Interview Date: Monday December 04, 2000
Collection: Hauser Collection
GREENE: Good morning. This is Susan Greene. I'm with The Cable Center in Denver and as part of the Gus Hauser Oral History Project; we are interviewing Nick Davatzes, who is President and CEO of A&E Television Networks. It is April 19th, 2001. Good morning, Nick.
DAVATZES: Good morning. How are you?
GREENE: As you know, this is part of an extensive oral history project that The Cable Center is doing under the auspices of Gus Hauser and his endowment of this and we're spending time speaking with the people who are the movers and shakers and the founders of the industry.
DAVATZES: Well, that doesn't include me; I can tell you that for sure.
GREENE: You just took my line! It definitely includes you!
DAVATZES: No, I don't think so.
GREENE: So, what we would like to do is start a little bit on your personal background, a little bit of your history, how you got into the business. But let's start with who you are, where you came from, and what your early history was.
DAVATZES: Well, I'm a born and bred New York City guy. I grew up on 19th Street and 8th Avenue, went to the public school system. I eventually went to St. John's University undergraduate, graduate; post-graduate at New York University.
GREENE: What did you major in?
DAVATZES: Philosophy and economics, undergraduate; sociology and psychology, graduate. I thought I was going to be an academician but I had to fulfill my military obligation and so I went into the Marine Corp. I was going to go teach at Nazareth College, which was an all-girls college in Rochester, New York.
GREENE: Now there's a smart man.
DAVATZES: I went into the service and I came out of the service and was tired of being poor. So, I had a group of friends who worked for Xerox Corporation and I went to Xerox and I spent 12+ years at Xerox Corporation and then after that I got involved in a turnaround company called Intex, where I was recruited out to be president of one of their divisions. Turned it around in about 2 ½ years and it started to attract bidders, which was terrible because we didn't want to sell it but we management didn't have enough courage to buy it. We eventually sold it to NEC and then I met Gus Hauser at Warner Amex Cable and got into the cable business. I didn't know anything about cable.
GREENE: I'm going to take you back a little bit and then we'll come back to the cable business.
GREENE: Tell us a little more about how many siblings, what did your father do?
DAVATZES: I'm first generation; my dad was an immigrant from Greece. He was a furrier. I have a sister who's brilliant, very smart, a mathematician. We had a very traditional immigrant experience. We lived the American dream; my sister and I both went to college and graduate school. My dad had a third grade education. My mother only went through the second year of high school; the depression came and she had to go to work. She was the oldest in her family.
GREENE: Was she an immigrant as well?
DAVATZES: She's first generation. My grandparents, her mother and father, were immigrants. She was the brains of the outfit in our family. Very, very smart. In fact, she was a straight A student, I found out while I was principal for a day. I went to the same elementary school where she went. She was 18 when she married my dad. We are the typical American experience that people talk about. My dad went through Ellis Island. After the Greek army, he came to the United States on a 90-day visa for a business trip and when he got here they said he was too young to be a businessman so they interned him at Ellis Island for a while and he had 10 bucks and he gave 5 bucks to a guy that he later told me – I don't know how he found this out, the guy's name was O'Brien - to get off the island. Then he disappeared into the city and married my mother and became a citizen in World War II – became a citizen while in the American army, a 38-year old draftee because he had previous military experience.
GREENE: And what year did he come over?
DAVATZES: He came over in 1930.
GREENE: It was the archetypal American experience.
DAVATZES: Yeah, and what's interesting is that within two years that he was here he had his own business, which says that it can be done. He didn't speak any English, lived in a factory.
GREENE: That's very admirable.
DAVATZES: The reason I know all this is, he died about a year and a half ago when he was 93 and prior to that for about five or six years, every time I met him I sort of conducted an interview to find out where our people came from and the proud moments in his life and the low moments in his life and the things that were important to him. He was really what I'm going to call a peasant philosopher. He had a really great view of the world and a lot of wisdom. I guess that happens when you're in two armies and have seen as much as he saw in his life.
GREENE: And your mother?
DAVATZES: My mother is still alive. She was born in a coalmining community in Pennsylvania, Lansford, Pennsylvania. She doesn't really remember it, she moved when she was two to the Bronx with her dad, who was a coalminer. He decided that that was crazy and he got into the grocery store business and they went belly up in the Depression and lost everything and started all over again. Eventually through sort of a church group, she met my dad and then they got married and I came along just as the war was beginning in 1942 and she is a very unusual woman. What makes her unusual is, my sister told me a story that when my sister was getting married, she had a long discussion with my mother and I don't know what mothers and daughters talk about, but the one thing she did tell me was she said to my sister, "Now remember, you have to have your own money." I think that was really sound advice.
GREENE: That's wise counsel.
DAVATZES: I think so, and especially in the generations that my sister and I grew up in, that was not prevalent and even to this day, my wife says I'm terrible, I'll meet somebody and we're chatting, we get to know them and ask questions and eventually at my stage in life you talk about "what are you doing with your money and what are you going to do?" You're going to give away most of it, hopefully, but you talk about that, "well, your wife ought to have her own money and if she doesn't, even for tax reasons you should do it, even in a traditional family assets should be split. And I always cause problems there, my wife says, but I think it's a good thing. So my mother was, and is, really smart. Sharp as a tack to this day. Recently I had to do something for her, get some assets out of Greece and she knew every step of the way what I was doing and we sold a piece of property and she wanted to know how I knew it was the best price we could get and it was pretty interesting. I was being grilled. She's still the CEO of our family.
GREENE: You may be powerful here but you're clearly number two in the family.
DAVATZES: Well, I can tell you that I'm not powerful here. Things at A&E Television Networks are such that people actually run their own shows, though I do think that I get blame for a lot of things. If somebody can't get something done they probably say, "Nick said..." I have a whole thing that I do with new employees. When that happens, the first thing you do is you get on the phone and call me so we can have coffee or tea and find out if Nick really said that.
GREENE: That's probably wise counsel.
DAVATZES: We have a couple of Nicks in the company now, so I always say it must be the other Nick that said that.
GREENE: I'm sure. Let's go back to your early days in the cable business.
GREENE: You started with... I guess you were hired by Gus Hauser.
DAVATZES: Yes, I was.
GREENE: Gus Hauser is a lion in this business, has also been interviewed for the oral history project. Could you tell us a little bit about how that came to be?
DAVATZES: After we sold this company that I was telling you about, Intex, a friend of mine was doing some work, a guy by the name of Jim Lundy, for Gus Hauser and Warner Amex Cable. I didn't even know what cable television was, having grown up in the city, never really dealt with it even in the country home that we had in upstate New York, not so far upstate you could get off-airs, so I didn't know anything about cable, but Jim said that it would make real sense that I talk to Gus Hauser. So I was in the process of going into the banking business, having been with a technology company and then a publishing and education company and I was going to go into the banking business. In fact, I was going to go work for a bank that at that time was called Banker's Trust, and run a portion of the bank. And I met Gus and in the first interview we spent about 90 minutes together; we never talked about the industry except maybe in a casual way. What we spent most of the time was talking about women's rights.
GREENE: I knew I loved you. That's great.
DAVATZES: And it was a very interesting conversation. At the end of the session, he said, "You know, you ought to work for me." And I said, "Well, I'm a pretty good line executive." And he said, "Well, I don't have any of those jobs." So I said, "Well, what do you want me to do?" He said, "I'd like you to run the human resources part of the company, and by the way also real estate." I said, "I don't know anything about that." He said, "The reason we need a line guy in this job, we have to hire 4,000 people in the next 24 months," and he said, "I promise you that you'll get a chance to run a line operation." So I said, "Well, I've got to really think about this." Fortunately for me, there was a guy working for Gus by the name of Larry Wangberg and Larry Wangberg and I were at Xerox together. Different parts of Xerox, he was at, in our last assignments, not last assignments but the assignments when we were there together, he was a national sales manager for University Microfilms, a Xerox company, and I was a national sales manager and then both of us became vice-presidents of sales and marketing – I was sales and marketing for Xerox Learning Systems. And we would meet periodically, you know, going to corporate and presenting our business plans and we formed a friendship and so we knew each other from Xerox, then it comes to pass he's working for Gus Hauser. He was running, at that time, the Columbus system. He was the general manager.
GREENE: This was with the Qube system?
DAVATZES: Where Qube was.
DAVATZES: So I got a hold of Larry and I'm talking about this and he's telling me about the brave new world and about how things work and of course a cable system in those days was very much organized the way a Xerox branch was. There was a sales force, a technical force, a customer service force, a financial organization, and the way you would be judged, was what were called "net adds" – how many new machines you put in, you'd have churn and then you'd have to add machines in very much the same way, and I know a fair amount about that...
GREENE: Except now you're talking about subscribers.
DAVATZES: You're talking about subscribers, and so he said, "Nick, you've got to do this." And so I then went back to Gus and said, "Okay, but I can't do this forever because I know I'm not going to be happy. I want to have a line job." And what it did is provided me with an opportunity to learn the business. So the first thing Gus did is after I got on board he made this announcement: people didn't believe I was there for the job because my credentials in this sort of emerging business seemed more valuable than they actually were, but in relation to some other folks, and so I was sent to Pittsfield, Massachusetts to learn the business so to speak and spend some time in Pittsfield, Massachusetts in this little system and found out how people make installations and climb poles and make installations crawling under houses that don't have basements and they had tubs for the customer records, you know, and it was pretty interesting. So I got to begin to learn the business and started working with some terrific people: Gus, and a guy by the name of Peter Alden, who was the engineering and ops kind of guy, obviously Larry Wangberg, Jim Gray, Dick Aurelio, Rich Berman, who was the general counsel, and then got to meet the Warner people: Marty Paysen, who was a class guy, and Steve Ross, who was a class guy, and along the way I met some guys from American Express, who were also interesting people, one of which was Lou Gersner, who went on to bigger and better things at IBM. So that's how I got into the business and I was with Warner Amex for about three years and about fifteen months into that there was a reorganization and I ended up with a group of Qube systems reporting to me and was finally in operations, and then Drew Lewis came in and he and I didn't get along actually.
GREENE: Nick, do you want to just describe to people, who may be watching this, what Qube was. I'm old enough to know it, you're old enough to know it, but I'm not sure everybody else is.
DAVATZES: Well, Qube was the first interactive television system. It had a return path, a remote, you could select movies pretty much, not quite on-demand, but pay-per-view, you could participate in games, you could do a number of things, and of course Qube, in Columbus, and this is really Gus's baby and he doesn't get enough credit for it, that's where Nickelodeon was invented, and MTV, and The Movie Channel. He, and Mike Dann was involved in that, and Dr. Horner was involved.
GREENE: Vivian Horner, right.
DAVATZES: Vivian Horner was involved in that, and of course Larry Wangberg had to run the damn system and everybody and their mother visited the Columbus system from all over the world looking at this thing.
GREENE: Do you recall what the years were? What the timeframe was?
DAVATZES: Well, part of that started before I got there, but I want to say '79-'80, '78, '79, '80. I didn't get there until '80, and then of course, Dick Aurelio and the franchise people went on this run where everywhere in the country, in the big cities, Warner kept winning franchises. In fact, there was a time when we kept saying, God, we can't win anymore because the interest rates – this was Jimmy Carter time – the rate was like 19% and hundreds of millions of dollars were being borrowed to build these systems and Gus's point of view, and I think it was also Steve Ross's, was get as many franchises as you can, and so I think there was Milwaukee...
DAVATZES: Pittsburgh, Cincinnati, Houston, Dallas, Chicago suburbs, New York City – the best parts of New York City, from a business point of view in terms of middle class, real kind of cable country, and that was pretty fascinating. I remember taking some trips with Dick Aurelio that were unbelievable. Houston was really interesting, it was one of the things I was involved in putting together, Houston and the Gulf Coast and all the wars that went on over that, and of course, the designs were hub and spoke designs built with fiber, things that are just now everyday occurrences. Those systems were up and running in the early '80s. Very exciting times. In Dallas, the studios in Dallas were better than the studios of the broadcast affiliates. There was local o studios...
GREENE: Local origination.
DAVATZES: Yeah. Pretty interesting stuff.
GREENE: Now, you've made a very interesting transition because unlike most executives of a cable network, you actually started on the system in the distribution side of the business, which is unusual.
DAVATZES: Right, right. Unusual then.
GREENE: Unusual then, that's correct.
DAVATZES: It was a big asset.
GREENE: Do you want to talk about that a little bit?
DAVATZES: Sure. One of the things that I've discovered over the years is that I usually end up doing things that I've never done before. Whether I do it right or wrong, I'm not sure, but what I do know is that it allows for an incredibly fresh perspective and when I got here one of the things that sort of smacked me right between the eyes, what broadcasters didn't understand, was you could build a better mousetrap, but if nobody could see it, it didn't make any difference, and so when we started A&E, the original network, my view of the world was the number one thing we needed to do was get distribution. We didn't have to have all original programming. We didn't have to have lots of new programming. What we had to have was distribution and then programming that had a production value that we could stand up for, and we didn't have to create it. We could license it, we could co-produce it, we didn't have to be "show biz" and eat at "21" and so on and so forth, and I can tell you there were what we now call cable programmers who said that they never bought a lunch because their companies were paying for it and my whole point of view was we're here to build businesses. So, having had that experience, and I think having had the opportunity to work with Gus and specifically Larry Wangberg and Jim Gray, we really knew how to manage resources. If you were working for Jim Gray you really had to justify your expenditures and I was able to see that and learn from that and those three guys really taught me that end of the business. Coming over to this end of the business, there were a lot of similarities to a portion of my career that I spent at Xerox at Xerox Learning Systems, because we actually were involved in the development of software, both print and video, as part of management development and sales training and marketing consulting, so I had some notion of that and was always focused on the idea that if you could figure out what your customer was, what your target group was, you could actually make the business work. And I was fortunate enough to come together with a group of interesting people and some great investors and we made a business and in the old days we were described, I think, by the New York Time in 1988, around our fifth anniversary, as very much like a bumble bee. We weren't supposed to fly, but we did, and a lot of that was because of the support that we got from cable operators across the country, and I had made a commitment about how we were going to operate and had never moved off of that. We bring a lot of product for a very reasonable price and I think if you talk to every cable operator in the country, they would say the people who bring the most at a price point would be A&E Television Networks.
GREENE: When one thinks about the various kinds of networks from the cable companies side that they have negotiations with and sort of arm wrestle about over pricing and licensing fees, A&E always come through as the value network, and I would think that having started at that side of the business must have given you an enormous perspective in terms of who your customers were and how they think.
DAVATZES: I think it did, but I actually believed that before. I mean, I've always believed that you're in business and you should have a 25 year horizon, and we've never operated trying to get the last nickel on the table. In some instances, even if we wanted to we probably couldn't have gotten it, but the reality is that I'm for the long term. I think of continuous growth and if you do that in a reasonable way, people will deal with you reasonably also, and that's probably the biggest change that has occurred in the 20-some odd years that I've been in the industry, where it's more contentious now than it was in the early days. In the early days, it was very much like a fraternity, maybe you didn't like everybody, but you were in the same fraternity, or maybe sorority, depending upon your point of view, but that has changed, and I do think that people believe that. I think that people believe we're honest and ethical. For example, we don't have any kind of shopping or long form advertising on our networks, and the reason for that is that's not what people pay for, that's not what they got, so we actually have programming 24 hours a day and we've never looked for guarantees. We've always taken the position that we have a quality product to sell and we merit the distribution and if we do you'll put us on, and if we don't you won't do a deal with us. And some of that, I think, may be borne out of the fact that we're not leverage players, but that's only recent, that has only occurred recently with retransmission consent and vertically integrated companies; they're actually leverage players. We're probably the last of the real independents. We have no vertical integration, no distribution partners, and we have no retransmission consent rights, so whatever happens for us is sort of the old-fashioned way, we either earn it or we don't.
GREENE: You stand or fall on your own reputation, so to speak.
DAVATZES: Yeah, and I kind of like that. I mean, you know, what are they going to do? On the other hand, I don't think you'd want to be the distributor that says they're going to throw off A&E or the History Channel, but we do deliver a lot of value for the price point.
GREENE: Nick, let's go back a little bit, and then we'll come back to a little bit more about the development of the network. I spoke to your friend, Ray Joslin, and I said, "Ray, tell me something about Nick, so we can make this a little bit anecdotal." And he started to laugh, and he said, "Ask Nick about Oscar's."
GREENE: So, why don't you tell us about Oscar's.
DAVATZES: Well, when I was being recruited to join A&E, which as you know was the result of two companies that had a very hard time, the Entertainment Channel and the Arts Network, during the course of that process, as we were getting near the end, Ray Joslin took charge of the process, as is his way. He's a guy who is goal oriented and likes to get it done, so on Thanksgiving weekend in 1983 – you know, I was kind of hemming and hawing and there were other things I was interested in doing and he said, "Look, why don't we just get together for coffee on the Friday after Thanksgiving." I said, "I can't do that. I mean, I have a zillion people at my house." He said, "Oh, let's just get together for coffee." And so I said, "Where would you like to meet?" and he said, "Oscar's" in Westport, Connecticut. I live in Wilton and he was at that time living in Westport and we got in there and started talking and he wouldn't let me leave until we fundamentally signed an agreement on the back of a napkin in Oscar's and I then said, "I'll let you know on Monday for sure." He said, "Well, no, let's get this done." And so I said, "We're going to get this done, but I'm telling you," unless I talk to Dorie, who is my wife of 33 years – not at that time, but now – I wouldn't do it, but I did do it and he closed the deal at Oscar's.
GREENE: On a napkin.
DAVATZES: On a napkin. It's like that story, it actually did happen. And I've looked for that napkin over the years and I can't find it.
GREENE: That's a shame.
DAVATZES: It's somewhere, because I'm a little bit of a pack rat, so it's somewhere in one of my files in the basement of my house.
GREENE: So when you started at A&E with the merger of these two not terribly successful networks, what were your biggest challenges?
DAVATZES: That's an interesting question. In reality, it was that I was handed a business plan that was probably designed for the bank and not reality, there was no product, there was a small organization, which basically had shut down, the Entertainment Channel was completely out of business, and as you know, that was a joint venture between RCA and the Rockefellers, and there was the Arts Service, which was a joint venture between Hearst and ABC. So, I'm given this plan and I look at it and I said, "This is not based in reality." But we needed to be on the air on February 1st of 1984 and I finally came to work in December, and the joint venture was started in December, the new joint venture. So the challenges were: we had a plan that wasn't real, we didn't have any people, we had nobody really focused on distribution.
GREENE: Did you have a new budget?
DAVATZES: We had a budget, and the first thing we did is once we figure out what was going to be put on the air was to go in there and completely build a new plan that completely reallocated resources and put the major portion of our operating resources to the building of distribution, and in fact, a case study's been done on this and it's published in some book. But that was the number one challenge, was to come up with a new plan. The second challenge was to put together a team that would be cohesive and would respect and understand the mission, and the way we did that is we combined a number of the people that were in the firm at the time, the old firm, and brought in some new people, which was pretty unusual. One of the things I learned about the television side of the business is that they're all fond of firing everybody and then "bringing in their team", and I was opposed to that because I thought there were some good people there and sort of like my philosophy about administrative assistants, I love these executives that travel from company to company and they bring along their... My philosophy is you want to hire somebody that's on the staff, for a number of reasons. One is, they know a lot about what's happening in the company. Second, you send a good message, and third, rapidly the company gets to know about you because that person, in the course of informal communication, will tell them what kind of person you are.
GREENE: That's right.
DAVATZES: And I'm a big believer in informal communication. I think that that's actually very positive in companies. So those were the challenges we faced and then shortly thereafter was coming up with a programming plan that made sense in which you could eventually make some money at it, and the goal in the end was to serve the consumer, but also provide programming that you could actually get an economic return on.
GREENE: There were a lot of discussions in those early days of how long it took to break even, whether or not you could beat your plan, was it three years, was it five years, was it seven years, or did you just go on forever just cutting checks and supporting these networks. Where were you in that range, where was A&E?
DAVATZES: We actually turned positive at the end of three years. The plan said five years, but we were able to do it at the end of three years, and a lot of that had to do with the way we approached the business. We approached the business as that our primary responsibility was to the consumer, and secondarily to our distributors and advertisers. But we also had a divisible responsibility to provide an economic return to our investors, and the way you decided to do programming, the rights that you were trying to get, the way you decided to operate... I'll give you a small example of that. When I got there, I felt very much that the organization had what I'm going to call "television broadcaster's mentality", and that in the previous companies, which had problems, I thought that their costs were a little out of control. Symbolically, as an example, T&E was out of control and everybody had a corporate American Express card, and so in an operating meeting, which would be my immediate staff, I sat down at the meeting and I had a scissor sitting next to me and I had the plan, and I took out my wallet and I took out my card and I asked them all to take out their cards and I cut mine in half and passed the scissor around.
GREENE: I'm sure that's never happened since in the annals of television.
DAVATZES: And what we found was that our T&E costs went down by 23%. We did issue American Express cards again, but they were the kind where you were responsible for paying the bill and therefore, I find that people were more responsible then. But that's some of the philosophy that we brought. I think that part of that philosophy was honed in my other experiences in business and clearly was honed the way, if you look at the way systems are run, they're run very frugally.
GREENE: Cable systems?
DAVATZES: Cable systems are run very frugally, and I think you have to have that mentality when you're in this emerging part of your business cycle, and so we were lucky there and we were able to do deals all over the world that people said we couldn't do, and a lot of that had to do with because I didn't know we couldn't do it. People would say, well, you can't do this deal because of so and so, and I would say, well, I don't know that. And we would do deals for programming everywhere, and we then began to believe as an entity, I always believed that there were creative people in places other than New York and Los Angeles and London. There are creative people in Chicago and Memphis.
GREENE: And how did you utilize those creative people?
DAVATZES: Well, that's how we commissioned programs, with those people. We were more interested in what the program was and we didn't have to have the highest production value and there were some interesting things. I actually, in the early days we actually licensed some home video programs that were never designed for television, we got the rights to do that, and some of our highest ratings came out of those programs.
GREENE: What was the title?
DAVATZES: One of them was on the subway system in New York. I'll never forget it. It was like a big hit!
GREENE: That's great.
DAVATZES: Yeah, it was great. And there are other examples of that, and so it's just a certain kind of attitude that we brought to it and I think that's one of the reasons it's probably the quickest turn around of any new network that ever was launched.
GREENE: Now you did a lot of licensing in those early days.
DAVATZES: Yeah, we did, a lot of licensing.
GREENE: And were you doing co-productions, as well?
DAVATZES: Some co-productions, a few co-productions, but mostly licensing.
GREENE: Such as?
DAVATZES: Well, you know, we licensed All Creatures Great and Small from the BBC, and other programs like that. One of the probably more important programs that are on the A&E Network is Biography. When we started Biography in 1987 as a once a week show, we went out and licensed product to put in there. We licensed the original series, which as you know was a half hour series on CBS with Mike Wallace. We then turned that into an hour show and we started licensing product from all over and then we started commissioning it, and of course, Biography was a series that we thought could anchor A&E and we wanted to strip it. Before we stripped it, I wouldn't strip it until we could buy the underlying rights to the trademark, so we bought the original series, which had an electronic trademark for a single word, and I knew that it existed and I knew that if we didn't get that we couldn't take the risk of stripping it, so we bought the underlying rights, and then after that, in the early '90s, we stripped a series and that actually propelled A&E to a new level, and from that we have gone on to commission lots of documentaries and dramas and drama series now. That's probably the single most important event for A&E, was the acquisition of the underlying rights trademark and then stripping of Biography, which is for us like an anchor series. Think of it like the news is to other horizontal networks.
GREENE: It's almost your brand at this point.
DAVATZES: Well, almost. Not quite, but almost, and any horizontal network like A&E has a more difficult time branding itself, but we now have, for example, this past year we launched a very important series, 100 Centre Street, produced and written and directed by Sidney Lumet, you know, 12 Angry Men and so forth.
GREENE: Great critical review, very positive.
DAVATZES: Right, and good ratings and advertising revenues, which help, and over the last, I guess, five years, we've done a lot of interesting things: The Hornblower series, you know, Forester's books have been very good. We've done a movie last year called The Crossing, which has won a Peabody, about the George Washington crossing.
GREENE: Pride and Prejudice?
DAVATZES: Pride and Prejudice, that was a co-production with the BBC, and Emma, and we're doing some new things with the Spencer novels, and we have a new series coming out, Nero Wolfe, and of course we're still doing some performance programs. In fact, coming up at the end of this week we'll have In Concert with the Bee Gees on a live by request, which has been quite good. And of course documentaries for A&E in the early days, some of the really important ones were, we did a series on the American Revolution, which was award winning, and then probably one of my favorites was, we did a two hour special on the Lincoln assassination, who probably is the most important President that this nation has had in the most difficult times, and we've done about 900 Biographies now, and that has led to a magazine and a digital channel, a channel that is up and running in the UK to be launched this fall in Canada. And of course, A&E has gone to Canada and is now throughout South America, and of course, the big success coming out of A&E is the History Channel, which is a little over five years and we knew it was an interesting idea. I'd like to tell you that I thought it was going to be successful as it is.
GREENE: Did you?
DAVATZES: No. I thought it was kind of an interesting little idea and might get to 25 million homes and of course, when we were launching it, it was right after coming out of some new regulations that came out of Washington, and of course I worked hard in trying to change that climate. I think if we're perceived well by our customers, the cable operators, I think part of it is because they feel that the people at A&E Television Networks are in the same rowboat as them. We're not out there running around like loose cannons, and we helped change the climate in Washington. I can tell you it's not a place I like spending time in. I would say probably the only thing I don't like about the industry is the amount of time I personally have to devote to some Washington issues. It sort of reminds me of a gang when I was growing up; there was a gang that I probably spent a little too much time with.
GREENE: Were you a gang member?
DAVATZES: Well, it has a different connotation than it does now. It's not like the Crips, you know? A fight was fists and maybe a baseball bat and you know, they had zip guns, and I like telling our sons that it was West Side Story without the music and of course when they were younger they used to ask me what West Side Story was, but I think one of the things growing up in New York City, about gangs in those days, sort of a common theme was, if you were alone with a gang member, they were all pretty nice, but when they were together, collectively, they were a real problem, and in a way, that's the way Congress is. When you're with them individually, they're charming, you say, they're smart enough. But something happens when they get together and most of the time it isn't any good, and that's our own fault, our industry's fault, the media as a whole, not just cable programmers, the media as a whole, we don't give those guys any space, every aspect of their life is there, but then again, they're there forever, most of them, which is another problem. But in any event...
GREENE: Nick, let's go back to your ownership situation.
DAVATZES: Yeah, it's great!
GREENE: Well, it's most unusual, certainly to have somebody say it's great. Do you want to elaborate on that a little bit? Tell us about Granath and Joslin...
DAVATZES: All those guys?
GREENE: The folks you deal with.
DAVATZES: Well, first of all, Herb Granath is the guy that actually got me into this end of the business. I was having a little to do with Drew Lewis. He wanted me to do something and I didn't want to do it. I wasn't prepared to let some people go that he wanted me to let go.
GREENE: And this is when Drew was...?
DAVATZES: He took over for Gus Hauser.
GREENE: At Warner Cable?
DAVATZES: Yeah, he thought he was a tough guy, but not tough enough from my point of view. Anyway, so I was not going to do what he wanted me to do, which was to move to Texas, and get rid of some people that I wasn't prepared to get rid of. So, a friend of mine, a guy by the name of Holmes Hardin, was commuting and he was the CFO of Warner Amex. He was commuting and he commuted with Herb Granath and Dick Munro, from Time, Inc., and during the course they were talking and I guess Herb Granath says, "I've got this issue, I've got this problem. We've got this company that we're shutting down; we want to give it one more chance and we're looking for a certain kind of guy." And Holmes Hardin says, "I know the guy, Nick DAVATZES:." Well, I get a call from Herb, and of course he can't pronounce my name, so he says Nick and he says Holmes Hardin, and so I went over to talk to him and that's how that all got started and then of course Ray took over the process. But, Herb's a pioneer in terms of ABC; he doesn't get enough credit for bringing them into the cable business, you know, with ESPN and A&E and Lifetime and the History Channel. In fact, he just retired from my board this past December, and of course, Ray was at the Hearst Corporation and they're different than ABC and we had, at that time, NBC. They were still part of RCA and Herb Schlosser was there and then there was the Rockefellers, who got out a little over ten years ago after they were bought by the Japanese and the real estate market and anyway... they had a deal on their part because the firm was worth so much more, but what's really interesting about the three companies that are still the investors in A&E Television Networks is that they have consistently said to me, and of course Ray and Herb have been here since the beginning, to do what is in the best interest of A&E, and in each instance, they were able, and NBC was able, to focus on that and so if it was in the best interest of A&E to participate in the suit against must carry, I went and did it.
GREENE: Even though it was against their parent corporate interests.
DAVATZES: Absolutely, and I always operated with them as it was their fiduciary responsibility in this joint venture to do what was in the best interest of A&E Television Networks. It also helps that that's the law in the State of New York with joint ventures.
GREENE: Well, it has been described to me, not as it relates to your parent companies, but other partnerships for other networks that the parent companies at board meetings would pretty much have to leave their guns at the door before they went in the conference room.
DAVATZES: That should never happen, and if that happens I fault the management of the joint venture. You have to be prepared to be fired and the way I look at that is there was a baseball manager by the name of Walter Alston, who managed the Brooklyn Dodgers then the Los Angeles Starters for 20 some odd years, and his philosophy was really simple – "you're only as good as last year", and I believe that. And I believe that people who have been lucky like I have, you know, if we get fired it's not so bad. It's harder if you're putting the left front fender on at Lourdes; that person doesn't have a lot of choices, and fortunately for me guys like Frank Bennick, who's Ray's boss was just fabulous about that and the same thing for Herb Granath when Fred Pierce was there, and then after that Tom Murphy. They always believed that, and Bob Wright, who's been at NBC forever, he actually believes that. And so, I know people don't believe this, but I get total support and I don't get any interference, but you also have to be willing to push back. I remember when Disney bought [???] at ABC, they wanted to send this team from Burbank and I said, "I'm not doing that, because if I do that for you then I've got to have the guys here at the same time from the Hearst Corporation, at the same time from General Electric. Their accountants are going to be here and their lawyers are going to be here, and why are we doing this? I'm not doing it." And they haven't bothered me since then. I must admit when GE bought RCA, one of the first things I got from GE was a policy manual, which I sent back to them because... and of course, if any of them got control of the business then we'd operate under the auspices of that company, but right at the moment what I'm interested in is doing the best job for the consumer, the best job for cable operators, the best job for advertisers, and the best job for all the employees at our firm who have to pay mortgages and rents and send their kids to school, and so far we've been lucky.
GREENE: What about the whole area of advertisers, demographics, who pushes who, how does that whole dynamic work, and what has the evolution been for A&E from those early days as it relates to that whole space to where you are now?
DAVATZES: Sure, well, in the early days, A&E, when it was known as Arts and Entertainment, was a pretty chi-chi network and we had great, great, great upscale demographics, men, women, and not very many viewers and the reality is you have to have some viewers, in order to exist you have to have some viewers, or as a professor of mine used to say, "A company only deserves to exist if it makes one dollar's worth of profit, if it doesn't, it ought to disappear." Which is sort of something hopefully that's happening to some companies now that need to disappear in the market place, but we were balance network and I think the common theme has been on A&E, as it is today, is to have... we target a better educated viewer, which in this country tends to give you better demographics. We like to be 35-54, we're a little older than that. Today we're more female than male on A&E, but that is really done on sort of a planned for basis, because when we launched the History Channel we wanted to make that very male so that we could compete for news and sports dollars on an advertising point of view and today the History Channel has almost 70% men watching it. In fact, it delivers more men than ESPN and CNN.
GREENE: That's remarkable.
DAVATZES: It is kind of remarkable, and the real wonderful thing about the History Channel is how it was embraced by the cable operators, and in fact, I remember John Malone telling me when the law changed that it was going to be very difficult, but it then turned around that TCI was one of the biggest supporters of the History Channel.
GREENE: Now, before the History Channel was a stand alone channel and that was part of the A&E mainstream programming, your demographics were somewhat different, were they not?
DAVATZES: That's right. The demographics were much more male/female balanced, slightly more male than female, but when we moved the historical programming, you know 99% of it, plus new programming to create the History Channel, we changed the balance. And of course, Biography is more a female venue. I'd say it's almost 54/46, and I find that kind of interesting and almost understandable. Women are more interested in people, and maybe that's why on balance they're better with people. Guys aren't, on balance, as good with people across the board.
GREENE: What about the A&E brand? What pops into your head when I ask the question, what does that brand stand for? You've invested a lot of money and a lot of effort into it.
DAVATZES: Yeah, it's probably the one unfinished piece of business that I have after doing this for 17+ years. A&E being a horizontal brand, the thing that you want it to do is you want it to be the preferred source for quality programming, I think is what you want, but the reality is that the sub-brands really identify the network, which is the point that you made before, that the Biography series is an anchor to that. We have Investigative Reports on with Bill Kurtis, which is almost on the air ten years now and has won Peabodys and Emmys and has been used in Congress for a number of investigations. The dramas that we put together, which are classical dramas, whether it's The Great Gatsby or Horatio Hornblower or Emma or Pride and Prejudice, but I think it's the sub-brands and what we're discovering in a sort of, "God, I wish it wasn't this way," is that the consumer segments the network. And so, if you're interested in Biography, you think of us as Biography; if you think of us as original drama, that's the way you relate to us; if you're into documentaries, especially investigative documentaries, that's what you think of us. And there are different demographic groups, so for example, investigative documentaries tend to be younger, more balanced in terms of male/female, but clearly the dramas and Biography are more female generated. But we did that on a planful basis because when we were going to create the History Channel we didn't want them to compete, so that has actually worked and then we've been able to extend the brands to other venues in television and other media quite successfully.
GREENE: What, if you had to pick out a few adjectives to describe A&E, and now its spin-off brands, what would come to mind?
DAVATZES: Trust: I think consumers trust us; quality: I think people think that we do quality work; entertaining. I think that's the words that they would use. At least, I would hope they would use those words.
GREENE: You have been noted, and this company has been noted, for one remarkable stability of management, not just at your level, but at the levels below. Whitney Goit's been around forever, other people, and also, early on having a noticeable number of senior women executives at a time much before much of the rest of the industry. How did that come to be?
DAVATZES: Which one do you want to know about first?
GREENE: Whichever way you want. Start with the stability first.
DAVATZES: Well, I think that we've had continuous growth. I think that always helps. We've been willing to deal with change. People have moved into different assignments. I think people want to be associated with something that they can be proud of. I've never gone to a party where anybody's attacked me for what I do. I think people want to do that. I think people want to enjoy their work and I think one common thing, none of us here are chasing the last nickel. Everybody here has had very interesting opportunities, but we've been able to put together a team that wants to do good work, wants to be perceived as a quality person. Yes, wants to grow, but we don't chase the last nickel, and I think probably the divisible of that is we actually all get along and there is no right way, no one right way, to do things, and I believe that, and I don't know whether or not this has helped, but people, what we say here, run their own shops, and what we want to do here is have a good batting average. You don't have to hit a thousand here to keep your job. What you have to do is have a good batting average. The batting average will be different by the nature of your work. If you're in accounting, you've probably got to hit 999.
GREENE: One would hope so.
DAVATZES: One would hope so. If you're in programming, we know that 85% of every new show that goes on the air usually fails. We've had a much higher batting average than that, and so we've operated that way, and the other thing, I think, that's happened is we have a philosophy here that we will not deal with politics here, internal politics, and in the instances, and I'd say maybe over these years, four or five incidents where that has happened, that person is not here anymore. So we've had some turnover, but if you were to talk about Whitney Goit, 15+ years; Dan Davids, who runs A&E Network now, 15+ years; Abbe Raven, who runs the History Network, 15+ years; Arlene Manos has been here, I think, 15 years, who runs ad sales. So we've had a significant number of people being here a long time. In terms of women, there are a significant number of women executives at A&E Television Networks. I think the reality is that the reason that occurs is that collectively we're for the best athlete. I don't care whether you wear a skirt or not, or if you wear trousers, or if you're an African American, or a Greek American. If I'm putting a relay team together I want the four best athletes on that relay team and there are an enormous number of athletes that are women. And that's the way it is. And the other thing is, I think one of the things that's happened here is, I believe that the reason that we've had success here is we've tried to ensure that we don't shut out any activity, any function.
GREENE: Such as?
DAVATZES: I believe that in order to make progress in this arena, you must have, whether it's women or, I guess the phrase now they use for the last ten years, people of color, they need to be in line jobs. The easy jobs are the staff jobs, but the line jobs! In the line jobs comes sort of interesting things. One is, you're measure more quickly. Success is a defense, so you don't have to put up with all the nonsense and if you don't make it you know it yourself.
GREENE: It's clearer.
DAVATZES: It's clearer. It's really simple. Of course, we could blame Gus Hauser for all of this because of Rita. And then of course, I didn't tell you this earlier, but until I met Rita and I got to understand what she was doing in her relationship with Gus that I really understand why that first interview went in that direction. I didn't know that.
GREENE: If you look towards the future, you diversify into websites, magazines, international, spin-off channels, what's the game plan? Where do you see this wonderful institution going?
DAVATZES: Well, I see it going wherever our imagination can take us. Right at the moment, people want to throw money at us. Money's not a problem for us in the sense of if we needed to borrow capital to do things. I think we are focused, I think, in dealing with all the aspects of the entertainment industry and the information industry. I'm not terribly interested in opening restaurants, for a lot of reasons. One of them is that it is a terrible margin business. But we are, yes, internationally we're, for example, the A&E Network in the Western Hemisphere is in well over 100 million homes now. We have taken the History Channel to well over 50+ countries. The Biography Channel will now be in the UK, here, and in Canada. We have got a very successful magazine. We bought a company recently called Geneology.com, which is a nice bridge between our Biography brand and the series and the History Channel. If you think of History as being a channel that focuses on events, Biography on people, Genealogy focuses on the stories of family. They kind of go together, and it's digitizing records at a rapid pace so that, especially if you're European, Eurocentric, the databases tend to be Eurocentric at the moment. So we do believe that there is going to be a role there. We think that there is an emerging role, probably a little different than, I think, others about interactive television. We think that there's an opportunity there. We have a potential role in the licensing area that might be a little bit like Good Housekeeping as it relates especially to the History brand. We have people talking to us about furniture and paints and that kind of thing, but we have a way to go and we're still at the beginning of our future. We probably over the next five or six years will double the size of our business. So that's kind of where we're trying to take this business.
GREENE: And where do you see the industry as a whole going? It's a little bit of a tough question to answer because of convergence. It's not so clearly channeled anymore, but if you just look out at the business environment in which you're working, what does that space cover?
DAVATZES: Everything. I don't think in the information, entertainment, transaction arena there isn't anything it won't touch. If you look at the industry, it's everything from home shopping over here to the printed word over here, and I think it's only limited by the imagination of the people that work in the industry. Who would have thought that when I started in the industry that some of the biggest retailers in the world were part of the industry, QVC and the Home Shopping Network. Who would have thought that our industry, initially led by CNN, was going to help bring down the Iron Curtain? Who would have thought that the History Channel would be in the People's Republic of China today? I would have never thought that. However, because the industry is fundamentally made up of entrepreneurs, fundamentally made up of people who created rather than inherited their wealth, they don't know that they can't do it. And that's a really wonderful quality. I think the real challenge for the industry is how to transition from that to institutions. Today, if you think of Adelphia, it's John Rigas. Today when you think of old TCI or Comcast, with TCI it was John Malone, well now it's AT&T, and that's different. Or Continental, when it was Amos Hostetter. That's different. And in some ways, the same can be said for Warner Cable and of course ATC, which is now AOL.
GREENE: And before that it was Monty Rifkin.
DAVATZES: And Monty Rifkin. The Bill Bresnans of the world, I'm sorry to see them out of the business. Alan Gerry, sorry to see him out of the business. Alan Gerry started out installing television antennas in the Bronx after he got out of the Marine Corps, moved to Liberty, New York and was in the appliance business and had a great company. That's going to change. I think we are going to be in the information and entertainment business in all its forms, whether it's computer based, whether it's cable based, whether it's internet based, whether it will be an integrated... everybody talks about convergence. I'm not sure that's going to happen and if it does it'll be for segments of the society and in some countries it'll be highly integrated and in others it won't. And I think one of the things that's interesting is all of us who have been involved in this industry are now beginning to play on the world's stage. That's too serious to think about. For me, I went to PS 11 and we didn't know from diversity then, but I have a picture of my 8th grade class in my office and if you look at those faces they're from everywhere. There are African Americans, there are Puerto Ricans, there are Greeks, there are Irishmen, there are English, and all of the sudden that's the world that we're playing in. So it's pretty interesting.
GREENE: Well, Nick, this has been a terrific interview. Thank you very much. Your friend and colleague, Ray Joslin, says he marks everything as it relates to A&E in the AD period, which means After Davatzes.
DAVATZES: That's true and I always remind him, just to kind of give him a dig, that Before Davatzes they were losing money.
GREENE: Right! Thank you.
DAVATZES: Thanks a lot.