

BARTON: We were just at the dramatic analyst presentation several days prior to the launch of Liberty. This had to be sometime in March of '91 and we had this prospectus that was this thick and so we stood up and we tried in very simple terms to explain Liberty, which was a relatively simple concept. It just didn't write that way once you complied with all the SEC requirements for reporting. We went out of our way, John and I, to say, well look, forget what you read. There's only this many pages that matter. I think we even said which pages. Read those, the rest of this stuff is not important. We went on and we tried to explain as simply – in fact there's tapes of this – the whole concept of Liberty and I thought this was going to be a gangbuster success. Now we had it organized where if a lot of people participated, in other words a participation right, then Malone invented this see preferred which was a rubber joint. It would get very small if a lot of people came in, and it would be very large if very few people subscribed and we explained all that. We encouraged people to make their choice and their participation rights and so forth and then it was over. I explained what all the assets were; John explained all the tax elements. It was really very, very clever. And he was explaining his cleverness. So I went to the back door and as everybody walked out, all the major analysts, I asked 23 of the top analysts are you participating or not are you recommending or not? 21 said no. I was astounded. It was jaw dropping to me and I was wondering how in the world they had come to that conclusion and I honestly had a personal panic because I was committing my heart and soul and life to this neat little gadget and 21 out of 23 of the smart people in the world were telling me it was a dog.

KELLER: They didn't turn out to be too smart, though.

BARTON: Well, it just goes to show you should listen to your internal soul. So I had this identity crisis, I mentioned this to John. I don't know whether he emoted or not. I just couldn't believe my ears. I few days later it goes public and it didn't do much. We didn't expect it to do much. And then I had this theory that we ought to just go underground because we had this enormous portfolio of junk. Some good pieces, some... but a lot of things that weren't great pieces, including sports which was hemorrhaging and little tiny bits of cable systems that no one had ever heard of before. Some of them were hemorrhaging and some weren't and I wanted to get it organized so that we could create value by making this into a rational group of assets that would make each other more valuable sometime. So the first, and probably most intelligent decision we made early on in Liberty was I went and begged Marvin Jones to come out of retirement. Remember Marvin? He had just been cast free by the merger of UA, I guess, to United. I met him at the Glenmore Country Club, which is something he belongs to – I don't go there, it's too hoity-toity for me – and we had a couple of pops and I plead with him to come back and be the portfolio manager for this cable company, turn them into something. Marvin came back and he's a one-man operation. Not that Liberty had a lot of people, I mean, we had 14 people and that included all the secretaries and all the accounting people and every single thing you need to have a public company in terms of jobs and Vivian Carr who had 46 hats on. She was head of PR and head of financial reporting and head of investor relations, head of everything else. And Marvin had one office but he was in charge of the entire cable portfolio.

KELLER: That's separate from the programming entity?

BARTON: Right. He was just doing the cable stuff, which was about maybe 40 or 50 percent of the value of our portfolio at the time. A year later, Marvin was running the third largest MSO in the country and his revenues per sub were the highest in the industry and his cash flow per sub was the highest in the industry and we began to realize that what we were really good at was managing this very strange, weird group of people that are true entrepreneurs. We are really a temple for entrepreneurs. We can provide them with financing and some scale economics because we could buy for them, aggregate them and buy them for scale, but we also knew how to leave them alone. We also knew how to just talk to them a little bit saying, you could be a little smarter if you did this and this and this. Marvin had a beautiful demeanor about him. He looks like a drill sergeant and he looks like your worst nightmare at boot camp, but he's got a heart of gold and he knows what the hell he's doing with cable. He really knows his stuff and he turned that little group of investments quietly, unassumingly into the best running entity, aggregation of entities, entity.

KELLER: Did you pull them to TCI?

BARTON: Well that was later. So that was going well and it didn't require much supervision on my part. I wasn't that keen on cable. I was very happy to have them do it. I wen to a lot of the meetings and talked there and I went to all of their quarterly meetings and so forth. Said no to stupid capital and said yes to under capitalization and all that stuff, but he did a great job. On the programming side, we had a high degree of urgency to continue the acquisition binge that we had been on with TCI. Buy as many programs and services as we could, buying as well as we could but buying anyway because my theory and John's theory was that these things haven't even begun to peak in terms of their value. Why? Because the dual revenue strength programming business is only going to succeed at a factorial level of growth. Why? Because it will raise its rates – if it's good, it will have enough pricing power because it has brand monopoly. I'm saying with the cable operators. And if it's good it will have pricing power with advertisers. Dual revenue strength and pricing power associated with branding make these things ever green. So we led the way in some acquisitions paying too much for things that ended up in retrospect being awfully cheap. We also encouraged all the programming services that we were involved with to clone themselves. Not just once, but x number of times. Let's start a second brand, you know. Family Channel, we need a second channel. Discovery - John Hendricks took this to heart. John now has, I'm going to guess 8 or 10 services, not even including all of his international brands. Little old Discovery is worth maybe 6 or 7 or 8 billion dollars today. We encouraged a lot of that rapacious behavior. We encouraged rate increases. We encouraged as friendly a deal as we could do at TCI, but as far as everyone else is concerned, get as much as you can. TCI basically paid pretty much what everyone else paid because usually there were other interests in each partnership and they wanted to be sure they got as much as they could out of TCI. But those were arms length deals. TCI became our absolute most difficult affiliate, which was ironic. But nevertheless, they were our biggest customer.

KELLER: Whom were you dealing with at TCI?

BARTON: The guy who succeeded me, I put him in, Jake Palmer, and John didn't want to intermediate because it was a tracking stock, well it wasn't a tracking stock, it was a separate company at that point. So it was good old-fashioned fistfights with TCI, just like everybody else had. TCI at that point substantially lost its way in terms of how to build volume, so it compounded the difficulties. In the meantime, Liberty was sailing right through these PrimeStar consent decrees because it was a separate entity. We signed our own consent but it was substantially better than everybody else's. The legislation came and forced us to have to deal with competitors to cable, which was wonderful leverage for us because until then, everybody wanted exclusive deals and if you were dealing in New York City, you only got to charge as much as Time Warner would pay. But once there was satellite and a few other competitors you could establish new rate cards and establish new Favorite Nations levels and so forth, so the whole things started ratcheting up. In about November of the following year, we had our first analysts meeting. Since there were very few people following us, because not may analysts bought in, we had a couple of - we had Gordy Crawford, Mario Gavelli and a couple other people who were the only ones following us and who cared and so we just treated them like friends of the family. We'd have board meetings and we'd invite our analysts to the board meetings and ask them to help us figure out - what else can we do here? Could we get a piece of A&E by doing this and doing that? Triangulating in this way, we became famous for doing very, very, very complicated deals. Not because we like complication but because we were capable of doing it and the reason we were capable of doing it is we had a shop that we'd do - during the first six years of Liberty we did a deal every 10 days. A deal every 10 days! To put that in perspective, most big companies do a deal in a year, maybe 2 deals, but we had the skill and the alacrity in this group of guys and women that we could sit down at a table and do a deal. The decision making process was very unbinding. If somebody was at a meeting, they could call me or they could call John, but they could get an answer right there on the spot whereas other companies would have to go back and have a meeting and this and that. We would get deals done – lots of overnights. So we were accumulating and merging and rationalizing this portfolio and we wouldn't talk to anybody. When people would call and they weren't friends of the family, we'd say, oh we'll have that analysts meeting and we'll talk to you about it later. Well, when? Well I don't know but I'll call you - and we'd just push it all off. That's very important. That was a key component to our success was the willingness and ability to operate under cloak of darkness so that you didn't have a lot of people trying to emulate our strategy. It gave us the opportunity to be the first at the table in a lot of deals. That was okay with me. I don't seek publicity. It's not important to me for some reason. In fact, I eschew it. I actually hired at my own expense for almost the whole time at Liberty, a PR person to keep me out of the press but that goes into my own set of craziness. So I was very happy. I called myself the second banana. I was happy to let Malone be the front guy, the top guy and the person everybody writes about and it freed me up to basically operate. I could get off a plane or walk into an office building and nobody would really know or care whereas if John walked into an office building, somebody would notice. Then our first analyst meeting – we get to it. I really didn't know what to expect. It was at some hotel in New York and I told him to get, Vivian was setting this up, and I told him to get not too big a room. Maybe for two hundred people, set up two hundred chairs, but I didn't think that many people would come to this thing. The stock had been coming up a little but... It was on a Tuesday, I remember because it was one of these things where I wanted John to sort of make an appearance and he had to leave because he had to go to his Tuesday thing at work, so we show up at the ballroom and I think it was an 8:45 start or something. Early for New York and people were bitching about that and we can't even get into the ballroom. It's not only SRO, there are people pissed off out in the hallway trying to just get their nose in so they can see what's going on. I was stunned. I just couldn't believe it. So John did his little opener and then he left and we did a two or three hour analyst meeting where we just basically explained item by item by item what we had in the portfolio and why we had done this merger with that, what we had gotten out of it. The fairly boring recitation of facts because I didn't want to hype the stock, I just wanted to do my duty to tell shareholders if they were interested, here's what we're doing. Well the stock just went straight up. On that day we created four or five hundred million dollars in market value for the company and it never looked back and unfortunately from that day on, we began to be hounded by hundreds of people who wanted inside scoop or strategy or I'm going to write a report. It would be interesting for people who want to follow Liberty just to go back and read the analyst reports. They'll give you a sense of, a timbre, an understanding of what the tonality was like through the evolution of Liberty. We very, very, very carefully managed our appearances, managed the mood by either appearing or not appearing, by being available or not available. By splitting the stock or not splitting the stock, creating a dividend and a device through the preferred. We spent a lot of time developing and managing what I have thought of as a closed end mutual fund. It was very, very focused and we were very, very good at what we did. A lot of people tried to liken us to Berkshire Hathaway because in fact one or two of my annual reports reads like one of Warren Buffet's, although I don't pretend to be anywhere near as eloquent as he. Our theory of making money was very similar to the Berkshire one but the big difference was, we were very focused. We were in the business of creating software assets in television programming and entrepreneur driven cable assets and we were highly nurturing of entrepreneurs to run all these things. In fact, in one of the speeches I was giving at the time was the speech that I called the power of will. The headlines of which are if you give a good entrepreneur a bad idea he will will it to succeed or she will. He will force it by sheer force of will to succeed. So what we did was we nurtured those kinds of people and one of my admonitions to these people was if you're going to make a mistake, make it with your foot on the accelerator and we'll back you. If you're going to drive with your foot on the brake and the accelerator, you're not for us. And if backing means we'll put some more money into we'll do it, if it means we're not getting our 30 or 40 percent compound growth rate, we'll fix that. We were very good at helping these people without interfering with them and I don't thing any one of them ever complained about our interference. I think that's true. When you interview them you'll find out.

KELLER: You carried this over also into the cable operation of TCI with some of the companies that they've invested in on the same basis?

BARTON: Well, Leo basically was one of our portfolio companies.

KELLER: Bill Bresnan, Lenfest and some of the others.

BARTON: Right. So Leo basically came in and adopted the Liberty style when he sort of disassembled the centralized operating nonsense that TCI had evolved into and we just got real good at what we did. I considered myself the curator of programming assets. There aren't many people in the world that are actually any good at programming and I think I'm one of them. But I didn't want to do the daily stuff in the programming because that would limit the authority of the entrepreneur and destabilize that. So my involvement, our involvement, would be at the level of what the voice of the new startup should be. What the mood of it should be.

KELLER: Are voice and mood synonymous?

BARTON: No, no. A voice is an attitude. To give you an example, Discovery has a voice that is distinctly different than BET. Fox Sports has an attitude that is completely different from The Family Channel or Faith in Values. The trick was to find a place where we could create a unique software experience that would appeal to the unique audience because as I said 35 tapes ago, the theory is less is more. Give people a few really good programming services that they really want and they're going to buy cable. They're going to demand that you be carried on cable or that your service be carried by the cable operator. If you can get an audience, then you will have the power, the brand power, to raise both sets of rates: your affiliate fees and your advertising rates and then you will become successful.

KELLER: You now have put both the cable assets and the program assets into Liberty as a separate company. Now you folded that back into TCI at one time, is that right?

BARTON: Okay, well then there were the dark days of the Bell Atlantic negotiations. Liberty had already been well established. It had essentially de-feased itself out of most of its more pernicious debt. It was flying high. Every day was a day to break out the mimosa, it seemed. As sort of a ritual, every New Year's Eve, whatever the last day of work was just before the New Year's break, was always a half day. John would come over and we'd sit and drink mimosas and celebrate the fact that our stock had just eked up to the highest it's been in the whole year. It was wonderful, it's king of the world stuff. Then TCI got into the Bell Atlantic negotiations and it became practical for Liberty to be part of that transaction so we contemplated a merger back into TCI and we kind of looked at other options for Liberty and TCI was going to pay us the most. Then the theory was going to be that it would be, I can't remember if the tracking stock was even in our head at that point, but the theory was going to be it was going to be the programming arm of the giant Bell thing. It was going to be the Bell Atlantic-TCI merger. Those were unpleasant days.

KELLER: When that fell through then you pulled it back out again?

BARTON: No, actually when that fell through we were already mostly done with the re-acquisition of Liberty into TCI and we finished it.

KELLER: We're going to have to break right here now for another tape.

BARTON: You're kidding!

KELLER: No, it's going fast.

(transition in videotape)

KELLER: Beginning of tape 5. Please continue.

BARTON: All right, so where were we?

KELLER: We were on the reforming of the public company.

BARTON: So now Liberty had become a creature of TCI.

KELLER: That was after the breakup of the Bell Atlantic deal?

BARTON: Yes. We did some clever things. Part of the reason for rejoining TCI was to trade back all of our cable assets for their programming assets. At the time they owned Turner and Discovery and a couple other things, like Faith in Values, and this gave us a tax-free way of swapping value for value and having Liberty become a pure programming play. So it wasn't all just serendipity.

KELLER: No, I never thought that. Now I see both the reason why it was merged back in and now the reason why it's come back out again, because you had to get those cable systems back into TCI where you wanted them.

BARTON: And from Liberty's point of view, we wanted the Turner stuff. Again, it was one of those things where it just made good business sense at the time to do it. So we did it and we got the benefit of the taxes and sort of one more rationalization. Then Liberty became a tracking stock and everyone is wringing their hands. All these analysts and shareholders, gosh, what's a tracking stock. So we spent an inordinate amount of time telling them not to worry about it. That it's just like Liberty used to be except because it's a tracking stock, we can consolidate for tax purposes, which is very helpful because we don't have any tax basis and they have gazillions of dollars in ???? and we were able to kind of reconfigure the company. And if we make a real big mistake, i.e. like STARS could be, we've got the mothership's balance behind us. So you needn't be too worried about it.

KELLER: Also to take the loss if there was to be such a situation.

BARTON: Correctamento. So there was a lot of elegance to the tracking stock. Again, this was another Malone brainstorm, not mine.

KELLER: Had it ever been done in the business?

BARTON: I doubt it. Not this way. Maybe it had but this was all invention. For me to come up with tracking stock would be like that gorilla with the typewriter. Maybe it will tell you four score and seven years ago, blah, blah, and blah. But that was pretty advanced calculus. It was pretty simple, once he explained it to me I got it right away, but that took a lot of genius to figure that one out. So we became a tracking stock and we re-emerged and the stock kept going up. Occasionally it would stall because of various silly, non-substantive reasons but we were in business to make our shareholder unconscionably wealthy and that's what we got up every morning to do. Around the first of the year in 1997, the velocity of growth and the creative part of Liberty, the velocity of creativity, began to slow down some. And I had reached a milestone in my life, which was I'd outlived my father in terms of years. It looked to me like the closed end mutual fund was ever green at this point and it could be just as well run by somebody other than myself and I could go deploy my skills as an inventor and entrepreneur and an unday fair with less restriction because I wanted to get out of television. I had the best possible job you could have in television, but I'd done everything I could do in television, that I wanted to do. So I waited until the very right moment which struck me as being April 1st and I announced my resignation and installed Don Bennett as my successor and talked to John and John was a gent about it. I went off on my own merry way. Subsequently, John and I remain very close personal friends as we were before and I still have a lot of friends in the industry, obviously still at Liberty as well. But I'm on to other things. I've been doing a lot of things on the Internet, a lot of things that are very high tech.

KELLER: Before we get into that, and I do want to get into your vision of the future, you make everything sound as if it was somewhat difficult but generally speaking pretty easy to get things accomplished in the overall picture. Were there ever any major bumps in the road as you moved down through this program?

BARTON: There were some bumps. Of course there were major bumps in the road. There were probably a million bumps in the road and you have to be like one of those, remember those windup dolls that run along and then they hit a wall and then they just find another direction to go. Look at Fox Sports, for example. There was a situation that we started, I think I mentioned 20 tapes ago, we started as a defensive business. A business to keep third parties from recklessly intermediating on our behalf and transferring huge amounts of wealth from us to team owners. The problem with businesses that just start out as defensive businesses is that people forget about that pretty quick.

KELLER: Once it changes hands, you'll go on the offense.

BARTON: By about the second board meeting everybody was saying, so Pete, where is the profit model for this? And you know these things were losing lots of money. So it wasn't until we had about 350 million dollars invested in sports that I finally got it turned around. And I can tell you there were many, many sleepless nights, very many unhappy phone calls from my shareholders about sports before that. Not that I needed that to motivate me, but there wasn't an obvious model. In the meantime, ESPN had been sold to Michael Eisner and he was not as easily bluffed as the predecessors were about what we were about to become so he went on the offense against us to make life very, very difficult for us. So I had to find another model. I had to find a way of making sports have leverage so it could raise its rates and not get creamed by ESPN in the purchasing part of this business. What they would do is they would go out and they would bid against us on everything because they had a broadcast network and a cable outlet. They would buy everything. We'd go in to buy basketball and we'd bid 300 million dollars for the cable basketball rights and ESPN would come in and bid 500 million for cable and broadcast, or 700 million. We couldn't compete. So I decided we needed a broadcast partner and I went on the hunt and I tried really hard to get the CBS guys to get it but they were so stupid. I went after them for three or four years. This is during the Tisch regime and then after that, the other Michael Jordan. These guys just didn't get it and the pressure was unbelievable at that point because sports had become giant and it was starting to weigh down on the Liberty equity and we had negative earnings. We then went to Fox and chased Carey and Rupert and got it just like that. It was a matter of months and we merged Prime Sports into Fox and we created Fox Sports with a whole new attitude and a whole new set of ways of looking at games and became a huge success. We not only got our 350 million dollars back, prior to that actually because we'd turned this thing into positive cash flow, we got our 350 million dollars back twice out of positive cash flow and then we merged it in with Fox and got a billion two from Fox for that, kept half of it and now Liberty still owns half of the business that's worth 3 or 4 billion dollars. So that was a big success, but it was not without a lot of anguish or angst. I went to Turner and asked him if he wanted to be our partner in hopes that we could somehow fabricate a... but I don't want to leave you with the impression that this or any of these other deals are without angst. To get deals done with the Rainbow people was a whole career of its own. A lot of pain in each one of these things.

KELLER: You never dealt with Disney though as such?

BARTON: Only as an adversary. I like Michael personally. We're good friends – Michael Eisner, but they don't have partners, they don't take partners, they don't do partners, they just do aggressive.

KELLER: They don't take prisoners either.

BARTON: Correct. So if you're going to play in the leagues that they play in, you've got to play just as hard. We've had probably 20 head to heads with Disney and we've probably come out 17 of the 20. Even this little Faith in Values was one of these businesses that I inherited from TCI. That was a deal where somebody had made a partnership between TCI and this coalition of ecumenical chieftains and I'm not kidding. There were about 50 of them. The head of the Greek Orthodox Church, the head of Trinity church, 7 rabbis, 5 monsignors. It was an amazing thing for me to go to a meeting like that. The first meeting I went to I had to tell them, the deal that they cut with you where TCI is going to just blanket underwrite all the losses of this business forever is no longer available because there's a new sheriff in town and I don't have that kind of money. This thing's losing 20 million dollars a year and we have two choices. We can either turn it into something that is business worthy or we can shut it down, but I'm not paying anymore. The invectives that were hurled at me, not blessings, they were not blessings. It was several very, very, very stressful meetings later where they finally said, okay we get it. Let's do this, we'll be partners. So we reconstructed the partnership and it's subsequently been reconstructed one more time where they've gone from being a controlling shareholder to, I think a 1/3 shareholder, and we got Hallmark in for writing programmer and all of the sudden the ratings are going through the ceiling and it's got pretty good distribution. But it was months of misery and pain and negotiating and having to travel from one church to another to have private meetings and private audiences with these people and not in confessionals. Being called the anti-Christ. It was horrible but now these are some of my best friends.

KELLER: You're making them money now.

BARTON: Well, see, what they needed and they didn't get it, they want to deliver a message and they have legitimate messages that they would like to share with people but somebody's got to watch!

KELLER: That's fair.

BARTON: If you don't have any distribution and whatever distribution you have nobody's watching it because all the programming on both sides of it is unwatchable, it's the tree falling in the woods. And this took awhile and it was very painful and every single partnership, probably, that I can think of has at least one or two stories like this where, you know, you just had to go through some soul searching to find a model, to find a way of doing it.

KELLER: Peter, there are untold stories yet to be put on tape about your adventures in the programming end of cable and I do want to come back at another time to get into some of these stories, but right now I think we'd better wrap it up. We've been here for an awful long time.

BARTON: Okay, well I appreciate talking to you.

KELLER: As always, there is a commercial. This has been made possible by a grant from the Gustave Hauser Foundation as part of the oral history program of The National Cable Television Center and Museum. The interview was conducted at the TCI studios on March 23, 1999 in Denver, Colorado. The interview was Jim Keller. Thanks, Pete.

BARTON: You bet. See you, Jim.