Interview Date: Wednesday December 17, 1997
Interview Location: Denver, CO
Interviewer: Jim Keller
Collection: Penn State Collection
Note: Audio only
KELLER: Mr. Lewis is a Cable TV Pioneer and has been in the industry for almost 40 years. I believe the date of his entrance into the industry was 1958 or 1959?
LEWIS: 1958 – April 8th.
KELLER: 1958. Bob is particularly interesting as a basis for history in our industry because he has a combination of very early experiences, and through four decades, also continues to operate at an executive capacity in today's industry. Mr. Lewis also has great experience in very small systems, both as a manager and as an entrepreneur, and in large corporations as a chief executive of many companies. Today he is the managing general partner & CEO of InterMedia Partners (IMP), a partnership, of which TCI and others, are limited partners. Mr. Lewis has consented to give us his views on the industry and we'll start by getting a little bit of background on Mr. Lewis.
Bob, tell us a little bit about yourself.
LEWIS: Well, Jim, when I was attending the University of Oklahoma in Norman, Oklahoma I was working at the local theatre company—had to work to go to school--and I kept hearing about something called community antenna TV that had been started by a subsidiary of the theatre company I worked for, which was Video Independent Theatres. I kept hearing about this thing called community antenna TV and I started checking into it. But Jim, I think I'll digress a little bit here and give you a little bit of my personal background.
I was born in a little place called Mena, Arkansas or close to Mena, Arkansas. I was one of three children. I have a brother and a sister. We moved to Oklahoma when I was about six years old. I went to high school at a little town called Haileyville, which is in the southeast corner of Oklahoma. Then my parents moved to Norman, Oklahoma so I was able to attend the University of Oklahoma. As a matter of fact, while attending the university, that is where I met my wife of 47 years, Norma. We married actually before I finished college. But I did graduate. Also, I got a commission in the ROTC and had to go into the Army for a couple of years and spent that two year period of time down at Ft. Sill, Oklahoma.
But now, go back to my story about theatre work. I was working the theatres and I kept hearing about this community antenna TV. So when I graduated I told the company that I would really love to try to get into that business when I got out of the Army. Of course, having to go spend two years in the Army I didn't know if I would have an opportunity or not. But they told me to be in touch with them, which I did when I got out of the service. They offered me a job in south Texas to manage a couple of theatres and if I would do that for them then they would give me the first opportunity that came along in cable, or at that time, community antenna TV. So I agreed rather reluctantly. I really didn't want to be in the theatre business, but I knew that if that was the way to get into the cable business then it was probably worthwhile. And sure enough, it took about 20 months until an opportunity came along in the cable business. They sent me to the town of Clarksdale, Mississippi which is about 75 miles south of Memphis on the Delta. That was where I got my start. This was in April of 1958. That is my first experience in cable.
So I was sent there as the manager - it was strictly a start-up situation - and I was able to take that little system and get it going. I didn't stay there too long, and that was okay with my family. We weren't too fond of Mississippi. Then I got transferred to Sherman, Texas. That was a little bit larger system and one that was still in the start-up phases. I only got to stay there for a couple of months and they wanted me to go to Hugo, Oklahoma and not only manage the cable company but also manage a couple of theatres. I didn't want to do it, but again, the company pretty well insisted. And by that time having two children I didn't have a lot of choice so I took it.
KELLER: May I interject here, please?
LEWIS: You bet.
KELLER: The company was Vumore?
LEWIS: Yes, it was. They called it Vumore Company and it was a subsidiary of Video Independent Theatres.
KELLER: Okay. Video Independent Theaters?
KELLER: How many subscribers were in Clarksdale, Mississippi?
LEWIS: I think when I got there, there were about 300.
KELLER: And how many in Sherman, Texas?
LEWIS: Sherman had, if my memory serves me correctly, we had about 1200 to 1500. Boy, that was a long time ago, Jim, but I think that is about right. By the way, I started under a Cable TV Pioneer, Larry Boggs, who was running the Vumore Company at that time. That is when I first met him and got started with him in the business.
KELLER: Was Vumore the subsidiary for only cable television or did Vumore also own theatres?
LEWIS: No. Video Independent Theatres was the parent company and Vumore was a subsidiary and it was strictly for cable operations.
KELLER: When you consider that Video Independent Theatres, was that the name of it?
KELLER: It would be one of the first . . . corporations in cable television outside of Jerrold Corporation.
LEWIS: Well, I think so, Jim. They actually started in 1950. That is when Larry Boggs got the idea of building the first cable system and that was in Ardmore, Oklahoma. As you know, the industry basically got started in 1948. But let's face it that was very preliminary. So he started a system in Ardmore, Oklahoma. They also had the theatres in that town—Video Independent Theatres did. He started individually and then he basically brought the theatre company into the ownership of that system and then that was the beginning of Vumore Company.
KELLER: That was going to be my next question. Larry Boggs actually started the system on his own? Then did he sell it to Vumore or did Vumore finance him?
LEWIS: I think they started to finance it. He had some connection with the theatre company there through relatives or whatever, but it was then very shortly after that, I think it was either 1951 or 1952, that Video Independent Theatres actually made it a subsidiary of their company.
KELLER: It would have been interesting to see how he convinced the board of Video Independent Theatres to finance him in that early year.
LEWIS: Well it would have been because frankly it was sort of "competition" to the theatre business if you recall back then.
KELLER: And an entirely unknown business at that date.
LEWIS: Oh, absolutely.
KELLER: But they did put their money into it at that point.
LEWIS: They did. Ardmore sat about a hundred miles south of Oklahoma City and a hundred miles north of Dallas and, therefore, was a perfect community for community antenna TV. They couldn't get any reception to speak of without the cable system.
KELLER: So we have established that Vumore and Video Independent Theatres were some of the very early corporate entities in cable television?
KELLER: And you were associated with them at this point. We left you in Hugo.
LEWIS: Yes. Hugo, Oklahoma.
KELLER: Well, we digressed a bit.
LEWIS: I went to Hugo reluctantly because it got me back in the theatre business which is, of course, nighttime work. In fact, my work hours there were from about 8:30 in the morning till about 4:00 in the afternoon and then from 6:00 until about 11:00 at night. The hours for "a family man" were not too good. However, as it turned out it was probably one of the best career moves that I could have made because when I went there the company had under 600 subscribers in the cable system. I was there a little less than two years. They had told me that was probably the most that we would ever get out of the system. They didn't think we would get any more subscribers. Well, I left there less than two years and we were over a thousand subscribers.
KELLER: What basic percentage of the community would that have been?
LEWIS: Let's see.
KELLER: Of the homes in the community?
LEWIS: I think there were about 1,800 homes in the community.
KELLER: So you achieved more than 60% penetration?
LEWIS: Yes, that's right. And that was still back at times when people were somewhat reluctant to pay and we were charging a smaller installation fee, and $7.00 a month was sort of the magic number we were using.
KELLER: But you were not charging them big money for installation like they were doing elsewhere - $100-$150?
LEWIS: That's right. By the time I got to Hugo we were charging something like $10 or $15 for the installation plus the $7.00 a month as opposed to many systems that started at $100.
KELLER: That was a departure?
KELLER: Yes. That was a departure from what the norm was at that time.
LEWIS: It was. That's definitely true. In fact, the system that I left in Sherman, Texas had done just that. They had charged a large installation fee and smaller monthly fee. But in Hugo it was a pretty poor town and people just wouldn't come up with a $100 bucks. They had already decided to make that change.
KELLER: Well the industry had learned by now. We found that from a marketing standpoint it was much better not to get that big hit up front.
Now how many channels were you carrying in Hugo at that time Bob?
LEWIS: Five channels.
KELLER: Five channels. What equipment were you using?
LEWIS: I think we had primarily Entron.
LEWIS: Yes. It was a mixture. But I believe that a lot of the amplifiers were the old tube type, of course with the smoke stack boxes.
KELLER: Low band, broadband?
LEWIS: Low band and strictly five channels. Yes, that was it. We were actually microwaving signals from Texas.
KELLER: That's interesting.
LEWIS: We were part of a microwave company that was bringing signals in to Parris, Texas, which was south of us. Then we added a microwave hop into Hugo in order to get three channels there.
KELLER: Was that an independent microwave company or was it AT&T?
LEWIS: No, it was independent. It was kind of a co-op deal that was part of the Parris, Texas system. It was part of Midwest Video out of Little Rock, Arkansas.
KELLER: George Merrill's?
LEWIS: George Merrill, absolutely. So we added a hop from there on up to Hugo when that system was built. I think it was three channels we were bringing them.
KELLER: And that was even before the Carter Mountain Case?
LEWIS: I think so.
KELLER: That came in 1953?
LEWIS: Oh definitely. Yes, definitely. Because I was in Hugo in 1959.
KELLER: So under the revised rules that were about to come, you would have been subject to Federal Communications Commission's (FCC) regulations at that time because you were using microwaves?
KELLER: But at that time you weren't because they didn't come in with that regulation till sometime later.
LEWIS: That's correct. Other than, of course, the microwave license themselves that we had to have to run the microwave station.
KELLER: You are now in Hugo and you have approximately 1,000 subscribers.
LEWIS: A little over, yes.
KELLER: What happened after that? And Vumore's still moving pretty rapidly? Are they still expanding?
LEWIS: Yes. Vumore had built quite a few systems by that time. Ardmore was a system they had developed from the beginning and it had grown quite a bit.
Well, Larry Boggs gave me a call one day and asked me if I would be interested in moving to Ardmore, Oklahoma. Which I think he knew the answer before he asked me. The deal was that I would become the company's first district manger. I would have Ardmore and manage it, but I would also have Hugo and Sherman, Texas. Those three systems would then be mine in the district. I, of course, immediately said yes and moved there in 1960. Let me think a minute. These dates are hard to remember. I should have jotted some down. I am sorry I didn't take the time to do that. Let's see.
KELLER: It had to be before 1960 because Larry died in '60-'61.
LEWIS: Or '62.
KELLER: Maybe it was early '62.
LEWIS: I got to think back on that date. It may have been '61 when I actually moved to Ardmore from Hugo because I was in Hugo almost two years--about 21 months I think. Anyway, I did go to Ardmore and that system, by that time, was up to 12 channels. I think we had some of the first transistor type amplifiers in that system. It was in the process of being rebuilt to 12 channels. I was manager of that system. Then, as I said, I did look after Sherman and Hugo.
KELLER: So you were rebuilding Ardmore with 12 channels and transistor amplifiers . . transistors only on the--was it the input?
LEWIS: Jim, not being an engineer . . .
KELLER: I am not either, as you know. I remember the first transistors were AMECO amplifiers, right? They were the developers.
LEWIS: Yes. I think that's what we were putting in there. We were converting that to a 12 channel system. There again, we had microwave coming from Dallas and Oklahoma City to serve that system. We added the Oklahoma City channels after I got there because we couldn't get the reception even off of a 400 hundred foot tower. It was still difficult to get decent reception. We had a lot of experience with microwaving. In fact, we put in, one of the—probably not the first—but one of the first CARS band microwave systems to bring in the Oklahoma City channels to Ardmore. We actually used Jerrold equipment on that. I remember that one for sure.
KELLER: You owned that hop then?
LEWIS: Yes. It was a CARS band owned by the system. The other was a common carrier coming up from the south from Dallas. It was a common carrier system.
KELLER: So we are still in the early '60s and probably around 1960 or '61 you were in Ardmore. How many subscribers did Ardmore have?
LEWIS: Ardmore at that time I think had about 5,000.
KELLER: And Vumore in its entirety?
LEWIS: Oh, Jim, I am not sure. I think something over the 50,000 mark maybe.
KELLER: It had that many subscribers at that point?
LEWIS: It could have been 40,000. But they had a number of systems out in the western part of Oklahoma. Some other Texas systems were being built--had been built. I think we were at about that number at that time. It is very difficult to recall.
KELLER: Did Vumore have the systems out in the Panhandle of Oklahoma?
LEWIS: No. We didn't have the Panhandle. We didn't have Guymon, for instance.
KELLER: You had Bartlesville?
KELLER: I want to go into that a little more in detail when we get to that point.
LEWIS: Okay. Actually it wasn't a cable system as you probably remember. It was a movie system. But we'll go into that a little later
KELLER: Yes. I do want to go into that in detail.
LEWIS: I was not directly involved in it. They had systems in Altus, Hobart, and Mangum, Oklahoma; a bunch of systems in the western part of Oklahoma. While I was in Ardmore we expanded a great deal and built systems. For instance, we built a system in Ponca City, Oklahoma, in which we were partners with two of the television stations out of Tulsa, and that was under my responsibility at that time. What happened is, as the company grew then my territory grew. I kept adding systems to my division and in about 1968 - again I am not positive of that date - I was named the regional vice president for the company. We sort of divided the company into five regions at that time. I ended up having most of Oklahoma, not quite all, but most of Oklahoma, then the systems that were in Kansas and Texas. I ended up with about 20 systems. I still headquartered there in Ardmore although I had, by that time, named a manager in Ardmore. I just officed there and worked out of there.
KELLER: That's interesting. I wasn't aware that Vumore was in partnership with the Tulsa television stations.
LEWIS: We were . . .
KELLER: Within their grade "B" contour?
LEWIS: They were just outside. Ponca City was just outside. They were able to keep it for quite a number of years. They didn't have to divest it. But it was channel KVOO and KWTV, two stations out of Tulsa that were our partners there. Ponca City turned out to be an excellent system. It used Anaconda cable and amplifiers which was one of the first to do that. They had some problems with it but it did work. Also Jim, not too long after that we made a deal in Amarillo, Texas and brought in two of the three broadcasters there as our partners. We got the franchise and built Amarillo, Texas. I still stayed in Ardmore, Oklahoma but I was responsible for the construction and building of Amarillo.
KELLER: Who's idea was it at that point to go into partnerships with the television stations?
LEWIS: I think by that time Bob Clark was the president of Vumore Company. That is after Larry Boggs passed away, which we kind of skipped over. We'll go back to it in a little bit. But anyway, I think the idea was number one - that we still were not blessed with a lot of money and so you needed some help; but also to get the franchise. In that case now, of course, those were the systems sitting right in the community and we still didn't have the cross ownership rule at that point in time. So they were able to be part owners of that system. We were responsible for building it and managing it. Amarillo became a very successful system. It's owned by TCA now.
KELLER: Did your partners who were the local television station(s) allow you to import the network stations that they were carrying from Dallas or Oklahoma City or elsewhere?
LEWIS: No. We didn't import networks. Did we import the independent stations out of Dallas-Ft. Worth? There was an independent station. I forgot the number, channel 11 or something like that. I think there was another independent in Lubbock.
KELLER: In any event you were not importing network stations or going in direct competition with them, but you were importing independents to give them decent programming?
LEWIS: That's right. And then started running movie channels, I think HBO, as soon as it was on the satellite.
KELLER: That didn't come in until '71 or '72.
LEWIS: That's right. Those were obviously landed later. Those were the two systems that I had that I really started totally from scratch--Ponca City, Oklahoma and Amarillo, Texas.
KELLER: Now, was Vumore - I am really interested in this thing - was Vumore in partnership with any other television stations within your area of responsibility at that time.
LEWIS: No. And I don't think they were any place else that I can recall.
KELLER: That is really interesting because in most other sections of the country they were at each others throats.
KELLER: Both back east and elsewhere.
LEWIS: We tried to do the same thing in Tulsa. We didn't get the franchise. Gene Schneider did . . . . . . but we tried to. We partnered with the same stations that were partners in Ponca City. They joined with us to try to get the franchise in Tulsa and it didn't work. That was the only other place that I am aware of that we actually partnered with the local TV stations and tried to get the franchise.
KELLER: There had been other partnerships and there has been other ownership's by local stations. Grand Junction is an example, and some of the other places, of course, Austin, Texas.
KELLER: That is interesting that you were able to do that. As long as we're on the subject of television stations, were there any areas up to this time where you were having difficulty with the television stations?
LEWIS: Yes. In Ardmore, Oklahoma. We were bringing in the stations from Oklahoma City and Dallas - network stations. There was a local station assigned to Ardmore and Sherman, Texas. It was a two city market. It was really the same market but the station was assigned basically to the two markets. We had a lot of trouble on non-duplication. We fought that battle forever. Also then, the station out of Ada, Oklahoma, which barely put a grade B in Ardmore--I mean barely. And the reception was such that it really didn't do a very good job. They also made us non-duplicate their programming which was ABC. The Ardmore station was NBC. So we had non-duplication running out our ears and we were never able to overcome that at least for the time I was there.
KELLER: That didn't occur until after the Second Report and Order?
LEWIS: That's right.
KELLER: And that's in '66 was it, '65 - '66? It's before the freeze and that was in '68.
KELLER: The reason I say that is because I am looking at some of these dates here.
LEWIS: Yes . . . . . . you're one up on me. That is right. I was thinking it had to be the late '60s.
KELLER: Because then they took advantage of the non-duplication after that.
LEWIS: Oh, absolutely. Of course, at that time we didn't have sophisticated non-duplication equipment. You had clocks that had pins in it. It was really a nightmare. Finally, one of my engineers though did manage to hook up some kind of a system where you could change channels by telephone. By calling in and pushing buttons you could change channels. At least that saved some trouble.
I had the unfortunate pleasure of living very close to our tower. So guess who got to go to the tower when something didn't happen--set the clock or whatever?
KELLER: Brings back a lot of memories.
LEWIS: Yes. It was a nightmare. But you know we had to live with it and we still survived.
KELLER: You're now a regional vice president of Vumore and have most of Oklahoma, parts of northern Texas, and southern Kansas at this point. Was there anything else in Kansas?
LEWIS: Actually it was everything we had in Kansas.
KELLER: Were you experiencing at that time—we're still back in the middle to early '60s . . .
LEWIS: Middle to late '60s.
KELLER: Okay. Were you having any difficulty with the telephone companies?
LEWIS: Over pole contracts?
KELLER: No, including pole contracts.
LEWIS: Yes. Pole contracts we did have a lot of trouble, and power companies for that matter. I remember the little system that we started to build. We bought out a fellow named Jim Monroe, who is still in the industry, in Idabelle, Oklahoma. He couldn't get contracts. So he starts setting his own poles. When we bought him out, and he remained as the manger of building that system, we set our own poles and did the whole community with our own poles. It was a little unusual. That happened, of course, in some other systems. But we had trouble with pole contracts in many situations. I don't think we had any other kind of problems with phone companies, just the poles.
KELLER: That was settled by the FCC or by court rule, wasn't it?
LEWIS: Yes, it was a court rule. They had to give permission. You know, we mentioned Larry Boggs. Can we go back to that?
KELLER: Yes, please.
LEWIS: Larry was a great guy and I clearly enjoyed working for him and certainly felt like he was responsible for getting me into the business and then tutoring me along the way for at least awhile. Jim, I am sorry but I can't remember the year he moved to Denver and went to work for Bill Daniels.
KELLER: It almost had to be '61.
LEWIS: It may well have been. If not, in '62. Anyway, he did resign from Vumore and moved to Denver and went to work for Bill Daniels. I'll never forget the day he flew down to Ardmore to tell me what he was going to do. We were sitting in a restaurant having a cup of coffee and he said, "Well I am going to do this. I just think it's the thing to do." He said, "But you know there is something wrong with me and the doctor just can't seem to figure it out." Sure enough, Jim, it must not have been eight months or less than a year after he moved to Denver, that he died of cancer. It might have been a year. I am not sure. It wasn't terribly long.
KELLER: I joined Daniels in early '61. He was just coming aboard as I remember and died very shortly after.
LEWIS: It wasn't very long. Less than a year.
KELLER: I am not even sure he had moved to Denver at that point in time.
LEWIS: Might not have.
KELLER: But he wasn't around there very long. That's true.
LEWIS: He was a great guy. One of the awards that is still given by NCTA, although not now named for him, started out as the Larry Boggs award. He was a true pioneer, he really was. He obtained a lot of franchises and responsible for building an awful lot of systems that Vumore owned. By the way, when did Vumore become Cablecom-General? When did RKO General enter the picture?
KELLER: Well that's going to be a question I have.
LEWIS: We need to get into that.
KELLER: I want to get into that. Before you do that there is an interesting aspect of this whole thing - how the early franchises in all of these smaller towns were acquired?
LEWIS: We didn't do too much of the "rent a citizen" deal back in the early days. I didn't have a great deal to do with getting the franchises in many of the systems. I did in the case of Ponca City and Amarillo. In those smaller communities, generally speaking, people were pretty anxious to have better television reception. However, . . .
END OF TAPE 1, SIDE A
BEGINNING OF TAPE 1, SIDE B
LEWIS: Digressing a little bit if I may here concerning Larry Boggs. When I got asked to move to Ardmore and become the first district manager for Vumore Company it was really right after the owner of Video Independent Theatres—it was not a public company it was independently owned—Henry Griffing had been killed in an airplane crash. He and his family. It was about a year after that that the company actually was sold to RKO General. That happened in about early '61. They didn't change the name until we decided to take the company public and that is when the name was changed from Vumore Company to Cablecom General.
KELLER: This was owned by the General Tire Company?
LEWIS: It was actually owned through their subsidiary RKO General, and that was owned by General Tire and Rubber Company.
KELLER: RKO General, was that a theatre company?
LEWIS: Primarily they had become a television company. They didn't own theatre operations themselves other than when they bought Video Independent Theatres. But they owned the RKO studio, all the films.
KELLER: They were a production company?
LEWIS: No. They had bought the films and everything from Howard Hughes, as a matter of fact. They owned the old Republic Studios films so they changed it to RKO. They may have been in the production business some but by that time they had bought the library primarily.
KELLER: So now Vumore was sold to RKO General?
KELLER: Was this before or after the Bartlesville experience?
LEWIS: This was after. Bartlesville came somewhere in the '60s. I believe it was called Tele-movies. That's what they called the experiment. They built basically a cable system in Bartlesville but didn't build it for the purpose of the community antenna system. Which I personally have never been able to understand because Bartlesville was far enough away from Tulsa that they could improve the reception and then they could have brought some Oklahoma City stations in as well which they didn't receive off air. Anyway, what they did was to make it basically a two channel movie service. It had movie machines running and sending it out over the cable, and they tried to sell people on home subscription to movies. It was just before its time. It was before HBO. I mean they really were before their time. Of course, it was a little bit crude in the way it had to be done. Still it worked but they couldn't get enough subscribers so it was eventually closed down.
KELLER: So, in fact the theatre and the projection equipment were basically the headend.
LEWIS: That's right. They did it just like you would be doing it in a movie theatre. That's basically what they were doing.
KELLER: When that failed did Vumore then convert it into a cable system?
LEWIS: They did not. For the life of me, as I have said, I have never really understood it. I was not at that time in anyway connected with it. I was not involved in that experiment. I never really got a real answer as to why they didn't convert it to a cable system. I don't know why.
KELLER: Bartlesville then was built some time later but was not built by Vumore?
LEWIS: By Vumore or Cablecom General. No. It was not. In fact, what is it the Reynolds . . .
KELLER: The newspaper company.
LEWIS: Yes. Newspaper company ended up . . . It may have been that at the time they got permission to do the movie experiment, it may have been the city just did not or would not grant them a franchise for cable or television.
I started to go back awhile ago, and I know were jumping around an awful lot, but I want to get this one in. When I got out of the army and they said "Would you manage those theatres down in south Texas?" It was the little town of Cuero, Texas which lies to the southeast of San Antonio about 85 miles and just a little north of Victoria, Texas. When I got there I put up an antenna and tried to get TV reception. Well, you couldn't get any reception hardly at all. We applied and tried to get a franchise Cuero, Texas, I can't believe some of the stories that came out. The city kept saying "Well, you know if you put this in you're liable to interfere with the reception for everybody else." Engineers came in and told them no. They said, "Yes, you put up that big 400 foot tower you'll suck all the signals out of the air." You've heard that story before haven't you?
KELLER: . . . Yes.
LEWIS: We got turned down. It just made me so mad I didn't know what to do. Shortly after that I did get my chance to go to Clarksdale, Mississippi and get into the cable business, but we could not get a franchise there. That town sat there until the '70s without a cable system. The LBJ Company got the franchise and built it later.
KELLER: There were many communities that refused to grant franchises based on that same assumption.
LEWIS: I guess the story got around.
KELLER: Well, the antenna manufactures and the television stations all jumped on that at one time.
LEWIS: I thought that was so funny.
KELLER: We are at the point now where RKO General and Cablecom General bought out Vumore after Mr. Griffing's death?
KELLER: Spell Griffing would you please.
LEWIS: G-r-i-f-f-i-n-g. Henry Griffing. Unfortunately, he had learned to fly. Larry Boggs, of course, was a pilot too. Anyway, Henry Griffing flew a private plane back to New York to pick up his wife and two children and fly them back to Oklahoma City. They crashed in the mountains of Pennsylvania on the way back and killed all of them. The only heirs were his brother and his son and they decided they didn't want to operate the company. That is why RKO then entered the picture and bought the company.
KELLER: That was a giant step for a major company to come in and buy cable television at that point.
LEWIS: It was. It was definitely that. Unfortunately, while they did it they never seemed to really realize what they had bought in getting the Vumore cable company. Over the years of their ownership they really never supported cable like we had hoped they would.
KELLER: You think they were primarily interested in the theatres as opposed to cable?
LEWIS: That was difficult to understand. I guess that's really where their greatest interest was. And, of course, the theatres were still making pretty good money at that time, no doubt. I am sure they wanted to see about this cable thing. They were interested in it. At least RKO at that time was primarily a broadcaster, they were not as supportive of cable. They kept thinking, "Well it may not be here in a few years it may go away." I know we got that impression from some of the people from RKO General.
KELLER: So you stayed on then as a vice president of now Cablecom General?
LEWIS: As I said, they didn't change the name until we went public in the '60s.
KELLER: Late '60s?
LEWIS: Yes. It was in the late 60's. It remained Vumore for quite some time. Then it became Cablecom General and became a public company with RKO retaining about 80% of the stock.
KELLER: So when you went public you were well over 50,000 subscribers?
LEWIS: By that time we were close to a 100,000 if not more.
KELLER: How many systems at that point? Roughly.
LEWIS: Probably around 30 to 35 systems at that time, but growing. We grew to about 40 some odd systems before I left the company.
KELLER: These were primarily what we refer to today as classic markets?
LEWIS: Yes. They basically were. I guess Amarillo would have been one of the most non-classic because they did have the three network stations there in the city. I would say it was not a classic system.
KELLER: Go into that, Bob. I think this is an interesting aspect that is often lost. Would you agree that in the early days both from an entrepreneur standpoint and from a financing standpoint that if a city had all three networks it was very difficult in the minds of most people to build a system and almost impossible to finance. Would that be true?
LEWIS: Absolutely. In the very early days, even one television station made the early pioneers of this industry a little skeptical.
KELLER: But by the '60s, though, if there were three stations in the market you pretty much . . .
LEWIS: It was tough. And Amarillo didn't take off like gangbusters. We had to really fight for the subscribers. As I said, we brought in independent stations and educational stations that they didn't have and started doing some local programming which was pretty primitive at the time.
KELLER: Was that before we were mandated to do local programming?
LEWIS: Yes, it was before we were mandated to do it. Until they started getting satellite reception I would not say that Amarillo was a raging success. It was paying its way but it wasn't a success until satellite reception with HBO, channel 17, Turner station, and all those things started becoming available.
KELLER: You stayed with Cablecom General?
KELLER: The companies gone public with a successful initial offering, and you said at this point that Cablecom really didn't appreciate what they had in the cable business.
LEWIS: I don't want to be unfair to RKO General about that. What I really mean by that is it was at the point where franchises were turned down because we didn't have any financing. Even RKO did not support the financing. We basically had to do our own financing within the company, Vumore. Vumore going public helped. That got us some money to build some systems and so forth. But there still was not full support from RKO General. They did introduce us to bankers which helped some but as far as guaranteeing loans and that type of thing, they did not. They didn't put any of their own money into the company except for the purchase of the company itself. We were pretty much on our own.
I can remember Larry Boggs telling about how he could have gotten the franchise in one of the Mississippi towns that later became a pretty big system, at least by the standards then. Can't remember what it was.
KELLER: My guess would have been Baton Rouge.
LEWIS: Well, I don't think that was it. It wasn't. It was Greenville or something. It became a pretty successful system. He had to turn it down because he didn't have any money, and thus, couldn't build it. There were other examples of that. But, I guess going public was certainly a positive and that was done under RKO General.
KELLER: They still retained a majority of the stock?
LEWIS: They did, definitely. I think only 20% was sold to the general public. I stayed in Ardmore, Oklahoma for twelve years. My area kept growing because we either purchased or built systems, for the most part, we built systems.
We had another television station partner - Lufkin, Texas. We were partners with the television station there as well as the Buford's out of Tyler. They were our partners. In fact, I later bought them out of that partnership and it became wholly owned by Cablecom General. But that was another connection with the television stations.
KELLER: You used the term earlier in our discussion of "rent-a-citizen. That became an nefarious term in the later franchising efforts. Companies would go in and get influential local citizens and give them a piece of the action for systems. So you didn't go for individual citizens you went for local media companies.
We're now at the point where Cablecom is a public company and your still continuing to build but not at the rate that you would like to. Bob Clark is now the president of Cablecom General and you're still operating vice president based in Ardmore. The next question that comes to mind in relation to Cablecom General is Colorado Springs.
LEWIS: That's about the next step here. Through Bob Clark having association with Daniels they went to Colorado Springs and managed to get the franchise there. Shortly after that Bob Clark decided to move the Cablecom General headquarters from Oklahoma City to Colorado Springs. And you know by the way, I don't think we were a public company yet. I think it was still Vumore because the name in Colorado Springs was Vumore Video. We were not a public company when that move took place. When they got the franchise in Colorado Springs it was a joint venture with Bill Daniels company and Vumore Company and I think maybe some locals. I am not sure.
KELLER: This had to be after '66. I think it was '67 or '68.
LEWIS: Right. So they got the franchise to build a system in Colorado Springs. Even Bill would admit today that it wasn't a good franchise. Had a lot of problems there.
KELLER: There were two things that he had, as I remember, that he had to offer to get the franchise. It became nefarious in the industry. One was total underground the other one was a relatively large franchise fee.
LEWIS: And I can't remember that percentage, Jim. Can you?
KELLER: Yes, I can.
LEWIS: Okay. What was it?
KELLER: Twenty-five percent.
LEWIS: That I didn't remember exactly. I knew it was way up there but I had forgotten what it was.
KELLER: Of course, that was subsequently thrown out when the FCC set a cap on the franchise fees. It has infamous notoriety within the cable television industry at that point to offer those two things. Probably started the demands that cities were going to make on companies coming in requesting cable franchises.
LEWIS: Obviously it had to spread from there to some degree. I think that is correct.
KELLER: I remember it was the first one that really demanded concessions.
LEWIS: It was evidently very, very tough. Bob Clark felt that it was so important—that system was—that he decided to move the corporate headquarters from Oklahoma City (not for the theaters because he wasn't running the theatres - Vumore was being run separately) to Colorado Springs. Bob Clark was on the scene there and moved a lot of his corporate staff, not that it was that large at that time, to Colorado Springs to be there were that system was being built. In all honesty the system was not a success because of the underground and huge cost. Also, a lot of bells and whistles. It had a big origination studio, a lot of things like that. Today it is a good system. Back then it was a drain rather than a money maker. That's for sure.
KELLER: It almost bankrupted Cablecom General at that time?
LEWIS: I don't know that it did that. It certainly didn't help. Again, I was not responsible for the system and was not in on what was really going on there -just what we would hear through reports and through my talks with Bob Clark from time to time. He didn't stay in Colorado Springs to long. He found that travel out of Colorado Springs wasn't the easiest at that time. So he moved the corporate headquarters to Denver. Again, I think that must have been in 1969 early '70 maybe. Because I came to Denver in 1971 from Ardmore and became the executive vice president of Cablecom General and we had gone public at that time. Anymore about Colorado Springs? I can't tell you a whole lot.
KELLER: That's probably enough. That would be your recollection. Cablecom General had something to do with Baton Rouge. I am a little out of focus as to exactly what it was, but didn't Bob Clark get the franchise there and build it?
LEWIS: It was Bill Daniels. Let me go on with where I came in. In 1971 Bob Clark then asked me to come to Denver and be the executive vice president of Cablecom General, which I, of course, accepted and moved here. Eight months later Bob Clark left the company and went with Daniels. It was because they had gotten the franchise in Baton Rouge - at least that was part of it - and Bob actually moved to Baton Rouge and was the general manger of that system. Which was kind of strange in some respects, but he had always kind of wanted to be involved in the construction of a brand new system. He did that and probably had some ownership with Daniels in the system. But, that's where he went.
KELLER: But Cablecom was not involved?
LEWIS: Cablecom was not involved in Baton Rouge. When he left Cablecom General, RKO asked me to take his place as president of Cablecom General. I had only been in Denver for eight months so it was kind of a shock in a lot of ways. But I agreed and that was in 1971. At that time we had about 150,000 subscribers. We were operating about forty-six systems altogether. We had by that time also built Modesto and Santa Rosa, California and Topeka, Kansas, during that period. Topeka was probably just getting started by the time I came to Denver. These were fair sized cities.
KELLER: By this time you were able to import a number of signals as long as you didn't duplicate. And by 1971, HBO is on.
LEWIS: Yes, HBO came along which helped a great deal. Going back to Amarillo, that certainly helped as far as the system there was concerned. When did Turner come on? In '74?
KELLER: I don't remember. Something like that.
LEWIS: Which was another big boost, of course, to the industry by being able to get his signal. That brings us up to the time that I then became president of Cablecom General. That is where I got the full taste that RKO General was not as supportive of the company as I thought they would be. It was very difficult to get enough financing to do everything that we wanted to do. But, we operated and we were doing pretty well making good cash flow except in Colorado Springs. That, then, did become my problem.
KELLER: It was a drain on cash flow.
LEWIS: It was a big drain on the cash flow. I don't know how much of this you want to get into. Bill Daniels came to me one day and said "Look, I will buy Colorado Springs. I still believe in it. I would like to buy it." Rather a long story short, we basically had a hand shake deal. By that time RKO had decided to bring a chairman in to Cablecom General. His name was Richard "Dick" Forsling who had been at CBS at one time. He was involved somewhat with the CBS cable operations.
I had made a deal with Bill Daniels at a price which certainly could put us in pretty good stead, and I got vetoed on that deal by Mr. Forsling and Mr. Poor, who was chairman and president of RKO General. Mr. Forsling decided that we could turn that thing around and we could make it fly. He brought in another operating guy. He gave it a try for one year and wound up selling the system to Leonard Tow and Time Warner, which was then ATC, as a combination for 3.25 million dollars--less than I had it sold to Bill Daniels for the year before.
Well that was beginning of the end as far as I was concerned with RKO General and General Tire. We sat down and agreed to disagree in '75 and I left the company. They made a big, big mistake. It really was draining our cash flow and selling it to Daniels would have been the best thing we could have done for our company. I felt terrible. Bill never blamed me because he knew I was willing to go forward with it and RKO just would not agree.
KELLER: It was sold to Leonard Tow and ATC at that time and it was at that time that the industry started to turn around in the major markets.
LEWIS: That's right, although it took a few years.
KELLER: That's your point. But it was that interim period where it was a major drain on your company at that point.
LEWIS: It was keeping us from being able to build extensions in systems. We couldn't go for franchises because we didn't have enough money to build them. So we weren't even trying at that time to get any more franchises.
KELLER: It is interesting that it went to that combination of people because I know from experience that Monty Rifkin was not particularly interested in going into major markets at that time.
LEWIS: I think Leonard was the catalyst there. As Leonard Tow will admit, I got him in the business. His first purchase was some systems in southern California where RKO owned a television station. Because of their ownership of Cablecom General they had to sell the systems that were located in southern California.
KELLER: This was after the cross-ownership rule was adapted?
LEWIS: Yes, this was after the cross-ownership rules. We were basically forced to sell. They had KHJ in Los Angeles. We had systems in Brea, La Habra, and Yorba Linda; three small systems in the Los Angeles market area that we had built. We had to sell three northern California systems at the same time because they were in the same partnership. We did have a partner in those systems that Bob Clark had put together earlier. They were Albany, Benicia and San Pablo. There were those six systems in southern and northern California. We sold them to Leonard Tow. That is how he started his company, Century Communications. Then later, he bought the Colorado Springs system in conjunction with ATC.
KELLER: Is it still under that ownership today?
LEWIS: No, Time Warner traded their interest to Century for another property.
KELLER: Time Warner and Leonard Tow. Then you agreed to disagree with Cablecom General. What did you do then?
LEWIS: I tried to get into business for myself. Again, the banks weren't very kind to the industry at that time. I did a little consulting work during that interim period of time. Looked at several systems for purchase. I had gotten to known Glenn Jones, not very well at the time, but he had been involved with Daniels and they had obtained a lot of franchises in the metro Denver area. The old Mountain States Video Company which Vumore, or rather Cablecom General, had an interest in along with Daniels. The systems had not been built.
Anyway, that is how Glenn Jones had sort of gotten involved in the industry. Then he started Jones Intercable. He kept talking to me and one day he just said "Bob, I want you to come on board." I told him he couldn't afford me even though I wouldn't demand that much money. I just said "How could you afford me?" The comment from him was "I can't afford not to." He had a great idea, and that, of course, was the limited partnerships. It was a new idea to cable. He had trouble getting brokerage firms to even look at the company for selling the partnerships. He needed somebody on board that really knew cable operations. I think that is really why he wanted me, or certainly somebody like me, to be involved with the company.
After a lot of thought and consideration I felt like Glenn and his brother Neil, who was there raising the money for the partnerships—making that happen—I just felt like it was a pretty good team and decided to join him. I did that in January of 1976. I came on board as president and chief operating officer and a director of the company, which at that time was already public. Stock was very low priced. One of the first things I attempted to do and was successful at was meeting with Boettcher and Company, which was a major regional stock brokerage firm that also sold partnerships, real estate, oil, and things of that nature. We met with them and convinced them within about three months after I joined the company to sell our limited partnerships. That was the beginning of getting a number of regional firms to start selling the partnerships. We started raising a lot of money and started buying quite a few systems.
I started in 1976 and we continued to grow. When I joined Glenn he only had a little over 10,000 subscribers - very small. We grew fairly rapidly after that and started acquiring systems. Our partnerships were public. We had them registered and that was, of course, helpful in getting the partnerships sold by the brokerage firms.
We were able to get a number of regional firms like Foster & Marshall in the northwest and Robinson Humphrey in Atlanta to become retailers for our partnerships. By the time we had those three major brokerage firms selling, we were raising capital rapidly and our acquisitions were numerous. It was a fun time but not only was I looking at system purchases, doing due diligence, etc., I was also running the cable operations.
END OF TAPE 1, SIDE B
BEGINNING OF TAPE 2, SIDE A
KELLER: We've just changed tapes. We had a little break while we did so. Bob, we are now where you are in the development stage of Jones Intercable and the Jones limited partnerships. Where do we go from here?
LEWIS: Just to backup a minute and talk a little bit about Glenn's idea of raising money through limited partnerships for the industry. He was certainly the pioneer in that and it was a great idea. We had Neil Jones there, and he was in charge of raising money and working with the broker dealers, and once we got them on board that started growing very well.
We started raising considerable amounts of money in the public partnerships. We looked for systems throughout the land. We didn't have any geographic barriers as to where we would go. (This was before clustering became important!) We bought systems throughout the country. Jones Intercable grew to a little over 400,000 subscribers in the eight and a half years that I was there. It was an interesting time because we also cycled out some of those early partnerships while I was there.
KELLER: So you were not only buying but you were selling also?
LEWIS: Yes. For instance, number one, a little system up in the mountains which we bought into Jones Intercable by taking the partners out. Number two, we had a system down in Alabama which we actually sold to someone else. Then number three was one of the first public partnerships. I think those systems—they were small systems—I believe up in Idaho, and we ended up selling those systems. Number four, we had a system in Smyrna, Georgia, which we also ended up selling to another party. Then our Jones Fund Five, we called it, was the largest fund to that date and we bought the system in Alton, Illinois from the Anaconda Company. Anaconda had to repossess it from the people who had built it originally. We bought it for not very much, a little over $2 million. We grew that system from a small number of subscribers (about 3,000) to well over 10,000 subscribers in about five years. We ended up selling that system to my friend Bob Magness, at TCI. I went over to visit with him and told him it was for sale. They had other systems close to that one. You know how Bob was--we sat there and chatted about everything else. About forty minutes into the conversation we talked about the system and he wrote something down on the back of an envelope and said "Well okay. I'll give you a call tomorrow and tell you what we want to do." The next day I had a deal. Had to negotiate a little bit with him but at that time it turned out to be a real success. Our limited partners actually received about seven times their investment in that system. We kept the system for about five years. That success story made it even easier to sell the partnerships as we went forward. I am trying to remember the year that we sold Alton. It had to be about '81 or '82.
We continued to raise money and buy a number of systems in Wisconsin, from the Fitzgerald's, and a lot of other areas that I am having trouble remembering. I know that one of the last deals that I did make before I left Jones, which was in August of '84, was some systems around Buffalo, New York. A fairly large complex of about 20,000 subscribers.
I finally did go into business for myself. I bought some systems from a little company headquartered down in Texas. Two in Texas and about four in Kansas and one in Nebraska. I started my little company called LEWIS: Communications in '84. Right about that same time Carl Williams started talking to me. One day he came to me and he said "Bob, can I buy a little bit of your time?" I said "Well, what do you mean?" He said "Well, I need some help." Again, a long story short, he was having some problems and decided he wanted to bring his operation headquarters to Denver, which was located in Walnut Creek, California. I agreed to do that--I was just running my own little company more or less out of my home. He decided I could do both from his office. We made quite a transition with Televents which was the company name. We moved the operations to Denver. Didn't really move any of the people but we reestablished the operations. I hired a controller and a few other people and we started the Televents operations. I was running my company and his out of his office here in Denver. I did that for a little over two years. We had about 130,000 subscribers primarily in California. Although one in Florida and a couple in Wyoming and a couple here in Colorado.
KELLER: Had he built Coronado, California at that time?
LEWIS: He had already traded it to Time Warner. In the trade he got the system in the Bay Area, which was, I believe, Moraga.
KELLER: One was adjacent to Martinez as I remember.
LEWIS: Yes. Anyway, that was a trade that he made which I think was good for both parties actually. Time Warner had systems around Del Coronado. The Contra Costa system of Televents was a large system, about 70,000 subscribers. In fact, grew to about 75,000 by the time we sold the company.
It was a great little company. The problems that Carl really had were simply a lack of experience. The people running the company, the president, had come from a programming company. Apparently he had been too optimistic on some of his projections and the banks were a little nervous even though they had no good reason to be. We got the banks satisfied in about six months. We made some realistic projections and produced the necessary results. In fact, that happened to be the Bank of New York which was also TCI's lead bank at the time. We had a good time with that company.
Carl decided in '86 it was time to sell. Oh, and John Malone was on our board. And Carl said, "I've always told John that they get first crack." So he sent me to see John. We negotiated a deal to sell Televents to WTCI not just TCI, but to WTCI.
KELLER: That was a microwave company wasn't it?
LEWIS: It was. They wanted them to be in the cable operations business as well. It was a separate company at that time. It had been spun out. Although, I think plans were already in the works to bring it back which did happen shortly thereafter. It happened when the Marcus deal came together. They brought it back into the company after Jeff Marcus left. I digressed there. I'll go back to that later.
I did negotiate the sale of Televents to John Malone. At the same time I decided to sell my little company. Prices were pretty good at that time and I felt like that's what I wanted to do. I sold my company to Jay O'Neil who had been in the business and owned some systems. He had put together some investors and I sold my company to him. Ironically, we closed the sale of Televents to WTCI on Christmas Eve of '86 and then I closed the sale of my company to Jay O'Neil on New Years Eve of '86. We had a busy year end!
John Malone had asked me to continue running Televents for WTCI. I said I would for a while. I didn't really know what I wanted to do. But I said I would be glad to do that for a while. Then about three months after that, and this is now in March '87, he called me over one day and asked me if I would like to come over and be the vice president of corporate development and do mergers and acquisitions for him. I jumped at that chance because I had done a lot of acquisitions at Jones and loved doing deals. That was April the 1st of '87. That was fun. It was a lot of fun working with John. We did a lot of deals!
It wasn't but a year after I went there that we got involved in the Storer deal and ended up partnering with Comcast to do that deal. For many years that was the largest cable deal that had ever been done. It was $3 billion total purchase price of Storer Cable, which had a million and a half subscribers.
KELLER: This was in '87?
LEWIS: No, it was 1988 when we started working on it but we didn't close until '89.
KELLER: By this time though, TCI was on a good solid footing and their banking connections were solid at that point too.
LEWIS: That's true. Actually, the deal was negotiated twice and fell apart. Kohlberg, Kravis & Roberts owned Storer at that time.
KELLER: That's right. What do they call those things? Leverage buyouts?
LEWIS: Yes. They had bought all of the Storer properties. They had already sold the television stations to Gillette.
KELLER: Leverage buyouts.
LEWIS: It was a leverage buyout deal. They had already sold the television station and they had the cable left. The third time that we finally sat down we were able to strike a deal.
KELLER: So, at this point TCI needed a partner to make that deal?
LEWIS: Basically they felt like they did. As a matter of fact, it went even further than that. I wasn't directly involved in the Group W deal, I was on the tail end of it - but that's where the consortium of operators went together and brought Group W - Westinghouse Cable Group. The same philosophy was being used in the Storer deal. As a matter of fact when we started it was Time Warner, Comcast and TCI - all three of us. Time Warner dropped out later.
KELLER: This was just Time at that point? Wasn't Time Warner?
LEWIS: Time had bought . . .
KELLER: Had bought ATC.
KELLER: But that was before they merged with Warner Brothers wasn't it?
LEWIS: I think you're right about that.
They did drop out after two attempts to negotiate the deal failed. They dropped out of the picture so it just left Comcast and TCI. But we did manage to negotiate the deal. TCI went to Knight Ridder in Miami and brought them in as a partner with us in part of the systems that were going to come from Storer. That was how TKR was born. Telecommunications & Knight Ridder combination. The systems in Kentucky - Louisville, Bowling Green and Covington - and some in New Jersey became TKR.
KELLER: At the inception of that agreement which you have - Comcast, TCI and Knight Ridder, was the thought to separate the systems based on geography--did that thought even entered the deal.
LEWIS: Basically that is true. Comcast was taking primarily eastern systems. Although they did take the Florida system—Saratoga.
KELLER: So that could really be what would later be called clustering.
LEWIS: It could to a degree.
KELLER: I don't remember any one else looking at deals on that basis at that point. You at Jones sometimes looked at those deals, but you wanted to look at where those systems could possibly be sold, is that correct?
LEWIS: Well, that's true. Yes.
KELLER: Based again on clustering.
LEWIS: Yes. We would buy groups of systems. We didn't necessarily say that any geographic area was off limits. By the same token we were reluctant to buy little systems that were scattered. If it was a group of systems—even if it was Wisconsin or California or whatever—we would buy them. We weren't trying to keep our operations strictly in a particular geographic area. However, we didn't want to buy single systems that were small and located where we couldn't sell them as a group later on.
KELLER: Nonetheless, when you bought a system for Jones through limited partnership you knew that within a period - five, six, seven years, whatever period it was going to be - you had to sell it.
LEWIS: Had to sell it, yes.
KELLER: So you were also looking at the front end as to where you were going to get out in the back end of these deals.
LEWIS: That's true.
KELLER: Is that correct?
LEWIS: Oh yes, no question about it. You always looked to see what your exit strategy was. Of course in some cases the strategy became more to buy them into the Jones Intercable operations and buy the partners out. But that didn't come until after we had quite a few successes because there wasn't any way that Jones Intercable itself could have financed them until the company got pretty healthy financially. Also, the public stock of Jones Intercable had to become worth a lot more than it had been earlier.
KELLER: So now you were working on the deal with Comcast and Knight Ridder to buy Storer, and you worked on that deal for TCI?
LEWIS: John Malone was involved and I worked with him. He made a couple of trips back to New York with me, but I practically lived in New York for quite awhile trying to get that one done. Once we had struck a deal it was still the negotiations and all the terms of the deal that were very, very tough. Kohlberg, Kravis & Roberts (KKR) started to walk out several times.
KELLER: Tell us about KKK.
LEWIS: Let's not get it confused with the Klu Klux Klan. .
KELLER: No, no. I don't want to do that.
LEWIS: It's KKR.
KELLER: KKR, okay. Well maybe that was a Freudian slip. In any event, you were looking to buy out KKR investment company?
KELLER: And KKR had purchased Storer for the purpose of selling it?
KELLER: Were they difficult to deal with?
LEWIS: Yes, very. As I said, they walked out of conversations with John Malone and I and Time Warner and Comcast. We were all in the KKR office in New York and we came back to them with a proposal and they just said "Gentlemen that's not acceptable. We'll see you later. Goodbye." I mean we were in his office like three minutes and we were gone. I think John was just as surprised as most of us but we had just never been treated quite like that.
It still kept coming around. They didn't have anybody else clamoring at their door to buy it. It was a big deal. It was a huge deal. I think I told you the price—that was wrong. It was a $3 billion dollar deal that had a million and a half subscribers. I said $1.3 earlier, but it was $3 billion. The largest deal that had been done in cable up to that point and for quite some time afterwards.
We finally did get an agreement on price. But then getting the terms negotiated was difficult. It was almost killed two or three times because of that. It took us weeks to get a contract actually signed.
KELLER: What were the major hang ups after price? Because I thought they were primarily interested in price.
LEWIS: Yes, but then when you get to asking them to warrant subscribers and homes passed and things like that – they said, "No. You're buying it as is." For $3 billion dollars we weren't buying it "as is". We were saying we've got to have some guarantees. It was those kinds of things. Account receivables became a big issue. They had not done too good a job of collecting their past due accounts. The ordinary things you go through, but they were being so adamant that they weren't going to give on them. There were times when it looked like the deal was going to crater again. But finally we would get through them. We just took them one at a time. It took a lot of negotiating.
KELLER: How did you as a little guy from Oklahoma feel going up against KKR? One of the big financiers in New York.
LEWIS: Fortunately I wasn't by myself. I had Julian Brodsky of Comcast. Of course, you know Julian – he is never bashful. But we had him and I had John Malone to help me when I needed him. It was actually probably one of the most stimulating deals that I have ever done. Because of the size and maybe the fact that we were sitting there with KKR people. Of course, they were just like a lot of people. When you get right down to it, just tough to deal with.
KELLER: But they had the R.J. Reynolds deal under their belt by that time didn't they, or did that come later?
LEWIS: I believe that came later.
KELLER: Anyhow they were very experienced at making these kind of deals.
LEWIS: Yes, they were. On the other hand they really didn't know the cable business even though they liked to think they did. Ken Bagwell was still running Storer.
KELLER: I was going to ask who was advising them from an operating standpoint?
LEWIS: He was. He was obviously on their side but in a sense he was a fair guy and all.
KELLER: Well he knew how to guarantee subscribers or accounts receivable and things like that.
LEWIS: I think that behind the scenes he was certainly able to—not during the discussion—but he was able to convince them of some of these points that we were bringing up that were very important.
It was one of the most stimulating things I ever did. I loved working the deal. As I said, John made a couple to three trips but he really didn't get involved in those day to day negotiations. It was fun to work with him because John is the kind of person you can tell him just a few things and he's got an answer for you just like that. It always amazed me at his vision and all. It was just fun to do the deal and work with the guys from Comcast. TKR wasn't involved in these negotiators. They came in later.
KELLER: As Knight Ridder?
LEWIS: Yes, as Knight Ridder. I am sorry. Knight Ridder was not involved in the early negotiations. We really brought them in after we had a deal struck with KKR. So they were not at that negotiating table at all. We only put part of those systems into the TKR partnership. The others like Houston and a lot of the other systems that we got were not part of the deal with TKR. TKR was already formed and had some systems in New Jersey. Then the Louisville and other Kentucky systems were added to that partnership. Of course, they came up with their equity money which was good for us. We needed some extra equity.
KELLER: So in effect TCI brokered some of those systems?
LEWIS: To our partnership with Knight Ridder. But not brokered outside.
KELLER: Yes, I understand. But still internally was a brokeraged system.
LEWIS: That's right.
KELLER: To various subsidiaries of TCI then?
LEWIS: Yes. But it was just the one. The Knight Ridder was the only one that we brought in.
KELLER: But that became then kind of a trademark of TCI after while did it not? Shifting systems from one of their existing subsidiaries to others. It's going on even to this day as we speak.
LEWIS: That's true. In fact, we'll get to the InterMedia situation one of these days in our conversation, Jim.
Anyway, we got that deal done and then a lot of smaller deals. We bought a lot of systems that were next door to our operations that we already had. Because my philosophy was if you can add 5,000 customers to a 20,000 customer system you just made the whole thing more valuable. We did a lot of those kind of—I won't call them just fill-in, but—additions to systems that we had all over the country.
KELLER: The clustering again.
LEWIS: Yes, definitely. The time that I spent at TCI we did an awful lot of that.
TAPE INTERRUPTED BRIEFLY FOR EXCHANGE OF MESSAGES
KELLER: Now, Bob, you are at TCI right now and you're in the process of making deals. The Storer deal, the joint venture with Comcast and Knight Ridder had been made. You went on to do other deals. How many subscribers did you bring in the deals that you did when you were with TCI?
LEWIS: I've never gone back and added them specifically, but we did make an estimate one time and I think it was a little over two million subscribers' altogether. I don't have the exact number. It was something I never thought too much about.
KELLER: And those were the ones that were actually brought into TCI?
LEWIS: I will say that probably includes all of the – no, I'll back up. That's true. It was about two million that we brought in - 750,000 of them coming from the deal with Storer.
KELLER: So about a 1.3 million in addition to the Storer deal?
LEWIS: Yes. I don't believe that's correct. I think when I added those up we added the whole thing. I was talking about the deals I was involved in that we did and it was the million and a half. Then I think there was about 550,000 to 600,000 additional subscribers that we brought into TCI. But TCI only got credit for obviously half of those subscribers in Storer. However, keep this in mind, the Storer deal was kept in tack. It was run as Storer Communications for some period of time even though Comcast ran the systems they were going to take out at a future date, and we ran the systems that we were going to take out. It was still run as a corporation, a Storer corporation because it was a stock deal. We couldn't break it up for at least two years.
I was on the board and we had board meetings. J.C. Sparkman was on the board from an operational standpoint as well. So we held regular board meetings in Miami. The headquarters of Storer remained in Miami for some period of time. We promoted a guy there to be the president. Julian later took him to Comcast and we brought Bill Whalen back as president. He had been the operations vice president of Storer. So we brought him back for about a year before Storer was divided. We took our systems out and Comcast took the corporation. That is the way the systems got divided. But for some period of time there we were operating Storer as Storer Communications.
KELLER: The intent anyhow of the joint venture, to use a broad term, was that these systems would be pulled out and go to various geographical area.
LEWIS: At some point. And they were. We couldn't do that initially for obviously many reasons. That is basically the story. As I said, that was a very interesting time. I did stay on the board for those two years. We had a great time running Storer. It was a good partnership with Comcast, Julian and Brian Roberts. They contributed very much to the deal itself and to the operations of the company as we kept it together for two years. Where do we go from here?
KELLER: You at this point were with TCI in the development area for two years, three years, what?
LEWIS: You mean how long did stay in it?
LEWIS: Nearly ten.
KELLER: Was it that long?
LEWIS: I became a senior vice president in '91, with the same responsibilities basically. I was running what a lot of people called the M&A division we called it corporate development at the time. It was primarily mergers and acquisitions. During this period of time is when Leo Hindery decided to get into the business. In '88 I first met Leo. He had talked with Malone and Donne Fisher and they had basically agreed to be partners with him if he could find systems to buy.
In fact the first group of systems that he ended up buying were systems that were owned by the Hearst Communication company out of New York.
END OF TAPE 2, SIDE A
BEGINNING OF TAPE 2, SIDE B
KELLER: We are going to finish what Bob has started and leave the rest until our next session.
LEWIS: Jim, as I was indicating that one of the deals I had started working on and had pretty well negotiated a deal was with Ray Joslin of Hearst Communications and the Hearst properties that they owned in the Bay area of San Francisco. They had about 70,000 subscribers out there in smaller systems south of San Francisco. We had been looking at those for TCI but at about the same time, Leo Hindery had been looking for his first deal for InterMedia Partners. One day I was in talking to John Malone and telling him what the deal was with the Hearst properties and he said, "You know, that's a deal that we ought to let Leo have." So I got in touch with Leo then and told him about the deal. We went back to New York and negotiated some more with Ray Joslin and his folks and got that deal signed up for InterMedia Partners. That became Leo's first cable deal.
KELLER: Now Leo was with the Tribune Company wasn't he?
LEWIS: The Chronicle.
KELLER: The Chronicle Company who also owned systems in the Bay area.
LEWIS: Yes they did. They owned some there and of course some down south as well. Leo had left the Chronicle. He was the chief financial officer for the Chronicle for quite a while. He had left and decided to form InterMedia Partners and go after systems. He had Ed Allen, who you know, a pioneer in the industry. Ed had been running all the western properties but had retired from that sometime before. But he was one of Leo's initial partners in InterMedia Partners. Anyway, he was looking for a deal and so we let him have the Hearst deal. I think part of the reason was we wanted to get him in the business and so we decided to do it that way. That was the beginning of InterMedia Partners. I think that deal closed in late '89. He had formed the company in '88 but I believe that deal got closed in '89.
KELLER: Did he buy the Tribune systems then?
LEWIS: The Chronicle systems?
KELLER: The Chronicle systems.
LEWIS: No, he did not. I did that for TCI later, quite a bit later. In fact, just before I left TCI, before I retired, that really was the last major deal that I did was to buy the Western Communications systems for TCI.
KELLER: Bob, this is apparently a good place for us to stop. We will setup another date when we can finish.
END OF TAPE 2, SIDE B
KELLER: This is the second session with Robert J. LEWIS:. The date is January 7, 1998. We are once again in Bob's offices at 15504 East Hindsdale Circle in Englewood, Colorado. The time is approximately 2:00 p.m.
Bob, when we left off you had just made the Western Communications deal for TCI. I believe the pertinence of that was that it was the first time you met Leo Hindery. Is that correct?
LEWIS: Well I had met him way back. Remember we were talking earlier about how we (TCI) gave him the first deal. So I actually met him in '87. He formed InterMedia Partners in '88. Then we gave him the Hearst deal, the properties in California, which we talked about earlier.
KELLER: You're referring now to InterMedia Partners. Is that correct?
LEWIS: When Leo formed InterMedia Partners in '88 and TCI agreed to be a partner with him then we actually gave him the first deal, which we have already discussed - the Hearst properties. Okay. That closed in '89. But I closed the purchase of the western cable company from Chronicle Publishing Company. We contracted the deal in '94. It actually closed after I retired. But we had the deal done. We had struck the deal and everything had been signed. Well anyway, when we got Western agreed to, that was probably the last deal I did for TCI before I retired.
KELLER: Let's see if I understand. You were with TCI making deals and TCI was parceling off some of these deals to other companies like InterMedia Partners and others that they were bringing in as partners in other deals?
LEWIS: Well, that had been done over the years previously by John Malone, like with Bill Bresnan. A deal was done with Bill Bresnan, some time ago. But I didn't negotiate the deal on the Hearst properties to take it and give it to InterMedia Partners. But as we got into the process and we had basically struck a deal with Hearst, John Malone and I were talking one day and he said, "You know, this would be a perfect deal to let Leo have so that he can get started in the business." That was really the only one of those that I was involved in where we took a deal and gave it to one of our partners.
KELLER: How would you or John Malone or both of you decide which one of these deals you would allow the Bresnans or the Hinderys or some of the others that you had deals with. How would you determine that?
LEWIS: It was usually almost an afterthought from time to time. Certainly the Hearst deal was. We had no intention of not taking that one ourselves in the beginning. It really was not a, if you will, a formula or any particular policy. It was just as things would come up. In this case, I think part of it was the fact that Leo had not found a deal yet and we wanted him to get into the business and thought that this was probably as good a vehicle for him to get started as anything. There has never been any particular policy. Just sort of a case by case basis.
KELLER: I think I can enumerate some other deals that TCI has been in partnerships with such as Falcon. TCI had a piece of Falcon or they had certain deals together.
LEWIS: Well they do now. I mean as we speak, they have signed a deal. Prior to that, not really. TCI didn't have any ownership in any of the Falcon systems.
KELLER: How about any others that TCI did have ownership in that you recall? Other than Bresnan and Hindery?
LEWIS: There has been a number over the years. That really taxes my memory because I wasn't involved in a lot of those. Let me think. Well, Time Warner.
We had two major deals with Time Warner. One was Memphis, Tennessee where we were fifty-fifty partners, and Kansas City, Missouri, where again there's a partnership fifty-fifty. In both cases Time Warner was the managing partner. As a matter of fact it was in the early '90s we decided that it was time that Memphis be bought by one party or the other. There was no particular reason to keep that in joint venture at that time. We had a buy-sell arrangement. It was kind of fun. I got to pull the trigger on my friend Dave O'Hare at Time Warner. So I wrote him a letter and said we will buy the system for x-amount. They, in turn, then had the right to say "No, but we will buy you at that same amount." They decided to buy the system. Which was not unexpected because they were managing the system. So we ended up selling our share of Memphis, Tennessee to Time Warner – for a very healthy price.
KELLER: I think I can recall hearing John Malone state that in any of these partnerships where there is a buy-sell agreement, you name a price and he'll tell you whether he is going to buy or sell. Is that basically correct?
LEWIS: That's right. Except in this case I did it for TCI. I named the price and they said, we'll buy.
KELLER: Yes. Usually the deals he gets into are just the opposite. You give him a price and he would make the decision one way or other. Is that true?
LEWIS: But I think actually it was always whoever pulled the trigger first. It was a true buy-sell where either partner could pull the trigger. In our, case as far as Memphis was concerned, we did it. They could have done it. It was mutual. Either party could do it. But the party that made the offer gave the other party the right to buy or sell. Anyway, kind of fun.
KELLER: Now there is, I think, still in existence a company in Pennsylvania or New York where TCI has a major interest.
LEWIS: I am remembering.
KELLER: I can't recall it either.
LEWIS: Obviously this past year, 1997, they have done a lot of joint ventures, which I certainly haven't been involved in because I haven't been there, with the exception of one that we're doing with them that we can get into a little bit later. I can't think of whom you might be referring too. Not Joe Gans. I honestly can't recall a partnership in Pennsylvania.
KELLER: I can picture the guy but I just can't put a name on him right now. My memory is as good as yours.
LEWIS: You know, there were several systems that had some minority ownership by either local people or other industry people, but I can't think of any that were in Pennsylvania. At least I was not involved with.
KELLER: I thought it was headquartered in Pennsylvania but I could be wrong. But that's not important. In any event, TCI was making these partnership kinds of deals initiated by them in some cases. You can't say what the reasoning was or how they got into these deals or why they wanted to make the deals. Did they want to get these companies off the balance sheet? Or was there a particular reason why these things happened?
LEWIS: I think in the case of the Hearst properties, for instance, that we let Leo Hindery take over and do that deal. They were not cheap. That was when prices were pretty high on cable systems. I think that one of the reasons was, in part, John Malone's thinking. It was simply, "Hey this is not a deal that we necessarily need to do right now and put the debt on our balance sheet." That may have been one of the reasons although it was not really spoken at that time. I think we just wanted to get Leo in the business.
KELLER: It's not an unusual situation to try get as much debt off the balance sheet as possible and then still be able to bring the systems or companies back when the timing was right. But he has made more and more of these over the last years. How many of those were you involved in, do you know?
LEWIS: As far as doing other deals with other cable companies and becoming either joint ventures with them or putting systems off to the other companies, I really was not involved in any more of those that I can recall than we talked about, i.e. Storer, Comcast. We did consortium deals where we would buy systems. The one that comes to mind of course is Jack Kent Cooke's company. But that was not a deal where we did a joint venture with someone. Leo Hindery and I put a bunch of companies together as a consortium to buy Cooke. Now there is where Falcon came in. Falcon was involved. TCA out of Tyler, Texas, Bob Rogers company. Adelphia Communications and ourselves and InterMedia Partners. There were five of us that went together as a consortium and bought Jack Kent Cooke's company.
KELLER: Why was this Bob? Why couldn't TCI have handled it themselves?
LEWIS: We didn't want them all. They were not strategic to us. We just wanted certain systems out of the group. And, of course, Leo Hindery couldn't have really handled the whole thing. It would have been too big for him. Of all five of these companies there were systems that were strategically located for those five companies. So that's really why we did it. Cooke's systems were quite spread out, quite scattered. It seemed to be the logical way to do it.
KELLER: Before you went into the consortium, virtually each company knew which of those systems they were going to pick up?
LEWIS: Pretty much. They knew which ones they wanted. We got together as a group and just said, hey, let's make a joint bid. After many cantankerous meetings and gnashing of teeth and pulling hair and so forth, we finally got a deal struck.
KELLER: I could imagine how difficult that would be with all those participants.
LEWIS: It was not easy. The consortium worked pretty good but Cooke was something else.
KELLER: Tell us about him.
LEWIS: The guy that worked for him, Jim Locker, was also something else. We finally negotiated a deal. In fact, I finally got it done with Locker sitting in my TCI offices here in Denver. We finally came to an agreement after many aborted attempts.
KELLER: If I remember, these were mostly small systems were they not? Relativity small.
LEWIS: Tucson actually was the largest system in the group. Hindery took that along with some other systems. We took some primarily in Oregon. Took a couple or three in Pennsylvania, some smaller systems. Primarily Oregon properties that were next door to other operations that we had and so forth.
KELLER: It's interesting. You had five companies involved in that thing yet you talk about Tucson. The Tucson system is surrounded to a large extent by Jones.
LEWIS: That's right.
KELLER: Yet, Jones wasn't involved in the deal.
LEWIS: No. I think that's primarily because - and I am not sure of this Jim so I wouldn't want this to be quoted as the truth because I can't remember exactly - but I think it may have been primarily because Leo Hindery had decided that those were properties that he would like to have in his partnership, and he had raised a certain amount of equity money. He basically needed that to be a part of his package. I don't think that Jones was invited into the deal. I can't recall that for sure.
KELLER: Because I would have been surprised. I know that when I was at Jones they had looked at Tucson with a gleeful eye for a long, long, long time. There were constant battles going on for various new areas as they were built contiguous to Tucson.
LEWIS: And they are still separate.
KELLER: They're still separate?
LEWIS: TCI does now own Tucson. They bought it out of the partnership, InterMedia's number one partnership. So they do own it.
KELLER: Are there still overbuilds in certain areas down there?
LEWIS: There is a little bit. I don't think there is a lot, but there is some.
KELLER: Bob, that brings up a thought now that you eluded to earlier - that is the term clustering, which seems to make a lot of sense. Larger companies right now are swapping properties and switching and selling to each other back and forth so that they can consolidate various systems around a central hub. When in your experience did you start thinking in these terms?
LEWIS: Well, actually almost from the beginning as far as my joining TCI after the sale of Televents to them. One of my objectives in my job at TCI was to look for and find systems that were next door to operations that we already had and buy those systems. Certainly if they could be interconnected. We did a lot of that, Jim. I can't even remember what they were because they were small deals, medium size deals, not very many large deals that were like that. With one exception we'll get into in a minute. That concept goes back ten or twelve years as far as TCI was concerned. Those were pretty easy decisions for us to make at TCI. If a system was on the market that was next door to one of our systems then we had every reason in the world to want to buy it. It didn't mean we bought them all because some of them we wouldn't pay the prices that the owner wanted. But usually we were able to successfully negotiate a deal that was fair to both parties. We did a lot of that throughout the country.
To me it was like adding an extension to an existing system. You make a small system larger it becomes more valuable. Now it has gone much beyond that today because now we are taking about clustering major cities like Chicago. I don't know if Los Angeles will ever get consolidated, but there are some things in the mill that will certainly help do that. I think TCI always had that concept but it was hard to get other companies to agree to swap a property because you know, "my system is worth more than your system" or whatever. Until, frankly, the last two or three years it has not been as accepted as it probably should have been.
One major exception to that was one of the deals I did do at TCI was to consolidate the Denver market. As you recall, the Denver proper system, Mile High Cable, was being operated by Time Warner and had various local partners involved when the franchise was granted. TCI had a lot of the suburbs but Time Warner had some of the suburbs. So my friend, Dave O'Hare, and I put together a deal wherein we would swap some of the systems that we had in other parts of the country that made sense to them for the systems here in Colorado. That included the Mile High deal. We brought in Bob Johnson of Black Entertainment Network as a minority partner in that deal. Anyway, we got that deal done with Time Warner and traded for their systems in Littleton, Northglenn, Wheatridge, Arvada, and several more.
KELLER:: And Aurora?
LEWIS: Well no. That was already United which had been bought by TCI. Time didn't have Aurora.
KELLER: I thought TCI had it because United had the suburbs.
LEWIS: Yes, that is how we got the suburbs in the beginning. That's true. Time Warner had those others.
KELLER: I know they had some of the northern suburbs, Thornton and some of those areas up there.
LEWIS: They had Thornton, Northglenn, I think Wheatridge and maybe Arvada. And then they had Littleton. So we swapped systems in various places. One was Germantown in Tennessee, which was next door to Memphis, which they had bought from us earlier.
We did that deal which consolidated the Denver market with the exception of what Jones still owned in the market. Of course, that's now since been done. So that TCI does have all of the market area in Denver. By the way, that was a deal that Malone didn't think I'd ever get done. But O'Hare and I stuck with it and kept on and finally it turned out to be a good deal for everybody.
KELLER: The concept or the term clustering seems to be relatively new--within the last two or four years--but as you point out it's not. As one of the things we had discussed earlier in the last session, when you were looking at properties to buy for a Jones Intercable partnership you were also at the same time looking for a potential out or potential sale of that system to a larger operator in the area. So it goes back that far.
LEWIS: That's true.
KELLER: I think even maybe farther than that. Anyway, I did want to bring up that term clustering because I am not sure too many people will talk about it from the perspective you have.
Okay. Now you're still at TCI. You're still making these deals. Shall we go from there and get into what you did after you retired from TCI the first time?
LEWIS: Well, I am not with TCI now.
KELLER: Then you were out putting together some of your own properties?
LEWIS: Well, no. When I left Jones Intercable that is when I actually formed my own company. We talked about that. No, when I retired I really didn't intend to be very active. Before I retired, Leo Hindery said to me, "You know if you're going to retire". In a way he hated to see me retire because we had done a lot of deals together at TCI and InterMedia, but he said, "When you do I want you to come on my board." It's really an advisory board because it's not a corporation, it's partnerships. So I agreed to do that. I started attending all of his management meetings and advised Leo on a number of things. I got involved with an internet company called On-Line System Services, Carl Williams and I did. I am on their board as well. Other than that and other than doing an occasional bit of consulting, which wasn't much, I was looking after some real estate investments I have and a few things like that. Thought I was busy then. But that lasted about a year and a half.
I did attend a lot of meetings with Hindery with some of his investors and also attended, as I said, his management meetings. I wasn't day to day active except by phone. Hindery was always calling me. Probably hardly a day went by that we didn't talk on the phone some because he was still doing additional deals. When he got the call then from Malone to come to TCI and be president, that is when he called me and said you just got to take my place at InterMedia. It was hard for me to say no because frankly I was very pleased that Malone had asked him to come to TCI. It was hard for me to tell Hindery no. So I agreed to become the managing general partner and CEO of InterMedia Partners. So that is what I am doing today and have been doing for nine months now.
KELLER: How large is InterMedia Partners now?
LEWIS: Our present customer cap is about 850,000 all in the southeast part of the country - Georgia, North and South Carolina and Tennessee. Now one of the deals that Hindery had already started with TCI was to take on all of their Kentucky properties. Primarily those that came out of the Storer deal which was run by TKR and the Telecable systems that you will remember, Lexington and some of those. That's when TCI had decided to offload some of the debt from their balance sheet and put those properties into a partnership with InterMedia. That had been started before Leo Hindery left InterMedia and went to TCI. We have continued to put that deal together and have an investor with the Blackstone investment group out of New York who will be our equity investor along with TCI. They will each own 48 ½ percent and then we will be the managing general partner of the Kentucky properties. The deal is signed and the franchises are now in process of being transferred. We hope to close at the end of March but it could go into April '98 before we get it finalized. That will put us at about a million and a quarter subscribers. That's an additional 430,000 subscribers.
KELLER: Which places you where on the scale of largest companies?
LEWIS: I think it puts us close to number ten. It depends, I am not sure. I haven't looked at the latest list because there's been some consolidations and all. But I think we'll be right at ten maybe even nine. Nine or ten. Mid-size.
KELLER: Would it be correct to assume that you're being saddled - you, as the managing general partner--are being saddled with a tremendous amount of debt?
LEWIS: Pretty high. .
KELLER: Has to be tremendous since you're getting dumped with the TCI debt. Your debt amortization has to be tough.
LEWIS: Of course, we don't take over their debt it actually gets paid off and we refinance everything and we brought in Blackstone with new equity. But we already have the financing in place with a consortium of banks. Toronto Dominion is going to be the agent bank. There are about fifteen banks involved altogether.
KELLER: But you still have to pay that off.
LEWIS: A lot of debt. Yes, that's right. But our projections on the systems show that it will work. It actually shows an excellent return to both Blackstone and to TCI over a five year period of time.
KELLER: Is that the term you're looking at, five years?
LEWIS: Generally speaking it is. It could be longer, could well be longer. But it also could even be shorter.
END OF TAPE 2, SIDE B
BEGINNING OF TAPE 3, SIDE A
KELLER: I am doing the oral history with Robert J. Lewis. We were interrupted briefly. Bob, tell me where you were, please.
LEWIS: Where was I Jim? That's a good question.
KELLER: You were making the deals and just joined InterMedia and we were talking about InterMedia Partners.
LEWIS: Something about the Kentucky deal actually.
KELLER: Yes, at the present time.
LEWIS: I was just on the phone about that.
KELLER: Which will bring you from about 800,000 to over a million plus subscribers.
LEWIS: A million and a quarter subscribers. Yes. We are hopeful of closing that transaction in April. This will be Louisville, Lexington, Bowling Green, Covington, and Hendersonville, Kentucky, which is about 430,000 subscribers. Primarily we'll have two basic partnerships. Our InterMedia Partners Four which has most of our current operations and this will be InterMedia Partners Six which will have all of the Kentucky systems.
I think we were talking about the financing of that Jim and you asked about the fact that they will have a lot of debt on them and that is true. By the same token our cash flow projections based on both actual and what we think we can produce out of the systems does definitely pay the debt, the interest, and what have you. It should be a good return to our investors once those partnerships are sold or refinanced or whatever the case may be.
KELLER: Your investors now from apparently what your saying are more corporate type investors as opposed to individual investors?
LEWIS: Yes. Even in the InterMedia Partners Four, while we have a number of investors, they are investment companies and various - even some pension funds and things like that. Just to name a few, we have Sumitomo Corporation as a partner in InterMedia Partners Four, along with General Motors Retirement Plan, General Electric Credit Corporation (GECC), and Center Partners which is an investment company out of New York. In InterMedia Partners Six there is only one investor but they represent a group of investors. It is the Blackstone investment group out of New York.
KELLER: Now are all of these limited partners? Are some of them limited partners and some of them general partners?
LEWIS: All limited.
KELLER: All limited. InterMedia Partners is the only general partner?
LEWIS: That is correct. TCI, of course, is also a limited partner in both InterMedia Partners Four and InterMedia Partners Six.
KELLER: Where does InterMedia Partners go? What are the future projections? What is it to be over the next five-ten years? Are you buying any of them back into another company as others have done?
LEWIS: Like Jones has done?
LEWIS: The answer is no. We have not done that nor do we have any definite plans to do that. In all honesty, the fact that Leo Hindery left and went to TCI probably gives InterMedia Partners a limited life. Now that could change and there are a number of things that could happen to make that change. My guess would be at this point would be that InterMedia Partners probably has about a five to a seven year life left. Might not be that long but somewhere in that neighborhood. Because I don't think that we will continue to do deals past this InterMedia Partners Six deal that were doing with the Kentucky properties. Now we may do some fill-ins, clustering, again. Adding systems to the areas where were already operating, but they will go in the present partnerships.
The scenario that could happen that might perpetuate InterMedia Partners as sort of an operating company could be that, when these partnerships are mature and it's time to basically sell the assets or do something with them, one possibility would be to put those two partnerships together and go public with the company. In other words, an IPO. That's a possibility. In fact, Blackstone was very interested in being at least able to do that. To me that's not the most likely scenario.
I think the most likely scenario are two others. One, that TCI may want to buy these systems out of the partnerships down the road assuming that they get their balance sheets in good shape. These systems are all good systems and they're going to be clustered and it would make a lot of sense. So that is one.
KELLER: Does TCI have the right of first refusal on this deal?
LEWIS: Not really, no. But they certainly will have a right, in other words, to try to buy them assuming that the other partners agree, but the other partners would have veto power. They could say no we want to put them out on the market and see what price they would bring. There is nothing that would keep others from being interested. Because you know how that works. If somebody has a right of first refusal it sometimes keeps others from being interested in the systems. Obviously, the outside investors are very concerned about that not happening to them in these deals. But TCI certainly would have the right to bid on the systems and could buy them back in if they wanted to.
KELLER: Who pulls the trigger?
LEWIS: It has to be agreed to by a majority of the partners. In this case of InterMedia Partners Four it would be a majority. In the case of InterMedia Partners Six you would have to have both parties agree. TCI and Blackstone agree that it was time to do whatever they intended to do.
The other scenario simply is to put them on the market and let whoever bid the highest price buy the systems. So, I have to be honest and say that InterMedia Partners is probably not a company that will be around for a long, long time to come. It was not designed as that kind of company. Particularly with Hindery being in his position it changed the company entirely because he is out of the ownership of InterMedia Partners.
KELLER: Where does Bob LEWIS: go?
LEWIS: Well, Bob LEWIS: retired once and he hopes to do it again. The question is, will I stick with it as long as it may take? I don't know the answer to that. Good Lord willing and I have a lot of fun, why I might do it.
KELLER: You're still enjoying it then?
LEWIS: Oh, I am enjoying it. Yes. I am enjoying it. Got a lot of good people and I can fortunately do most of my work from Denver. I travel a little more sometimes then I want to, but it works okay. I've got good people both in San Francisco, which is where our corporate headquarters is. And then our operations headquarters is in Nashville which is close to the systems. Of course, we have the Nashville system. It works out very well. Steve Crawford is our chief operating officer, he's basically responsible for the day to day operations of all the systems. So it is working very well.
KELLER: When you're looking at properties to buy do you do your own projections? TCI does their own projections and whoever the third party may be do their projection and you put them all together and see which one makes the most sense?
LEWIS: We do them. Then we, of course, furnish them to the other partners, as in the case of Blackstone. Then they take them and they go through them. This is not Blackstone's first cable deal so they are familiar with cable. They basically fine tune the projections and show them back to us and we get together. By and large, we do the projections because our people are the ones that are the most involved in operating the systems.
TCI, of course, in the case of Kentucky, those systems they had been running so they know what they are. But they accepted our projections on what we think we can do with the systems. A lot of rebuilding will be going on in those systems in the next couple years.
KELLER: So you in fact as a general partner do the due diligence for the other partners before getting into the deal?
LEWIS: Absolutely. Then we give them our information. We put together a whole booklet of information. A little bit like what the brokers do when they have a property that's on the market.
KELLER: Bob, we have brought your operating career to the present time. Looking back over your entire career, over forty years in cable television, what do you think were the major milestones both in terms of the industry and your personal association to the industry, over this period?
LEWIS: I think as far as the industry is concerned it's been the technological developments. The changes in the industry that I've seen over that period of time. That's by far the most important aspect of the industry because I started when we had amplifiers that carried five channels and look where we are today. When I say technological developments that includes obviously the satellite transmission and all of those things. I guess I am not as much of a visionary, I know I am not as much of a visionary as someone like Malone and people like that.
KELLER: That's going to be my next question. I would like you at this point just to think back over the forty years. What are your major memories both personally and from an industry standpoint?
LEWIS: To try to kind of take it in chronological order from both an industry and my own personal involvement's point of view. Again, back when I got into the industry we were only looking at communities that one, didn't have television stations at all because we didn't have a whole lot to offer. And that's what we were doing. We talked about this earlier. It was strictly a community antenna type system.
The order of development of the industry is hard for me to divorce from the technological advances. Which also then created the programming advances over the period of time. I remember when Ted Turner came to an NCTA executive board meeting in Florida, in about '74, and told us in a meeting that he was going to put his channel 17 signal on a bird in the sky and we could all get it in our cable systems. We sort of sat there with our mouths open. We said hey that would be programming that would really make the difference between being able to build a system that had three stations, or even maybe two stations, which was territory that we wouldn't even consider previously without having something else to sell. Of course, obviously, HBO had come along about that time and they were the first ones to go up on the satellite.
My vision of the past is tied with all of those technological developments. We had a lot of stumbling blocks along the way including the second report and order, and the FCC, and Congress, and all those things. There was a multitude of fights we had to go through - copyright and so many different things. But technological advances kept this industry moving. My personal involvement, obviously starting just as a non-experienced cable system manager and learning through the school of hard knocks, believe me learning about the industry and trying to learn enough technically to not be buffaloed by the engineers.
KELLER: We all went through that.
LEWIS: My interest has always been in "management." It was my major in college. Fortunately, I was able to advance with the old Vumore Company and then Cablecom General over that period of time. The industry never would have grown like it did without those technological advances.
KELLER: Do you recall, as I do, and I considered this one of the major turning points of the industry, the Miami convention in 1966?
LEWIS: Yes, I was there.
KELLER: President of the NCTA, Fred Ford, the former chairman of the FCC hired as the president of the NCTA. I have asked a number of people this question over a period of years and some of them remember it and some of them don't. Fred in his inaugural speech to the convention threw out a proposition that the cable television industry make a deal to be allowed to carry distance signals if they would give up the right to initiate programming.
LEWIS: I haven't thought about that forever, but you're right. That proposal was made, wasn't it?
KELLER: Yes, it was.
LEWIS: It absolutely was.
KELLER: I am absolutely frightened to think what would have happened if that had been accepted.
LEWIS: Boy, I had forgotten all about that. That would have been pretty disastrous.
KELLER: Catastrophic in my mind.
LEWIS: Yes, that absolutely would have been. Fortunately, that didn't happen and we did get the right to carry distance signals under certain conditions although limited at first.
KELLER: But we never gave up our right. In fact, we were required to program at one point.
LEWIS: Never gave up the right. Jim. Your memory is very good.
KELLER: Well some of those things are that striking I will keep reminding myself of what could have been the big difference in the industry. People. We've already talked about some of the people who had major impact on you. Larry Boggs?
LEWIS: Yes, definitely.
KELLER: Bob Clark?
KELLER: Got to say John Malone?
LEWIS: Oh yes, and Glenn Jones.
KELLER: And Glenn Jones, okay.
LEWIS: You bet.
KELLER: Any others that you could think of?
LEWIS: Well, there are some. Going back to my early days. When I mentioned a while ago that learning enough technically to not be buffaloed by the engineers, I have to give credit to our chief engineer at the time at the old Vumore and Cablecom General companies, and that was George Milner. I learned a lot from him. There is another fellow that worked basically under him as sort of a field engineer, and both of these gentlemen have unfortunately passed on, but a fellow by the name of John Holmes. I spent quite a bit of time with him just learning the basics of what a cable system was about. Of course, then they were pretty simple compared to today.
I hate to think about if I had to go and explain the headend equipment to somebody today. I would not be very good at it. That's for sure.
As far as other people. I think those are the ones. With Glenn Jones I learned a lot about partnerships and financing in that manner, from Glenn and Neil Jones for that matter. That has certainly helped me down the road and even now because were involved with partnerships now.
But I give Larry Boggs a lot of the credit, and Bob Clark. Because Bob gave me a lot of responsibility and chances with Vumore and Cablecom General. So those are the people that I give the most credit. They certainly got me in the business.
KELLER: Bob, there seems to be some kind of a void or at least there's a mist in my mind. You're in Oklahoma and Vumore was operating in Oklahoma. The Schneider's came down to operate in various parts of Oklahoma at that point under whatever their various names were.
KELLER: Genco was one of them. Ultimately, United Cable. Was there any time that you were involved with them or that there were joint ventures between the two of you?
LEWIS: We didn't have any joint ventures. We battled with Gene Schneider in Tulsa, Oklahoma to get the franchise and he won. At that time Cablecom General was the company and we were trying to get the franchise there and, of course, had been an Oklahoma company which had moved to Colorado. But we had two of the local television stations as our partners. At that time that was not prohibited. But we still didn't win the franchise, Gene Schneider did. But we never had any joint ventures with them.
KELLER: It was some years before that Tulsa system was built though wasn't it because of no importation and . . .
LEWIS: Well, you know . . .
KELLER: Or was that one that was built immediately?
LEWIS: I think it was built fairly early. I don't believe Tulsa at that time even had a independent television station. So I think it was built long before Oklahoma City got built. I think it was built fairly soon after Gene Schneider got the franchise. I couldn't say how long but I don't believe there was a big delay.
KELLER: I can recall down in Oklahoma that in some of the markets, and I am going to use Stillwater as an example, where they were getting signals both from Oklahoma City and Tulsa yet relied heavily on local origination in the early days. Bartlesville was another one, I think, they did that too. There was a big question as to the large expenditures required for local origination. Often times it didn't even work. Those systems were a tremendous cash drain for some time. Do you remember any of the other situations that were like that other than Colorado Springs?
LEWIS: Most of the systems, in all honesty, that I was operating I would consider more classic. I mean they were all pretty much in areas where they had to have our service to get decent television reception. We tried local origination in a number of the systems and it was very amateurish. It really was. One camera in a little corner of the room and you do a few little local shows and all. But very amateurish and really, I don't think ever got the attention of people in your community to the extent even that local originating programs today could do because they are much more sophisticated.
What you do, as you well know because you did a lot of franchising, you would always put that in your franchise application--that you would do a lot of local origination and sometimes to the extent that it cost so much money it was difficult to ever actually produce what you said you would do.
That's all I can remember. Certainly Colorado Springs was a big local origination type of franchise application. In fact, they had a huge studio there.
KELLER: When you were in partnership with newspapers, at least one as I recall was Bartlesville . . .
LEWIS: Well, I wasn't involved in that.
KELLER: Vumore was?
LEWIS: Not really. You're talking about the Reynolds?
KELLER: I was talking about the partnership with the newspapers in Bartlesville and also in some other communities.
LEWIS: We had a newspaper out of Topeka, Kansas. A publisher that was one of our partners in Amarillo, Texas, system I did build. But we also had two local television stations. They had the newspaper in Topeka but they also had a television station in Amarillo.
Bartlesville, the old telemovie experiment, was closed down because it was ahead of its time. They couldn't get people to subscribe just to take movies over a cable system. That system never did produce regular cable programming. It was closed down and then Reynolds . . .
KELLER: Reynolds Newspapers or something like that?
LEWIS: Well, the name of the company just escapes me. Many years later they came in and got a franchise to build the cable system in Bartlesville. Vumore did not.
KELLER: Then sold it to ATC. I know that.
KELLER: And the newspapers still had a minority interest in it.
LEWIS: They may well have. I wasn't aware of it.
KELLER: My question and the reason for bringing it up is that often times when the local newspaper was a partner or had an involvement with the system, but they never used the news gathering facilities on the newspaper.
LEWIS: I guess that's right.
KELLER: I have often wondered why.
LEWIS: That's a good question and I don't know why, probably because it doesn't make sense.
KELLER: Are they originating programs from, say, the city room of major newspapers.
LEWIS: It still hasn't happened to my knowledge.
KELLER: I thought maybe it happened in Lexington?
LEWIS: Not to my knowledge. Now I've been to Lexington and seen their system and they have a local origination studio that is fairly inactive, quite frankly. I am not aware that they are doing that there. But I was only there for a few hours. I haven't spent a lot of time there.
KELLER: Where does the industry go from here Bob, in your opinion?
LEWIS: Good question. Obviously, I think getting into the data transmission, internet services, a converter (smart box) that will do a lot of different things.
KELLER: Including a modem?
LEWIS: Yes. That will be good for the industry. Although I don't believe that the TV set is where most people are going to want to do their internet activities. I think that the PC is still going to be the primary vehicle for that.
I don't want to rule out telephony but I am not sure that local telephony services are going to be a big play for the cable industry. Just as I believe most phone companies are thinking that cable is not where they ought to be. There is some exception with Ameritec, in particular, where they still seem to keep going after cable franchises. But I do think that getting involved in data transmission and maybe long distance type services through the cable system is an area which will develop. Local telephony will need major players to make it successful.
A lot more pay-per-view through the digital television. Expanding our channels through digital, which is happening today and will continue to happen, even down into smaller systems as time goes on.
Beyond that, I am certainly no visionary like John Malone, but I think I still see the business as a good, basic, entertainment and data type business. With ancillary type services adding to the cash flow. I still don't believe that direct satellite will put us out of business. I am well aware that they may start doing local stations.
I still think that a good cable system is still the best way for people to get their entertainment, information, internet, and data.
KELLER: Do any of your systems have a web site at the present time?
LEWIS: Yes, in the sense that one of our systems in Kingsport, Tennessee where we have put in an internet service, we have a web site there. Also, we have @Home Service in Nashville. If you're talking about an identification web site on the internet, yes.
KELLER: Where you can provide information to your cable customers?
LEWIS: Yes. In fact, in Kingsport, which is about a 30,000 subscriber system, we will be going a step further and having local content and local advertising over the internet. That will be part of what we will be doing this year. We just turned that one on in August or September '97. We have close to a thousand subscribers. Part of them are just dial up subscribers because we didn't have the cable modems ready until about sixty days ago. We had some problems with the modems and had to get some bugs worked out. Now a lot of the dial-up customers are switching over to modems because of the high speed whereas the dial-up is a much slower speed. But we are encouraged by that business. Our @Home Service in Nashville has been in operation for only about three months and we have over a thousand subscribers there. That service, of course, is high speed and it's two-way on our cable system. People love it. We don't have anybody disconnecting from it unless they move out of town or something like that. But it also is not cheap. Its $44.95 service. You're not going to get huge numbers but you don't need huge numbers to make cash flow.
KELLER: Let's do a "what if." We're looking right now in the industry, and correct me if my figures are wrong, at roughly $500 per year per subscriber give or take a little bit.
LEWIS: You mean in revenue?
LEWIS: It's not that much.
KELLER: Okay, $400?
LEWIS: Yes, about there.
KELLER: Okay, say $400. When you're looking at a subscriber, let's say five years down the road, what percentage of the total revenue do you think would be derived from the subscriber as opposed to whatever is going to be built on top of that $400? What portion of the total revenue will that $400 be?
LEWIS: Oh boy. I think it will still be a substantial portion. I don't think, especially if you spread that over your whole subscriber base, because not everybody is going to take the internet services. Certainly over a five year period of time we would be happy if 10% takes those other services. On an average I think it will probably still be 75% of your revenue. That is a guess on my part.
KELLER: Do you use that number in your projections for five year out? Or don't you even anticipate using that revenue?
LEWIS: What we do is budget our normal service, or "cable service." Then we are budgeting separately our internet and digital services so that we can keep a good record of what we do there. But we are budgeting our internet services separately. Obviously, you combine it in the end because it's a part of that cable system but we want to see exactly what the internet service will do. We don't do it the way you suggested, we do it separately. I think our projections, for instance in Nashville, at the end of two or three years we hope to be at a 10% level of internet users.
KELLER: We use to call it "blue sky" - those services we couldn't absolutely pinpoint as to what the revenues were going to be. I remember a time when the financial institutions, the bankers and others, would not permit us to use any of the pay television revenue in our projections. Is that still the case today in looking in the future?
LEWIS: They're more open to allowing some projected cash flow. On the other hand, we don't use it for our financing purposes at this point. Because we don't know.
KELLER: You don't need it then probably?
LEWIS: Well, no. We really don't know what those services are going to do. It's just be safe, being cautious. But the banks are a little more optimistic about these services then they were about pay-per-view.
KELLER: Not only pay-per-view but pay television itself.
LEWIS: Pay television. I know. Absolutely, oh I remember that. You couldn't get any allowance for that potential cash flow.
KELLER: Even though we had 100% penetration.
LEWIS: How long did it take to . . .
KELLER: I was going to ask that question of you.
LEWIS: I know they haven't been allowing for that probably more than ten years, if that long.
KELLER: I would be very surprised if it's been that long.
LEWIS: Eight to ten, something like that.
KELLER: It would have to have been more than that. I would say right around twelve or fifteen years.
LEWIS: Hey Jim, we're getting old you know. HBO came into being in what '74 or so on satellite, so yes, it would have to be ten to fifteen years, or something like that.
KELLER: It was a while though before they would recognize that this was going to be a major source of income for us.
KELLER: Now what do you project? Is your pay revenue going to be 50% to 60% of your total revenue?
LEWIS: It's about 50%. That depends. As we go digital and have more pay-per-view offerings we hope that that will go up. Right now it's probably about 50%.
KELLER: That's not surprising. That's about where I had pegged it also.
Bob, can you think of anything else you would like to add to this oral history before we wrap it up?
KELLER: It's been an interesting travel back through time with you.
LEWIS: The memory does come back with a few things. I am sure there is a lot more back there if I could wedge them out. I don't know. It's been a heck of a ride and I guess I am still riding.
I have enjoyed it and have met an awful lot of neat people in the industry. It's been a lot of fun. There is nothing that I can think of that I would have rather done with my career. Now, admittedly, there were a few times during that career that I wondered what the heck I was doing!
KELLER: We've all felt that way.
LEWIS: We've all been there I am sure. It's been a lot of fun and a lot of hard work. The rewards are generally there if you work hard enough. It's been good.
KELLER: You've been a great tribute to the industry. I think a lot of people would agree with that. By reviewing these tapes and the transcription, it's going to show an awful lot of it. You also will have an opportunity to review this transcript and add, subtract, or delete anything that you might want to.
LEWIS: Well I am sure you will do that too, right?
KELLER: I will also do that.
LEWIS: Because I was going to say between the two of us I am sure we will find some rough spots and we will find some fill-ins that need to be made.
KELLER: But that's not necessarily all bad because its exactly what it is—your remembrance of what occurred. It's not supposed to be a novel or a biography or anything like that.
LEWIS: Sometimes I just wish the memory was little better than it is because it has been a long time.
I will say this. When you mentioned people from awhile ago and who had been important to me, I think I left out something that I have always felt and that is the people I worked with - the associates and people that I worked with. I am talking about down into the systems and that type of thing. That is really where the money is made in this business. I talked about executives that I learned a lot from and all. But, I think one of the most rewarding parts of my career is the fact that there are still a lot of people in this industry that I have been associated with over the years. But also just the pleasure of working with so many of those people and some that are not in the industry anymore. That was always part of what was fun to me. It was always fun to see somebody advance in the company. Be able to promote somebody in the company. Those people to me are some of the most important people that I've ever been associated with. But also that the industry, not just my people, but I am talking about all the people that are out in the field and that handle all the day to day problems and workloads. A great group of people in the industry.
KELLER: The managers are only as good as the guy working with the customer.
LEWIS: Yes, that's right. It's been fun Jim. I've enjoyed it very much. I appreciate you taking your time.
KELLER: Thank you, Bob. This will bring to the end the second session with Robert J. Lewis.