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Balan Nair

Balan Nair

Interview Date: November 26, 2018
Interview Location: Cable Center Studio, Denver, CO USA
Interviewer: Stewart Schley
Collection: Cable Center Oral History Project

STEWART SCHLEY: Ahoy there, and welcome to The Cable Center’s Hauser Oral History Series. Look who has dropped into our studio in November 2018. Balan Nair, one of the best-known and esteemed senior technology leaders in the cable industry – in and around the cable industry – currently the CEO of Liberty Latin America, one of the companies in the Malone Liberty orbit, and the longtime CTO of Liberty Global, the world’s largest international cable company. Prior to that, Qwest Communications. Balan, thank you so much for coming in.

BALAN NAIR: Well, it’s good. Thank you. Thanks for having me.

SCHLEY: It’s a treat to have you. I want to start by asking you a question that has nothing to do with the cable industry. Tell me who you were as a kid. You have an engineering background. Were you the kid that tinkered with toasters and radios? Were you a bookish kid? What was your life like?

Click to see interview photos of Balan Nair

NAIR: Like, I’m guessing, not any different than most kids. Probably, if you ask my mom, she’d say I was probably rambunctious, ill-mannered, lazy, didn’t do my homework.

SCHLEY: Hard to raise.

NAIR: Yes. Absolutely. Ate too much. But, I grew up in Malaysia, and I came to the United States in 1985. My high school in Malaysia, I was very lucky to have a bunch of friends that were similar, like-minded, and we bought and shared a computer. Back then, ran on CPM. It’s an operating system that no longer exists, and we programmed a lot, played a lot. Wrote a lot of stuff on it. Yeah. I had a very good high school.

SCHLEY: The CPM was a predecessor to MS-DOS? Or a rival to MS-DOS?

NAIR: It was, at one point, the big brother to MS-DOS. There’s a long history there. This is a tragic story. I mean, CPM could have dominated, if they had only figured out how to cooperate with IBM.

SCHLEY: Right. Instead, the other guy did.

NAIR: Instead the other guy did. Yes.

SCHLEY: But, you did have an aptitude for technology, and software, and computers.

NAIR: Yes. Math was my favorite subject, and I did enjoy that.

SCHLEY: You then became a Cyclone, here in Iowa State.

NAIR: Absolutely. Four of the best years, yes.

SCHLEY: Why Iowa State?

NAIR: Oh, wow. How much battery do we have in that camera?

SCHLEY: Enough.

NAIR: (Laughs) I left Malaysia in ’85. I was going to go to a university down in Texas, Texas Austin. This was during the oil crisis – the beginning of the oil crisis – and they changed the tuition rates for foreign students. I quickly realized I couldn’t afford to go there. My buddy and I, we then started looking at different colleges, and we applied to a few, and Iowa State was one where we got this amazing catalogue. You open up this catalogue, and you go, wow, this is an amazing place. It’s got a picture of this downtown Des Moines with the skyscraper, and you’re thinking, wow. Yeah. I could live there. Then I flew into Des Moines, Iowa, and I’m like, “Oh my god.” That’s only one building, taken from a certain angle, and made it look like – but, you know, life is like luck, and I was so lucky to go to Iowa State. I met my best friends there, learned a lot, and most importantly, I met my wife there.

SCHLEY: You studied electrical engineering?

NAIR: I did. I studied electrical engineering. I started as an architecture major, and that’s what I wanted to do. But, for whatever reason, somewhere along the line I said, I’m probably better off being an electrical engineer.

SCHLEY: Well, I mean, you ended up designing and building things, just in a different motif. If I fast-forward, and I take you to the beginning of your executive career with Qwest Communications – this is an interesting preamble – there was a television spot your company ran in 1999, 2000. You probably remember it. And, it was this wind-swept desert motel.

NAIR: Yes. I do remember that ad.

SCHLEY: This wayward traveler comes up –

NAIR: Amazing. (Laughs) Not many people would know that.

SCHLEY: So, I’ll just describe it briefly for you guys. Wayward traveler comes up. There’s this very disinterested clerk at the hotel, and he says, “Do you have maid service?” “Yes.” “Do you have room service?” “Donuts and coffee.” And he says, “Do you have in-room entertainment?” And she says, “Every movie, in every language, ever made, day or night, whenever you want it.” And he’s sort of blown away by this. The expression you guys used was, “Ride the light.”

NAIR: Yes.

SCHLEY: I say that, Balan, to set up the question about -- we’ve sort of gotten there, right?

NAIR: Yes.

SCHLEY: Were you early with that argument for Qwest?

NAIR: Well, I have to fully disclose that I had nothing to do with that ad.

SCHLEY: I understand.

NAIR: Even though I thought it was brilliant back then. But, yeah. We have arrived. You know, when Qwest as a company was built, they acquired the company I used to work at, US West. It was predicated on building a backbone that transported gazillion amounts of data, and on a transit rate of about $75 to $100 bucks per meg. And so, lots of money flowed into that business model. As it turns out, two or three years after it was built, transit rates dropped from $75 to $100 to about $10. And so, you saw lots of companies – Qwest included – that ran into huge financial difficulties. But, the premise was, there was going to be lots of data, and video was going to be a big part of it. Except that nobody wanted to pay for it.

SCHLEY: In context, Qwest and its predecessor you just named US West, were ultimately progeny of the Ma Bell spin-off, and it was at heart a regional telecom company, but it had national aspirations.

NAIR: US West certainly did, and Qwest was a startup by Phil Andrews. And, great valuations, and they used that equity to purchase US West, to generate a lot of cash.

SCHLEY: What was your role there, and what did you get out of that?

NAIR: Well, I eventually came the chief technology officer and chief information officer at Qwest, but prior to that, I did a variety of different jobs. Some of my best jobs were there. I mean, I ran the Arizona operations with a field job. I learned a lot working the field, working with the unions, working with customers directly. I had a variety of jobs there. But, one of the persons I met there, in 2000, the chief technology officer for Qwest, was a gentleman that you probably know, Tony Werner.

SCHLEY: Oh my gosh. He was Qwest?

NAIR: He came to Qwest in 2000, and left in 2000, I think. He was there for probably not more than six months. He and I became fast friends. I worked for Tony, and that was transformational for me, for sure. And that is how I ended up in the cable industry five, six years later.

SCHLEY: Tony, today, the chief technology officer for Comcast.

NAIR: For Comcast. A true gentleman. One of the smartest persons I know, and certainly someone I have tremendous admiration for.

SCHLEY: Well, you sort of answered my next question, but what was captivating about the cable industry opportunity, and what did Tony show you about the possibilities there?

NAIR: Well, I left Qwest in 2006 to join AOL Time Warner. And, as the chief technology officer there, and I ran that and some of the products, and it was fascinating. It was in a fascinating time. The beginning of social networks, the beginning of a lot of what we call Web 2.0. And, during that period, Tony worked at Liberty Global, and he decided to take on the job of CTO for Comcast. He called me up and said, “I think you should really come in and join this company called Liberty Global.” And, long story short, I ended up doing that, but it was thanks to Tony.

SCHLEY: Did you know of Liberty Global prior, much?

NAIR: Very little. I actually thought it was an insurance company.

SCHLEY: (Laughs) Kind of sounds like that. Liberty Mutual, Liberty Global.

NAIR: Liberty Global. But, Tony introduced me to Mike Fries. Of course, I know John, and his history, and that’s another interaction with John, as well. But, Mike Fries contacted me and we had met at CES 2007, in Los Vegas, and we had a good conversation. Subsequent to that, I met with John, and then eventually joined Liberty Global.

SCHLEY: John being John Malone, patriarch of the US –

NAIR: John Malone. Yeah. Another amazing person. My life is like 95 percent luck, and a big part of that luck is meeting amazing people.

SCHLEY: Balan, I don’t want to lose sight before we go to the Liberty Global experience, about something you said earlier, which was your experience in the field in Arizona. How it informed and influenced your view of everything, really.

NAIR: You know, my experience in the field was just very invaluable. I mean, I learned a lot about people. I learned a lot about working with unions. I learned a lot about working with customers. I learned about technology; things that work in the lab, and how it doesn’t work in the field at 120 degrees temperature. Working troubleshooting in the central offices. You did everything when you were in the field. There was no question you couldn’t find an answer to.

SCHLEY: Were you literally in the field?

NAIR: Yes. I ran crews. I had all the crews reporting to me. I’m kind of a hands-on guy. So, I really got involved. I was out in the central offices, I’d visit with customers. When there’s an outage, I’d be out there in the field, whether a fiber cut, or a power-outage, or an electronics doesn’t work. Anything that happened in Phoenix, I was kind of involved.

SCHLEY: You get an appreciation for the intensity of customer expectation.

NAIR: Absolutely.

SCHLEY: Is that fair to say?

NAIR: Yes. This was the year 1999, 2000. It was the beginning of a lot of startups running with lots of bandwidth. At that time, the only place to get it from was the phone company. And so, we were just busy as heck.

SCHLEY: Producing the requisite –

NAIR: Just custom orders, day in and day out. It was the Golden Age for phone companies.

SCHLEY: Was government relations part of what you did in that era? Were you mostly a tech ops kind of guy?

NAIR: No. By government, mostly city, not state and federal. But, city, yeah. Absolutely.

SCHLEY: So, you talked about meeting Mike Fries at CES. You were drawn to the Liberty Global, but it was so different. It was obviously an international company with markets you may have been unfamiliar with. What was the draw? What was the appeal?

NAIR: Well, remember early on, I said my life is like 95 percent luck? One thing I also forgot to mention was that almost all of my best decisions I made, were made by someone else. Mostly my wife.

SCHLEY: Really?

NAIR: Yes. I did not want to move back to Denver from McLean, Virginia, the center of cosmopolitan lifestyle. Working for one of the largest companies in the world, being a CTO there. And, I’m like, what? Moving back to Denver, and working for this company I just barely know? But, my wife really wanted to move back to Denver, because her brother lived here. Her family lived here, and she’s like, we’ve got to move back. And so, I said, “OK. Against all my better judgment, I’ll do this.” And, it turned out, it was the best thing that I ever did. One of the many best things.

SCHLEY: When you took the job, moved back to Denver, first day on the job at Liberty Global, what confronted you? What did you realized had to be done? And, how did you start?

NAIR: You know, when I first joined Liberty Global, it was a much different company. A very small company. It was just the beginning. I think it was formed maybe a year, year and a half, before that. A combination of two companies, UGC [UnitedGlobalCom] and Liberty Media International. Mike Fries was the CEO. He’s just a dynamic guy, and wicked smart, and certainly had amazing aspirations. So, I came in right at the ground floor, and we started rolling up cable companies in Europe. That was quite fascinating. I knew very little about cable, per se, and I spent the first maybe three to six months with a lot of cable industry veterans, learning. I would go to tutorials with companies that no longer exists.

SCHLEY: Vender companies?

NAIR: Vender companies. Yes. They would be very helpful. Everybody was so helpful. There were a few things I learned about the cable industry when I first joined. After six months, it became clear to me. One, everybody is out to help each other. Second, it’s quite entrepreneurial. And, third, it is full of people that just take risks. But, what I mean by that is that, it’s not blind risk. They’re just not afraid of failing, and that was just so different than AOL Time Warner. Even more different than coming from a telco. It was just magical for me.

SCHLEY: It’s interesting you say that, because I always try to ask people that question. Is this industry appreciably different from other industries you’ve taken part in? And obviously for those reasons, cable is.

NAIR: Yes, yes. Absolutely.

SCHLEY: Was the domestic cable scene, the maturation of the industry, appreciably different from what you saw in Eastern Europe, or central Europe, and elsewhere?

NAIR: Yes. I don’t know how to say this, but my job was a lot easier in ways, because it’s almost like I don’t have to predict the future. All I have to look at is what’s going on here.

SCHLEY: As a model.

NAIR: Yeah. Because everything’s time-shifted maybe about three years. So, whatever works here in the United States, it’s going to work there three years from now.

SCHLEY: OK. So, even DOCSIS, for instance, would have been something you could export, if you will?

NAIR: Except for DOCSIS. I don’t know how to say this without sounding arrogant, because I’m not trying to be arrogant. When I first came to the cable industry, the one thing I never figured out when I was in the telco world was how much superior the cable plant was. How much faster their product could be, but yet the cable guys never did take advantage of that. So, when I joined Liberty Global, this is 2007. DOCSIS 3.0 was just coming out. One of the first things we did was, just massively roll out DOCSIS 3.0 across the Earth. By 2009 – that would seem like a long time ago, it doesn’t seem that different – but by 2009, we were pretty much all DOCSIS 3.0.

SCHLEY: Before the domestic –

NAIR: Even the United States wasn’t getting there, yet. Well, the United States – I mean, they were getting broadband subscribers so easily, that they didn’t have to worry about speed, because the telco’s here were – DSL was just not catching up.

SCHLEY: Cable was better.

NAIR: Yep. However, in Europe, Europe was a DSL market. DSL dominated in Europe. So, we had to find something that was just different, and DOCSIS 3.0 provided that for Liberty Global.

SCHLEY: And, DOCSIS 3.0 got you to what, in terms of performance?

NAIR: We immediately went to 100 megabits. In Japan, one of the first countries, in 2008, we launched 160 megabits in Japan. Forty percent – I remember – 40 percent of all our new customers just bought that product. And, we didn’t even have the DOCSIS 3.0 modem. So, what we worked on with ours was to take four DOCSIS 2.0 modems, put it into one chassis – one plastic enclosure – and then just combined it.

SCHLEY: Like putting a big engine in the car, right?

NAIR: And we had four channels, which theoretically, we shouldn’t be selling 160 megabits on four channels of DOCSIS, because that’s just the maximum of the maximum, if nobody else is using it. But, we did it anyways.

SCHLEY: What was eye opening about the experience, from either the standpoint of customer reception, or what you ushered in, in terms of kind of a revolution of media? What mattered about that?

NAIR: Well, I learned two things. There’s only two levers you can play to get broadband customers; speed and price. You don’t want to play the price game too much, so you play the speed game. And, we used that for maybe a six, seven-year run, and it was great. The other thing I learned as well is, never ask the question, what somebody’s going to use with all that capacity and speed.

SCHLEY: Really? Just let it happen? Let it flower?

NAIR: Yes. It’s a false question, because you’re limited by what you don’t know. And so, when we launched 160-megabit, I can tell you, almost everybody thought that was insane. Why would you do that? What was the usage? And, who cares? Why do you need 500-horsepower in a car? Why do you need anything more than what you really need? It’s because you can get it, and that’s how it works.

SCHLEY: Was Chello Broadband an entity that existed prior to your run –

NAIR: It was there. We shut it down -- not shut it down. It was just a brand name. So, we took that brand name, and then we spread it out, because the Chello brand name was kind of confusing to some customers.

SCHLEY: I remember it, though, from the early days.

NAIR: That’s amazing that you know all this terms.

SCHLEY: Here’s what I don’t know. It’s maybe a naïve question, but what were the plant conditions like? Pick a couple of different markets. Was it mimicking the utility pole configuration? Was there a lot of underground plant in your market? Or, what did you face?

NAIR: There were a lot of underground plants. In Eastern Europe, like in Romania, there were a lot more aerial plant, but if you go down to Zürich, Amsterdam, if you go to Cologne, or downtown London, or anywhere, it’s mostly underground. Now, we had to spend a lot of capital upgrading our plant, but more important than that, we had to spend capital upgrading our customer homes’ plant.

SCHLEY: How so?

NAIR: Because most homes – and it’s not unique to Europe – the inside wiring is terrible, and it generates lots of noise, and it contaminates your service. I learned this a lot in the field. I mean, the last bit of your wiring usually is probably the crappiest.

SCHLEY: So, an installation might have taken hours to sort of get everything –

NAIR: Theoretically, it should. So, what we ended up doing was counterintuitive. We told our customers, you install it yourself. A lot of people said, does that make sense? Do customers really want to do that? They’ll get intimidated. But, what we learned was, customers actually like that. If you make it simple and clear, and a big piece of paper that says, “Step one: open the box. Step two: connect this red to this red.” Make it very simple, because of a couple of reasons; one, they feel they’re in control.

SCHLEY: I agree.

NAIR: Two, they don’t have to wait around for your technician for your two-hour, or four-hour window, to show up. They work on their own timeframe. And, if you get a good supply chain partner, you can get these boxes out to them within 24 hours. So, the cash through the door from the order. It’s sooner. When they get it done, they feel really good about it, as well.

SCHLEY: They had a role to play.

NAIR: Now, not all customers are that way. Maybe about ten, 15 percent of customers would end up calling you with some question. Whether it’s really complicated, or really simple, it doesn’t matter. To them, it’s still a problem. And for those few, we have a safety blanket and you say, we’ll send somebody out.

SCHLEY: OK. And, at this point, did you have a situation where your broadband business was sort of carrying the company economically? Or, was video still the mainstay?

NAIR: I’d really like to know the date when all cable guys woke up one day and said, it’s no longer video. This is a broadband company. And, every one of us will have a different date in our mind of when that became clear to us, and probably every one of us would think that we were the first ones that came up with that idea.

SCHLEY: Right (laughs).

NAIR: But, to us, it was probably in the 2010 timeframe when we said, you know, our commercials probably should lead with broadband.

SCHLEY: Connectivity.

NAIR: And, it’ll drag video, as opposed to lead with video and it drags broadband.

SCHLEY: I did want to talk about video, though, because I think one differentiating characteristic in some of your markets was, you had a pretty prolific satellite television operation in many of the locales. Maybe competitively it posed some issues for video, but could you just describe the competitive landscape that you – and how maybe it different from the US at the time?

NAIR: It differed in a number of ways. One, ARPUs, the average revenue per user, was significant lower.

SCHLEY: Yours were?

NAIR: Yes. In Europe. It doesn’t matter if you’re in a first-world country like Germany, or if you were in a second-world country like Romania, the ARPU was very low.

SCHLEY: Fifty-dollar range?

NAIR: Fifty dollars in Germany for the whole triple play.
SCHLEY: Wow.

NAIR: For voice, video, and data. Maybe about $10 in Romania for voice, video, and data.

SCHLEY: That’s challenging.

NAIR: Yes. Because Cisco still sells you the same devices at the same price in the United States or in Europe, regardless. So, you gotta get really creative. Second, even with that low ARPU, there are dozens of entrepreneurs coming into this business. People would just string wires up, drop a little ethernet box, and say, “You have broadband.” Illegally attaching to poles, you complain, you call the city. They come out, take off the wires. Five poles behind, the guy is climbing back up and putting it back together. Yeah. It’s the wild, wild West.

SCHLEY: I had no idea. I wanted to talk about technology deployment decisions, and when is the right time. Of course, nobody knows. But, can we talk about it in the context of Horizon? Can you explain what the Horizon platform is, and was, and why it was revolutionary for its time?

NAIR: Since I came from AOL, and being more software-driven, the other thing I didn’t understand about the cable industry when I joined was, why were we on this monolithic, one single stack video service, with just the most god-awful user interface, terrible search? It’s just hard to accept that’s what it really is. But, it took me about a year to two years to really understand why that’s the case; everything from the conditional access, all the entitlement rights, how little memory you have in those boxes, how captive the audience – I mean, the vendor community was. And so, you had to figure a way to break loose from a lot of orthodoxies. So, what I wanted to do was build a user interface that’s beautiful, great search, lots of really cool graphics where you can go in and out, things move really fast. So, I looked to a number of people to partner with. Everybody from TiVo, to Motorola, all the usual suspects.

SCHLEY: This was, again, Balan, when?

NAIR: 2009. Yes. By 2010, it became clear to me, this can be done. We can buy memory, and put the whole gig of memory in this box. There are processers already at that point. We were working with Intel. Intel came out with this chip called a Groveland chip, and you look at the mps on the Groveland chip – that’s the processing power – and you go, wow. We can probably make software run on this thing. You don’t need a PC. Because everybody would compare to why you can have these great UIs in PCs. Well, a PC costs $1,000 and a set-top box is, like, $100 bucks, $50 worth of material in there.

SCHLEY: That was always the excuse.

NAIR: Yes. So, you say, OK, to get this high processor, you can’t put a Pentium chip in a set-top box. That would be a $300 set-top box. But, Intel came up with this Groveland chip. So, the possibilities were getting there. Now, you gotta find the right software guy that understands all the cable industry’s specifications. In our case, DBBC. Everything. All the entitlements. Then you’ve got to convince your board. First, my CEO, Mike Fries.

SCHLEY: It sounds expensive.

NAIR: Yes. This is going to cost some money, it’s going to be different, it’s going to be radically – it’s going to be changing a lot of things. The headends, the boxes. We’re going to deploy a lot of it. But, guess what? This is what customers want. I was very lucky, because Mike Fries got it just right away. John Malone, who is our chairman, founder, owner, said, “Yes. This absolutely makes sense. We should go for it.” So, I partnered with the company in Israel, NDS, who built security, who had real aspirations to want to get into the software world. They had bought a company called Canopolis. Canopolis had many different divisions, a design house, and a number of guys that were good designers of user interfaces. So, we partnered with them. We built this beautiful interface.

SCHLEY: What’d you call it?

NAIR: We called it Horizon. Running on this really simple – what I thought was simple back then – middleware, and using Adobe Flash, which was cutting-edge back then for the cable industry, or even any industries. We started our project in the middle of 2010. By middle of 2011, Apple came out and said, Flash is dead. Nobody’s going to use Flash. By 2012, Intel decides they probably don’t want to be in the set-top box business in the cable industry.

SCHLEY: Are you already out in the market with –

NAIR: No. We’re still building this. So, at every stage, there was a problem in this. Intel -- NDS just found out how hard it is to write software for this new chip. Then, right before we – now, we’re 18 months into the project, and we’re about to launch in a couple of months, and NDS gets bought by Cisco, and all those guys that worked on the project, some of them left. Yeah. It was quite a learning experience. Nevertheless, we launched this in September of 2012. Initially, great reviews. Everybody loved it. Cutting-edge. By second quarter of 2013, problems starting coming in. Software that wasn’t good. There were some bugs in the software. It became a little buggy, and you run into memory issues. A lot of stuff that software people understand. But, the guys that wrote a lot of this in NDS – a lot of them left. It just became very painful.

SCHLEY: Was it unnerving, sleepless nights, kind of unnerving?

NAIR: Yeah. Probably, I’d say, 2012 and 2013 were probably the most challenging, from a technology standpoint, for me. We brought in a whole bunch of new software developers. Cisco, to their credit, decided, you know what? We’re going to make this right, and they hired a lot of people in to replace the folks that had left. By the middle – second half of 2013, we were able to resolve most of the issues. But, at that point, it became clear to me that it’s really hard to rely on somebody else. You can’t just outsource your core business. And, just about then, a colleague of mine who used to work with me in AOL, Sree [Kotay], was working with Tony Werner at Comcast. Tony Werner, in a very foresighted decision, decided that he’s not going to outsource the development of his video product. And, we had chatted, and I had spent some time on the architecture that Sree was building and everybody was involved in, and said, you know what? This is what we’re going to do, as well, and it’s something called RDK. At that point, we told Cisco we were going to move on.

SCHLEY: OK. And so, Reference Design Kit would be the entity that was sort of owned by the cable industry, or –

NAIR: Yeah. So, Comcast, back-then Time Warner Cable, and Liberty Global were the three founding partners.

SCHLEY: So, that was the big departure from the way the cable industry supported technology?

NAIR: Yeah. So, we ended up moving a lot of that development back in-house, and built our own platform together with Comcast.

SCHLEY: And, did it work?

NAIR: Yes.

SCHLEY: I mean, have you gotten what you wanted out of the vision?

NAIR: Yes. Well, I’ve left Liberty Global since, but I think it’s probably one of the – thanks to Comcast, one of the best things we decided on.

SCHLEY: For those viewers who are familiar with the X1 Interface –

NAIR: Same technology, except different interface. Truth be known, I would have – also, I wouldn’t have mind using the X1 Interface in Europe. Unfortunately, it was too challenging, I think, for Comcast to develop X1 in German, and Dutch, and Italian, and French. In all the different languages. In the Queen’s English.

SCHLEY: Right. I understand.

NAIR: It’s just not possible for them to.

SCHLEY: So, we were talking about the interface being a table-stakes inclusion in a broader video service, and you’ve talked to me about the cost of programming. The enormous cost of content acquisition, and how it differs from a cable industry perspective, and that of a direct-to-consumer provider like Netflix.

NAIR: Yeah. So, so let me talk about content, because that is really a challenge for the cable industry. We’ve all solved the user interface problem. Solved the fact that you can get your content anywhere, in any device, inside the home, outside the home. All that’s solved. Now, it comes to the quality of the content. That’s really the product, right? But, if you look at the way the cable industry approaches this, when we look at our balance sheet, there’s a line item called, “revenue”. Right under that is a line item called, “cost of goods sold”. We take revenue, subtract cost of goods sold, you have gross profit. Then you have another line item called, “operational expense”. You subtract that, and you have something called, “operating cash-flow” or EBITDA. OK? We always look at that EBITDA line item because that’s what the industry is valued on. So, if you’re Comcast, you’re about eight times that EBITDA number.

SCHLEY: That’s your value.

NAIR: That’s your value. If you’re Liberty Global, or you’re Charter, you’re nine times that value. So, you want that value to be a big number, because you’re taking a multiple of it. Now, remember that second line item, cost of goods sold. What’s in cost of goods sold? The primary part of cost of goods sold is programming. It’s stuff you buy; HBO, CNN, all that. Right? If you’re a good manager, and you see a line item that has the word “cost of goods sold”, what do you do?

SCHLEY: You want to lower costs.

NAIR: You want to cut costs. So, you are constantly trying to take down your costs, right? Your programming costs. If you are Netflix, and you have that line item, they don’t look at content as cost of goods sold; they look at content as product. If you were building product, what do you do? You try to spend more in products. While we are trying to cut down content, they are trying to increase content. I’m not saying one is right or wrong. The real answer is in between, but we’ve been looking at this content incorrectly. We spend lots of money on building products, but we put the line item for building products under something called, “cap-ex”, below EBITDA, when the world has changed. Content is your product.

SCHLEY: This is more than just a financial treatment; it’s an entire strategic scenario for how you run your company.

NAIR: And, how you try to convince your investors to value your business. That’s why Netflix, who has terrible EBITDA – their EBITDA margins are terrible. Right? And, you subtract all their cap-ex, they are negative free cash-flow business, but their value is significantly higher, on a multiple that’s completely insane compared to what the cable industry is, because they look at valuation differently. Their investors look at them differently than ours.

SCHLEY: Well, I wanted to turn to Latin America in that context – well, first, do you see that model changing? Do you see the economic foundation of cable shifting over time, where you treat that programming expense differently?

NAIR: I think we should treat valuations of our industry just based on the free cash-flows of business, whether it’s cap-ex or op-ex or COGS [cost of goods sold], it doesn’t matter. It’s how much cash you generate. If you have a cousin that has started a business, and they ask to borrow $100 bucks from you, and you give them $100 bucks, all you care about at the end of the year –

SCHLEY: What’s left over.

NAIR: Yeah. Did you generate $20? Fifteen bucks? Ten bucks? Right? You don’t really care if it’s op-ex or cap-ex. That’s how we should value our business.

SCHLEY: You’re now running a sizable international cable company in its own right.

NAIR: It’s very small.

SCHLEY: Uh huh.

NAIR: Really.

SCHLEY: In the day it would have ranked as a – how many video subscribers do you have?

NAIR: Not very many; a few million.

SCHLEY: And, you have operations in Chile, and Puerto Rico, and some of the Caribbean properties. I wanted to go straight to an issue that has been really intensely on your mind, which is disaster recovery.

NAIR: Sure.

SCHLEY: Hurricane Maria. Let’s talk a little bit about the devastation that wrought, and how you guys reacted to it.

NAIR: OK. Hurricane Maria hit us in Puerto Rico in 2017, September. September 21st, I think. We were going to take this company public in January of 2018, and we had already made the decision at that point we were going to do that, prior to the hurricane. By all measures, it was probably the worst time to spin off a company and take it public. You had this terrible devastation, where Puerto Rico is about a $440 million revenue business annually. September 23rd, it was zero revenue, and it was zero revenue for many, many months. Forget that your customers are all losing their homes and everything. There’s no power, people are leaving the island. All of our facilities were destroyed. I’ve never seen anything like that, ever. Even Katrina, when I worked at Qwest. Katrina hit, and we had lots of facilities that got destroyed, and it was terrible. But, rarely do you see one whole geography destroyed. It’s like, all of the United States destroyed.

SCHLEY: I don’t think you can adequately convey what happened. I mean, you know what happened, but you saw it from afar.

NAIR: It’s terrible, but I’ll tell you, here’s a few things that I’m really proud of. One, during the destruction, almost all businesses there were out. Hotels. Tourism is a big part of – you know – and everybody shut down, tried to rebuild themselves. Everybody’s let go. During this whole period, we had no revenues. We did not lay off a single employee. We did not fire a single employee. If you were a call center agent, there was nobody calling our call centers. We said, just come to work.

SCHLEY: People got paychecks.

NAIR: Everybody got paychecks. In finance, in marketing, in the call centers, engineering, construction. Everybody. Then, of course, the construction started to come back, the construction guys got busy, but still nobody was calling our call centers. But, yet, we said, everybody, come to work, because we made a decision that this would probably be the worst time to tell the employees, you’re out of the job. So, you gotta go back and tell your family. You don’t have healthcare when you need it most. You don’t have security when you need it most. You, as a parent, this is when your kids really count on you the most. You can’t come back and tell your family, your kids, “I just lost my job, as well.” So, we made that decision. This was a very – financially, it made absolutely no sense, but I am so proud we did that, and our whole board was very supportive of it. So, we had no revenues, so you lose $400 million revenues, but you had to spend a few hundred million rebuilding. So, your swing is really, like, $600 million, $700 million, but we did it. Then, in nine months, we rebuilt the whole thing, and we’re back in business, and stronger than ever. It’s a great business. Our employees are great. I love them, and yeah, it’s just awesome.

SCHLEY: Man. Well, you recently acquired the remainder of that company, right? Is that correct?

NAIR: Not recently. It was a little while back.

SCHLEY: OK. So, you believe in the market. You believe in the products.

NAIR: Oh, absolutely.

SCHLEY: You believe in the people, obviously.

NAIR: Yeah. Absolutely.

SCHLEY: You talked about the human impact there, but what does that buy you for the future, in terms of employee relations, loyalty, belief in the mission?

NAIR: Well, I think our employees would say they trust us more. They would probably say that we really meant what we said when we said we care about our employees.

SCHLEY: Oh my gosh, yeah.

NAIR: But, we didn’t do it because we were looking for loyalty. We didn’t do it because we thought this would pay back. We did it because it was just the right thing. If I was living in Puerto Rico, and my boss told me I got laid off, and my house is already damaged, and insurance money is not coming in, that would be terrible.

SCHLEY: Right. You’re just about ruined at that point. From an operational standpoint, and from a rebuild standpoint – from kind of a boots-on-the-ground cable industry standpoint, how did you rebuild the system? Did you change the architecture? Or, what did you do to, you know?

NAIR: Being an engineer and a technologist, when you get to rebuild everything from scratch you’d say, wow. I’m going to fiber-to-the-home, everything. I get to do everything all over, and do it right.

SCHLEY: (Laughs) Of course. Right.

NAIR: But, the reality is you can’t. You cannot for a couple of reasons. One, it’s a race of who gets it built first, fastest, and into the customer home first.

SCHLEY: You have competitors there?

NAIR: Yeah. Claro is our competitor. They’re the local telephone company. And so, whoever gets into the home first wins, because they’ve been starving for broadband, and for video.

SCHLEY: OK. So, it really is a race.

NAIR: It is a race. The power companies are putting their poles up, and you’ve gotta be right behind them, attaching your cables. You have no time to try to be cute, fancy, and no time to go ask for permits to dig up streets, and stuff like that. It’s a race. It’s a race for engineers, and construction crews, and it’s a race for our commercial teams. So, as soon as the drop happens in a home, the commercial team is right in there to try to get the customer to resign back with us.

SCHLEY: OK. You said it took like a nine-month period to get back to more or less where you were?

NAIR: Yes.

SCHLEY: What about going forward? I mean, do you have fear that this episode is going to be repeated? Or, how do you deal with that mentally?

NAIR: You deal with that through stress, through waking up in the middle of the night during the months of September and October thinking and hoping that no hurricane –

SCHLEY: “Is today the day?”

NAIR: I learned a lot about Doppler radars and stuff. We dodged a bullet this year. There’s not a single hurricane that hit us this year.

SCHLEY: What was enticing to you about making the transition from technology leadership to general management leadership?

NAIR: I think I’ve always been a general manager. Doesn’t matter what role I’ve played. I really do enjoy building our own culture, building our own philosophy of how we want to run our business. Building teams, being able to teach. That’s something I enjoy a lot. And, trying to also create value for others, because it’s not my money that I’m investing; it’s someone else’s. I learned a lot from John, from Mike Fries, from Tony Werner, from a lot of people, on being an entrepreneur, and risk-taking. All that’s coming together now.

SCHLEY: So, you feel you sort of fit into that cable persona that you mentioned earlier?

NAIR: Yes.

SCHLEY: Risk-taking, and sort of a pioneering –

NAIR: I don’t think I could have made the decision on what we did in Puerto Rico in any other industry.

SCHLEY: That’s interesting. That’s a great line. What excites you about the near-term future of the business? You guys continue to invest, and I think to acquire properties selectively.

NAIR: Yes.

SCHLEY: Why?

NAIR: Because we are bullish about our products, we’re bullish about what we can do for the local citizens. I tell my team, and some of my colleagues keep reminding me of this as well, that we are not out there selling tobacco, we’re not out there selling alcohol, we’re not out there selling things that people don’t want, don’t need. We’re not selling nice-to-have things. We are selling stuff that are life changers. The product that we sell builds communities. The product that we sell builds businesses. The product that we sell builds good government. The product that we sell builds good communities.

SCHLEY: Education.

NAIR: Everything. Our team should wake up every day feeling proud. They’ve made a difference in somebody’s life. Every day we do, and not often do you get to work in an industry where people really want your product, because it really makes a difference in their lives.

SCHLEY: Cannot live without it. Absolutely. How do you manage a far-flung global enterprise when you have operations that are geographically disparate, and you have managers who – they know each other, I presume – but, how do you keep everybody on the page?

NAIR: Well, a few things. One, you hire good people that are entrepreneurial, in some ways like-minded, but not all like-minded, right? You want a diversity in opinions and ideas. But, you want people with great character that work really hard, that are honest not just with others but with themselves. You want people that are kind and respectful, and you want people that are really risk takers. You have that combination you can do a lot of great things. And, we’ve hired and built a team around people like that. This business in Latin American is going to be a rocket ship.

SCHLEY: Can you talk about the Latin American market? What do you face in terms of competition, and where do you stand in terms of, you know, kind of rising to the top of the provider list?

NAIR: Well, let’s start with the fact that only about 35 percent of the population even have broadband. So, yes, that’s a great opportunity. Second, a lot of the services in the region have been, I’d say, not bad but not great, either. So, you have an opportunity on the service side. Third, with scale, you can drive a cost structure, and we did this in Eastern Europe. You know, I learned a lot there on how to price your product effectively that provides value but yet, you get to also create value for your shareholders and your employees. We feel that we’ve got all of that going for us, plus we have -- on my board we have some amazing people.

SCHLEY: Who’s on your board?

NAIR: We have John Malone, Mike Fries, Paul Gould, Eric Zinterhofer. Just these four people are the smartest people on Wall Street. Paul Gould from Allen and Company, Eric Zinterhofer, one of the really super smart venture capitalists, John Malone, Mike Fries. I tell people, even if I wanted to -- even if I wanted to screw up a deal, it’s almost impossible.

SCHLEY: Not with that governance.

NAIR: Yeah. And I’ve got great operators. We’ve got Alfonso Noriega -- he’s the CEO of Televisa. Brendan Paddock, he used to run -- an entrepreneur himself, run a business. We’ve got Miranda Curtis, who is also a really smart financial person, a good operator. She used to run the Japanese operations for Liberty Global. Charlie Bracken, who is one of the best treasury minds out there. So, we’ve got a great board. Everybody’s a hard worker, everybody’s an expert at something. So, I’m quite lucky. And, having John Malone, I mean, he’s wise in so many ways.

SCHLEY: Right.

NAIR: Mike Fries, who’s built great businesses. Yeah, it’s really hard to screw this up.

SCHLEY: The team is strong. The team is strong. What do you see from a product standpoint -- to the extent you can say without giving away the roadmap -- down the road or an immediate horizon, that is really a great opportunity for cable?

NAIR: Remember, I said two things in broadband; speed and price. And you’re going to see us investing in speed and trying to take cost out so my price can be something that’s really attractive to customers.

SCHLEY: It’s a hard bar for the other guys to reach?

NAIR: Not really. If they really -- it’s not rocket science.

SCHLEY: It can be done.

NAIR: You just have to want to do it. So, mobile networks? We’re going to be LTE everywhere, and the best LTE. Now, fixed broadband networks? It’s going to be DOCSIS 3.1 everywhere.

SCHLEY: OK. Can you talk, Balan, about wireless and the dimension it adds to your business, both from a customer experience -- but, how do you parlay the network into an asset you can use for enabling wireless, or do you?

NAIR: I think the day of having a wireless company and a fixed company separate is coming to end. It has to combine. Now, they’re two different businesses, but they are destined to be together. It is as clear as day that every customer will want a wireless connection.

SCHLEY: But, why can’t I be content to get that wireless connection from AT&T and get my wireline services from Comcast --

NAIR: And you can --

SCHLEY: Here, in the US?

NAIR: You can, and many people do that. But, if you were a business you would want to have both for a number of reasons. One, scale, because if you own a wireless and don’t own the wireline, you end up spending a lot of money. Look at Sprint.

SCHLEY: To buy capacity from somebody --

NAIR: Yes, you’re constantly writing checks. Second, in the home, most people would use wireless but something called WiFi.

SCHLEY: True.

NAIR: And, if you look at your home, already today, even if you’re the most unsophisticated user, you have at least five devices that’s connected to your WiFi. If you’re sophisticated, you may have 150. You have light switches, your light bulbs, TV -- whatever.

SCHLEY: Alexa, yeah, sure.

NAIR: Whatever, yeah. So, no matter what, you’ll have more than one device. So, to think that just a mobile operator can replace fixed broadband is kind of silly, you know, because it’s multiple devices connecting and WiFi is great for that. And, the combined traffic requirements, nothing can beat fixed. So, if you want to truly be a communications company, then you don’t care if it’s fixed or mobile, you just have to have both.

SCHLEY: OK. And then, from a customer’s standpoint, I think you do get some benefit in terms of just consolidated billing and sort of a one-stop provider.

NAIR: Yeah, there’s a little bit. You know, you get the bundle. Bundle is really just a code word for discounts, right? Essentially you’re just getting discounts. And, the reason a bundle company can give discounts is because of the economics of scale. Right? You know, serving four products, the marginal cost of the fourth product is pretty low.

SCHLEY: Ah, OK. Do you have kids or young people in your life? In your family?

NAIR: Of course.

SCHLEY: What about their use of media has just kind of blown you away, and how does it instruct you about where your business is going?

NAIR: I think all of us would have kids that consume their content differently than this.

SCHLEY: Sure.

NAIR: They’re not interested in 100 channels. They’re not interested in channels, they’re interested in content. And, not all content that they’re interested in is professional content, you know? And so, there are services out there that support that. Good for us that we provide the connectivity to enable that, but for us to think that we could be in that business, that would be a bridge too far for me.

SCHLEY: You’re not going to establish another YouTube.

NAIR: No, you’re not, and to try to do that would be silly. Now, but you want to be in the entertainment business because if you’re not in the video entertainment business, the franchise that you have, the value of it diminishes because, when you build a network, one of the beautiful things about cable is that, in that same network you have a voice, video, and data revenue stream coming in on the same network. One of the challenges when I was in the telcos, you build that same network, it cost about the same amount, except you have only voice and data. You have two revenue streams on that same cost. It’s always more challenging. The cable industry has always had three revenue streams on that same infrastructure, and you don’t want to lose that because, when you lose one-third as your revenue stream on that, it may not be as profitable as the other ones, but it’s really -- profitability in a big part is just cross-allocation. So, guess what? If you don’t have video, are you going to shut down a third of your call centers? Probably not, because you still get a lot of calls that come in for your broadband product.

SCHLEY: I see.

NAIR: Are you going to lay off a third of all your technicians? No, you’re not, because it still takes the same amount of people to fix up an amplifier.

SCHLEY: Understood. Is that why you see the wireless titans really trying to participate more in the video business today, whether it’s AT&T-Time Warner, or whether it’s Sprint offering free Netflix, and that sort of thing?

NAIR: Yes. They have to. Plus, they all have to get into fixed business as well, nationwide, in the United States.

SCHLEY: In the moments I have left with you, what are you most proud of? I mean, when you kind of look back -- and it’s maybe a hard question to just answer on the spot -- but, what sort of, “I did this”? You know, what comes to you?

NAIR: I’d be remiss to not say that I’m most proud of my family, my kids, my wife has been amazing. Like I said, almost all my smart business decisions, she made for me. I’m mostly really proud of the friends that I’ve developed, especially in this industry. They really care for each other. I cannot imagine myself being this successful anywhere else.

SCHLEY: Well, that’s a question we ask this table sometimes; is the cable community really different from that that you might form in the shoe business or the grocery business, and it seems to be that there is a real distinction. I mean, people believe that there is.

NAIR: It’s truly a meritocracy. I mean, a kid like me -- when I was a kid, coming up from Malaysia, an Asian dude that hardly knew anybody in this industry, being able to make so many friends, trust so many people, get so much support from so -- I mean, it’s just unbelievable. Me sitting here talking to you today? It’s like magical. By all measures and means, I should be somewhere else, not here.

SCHLEY: I don’t know if I buy that entirely.

NAIR: No, it’s the truth.

SCHLEY: A topic du jour is of course the onset of the 5G ear in the wireless industry. Just some opening thoughts about either the competitive threat or the business opportunity, or the mix of both, that it presents?

NAIR: It is a mix. Like all technology, there are tremendous opportunities for some and risk for others. And so, you have to know which part of that side of the fence that you want to be on. Let’s put it this way: 5G will become real. Given. It’s high speeds, it’s better priority. It’s got something called network slicing. So, so many features built into it that it will be great. However, it’s not as big a step change from 4G as 4G was from 3G.

SCHLEY: Really?

NAIR: If you have a 4G phone, you would never use 3G. When you see on your iPhone, 3G, you’re like, “Ahh!” Right?

SCHLEY: Right.

NAIR: 5G to 4G, not as significant, but still, 5G will make a difference. Now, when will 5G become available? Probably after the 2020 Tokyo Olympics. 2021, the Apple iPhone may have a 5G iPhone. Right now, it’s still mostly for the fixed wireless network, less mobility, and that’s what Verizon has been talking about.

SCHLEY: Exactly. Right.

NAIR: I’m not a believer in that as much. 5G makes sense for mobility. For fixed? It’s questionable.

SCHLEY: I had a similar outlook when I saw that Verizon was offering a free Apple TV, and a free subscription to YouTube TV for a while for the fixed 5G implementation. I didn’t see the magic there. Do you see residential video playing a role in 5G?

NAIR: No. See, the reason 5G is going to take off also is because of the amount of spectrum bandwidth that’s going to be thrown at it, but spectrum is limited in different phases. So, the 3.5 GHz, there’ll be some spectrum, the CBRS bands, but maybe about 100 MHz to 160 MHz, 200 MHz perhaps. But, the real spectrum is up in the 60 GHz, the 35 GHz, where you can have like swaths of spectrum. The problem with those higher frequencies is that they are susceptible to all sorts of interference: range, line of sight, all of that. And, but if you want to be in the fixed wireless business, you have to operate at the highest frequencies, which means you have to have an antenna right outside your home, you’ve got to have line of sight from the beaming station, you’ve got to have a lot of these cells. Economically it’s challenging. When anybody has to sell a product and they have to give so much away for free, and still can’t sell it?

SCHLEY: Right. That’s what I’m saying. OK. And then, do you have plans to incorporate 5G technology anywhere in your --

NAIR: Yeah, absolutely. When it comes -- when 5G for mobility is available. There may be some corner cases with 5G fixed wireless, but they’re corner cases.

SCHLEY: Mostly a mobility product?

NAIR: Yeah. Be most excited about mobility play.

SCHLEY: Right. Thank you. As a closing thought, it has been absolutely delightful to talk to you about really a far flung set of issues. And I love that your career involved time in the trenches, you know, and you kind of carried that forward with you all the way through to CEO of, what you call, a small cable company, but what is in fact a fairly prominent international cable company. So, thank you so much, Balan.

NAIR: Thank you so much for having me.

SCHLEY: For the Cable Center’s Hauser Oral History Series, I’m Steward Schley. Thanks for watching.

END OF INTERVIEW

 

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Jeff Marcus

Jeff Marcus 2019

Interview Date: August 6, 2019
Interview Location: Denver, Colorado USA
Interviewer: Stewart Schley
Collection: Hauser Collection

Note: The Cable Center Website is made possible by a gift from Paul G. Allen, Jeffrey A. Marcus and Marcus Cable.

Stewart Schley: Greetings, and welcome to this episode or edition of the Hauser Oral History Series brought to you by the Cable Center. It is August of 2019, if I'm not incorrect. I'm Stewart Schley and we’re here in Denver with Jeff Marcus. You're not doing a doubletake. There is actually a predecessor interview with Jeff that was recorded in 2001, after the exit of some of the cable companies that you had formed which were some of the prominent companies of that era. Since then, you have hardly been inactive. You were an active investment strategist. You have been active on the national political scene and have a lot to say, I think, about the state of the industry and kind of where we've been since those days.

So Jeff, welcome and thanks for being with us.

Jeff Marcus: Thank you for taking the time to do this. I’m really very pleased to be here. When I was thinking about the fact that it was 2001, when we last did this interview, and what has happened since 2001, it's really been a remarkable 17 years. When I look back at 2001, I'm sure I had more hair and it was darker. But I also at that point didn’t have four grandchildren. That’s something that has been a major, major accomplishment in my life. And I also married a wonderful woman by the name of Nicola, Nicola Marcus. And she is the most beautiful grandmother you could imagine.

Jeff Marcus

Schley: It's funny. I watched the earlier interview recently and you made reference to, at the time, your son, I guess at one point was a big baseball person.

Marcus: Yes.

Schley: Could you talk about your association with the Texas Rangers and how that came about just for fun?

Marcus: Well, it was right after I moved to Dallas in 1987 that I met George W. Bush. What I didn’t know is right after we met, that he had been asked to put together a group to try and buy the Texas Rangers because there was another group from Florida that was wanting to buy the Rangers and move them to Florida. And they asked me to be a part of that group. So in 1988, I think, I agreed to do that. I think we closed in 1989 and bought the Texas Rangers and it was a great run. We owned it for nine years and we won the AL West during that time. My son was nine years old at the time.

Schley: Good baseball age.

Marcus: Boy, he had a great time. This was a great lifestyle investment. He and former President Bush would sit in the front row and they would eat sunflower seeds and talk baseball and my son knew a lot more than I did. So it was really a lot of fun.

Schley: I appreciate you sharing this story. And I did want to reach back in the memory vault for one more question at risk of double-dipping in to the other interview. You literally started your career, Jeff, selling cable door-to-door.

Marcus: That’s right.

Schley: Just take us back to where you were and how that kind of felt or what happened.

Marcus: Actually, I was working my way through school and I had a number of jobs. I went to the University of California, Berkeley. And I was—in the summer of 1967 I was driving a garbage truck and I would get up and be at the yard at five in the morning and I'd work until two in the afternoon. I was a very conscientious garbage man. Even today, I have a heart for the garbage men of the world. But my roommate was selling cable TV door-to-door. And he would go to work at five o’clock in the afternoon, come home at nine, and he was making twice as much as I was making. It didn’t take me long to figure out he had a better job. So I applied for the job and I got a job selling cable door-to-door, and I stayed with it in my senior year of college. When I graduated, I actually got a job working in Seattle, Washington, running a cable television marketing program and I also had to go over to Wenatchee, Washington, to run the program there. And I just stayed with it. I can't say I had the great vision that cable was going to become what it is today.

Schley: And your life.

Marcus: We were selling antenna service. Then it was called CATV. Community Antenna Television. And that’s what it provided. There was no satellite, there were no distant signals. That had been shut down by the FCC. So we were just selling reception service to people who otherwise couldn’t have it.

Schley: It’s so poetic, though. Because do you ever allow yourself to think, OK, if I hadn’t taken that job in the late Sixties selling cable—your life, presumably, would be very different.

Marcus: Well, I'd still be in garbage, probably.

Schley: I don’t think that’s the case. It's a great story and so your heritage and involvement with the development of the industry through all of its incarnations is pretty interesting.

I want to talk about the last company you had formed and ultimately exited, which was Marcus Cable?

Marcus: Marcus Cable.

Schley: Just take us up to when that company was sold. How big were you, and where were you guys?

Marcus: At the time, we served about 1,250,000 subscribers, which in those days was pretty big. And we were the ninth largest MSO, but we were the largest privately held company. And it was a company we had built really from scratch, starting in 1989-1990. I had seven private equity partners that funded this growth and we did it all through acquisitions. We ended up selling to Paul Allen. He was a great buyer because he kept the company pretty much intact. He then bought Charter Communications and merged Marcus Cable under Charter. It was renamed Charter. His company was then Charter Communications. It was so ironic because so many years later of course we at Crestview got involved in that. And I know we’ll talk about that in a few minutes.

Schley: It makes for such a great jumping off point because maybe you could talk about—that was a transformative time and Paul’s vision was for a very different-looking industry, I think, than previously had existed. Can you talk about that era of cable and what you saw forthcoming when you got out of Marcus Cable?

Marcus: When you look back on your life and you look back on your career, and the choices you made, and the doors you went through and the ones you didn’t go through, that day in 1998 when I sold Marcus Cable, when we sold Marcus Cable, it was really a fateful day. Because I had spent my entire career in the cable television business, and I had built up this company to be an important company in the industry. I guess if I look back on it today, I would say, I wish I hadn’t sold it. Because where cable was then and where it is today, it hasn’t missed a beat. But it's gone through many capital cycles, it's gone through many ownership cycles, with seven private equity firms as partners. Private equity companies, as I well know, look for an exit and for a realization and return on their investment. So when I sold Marcus Cable, it was really with a great deal of regret. But you don’t really think about it at the time. You put one foot in front of the other and you go forward and I had an opportunity to continue to lead Marcus Cable. Paul Allen wanted me to stay and be the chairman and the CEO of what he envisioned to be the wired world. And to make acquisitions and it was something that interested me, but I realized that I wouldn’t be working with Paul, for Paul. There were some intermediaries involved there. That didn’t appeal to me, and I had an interesting opportunity to become the CEO of a large public radio company and so I chose to do that. That sort of sent me off on a different path.

Schley: Could you see at that point, around the time of that transaction, the Internet high-speed broadband category coming into focus?

Marcus: That was the next capital cycle that was facing the cable industry in 1998. Because cable, phone and broadband were just becoming on the scene. And it would involve a big upgrade of the systems, a big upgrade to finance this new technology and my private equity partners I knew weren’t going to want to fund that. So that was one of the reasons that we chose that moment to sell.

But when you look at Paul Allen’s vision of the wired world, he really was a visionary guy. And by wired world, I think what he had in mind—we had several conversations about this—was that we would be interconnected via the Internet and that cable could be the star player in that. And I think that what has happened in terms of broadband now being the most important product that cable has to offer. I think this was probably in the back of Paul’s mind. I don’t think that anybody at the time could see how it evolved exactly, but a wired world company is what he had in mind. I think that’s in essence what’s happened.

Schley: I wanted to ask you—I was just thinking about this as a prelude to this interview. In your career as the chief executive officer of former cable companies, were there ever moments when you had a crisis of faith about the industry and the economics surrounding it, or was the characteristic such that this was a very predictable, understandable, kind of business model?

Marcus: Well, there have been so many existential threats to the cable industry over the years. When I first got involved, it was the telephone companies and the broadcasters early on back in the late Sixties. And there was always going to be something that put the cable industry out of business.

Schley: I remember.

Marcus: And yet, the cable industry always was able to come up with something more to sell and another reason to have cable. That old tagline, “there’s more to see on cable TV,” always was true. And even today, we can talk about the existential threats to cable and some people will say they’ve never been greater, and I would say I'm still a bull on cable. I was when I started knocking on doors in 1967.

Schley: Jeff, what is the latest existential threat du jour? I mean, what's in the market today that’s—?

Marcus: I think it's probably 5G. And what 5G is going to do to the necessity they have of fiber and hybrid fiber coax.

Schley: Literally a line snaking into the back of your…but you see the industry able to thrive in the face of a 5G threat.

Marcus: As an investor still in cable, and as the chairman of Wide Open West, we've done a lot of work looking at 5G. And we've had a lot of people come talk to us, technical people. I think that 5G is like so many emerging technologies. I think it has been over-hyped and I think that the standards that have been adopted here in the United States are not going to enable the 5G providers to really compete in a way that it's going to be a major threat to cable.

Schley: It's interesting because cable guys—you're an archetypal cable guy—you understand, I think, the capital demands and the physical labor demands of building a cable system are intense. When I see what's happening with 5G, it makes me think back a little bit to the—you know, you’ve got to put a lot of antennas in a lot of places to make this infrastructure work.

Marcus: And it doesn’t go through buildings very well and it doesn’t go through other obstacles very well. It's very expensive. I think that the day of reckoning for the 5G people may be coming. We’ll see. But there is certainly a lot of enthusiasm and hype about it, but it's not something that I see as the existential threat that some others might see.

You look at the people that are out there selling broadband 1 gigabit, broadband such as Google Fiber, etc. And Google, with all the money in the world, all the technical expertise, they really haven’t been able to execute very well on that vision. Because it really is hard to go door-to-door-to-door to hook people up and service people and bill them. And have customer service available 24 hours a day. It's not as easy as it looks.

Schley: People used to criticize your industry: “Well, it's a monopoly industry.” I don’t know if that word was ever really the right word, but the truth is, the economics really didn’t support multiple players usually in a market, right? Because of what you just articulated.

Marcus: Well, that’s right. It's hard. That’s the way it is. The day-to-day running of a cable company, there's a thousand things to do—not that that’s not true for every business, but you have a customer-facing business that has a very, very precise technology that has to work. And you’ve got to have people that come out, that can talk to the customers in a way that they're talking through how to operate it. It's very complicated.

We all remember the days of turn on your television, click through the channels. No more.

Schley: You mentioned a reference to Wide Open West, colloquially known as WOW!, I guess that’s what we call it. That’s one of many companies in which Crestview has investments, either active or has exited from investments. Can you just run through what the intent and purpose of what Crestview is and some of your media-centered investments?

Marcus: Well, Crestview is a middle market private equity company. And I joined Crestview right after its formation in 2004. It started in April of ’04 and the founders came to me and they wanted me to run the media vertical. And I agreed to do that. The company is headquartered in New York. At the time, I was living in Dallas. I spent time in New York and shortly after that, I moved to Palm Beach, Florida. And in the media side of Crestview, we did a number of investments in the cable industry. Our first was to buy, along with another private equity company, the cable system serving San Juan, Puerto Rico, and adjoining communities. We owned that from 2005 for, gosh, I can't remember how many years, but we ultimately sold that to Liberty. That was an interesting investment in that I found Puerto Rico to be a very difficult place in which to operate. All the things that we learned in terms of customer service here in the mainland—it's hard to apply them in Puerto Rico. And even though Puerto Rico is a commonwealth of the United States and operates under US law, and we think of it very much as we can just go there and expect the same thing, it's very different and a very different culture. I would say it was an OK investment for Crestview. It wasn’t a great investment for Liberty. It's been a very difficult investment compounded by what happened with the hurricane.

Schley: Right. And then you went on, though, to invest in other cable companies.

Marcus: We did. And I believe our next investment was Charter.

Schley: A familiar company.

Marcus: A familiar company. At the time, Marcus Cable comprised 20% of Charter. From 1998, Paul Allen went through, or his management team went through a number of very expensive acquisitions and they built the company that was quite large, but also had a huge amount of debt and a very complex capital structure. We looked at that as an opportunity because one of the things I thought about, with respect to Charter, was that here you have a man who was dedicated to cable and to the proposition of what cable is and what it can be.

Schley: Mr. Allen, Paul Allen.

Marcus: Paul Allen. And even though the company was very troubled from a debt to EBITDA perspective, he was the one person that could actually backstop this. I didn’t believe that he would ever let it go into default. So we found a place in the capital structure where we could invest, and feel comfortable that if that thesis was wrong, that in fact the company were to enter a restructuring, this particular tranche would become the fulcrum security. And that was our least probable scenario. But it turned out that, I think it was in 2008, Paul had some sort of a health scare and I think he had had enough of this investment, although he had put something like $7 billion of his own money. And he decided to let it go through a restructuring. I'll never forget when we learned that, and the bonds that we had bought had whatever the price was, were virtually worthless. Everybody looked at me and said, “OK, Jeff, what do we do now?”

Schley: What was the answer? What did you do?

Marcus: Well, we actually participated in the restructuring. There were two other major holders of this tranche of bonds that we worked together with on the creditors’ committee. Because of our knowledge of cable, and experience in cable, we took an outsized role in the creditors’ committee. And when all was said and done, we ended up owning—we were the third largest holder of Charter Communications when it emerged. This is the interesting thing about being in the private equity business. Because we make these investments and then five or six or seven years later, we need to harvest them and return the money to the investors so we can raise the next fund. So that’s sort of the oxygen of private equity. It's very different from the long-term ownership vision of so many of the people in the cable television business. And the people that have done so well in the cable television business.

Schley: Which could be generational.

Marcus: Exactly, exactly. So once the stock started to move, my partners came to me and said, “Boy, we've done so well on this investment, we not only have our money back, we have multiples of our money back, so we need to sell and move on to the next fund.” I said, “Fellows: we’re just getting started here.” We were recruiting Tom Rutledge to come in and be the CEO and I would say, “The best is yet to come.”

I'm giving you all public information here. We owned at the time, we at Crestview owned 11 million shares of Charter, and when the stock was $71, we sold a million shares. Then when the lord of Liberty came in, we sold some stock to them. Again, all public information. That was just great because not only did we have Tom Rutledge, but now we have John Malone and Liberty and all that. Hey, they all represent—Malone and I go all the way back to the late Sixties. And this was really going to be fun. The fun’s really going to start now. And my partners wanted to sell. Because we were raising our next fund.

So our next fund was—we raised Fund Three, which was like $3.3 billion.

Schley: Earmarked for media or—?

Marcus: No, for the entire four strategies of Crestview. Had we kept that 11 million shares—

Schley: Here’s one of these stories.

Marcus: Think about it. The stock is $400 today. Do the math. That would be over $4 billion. What are you going to do?

Schley: You all along that odyssey—it sounds like your fundamental confidence in the business of cable never was questioned, right? You saw value.

Marcus: The fellows behind Crestview were out of Goldman Sachs. And the first private equity investor in Marcus Cable was Goldman Sachs. And this was before they had a fund. So all the partners chipped in to make the investment in Marcus Cable. So there is not a former partner of Goldman Sachs of my generation that doesn’t remember the Marcus Cable investment because it was a very good investment.

Schley: They did well on that.

Marcus: And so when the former Goldman guys were forming this private equity company, they wanted to have a media vertical and they wanted to get it all in cable. That’s when they came to me.

Schley: In the media vertical itself, what do you look for? What are the fundamental attractions for a particular investment versus another? Is it the management team? Is it the moment in the capital markets? What do you look for?

Marcus: First of all, we would look for a company that is –with the addition of capital and with the addition of coaching and the Crestview magic (we used to call it), we could do better. We could expand what we could buy and build. So we thought that given the history of the Puerto Rico system, that we could bring our expertise to bear, we could manage it better, we could expand it.

Schley: You weren’t the passive, “here’s some money, go do your thing.”

Marcus: No, no, no. We would take a very active role, and hence my being chairman of WOW!. We have two other people out of Crestview. I'm no longer with Crestview. I retired from Crestview. But two of the Crestview partners are also on the board of WOW! So yes, we will take a very active position. Not always, though. When we bought the bonds at Charter, we were passive holders of the bonds. We just felt that those bonds would appreciate as the company did better, so we bought them at a discount and if we could sell them at par, we would have done very well. But we also protected our downside by knowing that if the company ever did go through restructuring, we strongly felt that would be the fulcrum security, meaning that the security that would own the equity.

Schley: It's interesting because the cable business primarily has been a subscription supported business. You made an interesting pivot in your career into the radio business. And I'm just curious if you could talk about what was the attraction and what was the risk you saw in radio at the time?

Marcus: At the time—this was back in 1999—and two years before that, the laws had changed with respect to the radio business. And it used to be that radio ownership was significantly limited in markets; you could only own so many, there was a lot of cross-ownership restrictions. In 1997, there was a deregulation of radio so people were rolling up radio stations, and it felt a lot like the early days of cable and cable consolidation. This was before Internet radio, before Pandora, before Spotify, before any of that. And I'll tell you an interesting story about that in a moment. But this was a chance to sort of do what I had done at Marcus Communications and then Marcus Cable in terms of the buy and build. Indeed, we started off with two radio stations in this company, which was called Chancellor Media, later, AM/FM. When we sold the Clear Channel, we had 479 radio stations. So it was a huge home run for the private equity company that was behind it, Hicks Muse. And it was a very interesting experience for me. Obviously, I was not a radio person, but I was a person that understood how to run a business, how to build a business, how to finance a business. And it was new for me to run a publicly-owned company, publicly traded company, although Marcus Cable had public funds. So there are a lot of similarities.

Schley: It was interesting because it exposed you to the vagaries of the advertiser-supported media side. This was before, as you said, subscription streaming came into the fore. So what was that like? What was that reckoning like?

Marcus: Well, we actually sold to Clear Channel before that happened. But the story I wanted to tell you is I had a guy come to me one day that I kind of knew in Dallas. And he came in and said, “I have a great idea. I want to put all your radio stations on the Internet.” And I said, “Well, Mark, that’s a great idea. What are you going to pay us for that?” He said, “No, no, no. I'm going to let you invest in the company. You can buy a quarter of the company for $25 million.” I said, “Well, what's the revenue model?” And he said, “We’re figuring that out.”

Schley: This is early Internet…

Marcus: I said, “This is a public company so come back when you’ve got this figured out.” So he calls me back a few months later and he says, “Well, I've got some late developments. I want to come see you again.” I said, “OK.” He said, “We changed the name to broadcast.com.” I said, “That’s probably better than AudioNet. What's the revenue model?” He said, “Well, we’re getting closer.” So I said, “I'm going to give you the same answer. You want a valuation of $100 million in a company that has no revenue.” And I said, “We’re not a venture capital firm. We really can't do that.” And I said, “Mark, come back when you’ve got it figured out.” So he called me, I don’t know, seven, eight, nine months later. And he said, “Well, I've got good news.” I said, “Well, what's that?” He said, “We just sold broadcast.com to Yahoo for $7 billion.”

Schley: Oh, my gosh.

Marcus: And I said, “Mark.” Mark Cuban. “That is amazing. What's the revenue model?” He said, “We still haven’t figured it out.” Mark Cuban’s brilliance was not only in doing it, but in collaring the Yahoo stock. And if you look at Mark Cuban today, that’s how he got his start. That $25 million would have been worth how much…?

Schley: I mean, the absence of a business model was not unique to broadcast.com. And so what was your view? You sold cable door-to-door. You sort of sweated it out to make a living. Here are these guys who don’t have a discernible business model; in some cases, flipping companies and making money. It had to feel kind of off-kilter.

Marcus: Interesting enough, when I sold Marcus Cable, and we then sold Chancellor Media to Clear Channel, some of the guys said, “We’re old Marcus Cable guys and we formed a company and we were going to get involved in this whole Internet situation.” So we went out to learn as much as we can. And we went to see a fellow out in Massachusetts who had built up a collection of all these Internet companies and his stock was way up and he was doing great. And he was very nice to receive us. We flew there and he spent the afternoon with us. We had a very nice dinner. And as we were driving back to the hotel—I think there were four or five of us in the vehicle—and I looked at my friends and partners and I said, “All right guys. Do you have any idea what they were talking about?” And they said, “No.” And we weren’t very successful because we couldn’t share in that vision and we were—

Schley: I understand.

Marcus: We were all steeped in the whole model of revenue—

Schley: ARPU, Paying customers…

Marcus: That company, by the way, went bust… We’ve seen it happen again, but today it's very different and you get these startup companies and they're doing well. Now they have revenue. And now they have profits.

Schley: There's a business behind it.

I know you're not actively engaged with Crestview, but do you see interesting investments when you sort of scan the horizon and you look at the media business, which is always in a state of flux, right? What do you like right now? I mean, what's of interest? Is it online video?

Marcus: I like being retired. (laughter) I think it's really hard to find good deals today. For a number of reasons. Everything is really highly priced, number one. Number two, there is so much money that’s being thrown at deals, it's really hard to find value. And Crestview is a value shop. We don’t look for growth investments; we’re more of a value shop. So I think it's hard to find value today.

Schley: Regulation and regulatory policy has always affected and influenced the cable industry, probably maybe forever will. I don’t know, but you’ve had some exposure to and involvement at a high level in the world of politics and governance. I wonder if you could just talk about your roles and responsibilities there and sort of how you see a regulatory structure that might make sense for the communications industry going forward. Is there one? Tell me what you’ve done, first, tell me what your involvement has been with politics.

Marcus: I guess it was after the Internet company didn’t work for us, I was asked to get involved in Republican party politics on the fundraising side. So in 2001—and I was never really a big donor, I was never that involved, but I was interested. And Governor Bush of Texas, who was one of our partners in the Texas Rangers, when he ran for governor, I was off doing something else and I didn’t really raise money or get involved and didn’t have a role in the state government at all with him. But a friend of mine asked me if I would participate, and I got involved actually through the Republican Jewish Coalition and helped them in their endeavors. And I was asked to co-chair the Republican National Committee presidential gala in 2001. We raised a record amount of money. And when you raise a lot of money, then they ask you to do a lot more.

Schley: …you volunteered…

Marcus: Right. They asked me to become the head of the major giving program, the $100,000 giving program for the RNC. I did that. One day I received a call from the attorney general of the state of Texas, who was running for Senate, and he wanted to talk to me about helping him in north Texas. And I ended up helping him not only in north Texas, but throughout the country. And I became his national finance chairman. That’s John Cornyn, who today is the number two man in the Senate, the number two person in the Senate. I also helped Norm Coleman, who was running for Senate in Minnesota. So all of that—in 2002, the election of course, John Cornyn was elected senator, Norm Coleman was elected senator, we raised a lot of money for the RNC. And I got a call from the President, and I was honored to go to Washington and meet with him in the Oval Office, just the two of us. He asked me if I would be an ambassador for the United States. And that was really…

Schley: What was that like?

Marcus: That was such a high moment in my life. Here I am two generations away from the Lithuanian shtetl and I'm walking in to see the President of the United States.

Schley: Ambassadorship to?

Marcus: Well, I ultimately was appointed to become ambassador to Belgium. So you go through a process when you become an ambassador designee. Before they even announce your appointment, you go through an FBI check. And it's very, very intrusive. They did 42 interviews in Dallas and New York and Aspen, places where I spent time or lived, and that all went fine. So then once they do that, then they send your nomination to the Senate. So then the opposing party gets a crack at you. In the interim, you're going to school to learn how to be an ambassador, you're going to the Foreign Service School, you are going to see every agency that’s at post, so I had an exposure to the inner workings of the DEA and the CIA, which was fascinating. It was a really interesting year for me. Then you go in front of the Senate Foreign Relations Committee, you have a hearing, and the Democrats in this case, the opposing party, gets a crack at you and they ask you everything that possibly they could ask about. American policy towards the country where you're going, what's going on with the political situation in the country—just to try and trip you up. But also to make sure you're qualified to represent the United States.

Schley: It should be a little bit hard.

Marcus: Sure. And you're the personal representative of the President of the United States and it's a huge honor. I'll never forget I had both senators from Texas sitting there with me at the hearing and it went really well. The Senate Foreign Relations Committee sent my nomination to the full Senate unanimously that day. It's hard to think of anything happening unanimously today.

Schley: I was going to say.

Marcus: But then right before the recess in ’03, my nomination was taken up by the Senate. And there was this one senator who put a hold on my nomination. Not because he knew me, but because he was mad at the President about something. Fortunately, it happened to be a state where I knew the other senator and they were able to work it out. And I was confirmed unanimously.

Schley: I thought you were going to tell me he had a customer service issue from way-back-when with a cable guy. (laughter)

Marcus: Well, he might have. But this was August 31st of 2003, and I was going to go to post in October of 2003. I ended up having a family issue and I didn’t go. But I had the experience of a lifetime to go through that process and to learn what I learned about our Foreign Service, to meet so many wonderful men and women who serve our country and who do so just tirelessly for hours on end. It gave me such a great insight into the workings of our government.

Schley: Just talking to you gives me sort of a…

Marcus: When you asked me what would be a policy, a communications policy that would make sense for the cable industry, I really can't answer that today except to say that the partisanship has gotten so out of control in this environment. And the collegiality that existed even back in ’03, where one senator could go to another and say, “Look, I know you're doing this hold for political reasons, but this guy’s a friend of mine, he's a really good guy, he knows what he's doing, he’d be a great representative of our country. Would you find another way to protest?” And the man said to the other senator, “Fine. We can do it.”

Schley: You clearly got some Democrat votes out of the committee because it was unanimous. But you don’t see that existing anymore?

Marcus: I have friends that have been waiting for a hearing, waiting for a vote, that President Trump has nominated to be ambassador, and they can't go. And because they cannot, they cannot get through the Senate Foreign Relations Committee, let alone the Senate.

Schley: You did live through, though, the most onerous maybe piece of federal legislation. Was it the 1992 Cable Act that imposed rate regulation on the cable industry? I get my dates a little confused. But whatever, you lived through that, and that was hard, right?

Marcus: It was really hard. I remember going in front of city councils time and time and time again trying to justify a rate increase. We wouldn’t have a cable industry today if the federal government hadn’t gotten out of the way. We wouldn’t have a cable industry today if the federal government hadn’t reined in those pole owners who, early on, wanted to pay for their entire plant by having the re-arrangements and the pole rental fees paid for by the cable industry. So there's good regulation and there's bad regulation. And it depends whose ox is being gored in terms of how you see it.

Schley: Listening to you talk, talking about the appointment to the ambassador post, did you always sort of intuit that you were going to be a successful businessperson? I mean, you're a kid coming out of college and it probably would have been hard to foresee the evolution of what would be your career, but you must have brought this confidence, this quiet confidence, at least, through almost every hurdle along the way, it seems like.

Marcus: I think I didn’t know how tough it would be.

Schley: I think that’s an honest answer, but when obstacles did arise, what was your approach? Either management or leadership-wise. How did you guys get past those spots?

Marcus: I think you keep going and you try and learn from the examples of others. There were some dark days certainly, and times when you wonder—I remember going back to when I was a cable broker and I'd left—I managed two television cable systems in Minnesota, and this was in 1975. I decided to join Rick Michaels at a company called Communications Equity Associates.

Schley: CEA.

Marcus: The only problem was that Rick was—he was starting out and there was no salary and there was no income and so I cut the cord on the monthly income. And I didn’t know a whole lot about being a cable broker. I didn’t know how I was going to get any listings. I didn’t know how I was going to get any customers, but I thought OK, there's a whole bunch of guys out there that do it, so maybe I'll give it a try. And I got my first listing for a cable system in a town called Watertown, South Dakota. I had a guy that wanted to buy it. I can't recall how I even came by him, but I took him out there, and the day he wanted to go was the day my former wife and I were having a big party in our home. It was like a housewarming party. We just had moved into this house. And so I'm thinking, I've got to go to this, to Watertown, South Dakota, and I might not be able to get back, and how do I break the news.

Schley: That’s a tough sell.

Marcus: But I said, you know what? I've got to put food on the table. So I went out there and we did all the diligence of the cable system and we had dinner with the owner, and we shook hands on a deal. I remember going back to the motel—it wasn’t a hotel, it was a motel—and I laid in my bed. And I was going to make more money on that one commission than I'd ever made in a year in my life. I was just overcome. It was those kinds of moments that I remember today—this was what, 1976? It was those moments that made all of it worth it. When you overcome all the obstacles and you focus and you do this and something comes of it.

Schley: That’s a huge inflection point and I remember asking a gentleman who would have been your competitor at the time, Bill Daniels. I remember asking him in an interview the day, when did he know he was going to be rich? It was an interesting question and he’d answer anything. But he had a very similar story about getting a $50,000 commission on a cable deal. That’s pretty eye-opening.

Marcus: That’s what mine was…

Schley: Good. It must be the common number.

You’ve mentioned John Malone a couple of times as a figure who was prominent and important in your life. Can you talk (a) about that relationship a little bit, and then (b) could you identify another couple of people who have been kind of instrumental in the career that you’ve had?

Marcus: Well, John was certainly, I think, number one, instrumental in my life because when I was a cable broker, he was my biggest client. And we used to go around the country together buying up cable systems. It was really a wonderful opportunity to learn from him. He was the head of General Instruments at one point. Jerrold Electronics. He wasn’t a cable operator, but Bob Magness saw in him a person that could really come in and lead TCI. And John and I became friends and I'll never forget how John and I had flown out to Hawaii and we were trying to buy Oceanic Cablevision. I think it was Children’s Television Workshop and a few others. This might have been back in 1975. We had this meeting and it didn’t go well and we went out, probably drank too much wine over dinner (we didn’t drink wine then, probably something stronger). We were walking on the beach in Hawaii. And I looked at John and I said, “John, this hasn’t gone so well. But you're obviously—he was president of TCI—you're just on a great track. What do you think it would take to make you not want to work anymore and consider yourself to be hugely successful?” And he looked at me and he said, “Jeff, if I could make $5 million, I think I'd quit.”

Schley: Did he really. That was then, right?

Marcus: That was then. Boy, look what inflation’s done…inflations of ambition. But John and I were good friends. He actually was the inspiration for me to go into the cable television business because in 1979, we were out trying to buy cable systems and along with Rick Michaels, I had just bought a cable system in Richland Center, Wisconsin, from an independent operator. It had 2,000 subscribers. Once again, we were not successful in buying this cable system, but John, over dinner, he said to me, “Why do you buy that system in Richland Center?” And I said, “I want to become a cable operator, not just a broker.” And he said, “What do you know about running a cable company?” I'll never forget; I looked at him and I said, “Well, you do it. How hard could it be?” He got a chuckle out of that. And he said, “You really need to sell that to me because we own the Madison system and we need to own this.” It was 65 miles away, but over a mountain so they didn’t get any television. I said, “What are you going to offer me?” We had just bought it for $500 a customer or something. No, it wasn’t that. It was $662,500, that’s what it was. And I had scraped together a $100,000 down payment of which I had $5,000, and I raised $95,000 from other people. So John said, “I'll give you $1,000,000.” So that was three months after we paid $662,500. So I thought, this is a good business. And I said, “OK, we’ll sell it.” And I said, “There’s this much debt against it, but I want to have TCI stock for the equity. And he agreed to that.”

Schley: Why? Can I ask?

Marcus: Just because I was a great believer in the industry. I can't even remember whether we got the stock or we got the cash, but I don’t think he wanted to give me the stock. But in any event, he said, “I'll do the deal, but you've got to go get a rate increase.” So I said, “You’ve got to promise to deliver twenty channels.” So we made the deal and it all worked and it was that transaction that inspired me to go into the cable business. And it was a few years later that I sold my interest in CEA to Rick and I went out and formed Marcus Communications and the first cable systems that I bought were from TCI.

Schley: Perfect, a virtuous loop. What did you look for, what did people look for in the day, what were the characteristics that made a property attractive to add to your collective, if you will?

Marcus: When you're trying to form a cluster, it was, did this cluster well with your…

Schley: Geographic…

Marcus: Geographic cluster? And could you bring more services? Could you create better or provide better customer service? Can you create synergies because of the fact that it is clustered with your other systems? And where did it stand in terms of a physical upgrade. Was it a state-of-the-art plant, or did you have to put a lot of money in it?

Schley: People did pretty deep diligence, right?

Marcus: For sure.

Schley: Both on the brokerage side and on the operating side.

Marcus: You know, one of the problems I think that Charter had under Paul Allen is they were in a hurry to get big, and they paid big money for assets that they didn’t need to pay. They couldn’t get them to work so I think they were under-managed and probably needed to spend more capital and it just didn’t work out.

Schley: Did you ever imagine a day would come when the phone company, Ma Bell, AT&T, is such a prominent participant in the pay TV business?

Marcus: They always were interested. And years ago, they had these telephone leasebacks. I think they were called “Section 214” leasebacks where they would own the system and the cable operator would just lease it from them.

Schley: Tracing back to their heritage as the utility company that owns poles and…?

Marcus: So, look, I think that when AT&T bought TCI, that was their effort to get in the cable business. They didn’t do very well with that. They found that to be very difficult and ultimately sold out to Comcast as you know.

Schley: Now, with DirecTV and some of the online video stuff, it's still a prominent player in the business.

Marcus: But I don’t think it's been a great investment for them.

Schley: I don’t think so either. I think quite the opposite.

Marcus: I think they continue to not do well, and I think even Verizon, if they had to replay it, they probably would—

Schley: Might put their investment elsewhere.

Besides Malone, can you name an individual or two who sort of—you look back at your career in cable and this person made a difference in my life, or this person put me in a direction I might not have gone. There are probably a lot. I'm putting you on the spot. It's interesting to talk about.

Marcus: You talked about Paul Maxwell earlier. Paul and I used to be really close friends. We kind of lost touch. But Paul is always, as you know, a very iconoclastic kind of a guy.

Schley: Very much. That’s a good word.

Marcus: I always admired his free spirit and his view of the world.

Schley: Me, too.

Marcus: He was very different in terms of temperament and the way he looked at life from me. But that I think that was part of the attraction as a friend.

Schley: You're yin and yang a little bit…

Marcus: I sit here in Denver and I know Paul is somewhere nearby. I probably should look him up.

Schley: You’ll find him, but he was absolutely a champion of the industry in addition to being a journalist. I think it meant a lot to him to see this industry grow and thrive.

What would you say today—how old are your grandkids first of all?

Marcus: Four grandkids: 7, 5, 4 and 1.

Schley: So they have a ways to go. What is the attraction—what would you say to a young person who’s in college or about to get out of college—why is cable an interesting place to be career-wise today, if you wanted to pursue that world as a young person?

Marcus: I think what cable is facing today is a fragmentation of the video marketplace that has happened far quicker than I think anyone could have imagined. And we see this in our own viewing habits. And I know that the on-demand viewing that we consume in our household is so much greater than appointment television. Appointment television is sports, news and—

Schley: Sports and news.

Marcus: Right. Basically that’s it. So what I'm concerned about as a viewer is what everybody’s concerned about as a viewer, and that is: what do you want to watch, but you want to watch it when you want to watch it. And you don’t really care how it's delivered, you just want to get it in your home with the best picture, most reliable, good sound, etc. Theater-like quality. The challenge of the cable industry today is to provide that. So IPTV is no longer a luxury. It’s a necessity. And I think if you look at the loss of subscribers—DirecTV, AT&T, lost a million subscribers last quarter. That was almost the size of Marcus Cable.

Schley: I always make those comparisons. I know. It's stunning. But, as you alluded to earlier talking about existential threats, it's interesting to me how the cable industry has pivoted whereby the day may come where video is not such a major contributor to the revenue line.

Marcus: When you think about Apple TV, for instance, and we don’t really realize this, but when you click on Sundance Channel—I don’t know the economics of Sundance Channel—but recently at the Entrepreneurs Club, we were visited by a fellow that heads up the consumer business for Disney. And he was talking about Disney+ and he was talking about the commission that they're going to pay to the cable operators for the click-through. For if you have IPTV, and the cable customer is on IPTV—

Schley: Over my set-top box.

Marcus: —may click through and subscribe to Disney+, Disney’s going to give them the commission of the monthly fee. Apple TV, I don’t know this to be a fact on all programs, but their commission is very significant. So on your Apple box, when you go to Netflix and you go to Google or you go to any of these other services, every time you click on that, Apple is earning a commission.

Schley: It used to be 30%. And they’ve had a little bit of downward pressure.

Marcus: So that’s going to be and probably is today a huge revenue stream. So it's incumbent on the cable operator to be there. We have the pipe into the home. We have the ability to help that customer by being all things to that customer, giving them broadband, ever-increasing speed—

Schley: Connectivity.

Marcus: Whole home WiFi. Because if something goes wrong with your WiFi service, you don’t call—who do you call?

Schley: I don’t call Netflix. I don’t call Apple.

Marcus: So you might as well be, as a cable operator, you might as well get revenue for it.

Schley: So you see that—what's the word—the ability to be the bringer of convenience into this entertainment mix as a genuine role for the cable industry?

Marcus: I think it's all access. I think that the cable industry tomorrow is going to provide all access to all video products. To wit, to very robust connection, this broadband connection. WOW!’s footprint today—we are 100% 1 gigabit.

Schley: Wow.

Marcus: Thank you. And it's a great competitive advantage.

Schley: I follow a lot of the cable companies from a competitive intelligence standpoint and they are one who leads with the broadband product. That’s the entrée to the new customer relationships. And I think it's really interesting. It's smart.

Marcus: If you’ve seen the difference in your own home between 20 megabits and 300 megabits, it's huge. And as you get more and more connected devices, the speeds tend to—they use more bandwidth, they’ll slow down. So every home in America needs more and more bandwidth. And how do you get it?

Schley: I get mine through the cable company. But I think there's a limit to how much jerry-rigging people want to do to sort of create their own video portfolio. At some point you just want to give up and say, “Help me here.”

Marcus: That’s the interesting thing because you hear about all this “cord shaving.” Not cord cutting, but cord shaving. If you go and you buy a variety of services, and you go to the various channels, and this one is $5.00 a month and this one is $8.00 a month, and they're all morphing into the subscription model. Before you know it, you have a bill that looks a lot like the cable bill and more.

Schley: Some days I think, well, maybe people just want the self-styled sort of ownership of their own video service and they're willing to pay for that, but purely on a dollars and cents basis, I think you're absolutely right.

Marcus: I think what's going to happen is that there is going to be this disaggregation which is occurring and will continue to occur. And I think that the programmers that are all going to have their own little separate digital channels.

Schley: The direct to consumer…

Marcus: The direct to consumer channels. Because they're losing all this revenue. But then I can see a day when there will be an aggregation once more.

Schley: Maybe I'll be in a retired posture, but I think the same thing is going to happen. It's interesting; you get these cyclical—

Marcus: And the cable industry will be the gateway. It is the gateway to all of this. I'm not sure I would advise my seven-year old granddaughter right now to go into cable because by the time she’s old enough—

Schley: We don’t know what cable is going to be.

Marcus: But I think that the future for cable is still bright. And so does Wall Street. And if you look at the multiples, the public multiples, where the companies are selling, it's not so dissimilar to what the high watermarks have been.

Schley: It's really interesting. Well, we've had kind of a wide-ranging conversation, but it's been fascinating and really to be able to sit down and talk to one of the gentlemen who really did build the cable industry domestically, it's totally our privilege. So thanks for sitting with us.

Marcus: It's my pleasure.

Schley: Jeff Marcus. For the Cable Center’s Hauser Oral History Series, I'm Stewart Schley. We’ll see you next episode. Thank you.

END OF INTERVIEW

 

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Patty McCaskill

2019 Patty McCaskill

Interview Date: April 3, 2019
Interview Location: The Cable Center, Denver, CO USA
Interviewer: Stewart Schley
Collection: Cable Center Oral History Program

Schley: Greetings, and thank you for pressing play on this episode of the Cable Center’s Hauser Oral History Series. An hour from now, you and I are going to know a lot more about the business intricacies of getting television to the screen than we do now, because we are blessed to have us with us, Patty McCaskill, who’s a veteran figure in programming acquisition and content licensing in the cable industry during the time when that was absolutely a critical part of how the industry worked. So, Patty, thanks for taking some time and coming out from St. Louis to visit here at the Cable Center.

McCaskill: Thank you.

Schley: I have a fun question because I'm looking at your timeline and it tells me that you studied English literature and biology as an undergrad. So, of course, you ended up in the cable industry. What happened? How did you find your way in?

McCaskill: Well, it's a long story. I graduated from an all-girls school in 1970. Back in 1970, if you were in an all-girls school, you could be a nurse, you could be a teacher, or you could get married. There weren’t a whole lot of other choices. I never had a business course in my life when I was in college because they didn’t exist in this all-girls private college, and I knew that I didn’t want to teach. I had done some practice teaching and I knew that wasn’t what I wanted to do, and I didn’t know what I wanted to do. So my first job out of college was working for Stan Musial, the baseball player, in his restaurant in St. Louis. And I got involved in sales and catering with his restaurant.

Schley: What was the name of that restaurant?

McCaskill: Stan Musial and Biggie’s. And then I got married and my husband got transferred to Minneapolis. We lived in Minneapolis for two years and I worked for the Radisson Hotel Corporation and was in the sales and catering division of the hotel. The only woman executive in the hotel. It was secretaries and me and the men, which was very interesting. Then my husband got transferred to Milwaukee, and I worked for the performing arts center in Milwaukee, heading up all its food and beverage and public space. And we were there for a year, and it was fascinating because the symphony was there, the repertory theatre was there. So one night I might be in the green room doing Three Dog Night, and the next night it might be Beverly Sills and putting on a private luncheon with Beverly Sills, and it was an amazing facility and a great job. But I didn’t like the North, and I didn’t like the cold. So we moved back to St. Louis and I worked for three hotels in St. Louis. Then went to work for a trade show company, doing all the sales and marketing for a company that put on trade shows. I decided I kind of had been burned out on all that and saw something in the newspaper and went on an interview. It was Bob Brooks. It was just when cable was being franchised in St. Louis. I knew nothing about cable. I mean, there was no cable in St. Louis, so we had no experience at all.

Schley: This was when?

McCaskill: 1980. And he didn’t get the franchise he was going after, and I saw another ad in the newspaper for the Warner AMEX Qube system for the head of sales and marketing and customer care. So I went in and interviewed with them and flew up to New York and interviewed with Larry Wangberg, and Nick Davatzes up in New York, and Bob Russman, names that you probably recognize. And got the job. I came in the first day and Frank Webb, who was the general manager, was on vacation. And my desk was a cable spool. We were in the warehouse. We had cables coming down from the ceiling for the phone and an electric typewriter. And on the desk were four big binders with the franchise. And the note was, “Read the franchise. I'll call you when we come down from camping in the Rocky Mountains.” So I read through the whole thing, and Frank gave me a call and said, “OK, are you ready? One thing I forgot to tell you. We have a franchise in this one community, and we have four days to get three people hooked up, or we get fined $1,000 a day. So go to the chief engineer and find out where the four houses are and go sell them cable.” And I said, “OK, that’s interesting, where are the sales forms?” And he said, “Why do you think I hired you?” So I put together a sales form and got a reverse directory because we couldn’t go door-to-door because of the way the community was, it prohibited door-to-door.

Schley: So you had to call these people.

McCaskill: I had to call these people and get them to agree to see me. And I actually, over the next two days, sold three of them, and we got them installed in time. There were people pulling cable in the backyards as somebody was installing in the front yard, and I was out buying them turkeys to thank them for being our first customers.

Schley: What was the pitch? What did you tell them this cable thing was at the time?

McCaskill: Basically, I told them it was great cable reception. We were building a 450-megahertz two-way interactive system. But I think we had 22 channels maybe at that point. So basically it was great over-the-air reception, you don’t have to worry about going from room to room in your house and doing the monkey ears to try to be able to get it, and we had HBO and Showtime. And Showtime had been in St. Louis as an MMDS—

Schley: An over-the-air transmission.

McCaskill: It did have a brand awareness as something really cool with lots of movies. So I sold good reception and movies.

Schley: You must have been good just from the hospitality industry side and then segueing into this business. You must have been good at sales. I mean, you probably had an aptitude, I presume.

McCaskill: Yes, I was good at sales.

Schley: Where did that come from?

McCaskill: It just came from experience in the hotel business and trade show business. You know, I had to go out and call on companies and sell them booths in the show and run the sales force.

Schley: So you guys built out the St. Louis metro area…

McCaskill: Well, we started. We built out our franchise. St. Louis was—I don’t know if you know St. Louis. St. Louis City and St. Louis County are two separate entities. St. Louis County has 96 municipalities, each with their own mayor, their own police department, their own everything. And it got divided up. Group W was there, United Video was there, Sammons was there, Continental was there, Warner AMEX was there, TCI was there. So we each had our own little piece. We built out our piece as Warner AMEX.

Schley: It's really a very telling story about the patchwork nature of the cable industry early on.

McCaskill: Yes.

Schley: Since then it's been more consolidated.

McCaskill: Charter ended up consolidating all of St. Louis.

Schley: Where did the job take you from having achieved your three or four sales in this neighborhood? What next?

McCaskill: Then I had to hire a sales force. And I had to train them and teach them to go out and sell cable. I had to refine the sales order form because after that first day, my boss called me from the mountains, and said, “What did you charge for additional outlets?” And I said, “Additional outlets? What’s an additional outlet? There’s nothing in the franchise book about additional outlets.” And he said, “You're right. What do you think we ought to charge?”

Schley: You admit you were making it up as you go along.

McCaskill: Absolutely.

Schley: What did cable cost around that time?

McCaskill: I think HBO and Showtime were about $4.99. I think it was about $12.99 for the package of the 18-20 channels.

Schley: But did it feel like you could literally connection by connection watch this industry sort of take shape?

McCaskill: Absolutely. And in some areas, people would come out with shotguns and say, “Install me next.” I mean, it was this huge demand. We called it the “truck chasers.” So we had a lot of truck chasers.

Schley: And what was compelling? What were people buying? You talk about reception, you talk about the premium services. But you also had the beginnings of some original networks at that time, right?

McCaskill: Very, very few. It was a little later and Bob was there before we sold the system. MTV and Nickelodeon launched and MSG [Madison Square Garden] became USA Network. We started having more networks that we were able to sell.

Schley: And then, Patty, obviously you would go on to devote your career to this industry…

McCaskill: I fell in love with it.

Schley: Why, why? What did you like?

McCaskill: It was just exciting. It was just something different. I was there two weeks and I went to CTAM up in Boston and all the other Warner AMEX-Qube people were there and I got to meet them, and it was just so refreshing to be in a room with people that were sharing their business plans. Sharing what worked, what didn’t work. Ted Turner came and announced that he was launching CNN, and he was going to bury CBS. And I thought, this is a hoot.

Schley: This is big.

McCaskill: This is something just totally different.

Schley: We talk about that at this table a little bit how the structure of the industry lent itself to collaboration and camaraderie.

McCaskill: Absolutely.

Schley: You saw that.

McCaskill: Absolutely. Until the telcos got in and we started playing things closer to the vest. And DBS got in.

Schley: Very collegial business.

McCaskill: Very collegial. You know, we played hard and we partied hard.

Schley: You know, I think that if you asked someone who was active in the cable industry during the 1990s and beyond, what Patty McCaskill’s role was, people would associate you with programming. And relations with programmers. So how did you begin to become involved with that side of the business?

McCaskill: After we sold the Warner AMEX-Qube system to Cencom—Jerry [Kent], Barry [Babcock] and Howard [Wood]—then they sold it to Hallmark. And it moved down to Texas and they left, and they stayed in St. Louis. They decided they wanted to get back in the cable business. So they formed Charter Communications. And one day I got this call from Barry Babcock. He said, “Patty, we’re buying McDonald Management Systems down in Alabama and Louisiana, and you’ve been doing some consulting. Could you work for us two days a week and do our programming for us?”

Schley: No kidding.

McCaskill: So I went down and visited the systems, which were just a real eye-opener of a place. One had a window that had been shot out and they just put chicken wire on it and left the window there, down in Bogalusa, Louisiana.

Schley: Bogalusa, Louisiana.

McCaskill: Bogalusa, Louisiana. And then I was doing that—I guess it was about six weeks and I got another call from Barry saying, “We’re buying back our old Cencom systems. And now we’re going to be pretty darn big. I think I'm going to need you full-time. Are you willing to fold your consulting practice, and come to work for us full-time?” And that’s how I got into doing programming.

Schley: Paint a picture of what the industry was like at that time from a programming standpoint. You had new networks developing and being spawned?

McCaskill: We had new networks being developed all the time. They were generally very anxious to get distribution.

Schley: The networks were?

McCaskill: The networks were. So the negotiations were not as difficult as they became later on because they were willing to do just about anything to get distribution. Because there were lots of networks competing.

Schley: How many channels did a cable system carry around that time? 35 channels?

McCaskill: More than that. These were rebuilt 750-megahertz so you could do probably 60 channels.

Schley: But you—this sounds like a fundamentally naïve question and it may be—but you had to pay to carry a lot of these new networks.

McCaskill: Almost all of them.

Schley: And talk about how that relationship worked. They were charging you a fee per—

McCaskill: Per customer. Per subscriber. So they would come in and—

Schley: Pennies per month?

McCaskill: It depended upon who they were. Some of them were pennies per month. ESPN was dollars per month.

Schley: So you're making a financial commitment to these networks. How did you decide who to put on, and who not to put on?

McCaskill: You would sit down and look at the programming. Looking at their programming philosophy, looking at how much money they were going to invest in the programming. Whether it was different from something else we were carrying. Looking at who their executives were, who their programming heads were, kind of if you knew what kind of a track record they might have. Looking at the license fees they're asking for. And you negotiated all those things.

Schley: So you did pretty hard due diligence on these programmers?

McCaskill: Absolutely.

Schley: You’ve mentioned a theme that I've heard John Malone and others talk about. A real concern about, OK, we’re going to pay you to carry your network. How much money are you going to put back into it, so we all get better? That was a consideration?

McCaskill: Absolutely. We were looking at what their business plan was. Then you had networks like Fox News that came to us and said, we want distribution. We’ll pay you $10 a subscriber.

Schley: I was going to get to that and talk about it because it’s interesting. But the general tenor was, were there more channels than you could physically carry at the time?

McCaskill: At the time, we probably had space to carry more of them, but the concern was that if we put them on, it would be very, very hard to take them off. So we wanted to be selective about what we put on and curating it. Because no matter what a network was, even if we didn’t think it had a lot of value, it was going to have some customers that that was their favorite network.

Schley: That was what I was going to say. So at some point, the program had some leverage, once they were on the cable system.

McCaskill: Yes, they did.

Schley: Is that fair?

McCaskill: That’s fair.

Schley: I remember in Denver around this era, maybe a little later, VH1 for some reason was knocked off the Denver Mile-Hi Cablevision system and it caused a big ruckus. So you were sensitive to that.

McCaskill: Very sensitive to that. Because we were trying to grow the business and we were trying to gain market penetration. And so the last thing you want to do is if you had someone that was a customer, make them unhappy because you took away some program that was valuable to them even though we didn’t see perhaps the same value in it.

Schley: So you had two areas to pursue. One, you were building this collection of what I generally would call basic cable channels, right? These were generally advertising-supported channels?

McCaskill: Basic expanded. Basic became your public affairs, your broadcast channels, that type of thing. And then all of the ad-supported networks that we were paying license fees for became the expanded basic.

Schley: Then you also dealt with the premium programmers.

McCaskill: We dealt with the premium programmers. Then eventually we dealt with the digital networks, when we got to the point where we got into digital.

Schley: Patty, how would you characterize the tenor of the dialogue in the negotiations between a cable company like Charter and the programming community at the time?

McCaskill: It changed over time. When we were small, we didn’t have a lot of leverage. Over the years, Charter grew; eventually it had 7 million customers when I left, up from a small number.

Schley: You were a prize, you were a plum to get carried on Charter.

McCaskill: Yes, and so the negotiations became different because we were one of the top three MSOs in the United States.

Schley: I've always been curious. In the early days of let's say it's MTV, or it's maybe HDTV, but somebody comes to you seeking carriage. What were some of the little oddities or intricacies that might be involved in a contractual relationship like that? For instance, they gave you advertising time, was one.

McCaskill: They gave us local avails that our ad sales people could sell. They would come back and offer us marketing support dollars. And we could use those marketing support dollars for direct mailers and other customer-facing marketing tactics. They could give us money for customer care and customer service training and incentives for our customer service people, or for our technicians. So there were other things that at that point were kind of sweeteners in the pot. You're going to pay this much in license fee, but we’re going to be your partner and we’re going to give you back funds to help you grow your business because if you grow your business, we grow our business.

Schley: That’s right, that’s kind of the virtuous cycle that you guys had going. It was the heyday of what we used to call the affiliate relations departments of these networks.

McCaskill: It was truly affiliate relations. I mean, we worked together, and they saw themselves as a partner. They spent a lot of time with us. They would come visit us regularly, they would visit our regional offices, they would do training for our technical forces.

Schley: Bring you trinkets and mousepads?

McCaskill: Oh, gosh. The tchotchkes were always amazing in the industry.

Schley: The tchotchke business.

McCaskill: But that dried up. Near the end, there was very, very little of that.

Schley: We watched that come and kind of dissipate.

What could you see from the chair where you sat in your office? It had to be rewarding to see—I would imagine every month you're getting more and more subscribers because partly of the programming.

McCaskill: Absolutely. It was truly a partnership and a symbiotic relationship.

Schley: What was your sort of job title or function in those—was it called—what was it? Was it programming acquisition?

McCaskill: Vice-president of programming. And at Charter, pay-per-view, because I also had—we had three channels of pay-per-view and I did the negotiations with the pay-per-view providers, then at that time In Demand.

Schley: That was an interesting business. It's very different today when so much television is on-demand and available at a press-play. But pay-per-view took a while to develop.

McCaskill: It did.

Schley: What were the obstacles to that?

McCaskill: I think the customers didn’t understand it. There was a real hesitancy to push the button and find out you ordered something that you didn’t realize and now it was going to show up on your bill. And now I've got to call customer service and tell them that I didn’t really watch it. You had households where you had kids coming home from school that were latchkey kids and you would be amazed at what they would be watching, and their parents would have to put in parental controls. It was an education more than anything else and you really could have access to this content.

Schley: For our younger viewers, I don’t think people today understand that the pay-per-view movie, let's say was a movie, didn’t start whenever you decided it should start. It was pre-scheduled, right?

McCaskill: They were in the beginning pre-scheduled. And when we got to true on-demand, video-on-demand, that changed things. Then, this is much later on, when you got to TV Everywhere, it became total on-demand. Anything you want to watch, when you want to watch it, on any device you want to watch it, wherever and whenever. That changed everything.

Schley: Pay-per-view was sort of this halting interim technology. But was it a business?

McCaskill: It was a business, yes. It was sort of a step between if you don’t want HBO, Showtime, Cinemax, the Movie Channel—

Schley: All the time. Monthly.

McCaskill: That you could choose the movies you wanted. And the windows were different. They went from the theaters to pay-per-view to the premium services. And then it went to a window back on to say, USA or TNT. It was a very specific windowing.

Schley: What was the role of let's say, sports, boxing particularly, as a propellant of pay-per-view?

McCaskill: That was huge. That was real dollars.

Schley: Because you sold fights for $40-50?

McCaskill: By the end, it was probably close to $70 for a fight. Then you had WWE, which became very, very big. And the MMA that became very, very big. But none of that was there in the early days.

Schley: I want to take you into the next era in a minute. But what was fun about that business at that time? Besides a paycheck, what did you enjoy?

McCaskill: I enjoyed the people I worked with. We were all pulling in the same direction. We all were there because we were entrepreneurs and loved being entrepreneurs, the idea of being in a rigid rules-based company was not me. I worked for Southwestern Bell for a short period of time after Warner AMEX, between that and the Travel Channel that we haven’t talked about. Oh, the Army was less rigid than Southwestern Bell. So I knew that it was going to be very difficult for them to get into the cable industry. It was a very, very rock and roll entrepreneur.

Schley: Because you had to be agile…

McCaskill: You had to be very nimble. You had to be willing to try different things and if it didn’t work, say, fine, let's try something else.

Schley: Was it hard to say no to programmers who came knocking, or did you say no from time to time…you know, we just don’t have the space…?

McCaskill: Absolutely. If I'd looked at their business plan and I looked at their content and I thought, this is never going to fly. One of the other things we were careful about is if we were not sure about a network, we’d step back and let them develop. Because many of them went into business and within a year they were out of business because they couldn’t get distribution. So you didn’t want to go to the cost of changing all your channel lineup cards—

Schley: Rolling out the channels.

McCaskill: Changing your guide, rolling out the channel and then having it go dark on you. Because customers often blamed you, not realizing that the channel had gone bankrupt.

Schley: But you did say yes a lot and in saying yes, you produced this world where television used to be “mass,” right? It was sort of lowest common denominator, biggest audience. Now you had these interesting little slivers that were being served.

McCaskill: That’s right.

Schley: Can you identify an example of—I mean, MTV is probably one, but were there others out there?

McCaskill: MTV would be one, BET would be another. Nashville Network or Country Music Television would have been there.

Schley: TNN.

McCaskill: TNN. Financial News Network.

Schley: I remember.

McCaskill: It was later sold. Daytime that eventually morphed into Lifetime. There was a lot of this—

Schley: Cable Health Network?

McCaskill: Yes, Cable Health, and Daytime became Lifetime. There was a lot of morphing going on. People coming up with concepts and finding that they couldn’t be compelling enough 24/7 with that concept, so they would either morph into something else, or go away. Which became a challenge when you were negotiating a contract because we learned to put in language that was content description. And content warranty language so that if they morphed into something that was not something we wanted or would have ever carried in the first place, we needed protection so we could drop them if they morphed into something that would not have been acceptable.

Schley: Good point. And I'm not trying to diss anybody, but I remember when the predecessor became CBS Cable came out—I think I have the order right—very kind of artsy focus, and then it did become something else.

McCaskill: It did become something else. The Entertainment Channel came in, yes. It was an interesting time. We were trying to fill content to add value to our customers for what we were charging them because you needed to make sure you were having content that was valuable. And we were raising their rates every year, so we were able to say, “Look, we added five channels last year.”

Schley: OK, so you sort of justified it. I think it's important for people to understand. As you added more programming and as that programming developed, it started to cost more to you. That is really a big reason the cable bills ritually tended to increase every January.

McCaskill: Absolutely. You know, it was a phenomenon that someone would come and say, “I've got this wonderful channel. I'd like you to launch it. It's only going to be five cents a subscriber a month.” And I would think, this is a good value. Well, finally after we invested a lot of time and money, as they did, and they got very successful, they’d come back and say, “Now we’re worth 25 cents because we have the same ratings as USA. Or we have the same ratings as—” So suddenly you were in a conundrum. Do I give them more money and keep them, or do I drop them and anger my customers, who had their cable bills justified because they had new channels that they had gotten used to. So it became a chicken and an egg situation, but unintended consequences in some cases.

Schley: Did you go to the ultimate step of dropping channels from time to time?

McCaskill: We did.

Schley: At least temporarily?

McCaskill: Sometimes forever. We did drop channels from time to time. It was not something that was done lightly because we knew it was going to cause an outcry, and we tried to make sure if we were dropping one channel, we had another channel that was similar in genre, similar in demographics that we could point them to.

Schley: I want to take you to an interesting era. I think we talked about this previous to this interview. Around 1992-93—this may require a little explanation, but the regulatory regime that described the relationship between free over-the-air television and cable television, changed. Can you walk us through that?

McCaskill: Oh, those interesting times. 1992. What the Cable Act did was to say to broadcasters, you can either every three years elect must-carry, in which case the cable operator must carry you. So shopping channels and religious networks or very local broadcast channels with questionable value, all demanded must-carry.

Schley: I'm going to even take you back one step. Must-carry—tell me where I'm wrong—meant that a local over-the-air TV station could insist on being delivered by the cable company to its customers.

McCaskill: We “must carry” them. We had no choice in carrying them, OK? And then the alternative was a broadcast station could elect re-transmission consent. If they elected re-transmission consent in the fall of the year, by the end of the year, we had to negotiate with them whatever terms and conditions there would be for us to be able to re-transmit their signal.

Schley: So let's take an example of a Fox affiliate in one of your markets. A naïve view might be why would they not take advantage of the must-carry protection? Why would they risk that Patty may decide not to carry this channel? They all did, so what was the calculation there?

McCaskill: I think they looked at their viewership. They had Nielsen data and they looked at how many people were watching. And it wasn’t so much because that local broadcaster had really strong syndicated programming in the afternoon, or very strong local news. Although in some cases they did have strong local news. Or they might have some sports that was their local sports team before the RSNs really took off and took all those rights. But it was what they had in primetime programming that was very, very popular.

Schley: So “Married with Children.”

McCaskill: Think of—must-see TV. And they had sports on the weekend. They had the NFL. They had major league baseball. So they felt that they had a strong hand that we would want to negotiate. But in the early years, the first round, the first three years because there were three-year cycles, most of them just opted to trade cross-channel spots during sweeps. And we would run their spots on our networks on a run-of schedule during sweeps. We might agree to co-sponsor some kind of a teachers’ award or we might agree on our local—

Schley: OK. It sounds so innocent.

McCaskill: Our local channel to air some kind of public affairs programming that they were doing. The Junior Achievement Awards dinner, we might agree to co-air it with them. I mean, it was very, very simple stuff. And it was like, OK, we’re partners in marketing.

Schley: So you would sort of get along.

McCaskill: We live in this marketplace. Your viewers are our customers. So, while it's not exactly the regime we had, we found a way to work with it.

Schley: And that was a three-year, that was the first of the three-year cycles. So things were OK.

McCaskill: Things were OK.

Schley: Then?

McCaskill: Then the next cycle around, John Malone, in dealing with Fox—and this was Fox Broadcasting, not the individual Fox affiliates—this was the network parent, came up with this grand idea that in order to do it, he would launch FX. And he would pay a license fee for FX in exchange for re-transmission consent for all of the Fox owned and operated.

Schley: So let's unpack that. So the condition by which Fox will let you carry its station signals, is you don’t have to pay any money, Patty. I'm fine with that. But you know what I'd really like, I'd like a channel so I can—I'd like space on your dial.

McCaskill: I would like a channel and I want you to pay me for that channel.

Schley: OK. So that was clever. You’ve got to hand it to the Murdochs and the Fox people.

McCaskill: It sounded pretty good and then so of course ABC said, “That sounds like a grand deal.” So ESPN came along as a re-transmission consent. And ESPN Classic came along as re-trans. And ESPN News came along for re-trans. And suddenly it took off and you have Scripps, that’s launching Home and Garden and Food, and they decide they're going to do it. So there's a lot of money going to the owned and operated stations. NBC—

Schley: Great.

McCaskill: Yes.

Schley: It took the broadcast industry and made it a big player in cable programming.

McCaskill: A big player in cable. So then you have all of the smaller groups, the Nexstars and the Sinclair, that are not owned and operated.

Schley: Yes.

McCaskill: And they said, Huh. There’s money to be had here. So they started coming in and saying, we’re not going to take these cross-channel spots anymore during sweeps. We want you to pay us on a per-subscriber basis because we have more viewership than CNN does. Or we have more viewership than this. So we want money. So they started charging on a per-subscriber basis.

Schley: Just like an old-fashioned cable network would have done.

McCaskill: And they started charging—some good money. It wasn’t huge numbers, but they were charging enough that it went straight to their bottom line and they started bragging about it on their reports to their shareholders and to Wall Street. Found money. And they got greedier and greedier every three years and asked for more. Finally I went to one of them and said, “You’ve got yourself a problem. Because you're getting this money not because of your local news. You're getting this money because you’re an ABC affiliate and you’ve got all their programming.”

Schley: …primetime?

McCaskill: They're going to say, “We want some of that back.”

Schley: The network would then ask its affiliated TV stations—

McCaskill: So reverse compensation came in.

Schley: Share the bounty.

McCaskill: And so once reverse compensation came in, then Sinclair, who’d promised its shareholders “I’m going to get this much of the bottom line plus 3% a year” now has to make up the difference in reverse compensation to keep themselves whole with what they promised.

Schley: By charging you more?

McCaskill: Yes.

Schley: So it's a really…

McCaskill: It's a vicious cycle.

Schley: I've got to believe—the reason I wanted to talk to you about the early days—new networks would come into your office. They have a great pitch. You like their content. You agree to pay them seven cents a subscriber, whatever…that was kind of fun. You're spawning this new collective of television.

McCaskill: We’re offering real value to our customers.

Schley: Now, and I think this was an unintended consequence of re-trans (as we call it), the broadcasters not only are getting money from you for the right to carry their over-the-air signal to your customers, but they're taking all your channel space because their parents have said, quid pro quo, launch.

McCaskill: So you had the owned and operated—ABC, NBC, CBS. And then you have the affiliated stations with NBC, ABC, CBS. And Fox. So you have two different groups of people, each trying to put their hand in your pocket.

Schley: What did this do to Patty McCaskill? How did it change the nature of the job and the kind of vibe around it?

McCaskill: It became very, very, very difficult. Because it was every three years. So we started moving them off-cycle.

Schley: You got this barrage of…

McCaskill: I had 120 of them to do before midnight on New Year’s Eve one year.

Schley: From individual TV stations?

McCaskill: Yes, individual broadcast groups or TV stations. I never had a holiday for years. I never had a New Year’s Eve for years because I was working and neither did any of our people. Because all of the regional people—we had a phone open so that we could communicate what was happening with the deal because if we didn’t get the deal done, we had to take their signals down at midnight because we no longer had permission to re-transmit their signal. Or we would be fined by the FCC. So it became a bigger part of my job, I can tell you that.

Schley: I would love for you to comment on this. It just happened that one evening at one of the big cable shows I was riding on a shuttle bus back to the hotel next to a woman who had been what we just described as an affiliate relations specialist with a program group in the cable industry. She was kind of in a dour mood, and she said, “I think re-trans sort of ruined—maybe that’s a strong word—but it really changed the nature of what used to be kind of an entrepreneurial cable network programming community.” Do you buy that? Do you think it veered the industry off in a different direction?

McCaskill: I think it sucked some of the money out of the whole ecosphere. So the ability to take a gamble and invest with somebody who had a new network concept; you had to look at it. If your programming costs are going up 10-18% a year and your rate increases to your customers are 4-6% a year, you could look at what your margins are doing. So you don’t want to add a lot more expense because you know you’ve got this animal out there.

Schley: Patty, why did we not see more cable companies slam the fist on the table and say, no, we’re not going to pay you for this signal. We’re going to try to live without the Fox affiliate in Milwaukee on our channel dial. And good luck to both of us.

McCaskill: I think that the first time someone did that, Cox did that, with Nexstar. And with Cox Systems, that were the old TCA systems we later bought at Suddenlink. And they were dark for close to a year. And they lost, and we saw a number of customers that they lost. Because DBS was there. At a time when DBS wasn’t there—when we didn’t have Dish and DirecTV—we were the only option. Who wants to go back to broadcast only?

Schley: But you could still get that station and DirecTV.

McCaskill: Once Congress ruled that we had to sell all of our programming to DirecTV and Dish, which never made any sense to me—like General Mills has to sell Cheerios to someone else? We created all this programming, and now we have to make it available to our competitor. So suddenly there were other places our customers could go to get the programming if we went dark.

Schley: Correct. So in the end, it seemed like a lot of the balance of power stayed with the broadcaster. Really. If you take a hard, hard look at it.

McCaskill: It moved very much that way. Then after Fox had gotten as many new channels as it wanted launched, and ESPN ran out of channels to launch, then they started asking for cash.

Schley: So the relationship that was once very collegial and very “we’re in this together”—that changed. You saw that.

McCaskill: It did change. Certainly on the broadcast side, it changed. It became much more adversarial and much more difficult negotiations.

Schley: What about the cable side, though. Did you see—?

McCaskill: On the cable side, it took a little bit longer to get there and it got there as more of these companies were public companies. And they were being squeezed for performance as well. So as time went by, it used to be you had your affiliate relations person. And we became—we had really tough negotiations. I'm not going to lie about that. We fought for every last dime on either side. But at the end of the day then we’d go out and have a glass of wine and we’d share pictures of our kids. We got to know each other because we’d worked together for 5-7 years. And it wasn’t nasty, it wasn’t “somebody’s got to win, somebody’s got to lose.” It was, how do we figure out win-win here for both of us to find some kind of a solution that both of us can walk away. I used to joke that if we both walk away holding our nose, it's a really good deal because if one of us loves it, the other one has not done a really good deal.

Schley: Fair enough.

McCaskill: And there were shows. There was the National Show, there was the Western Show, there was the CTAM conference. There were state shows. There were a lot of ways that we went out and socialized together. We shared a lot of knowledge. We did educational seminars and then we would party at night. We’d go out to dinner. And so you found real friendships with people because you did have that. And that’s mostly gone.

Schley: In your part of the industry particularly because you were dealing with dozens of networks, each of whom employed dozens of affiliate relations people. So your circle was pretty wide.

McCaskill: Yes.

Schley: Interesting things were going on outside of re-transmission consent in the industry that you were very much a part of the digital transformation. What we call the digital transformation leveraged technology to just explode the carrying capacity of your systems. What did that mean from a programming standpoint?

McCaskill: From the beginning, because we had all this bandwidth. You know, you had networks—Viacom, for example, or Discovery, that took over six megahertz and put on six of their networks that I always called the “tertiary” sort of “who knows” networks?

Schley: In the space that used to hold one channel, now you could get—

McCaskill: You could get 7 or 8 channels. So they were putting anything out there as a placeholder because they knew that we needed content, and they were trusted partners of ours with some kind of a track record, and so we were willing to give them that space to let them develop that content. Over time it became apparent that there wasn’t that much need for all that content.

Schley: Maybe we had more bandwidth than…

McCaskill: So maybe we needed to be thoughtful about it. And maybe we ought to start holding bandwidth back for video-on-demand because we were going to need that capacity for other things. Or Internet—high-speed Internet. You had to take a good hard look. If you follow Discovery, for example, and I think Discovery is a wonderfully run company, an excellently run company. But if you look at their diginets, they seem to change formats and names about every two years.

Schley: Right…

McCaskill: As they’re still trying to figure out how to justify the space that they're occupying.

Schley: Did that create sort of a feeling of a renaissance, though? It almost feels like you went back to the future, whatever it was, because now you had all these new channels to at least consider, right?

McCaskill: And there were lots and lots of channels that you just didn’t even consider. You had to really think about it as it became apparent that digital bandwidth could be used for so many other things. That we had to be careful that we weren’t giving it all away.

Schley: To the wrong thing.

McCaskill: To the wrong thing, or just not giving it away at all. We had to husband it and hold it for Internet and be able to go to 5 meg service or 10 meg service, or whatever we were going to do. There's only so much bandwidth capacity within those megahertz.

Schley: I like your word “husband.” You really did have to be careful. Are you getting the most value out of this amazing machine that you built?

Around this time, your life and career intersected with that of a well-known individual called Paul Allen.

McCaskill: Yes.

Schley: Paul—correct me if I'm wrong—purchased a controlling interest in your company…in Charter Communications?

McCaskill: He bought a controlling interest in the company. We had been there at Charter for, at that point, probably for five or six years. And we had private equity. And private equity has a time limit when they want to turn their investment. And they were kind of getting ready to want to turn their investment. So we knew it was time that some of them wanted to get out.

Schley: So this legendary figure from the early days of computing and software, and an early partner with Bill Gates and Microsoft, suddenly is sitting across the table from you.

McCaskill: Comes in and makes an offer to Jerry Kent and the investors that they thought was a very, very good offer. And it was. So they sold the company to him. We were 1.2 million customers at that point. A month later we merged with Marcus, that was 1.2 million customers. So now we were at 2.4. And then we bought Falcon and we bought Bresnan. Suddenly we were 7 million customers.

Schley: You were at the center of a consolidation.

McCaskill: Yes, yes. We did 23 acquisitions during the time I was at Charter. So integrating 23 acquisitions. But also I got to see contracts from 23 different MSOs. So I got a really good insight into the art of the deal that was out there.

Schley: How interesting. Generally, did you feel like you had done pretty well when you looked at these other agreements?

McCaskill: Yes. It was reassuring.

Schley: Good. A credit to you.

McCaskill: And to Jerry.

Schley: 7 million customers. Now you're a big influence on the fame and fortune of a programmer of a TV network.

McCaskill: I used to joke—somebody said, “What was the difference between 1 million and 7 million?” And I said, “Respect.”

Schley: Did it feel like the pressure was elevated, in terms of decision making and stewardship of the brand…?

McCaskill: Certainly. We were very conscious of it. Conscious of the customers. And conscious of the fact that we were now a major MSO and there were lots and lots of people knocking on our doors, wanting a chance to take on a piece of what we had.

Schley: Did you begin to even contemplate—let's put you in 1998, for instance, just as a placeholder. Could you begin to see how television and video would begin to transform, even at that stage, as we started to push a little bit of video out on the Internet? And do some streaming media stuff? What was going through your head?

McCaskill: We were doing a lot of video-on-demand at that point.

Schley: Video-on-demand, great.

McCaskill: So I was out negotiating with the studios for video-on-demand rights, access to Warner Brothers or Universal or whatever. So we were negotiating that, and we were working with a company called TVN, which is now Vubiquity, and they were our content delivery network to be able to do video-on-demand. They would encode it to the adapted bit rate, they would get the metadata, or the studio art and they would send it down to our video-on-demand servers where it would be stored, and the people could access it. So we were looking at server capacity, we were looking at simultaneous users to make sure that no one was disappointed when they went to go in for a piece of content. So there was a lot of technology that was getting into it that had not been there in the simpler days when we were purely one-way or two-way with pay-per-view. But it became a different world. And then it became even more complex after I left and went with Suddenlink. I can't remember what year it was; I went to NCTA and the Consumer Electronics Show. I came back and sat down in Jerry’s office. I said, “Jerry, there's this thing out there that I don’t think any of us really understand that people are talking about, called ‘TV Everywhere.’ And we’re going to have to figure this out. Can you just let me ad hoc take this on as a project?” And he said, “You know, Patty, Bob Putnam, who was our CIO, head of IT, came back with the same thing. Why don’t you and Bob get joined at the hip and for a year figure out how we can cost-effectively, scalably, get into this business. You can travel wherever you want, you can visit whomever you want. And in a year, I'll expect you to come back to me with a business plan.” But that was sort of Jerry Kent. You're not in a pigeonhole doing what you do. You see something that is an offshoot of what you're going to have to learn and figure out—I'm going to say, go do it.

Schley: It's kind of a dream assignment. I mean, that’s unusual. To say, here’s a big, big thing. Go figure it out.

McCaskill: Go figure it out.

Schley: What is “TV Everywhere?” Explain to us what TV Everywhere is.

McCaskill: TV Everywhere is the ability for our customers to be able to validate that they are customers. For example, if they want to watch something on ESPN on their laptop, on their television, on their iPad, on their phone device, they have to be validated or authenticated that they are a customer and they subscribe to expanded basic. So you have to have all of this integrated with your billing system.

Schley: That should prove to you I have the right to watch ESPN on my iPhone.

McCaskill: Because I'm paying you for ESPN. So that’s what TV Everywhere is. It’s a lot of content so you need to be able to figure out how to do it. So we looked at it. Bob and I spent time with Comcast and realized they had 2,000 software engineers working on this project. And we had two of us working on this project. We talked to Comcast about having them work with us in doing this because they agreed there was a vested interest and I think all the big players with a vested interest in the cable industry to be able to stave off the telcos, to stave off the other competitors that were coming out there and making a lot of noise. But their first interest was taking care of, and rightfully so, Comcast customers.

Schley: Their own footprint.

McCaskill: And our billing systems were different than their billing systems. Our content delivery networks were different. So we came up with a creative way of doing it using TiVo for the—we had Suddenlink-branded TiVo boxes, so they had the best user interface that was out there. And they could integrate into that user interface all of the metadata, all of the adaptive bit rates, everything that we needed to be able to deliver it. Because what you send to a television is a different bit rate than what you send to a telephone.

Schley: Just to muddy the waters.

McCaskill: So you had to sniff out what device you were sending to, to send the right bit rate to that.

Schley: Right. So there’s complexity at every level here.

McCaskill: Then we had TVN Vubiquity already doing our VOD and they had contracts with some of the cable networks to deliver their content. So we partnered with them on that part of it. Then we had to have a customer portal, and we contracted with Synacor to build our customer portal. And we said, OK, Synacor, you have now got to create a TV Everywhere space within our portal. So that someone can go there, click on TV Everywhere, and then they click on a folder that’s CNN, and then the folder opens up all of the content that is currently available from CNN. And then the customer can click on that content and start viewing it from the computer or the device that they're using with suddenlink.com.

Schley: You know, I have a question. I wondered when you began this evolution, which is fascinating, I always thought to myself, you know the cable industry is going to charge an extra fee to get this content on these various devices. Did you ever contemplate that?

McCaskill: No. We looked at it as “stickiness.” Keeping the customers we had and giving them what they wanted and what they were asking for. And we felt if we didn’t do that, they were going to find it somewhere else. And over-the-top was starting, and so you knew that we had a limited amount of time to be able to do this. So we found different partners. Then the last thing that we did that was unique, and we were the first ones to do it and I think others have done it since, we didn’t want to be doing hosting and streaming.

Schley: I was going to ask you about this.

McCaskill: We didn’t want to pay TVN Vubiquity for all of the hosting and streaming. So we went to, I went to, the networks and said, “Look, you're already hosting and streaming. Tell you what. We will build you your own branded space in our portal and when someone clicks on A&E’s program, we will send them to your site, but when it's done, you want them to stay there and play in your space, we’re not going to allow that. You’ve got to send them back to our space, but all of your content will be in our space and you will have your branded space and your branded folder so that if they want to go from one A&E program to another, they can do it, but you're paying all the cost in hosting and streaming because you're doing it already and we’re already paying you a license fee.”

Schley: So you're leveraging the relationship to extend it to these new media devices and screens. Was it dizzying?

McCaskill: It was dizzying, and you had to get the grant to rights to all of this. So all of the contracts that were pure linear programming, you now had to get all of the rights for all of the ways you're going to use that content and deliver that content to customers.

Schley: Because we’re transitioning to an on-demand profile?

McCaskill: Because we’re transitioning to a grant of rights. They own those rights. If we didn’t have every one of those rights, we could not utilize that content. So suddenly contracts went from 12 pages to 35 pages. The engineers were involved. IT was involved. It became much, much more complex.

Schley: Did you realize from the TV Everywhere introduction the stickiness you had hoped for? What did it do in the marketplace?

McCaskill: It took some time and there was a lot of work. CTAM was doing a lot of work within their committees for the single sign-on. Because if every time you went to a site, you had to put in your user name and password, it was not a very good.

Schley: We wanted one credential.

McCaskill: And if somebody wanted to go to A&E, they could go to A&E. But if they wanted to come to our site, they could go to our site. They could choose how they wanted to do it, but we had to work on—and I think it's pretty close to done at this point, but it's been now many years, six years. A single sign-on. So once you put in your credentials once, it kind of travels with you across your devices.

Schley: I don’t know that anybody could have foreseen the rapidness with which this all developed.

McCaskill: It is a little mind-boggling. It was fun to be a part of it. It changed my whole perspective on things.

Schley: I want to make sure we get on the record. You talked about Suddenlink. You had made a transformation to a different company after Charter.

McCaskill: After Charter, I was there, Jerry left right after 9/11. His contract was up, and he and Paul Allen were kind of butting heads. Paul Allen was used to being in a private company and being “I'm everything.” He was very innovative, entrepreneurial. And Jerry was the president and CEO and chairman of the company after the IPO, a public company. And it was, “I can't just do what you want and spend more than it makes sense because I don’t look good in orange.” So 9/11 happened, and Jerry was away from home, and he just decided he didn’t need it anymore. So he didn’t renew his contract and he left.

Schley: He still sort of loved the cable industry, right?

McCaskill: He did love the cable industry. And I stayed on for two more years after that. It just wasn’t the same place, it wasn’t the same culture, I wasn’t having as much fun. And Jerry had gone off and he and Howard had formed Cequel III. And they were looking to get back in the cable industry. They didn’t know if they could do it, but they were looking to get back in the cable industry. And he called me one day and said, “You want to come play? We can have so much fun. But this is going to be interesting. We’re taking Classic Cable out of bankruptcy. And it's about 100,000 subs. And it's about 200 headends, the smallest one being ten customers…very dispersed.” They were still trapped, they were not digital, they were not any of the things that you might imagine. I didn’t realize how much fun it was going to be until we got there and dug into it. But it became a stepping stone and two years later we bought back the Charter systems in West Virginia and brought back the strong regional manager who was there. And then we bought the Cox systems that were old TCA systems in Texas and Louisiana. And then we bought St. Joe Cable and got Lake Havasu, Arizona, and St. Joseph, Missouri. And we had Eureka, California. So we built a new company and had fun doing it. We knew how to integrate, and Jerry brought back probably half of his management team, his former management team.

Schley: I can't resist. He got the band back together.

McCaskill: He got the band back together. So we started having fun together.

Schley: It amazes me that you could still cobble together, that there were enough cable systems that would be sold, owners were willing to sell, you could put a company together.

McCaskill: You could put a company together.

Schley: So programming-wise, you kind of had to go back in and re-establish relationships with these programmers.

McCaskill: It was very challenging because Classic had been in bankruptcy, and part of the bankruptcy judgment was, we had twelve months to negotiate new contracts with every single one of the programmers and if they didn’t agree to it, they got paid 50 cents on the dollar. So there was an incentive for them to do deals with us.

Schley: And you did it, though. I mean, you put together a legitimate…

McCaskill: But you know, when you're 100,000 subs instead of 7 million subs, it becomes a little bit of—someone would come and put a contract on the table and I’d say, “That’s not the right price.” And they’d say, “Well, you're not a big player anymore. This is what the little guys pay. And this is just what it is.” So they became some very, very interesting conversations. One large major program network, I called and said, “Would you come in and let's sit across the table like we've done before?”

Schley: Like the good old days.

McCaskill: For ten years. And he said, “Because I liked you and Jerry so much, I'll send my top lieutenant, but it will be for one time. We only send our most junior people to little people like you.”

Schley: Well, this coincided with how you and I saw the degradation of these big affiliate relations departments. Really shrunk.

McCaskill: Really shrunk. The lawyers and the accountants got involved. It became very much a numbers game rather than a relationship game.

Schley: But you were able to build, you guys built suddenly into north of a million subscribers before it was sold, ultimately to Altice?

McCaskill: To Altice.

Schley: So there you go again…

McCaskill: We built it up again and I left before Altice. I had retired at the end of 2014 and they bought out—with BC Partners and CCPIP, which is the Canadian pension fund. And at Altice, they bought out Jerry at that point and the other investors.

Schley: I should have asked all along through this journey, from transitioning from the hospitality industry to this wild world of cable. Were you a television fan? Do you like television?

McCaskill: I do like television. Interestingly enough, the longer I've been in the industry, the more particular I am about what I watch. Because I watched so much for so long, because trying to evaluate networks, trying to evaluate their programming, I consumed an awful lot of television. And now I don’t consume nearly as much television. I'm more particular about what I watch.

Schley: I was always curious about in the early days when someone brought to you a new brand or an idea for a channel that you hadn’t seen it. How did you physically watch it? Did you get tapes?

McCaskill: They usually had sizzle tapes, sizzle reels.

Schley: But all sizzle reels are great, right?

McCaskill: Oh, they all look great. One of the funniest ones that we got—all the heads of programming got this tape—it was the Puppy Channel. And basically it was watching puppies cavort all day long, and it was just like, “I don’t think so. I don’t think I can do this.” And I got on the bus at one of the cable conventions and one of the other heads of programming and I were talking about the Puppy Channel. And another head of programming, he said, “That wasn’t a joke? That’s a real channel? I threw it in the wastebasket. I thought somebody was pulling my leg.”

Schley: I guarantee you now, Patty, you could find some derivation of that on YouTube, or somewhere online.

McCaskill: I'm sure you can.

Schley: And over-the-top video.

You mentioned Jerry Kent’s name a couple of times. Sort of throughout your odyssey or your journey in cable, who else sort of loomed large as an influential person in your time?

McCaskill: Sure. Early on, Bill Bresnan. When I was at the Travel Channel, Bill befriended me. I was just really learning the programming side of things and traveling 17 states. And he had cable operations up in the Northwest. He really spent some time with me and helping me and introducing me to some of the other people that were within those states. So that was a big help for me. Others that were there: Fred Dressler. Once I got to Charter and got bigger, Fred and I developed a pretty good relationship and we shared war stories. We certainly didn’t—

Schley: Where was Fred at that time?

McCaskill: Time Warner.

Schley: He was buying programming. He was doing your job at Time Warner.

McCaskill: He was doing the same thing I was doing at Time Warner.

Schley: So you were peas in a pod…

McCaskill: Peas in a pod. And we’d share war stories. We certainly didn’t share specifics of contracts, but we did talk about where the industry was going and what kinds of things we might have to build into contracts in the future.

Schley: Trying to foresee what might evolve.

What’s been fun about the career at large? Because it's taken you to so many places and involved so many transformations that you couldn’t have foreseen. But what’s been the kind of the satisfaction or the glue that held it altogether?

McCaskill: I think one thing has been it's never boring. There’s always something new and I was given the opportunity to stretch and learn something new. And go out there and try to figure it out. So I wasn’t doing the same thing day in, day out.

Schley: As exemplified by, for instance, the TV Everywhere experience.

McCaskill: Absolutely. And the people. The one thing I miss most since retiring is the people. I made so many, so many good friends, whether it was through Women in Cable, whether it was through CTAM, whether it was through Cable Positive, whether it was through the shows, being on CTAM boards. It was just a wonderful way to find other people that were as passionate about the business as I was.

Schley: The list of awards and honors is too long for me to mention. Let's just say that there are a lot of them.

McCaskill: Nice recognition, but not what it's all about.

Schley: What would you advise the next-gen Patty McCaskill, who is charged with maintaining programmer relationships in a changing industry to center on? What counsel would you give?

McCaskill: I would say if they were going to be doing program contracts—I used to go to SCTE every year because I figured engineering was what was going to drive what was happening next. People would say, “The head of programming goes to SCTE?” And I said that I needed to learn what was coming so I could think ahead of what I needed, and often I was suggesting things in contracts before the programmers had thought about it.

Schley: That’s so interesting, because you saw the kernels of an idea beginning to formulate?

McCaskill: That’s right. So I think that’s important relying on the other people within your operation. You know, I used to joke and so did other people that I had an honorary engineering degree, I had an honorary legal degree because I'm not a lawyer, I had an honorary marketing degree because I had to figure out what marketing was going to do. We all worked together collaboratively.

Schley: You weren’t pigeon-holed…

McCaskill: No. Every Monday morning we all got together, and we all shared what we were working on and what we were doing and asked for advice from the others. It wasn’t siloed. That was very much Jerry Kent and Howard Wood. There are no silos in this company and no one is the star of the company. We all succeed together, or we all fail together.

Schley: The anecdote you told about TV Everywhere—and I'm sorry, was it Mr. Putnam that…?

McCaskill: He was the CIO.

Schley: So he’s a tech guy. You're a programming person.

McCaskill: He’s an Internet guy.

Schley: You invented this new way of distributing…

McCaskill: And then marketing and engineering came on later as we’d gotten so we had someone join the team, one person from marketing, one person from engineering. That was pretty much our 2000 software.

Schley: Another subject that’s a big subject, Patty, and will probably continue to be a big subject, is what happened with sports and television and cable distribution, where you firsthand saw these enormous expenses begin to build up for sports rights.

McCaskill: Yes. What you had was two major players, two major ones. The Fox RSNs, regional sports networks, and ESPN going for sports rights. And then you had the Comcast ones [RSNs] that were there in the mix of the whole thing. What happened was they kept on bidding against each other, and as they bid against each other, the sports rights went up. And then they decided that the one thing with fragmentation, cord-cutting, that was going to hold people was sports. Because people have to have their sports and there are no sports available with cord-cutting. So then they started doing deals through 2025, 2030. Numbers that are just impossible because they figured the cable operator was going to continue to pass it on to the customers. The owners loved it and the leagues loved it because now they can do these incredible deals paying $330 million for a baseball player. And they just figured, we would pay for it because our customers would not allow us to drop it. And it became a real, real problem. And then you had ESPN doing deals with the ACC. Then you had the YES network and then you had the colleges. So now the SEC gets involved and has their own channel. And all of these rights keep bidding up and they're the most expensive rights that are out there.

Schley: And they're all coming to you.

McCaskill: And they're all coming to us because they figure we’ll pay for it because we can pass it on to our customers with no thought that there's going to become a point where you can't pass it on to the customers. There was a little “come-to-Jesus” at one point when ESPN was getting 20% increases and Jim Robbins said, “This is insane,” and went to Washington and complained about it. And they went down to 5 or 6%. Well, they're back up again. They're not at 20%, but they're back up again.

Schley: Right.

McCaskill: I don’t know what it is now, but I could bet that ESPN is getting close to $10 per customer per month.

Schley: Unbelievable.

McCaskill: And the regional sports networks that have a lot of football. I said to one of the senior executives at ESPN, who has since retired, I said, “Where is this going to go? This is absolute insanity. We can't keep raising rates like this and absorbing the hits to our margins.” And he said, “Patty, I don’t know where it's going to go. We've got to do what we've got to do for our survival today. You and I will be retired, and the young people are going to have to figure this mess out.”

Schley: But I guess that’s the question. Right now there is no sort of resolution in sight.

McCaskill: They have no way to claw back from the different sports rights holder what they have agreed to pay. There's nothing in those contracts that says, if I started out and I had 50 million customers and cord-cutting brings me back to 36 million customers, I can pay less in the sports. It never goes away. So now they're paying more with fewer customers and we’re still paying on a per-subscriber basis. So it's a real challenge for those people that own those sports rights.

Schley: I always wondered from afar if people like you in your job capacity, every time you saw a major league baseball player sign a multimillion-dollar five-year contract, if you sort of cringe.

McCaskill: Absolutely.

Schley: Bet you kind of knew where that was coming from!

McCaskill: Absolutely. You knew it was coming back to us, whether it was in the short term or it was in the long term.

Schley: I guess you call it a conundrum that, as you said, as of today, people in 2019, I don’t see a resolution.

McCaskill: I don’t know how either the Fox networks, regional sports networks, which is probably why they're having a hard time selling them with the Fox-Disney thing, and getting someone to pay for it. I don’t know how ESPN is paying for those rights. Disney is propping them up. It used to be ESPN was propping up Disney. I think it's the other way around. The theme parks and the studios and the Disney networks are propping up ESPN. But that can't last forever.

Schley: You have the two revenue sources that have always supported the business, of course, or advertising and subscriber fees. And now you're seeing pressure on both of those at the same time as the rights, so tough formula.

McCaskill: Very tough formula.

Schley: Thank you for addressing that.

McCaskill: You're welcome.

Schley: So this has been just fascinating stuff. I think the relationship between programmers and distributors has never been really well understood by the general population. So we’re doing our small part to sort of help people understand it. But you have been so at the center of it so thank you for sharing your story and some of your reflections on the industry.

McCaskill: Well, thank you. This has been fun.

Schley: Thank you for tuning in for the Cable Center and the Hauser Oral History Series. Patty McCaskill, Stewart Schley, signing off.

END OF INTERVIEW

 

 

 

 

 

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Doug McCormick

Doug McCormick

Interview Date: December 2, 2014
Interview Location: Denver, CO USA
Interviewer: Seth Arenstein
Collection: Cable Center Oral History Project
Note: Audio Only

Arenstein: Hi, I’m Seth Arenstein; I’m here for the Cable Center Oral History Project. It's December 2, 2014, and we’re here with Doug McCormick, who was the president and CEO of Lifetime Television. You're a board member currently of Ovation and investor in Ovation Television. You are an operating partner at RHO Ventures. Welcome, Doug. Nice to have you here.

McCormick: Thank you. Great to be here, Seth.

Arenstein: Good. I want to start off by talking about cable’s early days because you were right there in the trenches and I use those words advisedly because you told me before that working in cable and sales in those days was like hand-to-hand combat trench warfare.

McCormick: We really got thrown out of a lot of advertising agencies because we were seen as just being too small to bother with. If you go back to the early days of cable—I started with Cable Health Network; at the time we were in 16 million homes.

Arenstein: And what year was that?

McCormick: That was back in the...

Arenstein: I can tell you that.

McCormick: My unaided recall...

Arenstein: 1982.

McCormick: 1982 sounds right.

Arenstein: 16 million homes. And we’d say “11” if there was a Ranger game on because we were sharing some of our carriage out there. But in delivering on a good day, we estimated a one rating. So that’s not a really big audience to talk to a network television buyer about, right? Because they’d be buying 80 million homes and they’d be getting back then, eights and nines were quite possible. It was a little bit like selling an apple at a time in front of a supermarket that was selling them by the giant carloads. The buyers thought if they could ignore us long enough, we would go away because we made their job a lot more difficult. Frankly, the other great kind of metric out there was I think there were about 35,000 primetime spots for each network. At the time we started, there were only three broadcast networks. So you got about 110,000 spots to buy annually, and that was a finite universe.

So measure all these cable networks coming on, each one with well over 100,000 spots because we were programming sign on to sign off. The buyers looked at us and there was really no way that they could handle or wanted to handle it until our numbers got stronger over the years. And we all know what happened after that. It was trench warfare.

Arenstein: But let’s stay back in those times before things got good. How did you survive? How did a cable network survive?

McCormick: For us, on the health side, we talked about the environment. One of the big successes that we had at Lifetime and Cable Health—they started at Cable Health—were the parenting shows we put together. This served two purposes. It was client-supplied programming so they would put up the money for it, which helped us survive. That was very nice. These were giant ad deals that were done whereby we would say, “You commit $5 million and we’ll put x amount into programming and you’ll run some of the spots inside the shows and some outside the shows. So we had a number of those and I remember one time giving a presentation and I showed—people said, “It’s still a .3 rating. It’s not a lot.” At that time, a .3 for us after we grew, was somewhere around 50,000-60,000 homes. During the presentation—no, it was probably more than that; it was probably 120,000 homes. When I gave the presentation, I showed Yankee Stadium filled with people. And I'd say, “You think that’s a lot?” And then click again. “Well, look at this!” And it was two Yankee Stadiums. So you had to really come up with these visuals. You had to sell. You really had to sell. It wasn’t about dividing the big number by the little number. It was about bringing people in, telling the story and we would begin a presentation with a flipchart—pre the Internet—and it would show Satcom III-R, transponder 24, and you’d have to explain to people what exactly the cable business was. So a lot of hard work, a lot of—somebody once said to me, “I already told you no. How many times do I have to tell you?” My answer was “Five. And you're only up to two!”

We hung around and a lot of the guys who started out in selling, like myself, came out of spot television, which was a business that gave you all the tools you needed to try to reason. But you had these spot guys coming in there reasoning with these time buyers that were spending really big money. It was tough because we were an annoyance to them in the beginning. So we got there simply through telling a story and re-telling a story and then going to the clients. Sooner or later, the agencies, being at that time the gateway to them, if you really were frustrated you would have to go around them and go directly to the client and they would get mad at that and we’d say, “We’ll cancel your orders.” And they’d say, “We don’t have any orders.” And we’d say, “That’s why we’re going to your client.”

Certainly accepting defeat early on was not going to happen.

Arenstein: Now you look at those bygone days, nostalgically now. Back then, did you ever think, “One day we’re going to laugh at these difficult days.” Or was it so difficult there was no time for laughter?

McCormick: There was really no time for laughter back then. For me, the pivotal point was when cable penetration went over 50% of the U.S. At that point we got to say, “Look, now broadcasting networks are playing in our business. They’re in our ballpark now as opposed to simply kind of the pushback.” We used—and this was one of the things I think that really helped out Cable Health Network and then beyond that, Lifetime. We used a lot of research. There was a great service that Nielsen put out called “Basic Cable, B-A-S-I-C.” It stood for “Broadcast Advertising Schedules Impacted by Cable.” B-A-S-I-C. So we could show an advertiser that you know, you're buying these CBS or NBC, and you're getting a nice number. But do you realize because of cable penetration in very high density areas, you're not getting enough A and B counties, you're getting way too many C and D counties. We would show them that now there was a big difference between a person living in a C and D county—these are the guys with the guns on top of the pickup trucks and the little bumper sticker that say, “I’m a roper, not a doper.” As opposed to some of the more, let’s say, higher income areas that are out there. That was a story that really helped us. I always find that if you’ve got a good mathematical story, that’s the place to start and you can’t really argue with logic.

So we brought that in there and that was definitely a story that advertising agencies did not want told to their clients. So they kind of acquiesced and started to believe that maybe it was a good idea to buy 100,000 young moms if you're selling diapers as opposed to another daytime spots that rotated through "Card Sharks" and "Concentration" and various other shows on the air.

Arenstein: Now tell me about going from sort of almost the door-to-door sales like that to the C suite. How did you get there?

McCormick: First of all, I have this personal motto that says, if it's easy you're not doing it right. And by that I simply mean that when people come in and they say, “Oh, we had this great show. We sold it out in two days.” Then you mispriced it. It’s like people say, “I sold my house in a week.” Well, you probably...

Arenstein: Underpriced it.

McCormick: ...picked it off. I’ve always liked selling—being at the vanguard of anything requires a tougher sell. Back in regular Television, when I started out selling spots—everybody liked to buy network affiliates. The Independents were tough. Channel 5 and Channel 11 here were looked at in a caste system of horribles. So after the indies then became somewhat acceptable—and again back then I would say, “Wait a second. Excuse me. You bought ‘All in the Family’ on CBS. And now you're not going to buy ‘All in the Family’ on this independent station when I’m running it Monday through Friday? Do you think these people know that they’re less valuable than the people who are watching on Saturday? And if anything if they’ve seen it twice, don’t you want to be in an environment where people like a show that much?” Etc., etc. So again, back and forth, almost Socratic reasoning to try and get A equals B, B equals C, then why wouldn’t you?

Anyway, it went from that bit to the UHF. Again, the same story. On a VHF it’s great. But on a UHF, channel 47, a new caste system, a new group of people that have to basically pledge like a fraternity or something to get in there. So of course when that became acceptable, then basic cable came along and when basic cable got too easy to sell, then it went on to the Internet—which was a whole other story in those early days.

Arenstein: Right. We’ll talk about it.

McCormick: For me, getting into the C suite was just about—we had a network that wasn’t as widely viewed as I would have liked it to be. And so when I was running sales, I had my choice. I could put together the best team of people that could sell a low number and make sure they could, but even then, you're going to optimize just so much. I mean, if I get maybe a 10%, 20% higher cost per thousand than I would normally deserve, that’s good but not nearly as good as trying to get the numbers up. So my background in television was from research and I knew what would work. I guess I agitated to try and get our schedule to put on more shows that would work and ultimately prevailed on that. So having made, I guess, a bit of a name in selling either client-side programming or making the right suggestions that could move us along and get us higher numbers—that, I think, got people’s attention.

You know, if the numbers are there, and you're growing a business, I think that was pretty important for the powers-that-be to optimize their investment. So that’s how it happened. I kind of came through sales but I'd always had a bit of a creative bent going on, kind of a parallel creative side, and thus tried to push that into some of the programming choices that we made and some of the creative ways to even sell the stuff.

Arenstein: But you were a trailblazer in the sense that you came from the sales side and went into the president/CEO slot and became kind of a programmer/content guy, although sales were still part of your job. You were one of the first to do that.

McCormick: I'm not sure there’s been a lot even afterwards.

Arenstein: There have been a few...

McCormick: Charlie Collier’s doing a great job

Arenstein: Charlie, yes...Kim Martin, who was at WE.

McCormick: Right.

Arenstein: Charlie’s a good example.

McCormick: Charlie I knew when he was getting ready to go out and get his MBA. We had chatted about that. I had gone through the same program at Columbia and basically told him about the deal. He’s had a great success. I think that the salespeople, basically you give them the ball and they have to get it done. By definition of a good salesperson, that’s something they can do that maybe an average person couldn’t. Anybody can sell a Super Bowl for $3.2 million but the guy who brings it in at $4.2,(mil) there’s something different there.

I just think that oftentimes if you're running a sales department, you go through what has to get done and you go through what everyone is contributing and you try to figure out, can this person do better, could that person do better, and you kind of spread yourself out and make sure that number gets hit as the team. And when you're running a business, it's not too different. Because you're saying, “OK, this is what I need from sales and I have a good sales guy there and I keep an eye on him—hopefully or a saleswomen in our case who is watching that—but then you put someone on finance, and on programming and on marketing to make sure they’re all competent and they can all deliver and they’re all going to—when they say they're going to do something, do something—and not give you a good excuse whey they didn’t.”

So in a way it's a highly transferable skill, I think, I guess that’s all I’m saying. Sales to me was always about empathy for the other side, really understanding what it is they need and what it is you have and where the concentric circles get drawn to bring someone in there to find a way that both people can win. Nobody feels they want as much as they should or like to, and isn’t that the same way to run a company, right? When you get the situation where two people aren’t getting along, or something like that, you put them down and say, “Well, come on, there’s a conflict here but we’ll try to do something. Maybe you don’t realize but this conflict might be affecting the rest of the family, so to speak.”

Again, it's about identifying the problem, going in with a can-do attitude, going on with an “I know this has to get done,” because what, are we going to be failures now? We’re going to go home and so that’s, I think, the way it worked.

Arenstein: So—tell me when you got into the top slot. What did you find and what did you do? I know you transformed the network, you changed it radically. What did you find and how long did it take you to change that?

McCormick: It took about a year to really move into it. What we were doing—coming from, I should say, the “Big Bang” that created Lifetime was the marriage of two systems. One was called Cable Health Network and it was really started by, I guess, Dr. Art Ulene with Viacom. Back then they had all these personalities. John Coleman had the Weather Channel, Art Ulene had Health, and Art Ulene—for people who are looking at this fifty years from now—he was the Sanjay Gupta, who your parents might have told you about of that time. So Dr. Art Ulene had a great idea to put together Cable Health Network and I was hired as part of that team from the boys at Viacom. It was totally owned by Viacom. ABC and Hearst had put together a service called Daytime, which was ABC Video Enterprises and the Hearst Corporation. Daytime was a women’s targeted program as an alternative to the daytime soaps. When we got together as the Big Bang and created Lifetime, it was kind of a potpourri of programs. Regis Philbin actually got his Monday through Friday start on us and Dr. Ruth came on. She had a strip on us. We actually had brought along Joy Behar; she had a Monday through Friday primetime show called “Way Off Broadway” and she was the host of that. Matt Lauer was in a show we did, “Esquire,” about her but for him or the other way around these days.

So there was a whole potpourri of things and what we did—the biggest thing we did was to really identify ourselves as television for women. Once we articulated that, it became really kind of a rallying cry. No one else had done so and it was crazy how that happened because it was really done at more of a marketing positioning to let people know that there was programming for women out there. And this is what happens when you get a guy from sales running the business. I didn’t know that that kind of decision had to be socialized with the board and talked all the way through. It was a marketing decision. I don’t have to (get ads approved) the so why would I have to approve this? To their credit, I never got hassled for it but it was just kind of one of those things where I was willing to live with the—you know, beg for forgiveness rather than ask for permission because you can't have nine people—most of them men anyway. In fact, one board member did in Multichannel News, after the announcements and said, “Well, what about the men?” And that puts a fine point on how cable was marketed. If you're a broadcaster, you want the biggest number you can. But if you're a cablecaster, you're saying, “You know what? I'm going to leave some on the side here, but I'm going to go with that core audience, whether it's a pet show honoring pet enthusiasts here or if it's a health show, etc., etc.” I think yet a high end product on that.

The long and short of it—it's just about changing the programming and putting in the right mix of original and encore performances—reruns, encore performances, as we say. I can say when I took it over, the programming was good and original. Unfortunately, the original wasn’t good and the good wasn’t original...

Arenstein: And you also had a good line. You had a good response when people said, “Why is a man running a women’s cable network?” And your response was?

McCormick: I had two responses. The first one was—“I’ll answer that, but you’ve got to promise me you don’t think a ten year-old runs Nickelodeon.” The other one was—if they really dug in—“You know, it's a great question. Clearly, I can understand why you would think that but just remember, do you think you would ask the same question of a woman if she were to run ESPN? Let’s be fair.” And so look, I had a great staff there and a woman was head of programming and then business affairs, sales, and we had a guy who was running finance and myself. It was kind of a blended mix. The heuristics of it were such that it created a bit of a question there. The important part is we got it done. We put together a battleship that today, thirty years later, is still out there, still the number one and if you do it right and build it right and have the right sensibilities, I think you can create a great company.

Arenstein: You did something else while you were in charge of Lifetime. You got an MBA.

McCormick: Yes, I did.

Arenstein: Tell us about that. I mean you were running a network and, you know, most people say that, “Well, that’s fine.”

McCormick: That’s very kind but at the time I was just running sales and for me, anyway, after the third or fourth time, go through the cycle...you can do it kind of, it’s like repeating the seventh grade a little bit. There’s not a lot of new things you're going to see that are going to be challenged, right? It’s almost like when you're driving when you're a kid, oh, my goodness, here’s my license. Now people are doing all kinds of stuff when they're driving. So it became somewhat routine, we’re still hitting the numbers. We knew what we were doing but clearly, it's almost the definition of business efficiency. Every year you’ve got to keep doing something better to get more out it. For me, I thought it was very important to—if I was going to be more successful in business—to get involved in the financial aspects to learn things that I hadn’t learned before. I was fortunate enough to be able to convince my then-CEO to sponsor me over at the Columbia program. I learned out and I felt good about it and the most important thing I'd like to say, I learned that marketers weren’t salespeople that couldn’t get an order. I had a lot more respect for the marketing aspect of television than I certainly had before and obviously got to understand the parlance of the financial community which was a great way to help me later on when I ran a public company.

Arenstein: Speaking of a man running television for women, Judy Girard, who was the director of programming, called you and I'm going to quote her here: “The most ardent feminist I know...”

McCormick: Judy is great people and that was very nice of her to say. Back then to be a feminist and today, is to be a humanist, right? I mean, if you care about people. One of the things when you talk to young moms and dads about equality and they’ve got the kid in a stroller, it's the husband who’ll say, “You're damn right I want equality. I want my wife to get the salary that she deserves because it's going to help our family.” I don’t think you’ve got to pick a side in that one. I think you’ve got to look for what’s right and what’s right is going to, I think, ultimately be a good feminist position to the extent that it involves people getting the rights that are due them.

Arenstein: Doug, let’s move to a little bit of the personal side. Where were you born, where did you grow up?

McCormick: I was born in Flushing, New York, Queens, one of multi-generations of New York City-bred McCormicks way back, or on the maternal side, even further. I grew up in Garden City, Long Island.

Arenstein: Where did you go to college?

McCormick: I went to college, undergrad University of Dayton, in Dayton, Ohio.

Arenstein: Why did you choose Dayton, Ohio?

McCormick: At the time, I wanted to be a chem major. I loved numbers and they had a great staff out there. University of Dayton is kind of like a mini-Notre Dame. A Catholic university and it had a very liberal theology department. In fact, back then, they were selling condoms in the drugstore, which is kind of interesting. I can remember the local parishes; the priests would say, “Don’t send your children to the University of Dayton! It's a hotbed of liberalism.” And today, it still is. It's the most liberal college. It's kind of an interesting thing to get involved and study a lot of the philosophy and theology while I was there, too. Then after a while in the chem lab, it was just too much. It was just not for me. I wound up switching my major. So that was undergrad.

Arenstein: Was it a big switch to go from New York City to Dayton, Ohio?

McCormick: Not really. I loved it. It was 645 miles away from home which was a nice drive. I loved it. College was some of the most fun I ever had because you start your life all over again. You’ve got a new fresh deck of cards and you really get to meet all kinds of new people, learn things and it was just great to be on my own. I loved the sense of freedom. Again, going back to the car analogy, the day you get your license, look where you are. For me, college was like that. I would sit in on a lot of classes—American History, that I wasn’t even signed into, just because the professor was great and you could sit there and it was much more entertaining than going to a movie, listening to an hour or hour and a half lecture from some of these guys. That was it for me, it was freedom.

Arenstein: Speaking of mentors, can you tell us about some of the mentors you met over the years in the cable industry?

McCormick: Yes. I would have to point to Ray Joslin. Early on, we met when I was running—we just lost Ray last year. When I was running sales on Cable Health and we got to be friends. He was just always a really good guy. There’s a guy who started out in sales and understood. When you’ve got a job that says, “Go get money from someone else. If you don’t, you're out.” You can't get much more demanding and kind of like, I guess baseball says, I want to be the guy up with the winning run on third base and this and that, or football I want to be...

Arenstein: Or in basketball, I want to take the shot with two seconds left.

McCormick: Exactly. In sales you live that everyday. Because there’s an order and there’s not an order. And an order is much better. Ray of course understood that. There’s nothing theoretical about sales; it's either in or out. It’s theoretical until you hire somebody to do it. That’s the whole thing.

Tony Cox was a great guy, a really, really—he asked all the right questions. There was a guy at Cap Cities, a Viacom guy called George Castell, a good guy; Jules Haimowitz was really a visionary way back then for a young guy; Herb Granath, of course, made a tremendous contribution. There’s a woman that’s unsung probably in the cable industry. Her name is Beverly O’Malley. She worked with Dancer Fitzgerald Sample back in the time. She was a woman I did the deals with for the Procter & Gamble original programming. We put collectively maybe ten seasons on the air of TV shows, which were a great part of defining the specialness, if you will, of cable—programs targeting babies and then kids 6 to 12, and then we did a series with Clorox (this wasn’t Beverly’s), with Joan Lunden at the time. It was called “Growing Up Together.” All these wonderful parenting shows that really didn’t exist. I like to say, if we didn’t do it, it wouldn’t get done. Whereas in previous years, if someone were raising a child, they would call on Grandma, the aunt and this and that. But now if Mom is in New York and the kids are in Phoenix, stuff like that, this daily kind of helper was there as a real kind of initial support unit. That was big for us.

I admire Ted Turner. He had great vision and he was just really a no BS guy, which I loved. Ted was around before political correctness so today he would probably be in a lot more difficult role. But he just told it as it was. And that’s so refreshing, so refreshing.

Arenstein: Speaking of hand-to-hand combat, as you talked of at the beginning, a lot of veterans of cable lament the days of handshake agreements compared to today. Were you in the era of handshake agreements?

McCormick: Oh, absolutely. Certainly on the ad sales side. Even today, I don’t think people are going with signed contracts. That was an interesting thing because I had grown up without signed contracts. Now when I went over to the Internet business, people were saying, “Well, we can't record this until it's signed.” They told me, it's the agency. The shadow of the future. What’s he going to tell me, he lied, you know? And yet, things had to be codified on that.

Oh, yes, it was all handshake and even in spot television. Now what we would do is we would send the contract out and it would go into the buyer. Very rarely would they ever check them, And heaven help them if they did because in spot television, more so than in cable, people pre-empt. You pay $1,000 for a spot, somebody else comes along, you're sold out, they offer you $1,200—boom! And they give you, in exchange for that $1,000 spot, which might have been a ten rating, they’ll give you 2, 7 (rated units) so you’ll come out ahead, they’ll come out ahead, but it's another contract. So these changed contracts would be that thick sometimes. Anyway, the short answer to your question is, yes, everything was done face-to-face.

Arenstein: Let’s compare the money that was on the table in those days to what is now. Can you remember some of the amounts that were passed around in your early days?

McCormick: I think in terms of the order of magnitude of the contracts, my first deal was $250,000. I was in New York but I was calling on a shop in Chicago and did the whole thing on the phone with the guy, over time. That was a nice one. I guess my biggest deal was in the tens of millions when I would put together multi-year deals with Procter and Gamble, Bristol-Myers, and basically it was a great formula that still could work today. Whereby you’d say, the first year you’ll spend a million dollars and I'm going to give you this CPM. The second year, if you spend two million, you can have that same CPM. But if you spend anything between one and two, the CPM goes up 10%. So your choice. Just keep spending more money and you can have your CPMs. So ten years into a contract, you're sitting there choking on this deal because you’ve got to live with the deal that you made early in the decade, but those were great deals because we couldn’t have gotten where we were without the support and the belief we would be successful and help move product for our people.

Arenstein: From the hand-to-hand combat days to where you ended up at Lifetime and then you left Lifetime and you went to an industry that you compared to the early days of cable. And that’s the Internet. Tell us about that.

McCormick: Actually the Internet, when I first left Lifetime, it was to basically take on new responsibilities and the Internet basically was the big buzz at the time. And they used to say, “What’s it like?” And I'd say, “I've sold indies, I've sold UHF, I've sold cable, and in college, I sold steak knives and pots and pans.” By far the Internet was the toughest thing ever to sell. Because when I got into it, everybody hated the Internet. It was right after the wipeout in 2000 or so, 2001. When you would call on someone, you represented either a person—because everyone was investing in the Internet and buying these stocks they didn’t know anything about except the call letters—you either were talking to someone who never thought the Internet would work and got to say, ha-ha, I told you so and that was that. Or you were talking to somebody who’d just lost half of his net worth based on three letters that his best friend told him was a good call. So you're representing to him all the bad news. It was particularly extra tough back then, but once again, it was a question of, anything else bad? All right, let’s get it all on the table, let’s go ahead. We wound up prevailing.

I had a big picture of—and I mean big, it was like four feet by five feet on my office—of Muhammad Ali standing over Joe Frazier. And it was kind of like inspirational. I always used to kid: Monty Python has this great skit in “The Holy Grail” where the Black Knight is guarding this bridge and in comes one of his opponents, cuts him arm off and blood spurts out, and he looks over and goes, “I've had worse.” So then of course he cuts the other arm off and the guy is just a stump going around saying, “I’ll bite you!” And in a way, that’s exactly how we looked at the Internet. That was the joke. You lose...“I've had worse.” And we kept going on, we stayed alive, much like George Washington kept his troops alive during the Revolutionary War. You didn’t have to win everything but just enough to keep going, just enough to get the French giving him some money. In a way we were like that, fighting those kinds of battles. Even in the early days of cable, it was like that. People think, oh, cable was just a straight line to prosperity. But you had a lot of companies that got caught on the barbed wire in early cable. Some great services: CBS Cable, Satellite News Channel with the auspices of Westinghouse in there, and Monitor. A lot of them had faded so it wasn’t guaranteed that you were going to be successful back then.

Arenstein: Speaking of that, you did mention that cable, when 50% of the homes had cable penetration, at that time did you think, OK, I'm in a business that’s going to be a going concern? Was that really it or were there other things along the way that you said, OK, OK, here we go?

McCormick: Yes, I'm not sure exactly in time when it happened, but I think when ESPN did its deal for Monday Night Football, that was one of the key things that said, all right, this is not going away and now everybody’s going to have to pay a lot more attention to it. So that was a big move that helped to establish that. But I pretty much knew that we had a business. We had a lot of competitors at that time, too, so it was a nice business to be in but certainly it required a different type of selling.

Arenstein: Switching gears a little bit, I have to ask you about your songwriting career. What’s all that about? I see names like Gladys Knight, Paul Anka. Tell us about that.

McCormick: I’ve always liked music, I always sang, was in the New York Oratorio Society here in New York for awhile. My oldest son graduated from Juilliard as an operatic tenor. So there’s a lot of music in our house. Every year my wife and I throw this huge bash out in the Hamptons. It’s a karaoke fest where the worse you are, the bigger the prize you can get. It’s a lot of fun. But I always liked music and played guitar in high school and then picked up the piano later on. I was in the 70s playing in a club after work; I’d sell spots during the day and then at night, put on blue jeans and go out and sing. I had an original song or two and somebody liked them and said, you should do more, and I wrote more, and sure enough, there was publisher in there that liked the original song. He was getting ready to do an album with Paul Anka, didn’t like the material that Anka had and sent me out to his house in Monterrey to work with him for a week or so. So I took a week off from work and went out there and we went into a kind of—they call it “opening the piano bench,” where you stash all the half-written songs. I took a lot of my work, we worked through some more, changed melodies. I ended up with one on his album. We wrote a bunch together. One was the lead single on his album. It went vinyl as we like to say; it didn’t go gold. So it was nice. Then the publisher basically put my music out there and one of them was recorded by a gentleman named Roberto Carlos, who was kind of the Frank Sinatra of Brazil. I had known, but when I tell my Brazilian friends they're much more impressed. Gladys Knight recorded but hasn’t released that or didn’t release it yet. So who knows what happens over time, but I still have that one. And another...was Dusty Springfield, who recorded one of my tunes, and that was a lot of fun. Some nice names and nice people and I wrote a bunch of tunes. To me, it was so funny. The day, I’ll never forget it. We had something called “PPS:” the Physicians’ Programming Service at Cable Health Network, which was professional, ultimately became Dr. Sunday and its own business on Sunday. That was opening the door to prescription drug advertising on television, which for better or for worse—guilty.

I’ll never forget, I was out in New Brunswick and doing a presentation to Johnson & Johnson and Art Ulene was to my left and I'm sitting at the huge podium, standing at this podium, and the lights go down and it was exactly like being on stage. Everything but the band behind me. It was very similar when you're making a presentation, that standing up, that fronting and knowing that there’s no stopping and keep going and listen and make sure you know what’s going on out there, read the room and go forward. I just had an unbelievable flashback, who that was exactly like standing in front of an audience. Maybe it was because I was standing in front of an audience.

Arenstein: Are you still writing songs?

McCormick: Yes, for my grandson. I’m writing “sneaker” rhyming, “winter” with “splinter” and things like that. I haven’t written any serious songs in awhile. But I do a lot of singing, but not too much writing anymore.

Arenstein: Good. You stay pretty busy. I see things like a whole bunch of boards, Ovation TV we mentioned. LIN Television, which I'm a big fan of.

McCormick: Yes. As we speak, again this won't make a lot of difference in 75 years, but LIN is merging with Media General. The deal is done, it's sitting on our lovely FCC Commissioner’s desk and awaiting his green light. But all the business has been done. That’s going to create the second largest group of television stations—I believe 78 stations and we’ll talk to 25% of the country, and we’ll be right behind Sinclair. So it's a great company, great group. The importance of local news—especially now with the demise of the newspaper business. Unfortunately that business has lost another half of itself. It was a $40 billion business in 2003 and now it's in the high teens, if that now. So when you really look at it, the importance of television, your cable or broadcast, locally it seems that broadcast is trying to pick up that mantle. It’s part of our democracy to keep that business alive. I like that service that broadcast continues to do.

Arenstein: And I know you're very involved in cancer research, especially breast cancer research.

McCormick: Certainly, at Lifetime we had to, maybe that had something to do with Judy’s comments. I just wanted to make sure that we were doing the best that we could. I surveyed the entire company and said, “We can do anything, but we can't do everything. So let’s pick the one thing we want to do.” And had the workforce saying, you know what? Let’s go forward on breast cancer. Let’s make that a big deal. So we did and threw the initiative behind breast cancer, won a Cable ACE for it, which was nice, and put some good programming together behind it. In a way that was kind of a precursor to what all the networks are doing now. They're doing Stand Up for Cancer. That’s kind of what we did eight, ten years before with Lifetime in that.

Arenstein: And hopefully if people are watching this fifty years from now, breast cancer will be something for the history books.

McCormick: Someone will have to go explain to them what that was.

Arenstein: We hope. We can hope.

So let’s just finish up on your Internet business because I know the ending was pretty good. How did that end?

McCormick: It ended with our selling the company. We’re a public company and we got an offer at a nice premium to the share price from GE, which at the time was NBC. We had an auction once there was interest and we had to keep it around and talk to a lot of companies and GE saw that it was important to try and get a toehold on the growing Internet and certainly with all it's programs that speak to women—especially in daytime—it was a natural fit for them. They purchased us outright for cash.

Arenstein: Coming up to the present moment, what are you doing now?

McCormick: I’m doing a bunch of things. I'm one of the board members that was chosen to go on to the new Media General board so LIN and Media General together. So I’ll be on that board once it constitutes and as I said, it's December, so hopefully that will get done soon enough. I'm also the chairman of the board of a company called Everyday Health. This brings us back to Cable Health Network. Everyday Health is a public company; we took it public this year and a lot of people call it kind of a mini-WebMD. WebMD got about a ten or twelve year headstart on us. But it provides a lot of services. We are the arm for the Mayo Clinic. We do everything from the South Beach Diet to “What to Expect when you're Expecting,” which is big. And Sanjay Gupta is our spokesperson. He’s associated with the network. So it's a really class act and they are making America a healthier place. People say, “Doesn’t WebMD do that?” And I go, yeah. But the term “second opinion” was coined in the medical business...let’s have some of that.

Arenstein: Exactly. And tell me a little bit about your work at RHF.

McCormick: Rho has been around since the 80s and for years was venture capital. We did six funds in venture capital. And I think that is a by-product, if you will, of the big downturn in 2008. Rather than go and do our seventh fund in the venture business, we saw an opportunity to do rollups. So what does 2008 have to do with that? Well, a lot of companies that were started in 2006 and 2007 had really hit a rough patch during that time, and thus are not growing to the extent that really merits a venture investment. So what we do is we’ll come in and we’ll take out some of those earlier investors and put our cash to work, put more money in to do rollups. And that’s really what our direction is.

Arenstein: Doug, your legacy. Your cable legacy. What would you like it to be?

McCormick: That’s a great question to contemplate. I always had a sense of humor about what I did and I think that anybody running a business, just because you are running a business doesn’t mean you have to be a stiff. It doesn’t mean to have to walk around with a frown on your face. You get so much time on this earth and how you spend it is up to you. So I think that I always had kind of a quick way to try—I really think that laughter or a good line that kind of clears the emotional palate, the intellectual palate if you will. I think that’s not a bad one to have, starting the women’s network. I mean that was kind of take your man for not jumping. Somebody had to do it and why not us? And we’re perfectly set up for doing it. But I think the way we did it and the way I’ve comported at least my career to also have a bit of a sense of who I really am and not get so hoity-toity about whatever position, what anybody has. I think if we had a little bit more of that, people would have a lot more satisfying life.

The funniest thing that ever happened and I think about it like it happened yesterday. We had a business affairs guy, older guy than me, but back when you're thirty and someone is fifty or sixty, they're old, it’s a little different. I’ll never forget: we got an order from 7Up over at NW Ayer (advertising). 7Up still exists, I don’t think NW Ayer does anymore. But it was a big deal for us and we had Peggy Fleming doing some commercials. Kind of like health tips if you will. This was a big deal too, multi-hundreds of thousands of dollars and we were doing a negotiation with NW Air and I brought my guy from business affairs, the lawyer, general counsel—hardnosed—I was just privileged to be there. This was like what the networks do. Going back and forth, I believe it was something silly like Peggy Fleming had—we agreed to a limo but with the limo was to drop her off and come back later and pick her up, it didn't have to stay all day long. Typical things that go on and this stuff. The other side was saying, “It’s got to stay,” and this and that. There was this pause when two people were hammering it out. You know, you kind of relax for a second...so my guy, our business affairs guy, wants to start up kind of a sidebar conversation. He looks and he sees a picture behind this (NW Ayer) guy’s desk and he says, “Your son looks a lot like Robbie Benson.” Robbie Benson being a (male) child star back then. . And the response was, “That’s not my son, that’s my wife.” Further down in the hole...so anyway, it's been a great ride and sometimes I just have to chuckle; there’s not too much you can do about it.

Arenstein: This has been a lot of fun, Doug. Thank you so much.

McCormick: Thank you for having me.

END OF INTERVIEW

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  BACK TO ORAL HISTORIES

Rob Marshall

Rob Marshall

Interview Location: Kansas City, Missouri USA
Interview Date: July 29, 2014
Interviewer: Stewart Schley
Collection: Cable Center Oral History Program

Stewart Schley: Your entry path into cable was unique. Just talk about how you got into this business in the early 1970s.

Rob Marshall:  I got out of the military in 1970. I’d been a radio relay and carrier crew chief and I was fortunate enough to return to college at the University of Kansas. I had always enjoyed writing so I took up course work in journalism and I got a Bachelor of Science in journalism and I went on to get a Master’s degree in radio-TV-film. During that time I went from print to radio to television to film to cable TV. The industry was started in 1948, as I recall, because the FCC had frozen licensing of broadcast stations. So those people who were outside of any service area of an existing station at that time couldn’t get TV and also people who wanted to sell TVs couldn’t sell them to people who couldn’t receive it.

As I understand it, entrepreneurs started setting up antennas, which was something I understood and receiving signals and transporting them via cable to homes that could then see TV. I’m not positive about this, but I think around 1968, the FCC issued a First Report and Order that pretty much froze the cable industry in terms of new systems. During that time, a lot of think tanks began to take a look at cable TV. They had a term I quite like called “television of abundance.” There was one called the Sloan Commission Report, there was one by the Rand Corporation and others. They predicted things like transmitting Encyclopedia Britannica in a microsecond.  Well, that sounded pretty good to me. But in my course work, we used a broadcasting text called “Broadcasting in America,” by Head and Head, I believe, and Chapter 7.2.2, they said, “Cable television: parasitism in the TV set.” So from the outset, cable had to struggle against broadcasting, even though broadcasters had this little secret when they charged for advertising. They’d say, “Well, our signal covers this area…”

Schley:  Thanks to cable.

Marshall:  …carried by cable in these places. But they fought the cable industry. We also had very powerful forces in the utility industry, both the telephone companies and the power companies that kind of had their eye on cable. So cable was always somewhat of an underdog at the beginning. We had a cable system that had started in Lawrence, Kansas, in the early Seventies and as an intern, I went down there and did production work, stood behind the camera, was a floor manager and that sort of thing. That cable system had a substantial local origination programming arm, had a studio, remote vans and really did it right. We worked for free at that time.

Schley:  As any good intern might, yes.

Marshall:  So I got to know the people at the local cable system, which was owned by the local newspaper, and when I went to graduate school then, I chose to study cable television, which was unknown in the journalism department.

Schley:  And had been labeled “parasitic” in one of the textbooks you read as an undergrad.

Marshall:  I was the resident cable expert. By virtue of my connection with the university and with the cable system, I was allowed unique access to cable. So I did a Master’s thesis on regulation of the cable industry by the FCC. In 1972, they issued their Second Report and Order, which was a very dramatic document and had a lot of unusual requirements of the cable industry and by using that as a case study, I was able to learn quite a bit about cable TV. Then I naturally should have gone to law school, I guess, but I was pretty tired of school at that point, and poor—I’d used up my resources. I took a little interim out and worked for the American Nurses Association here at Crown Center and went up to Nebraska and recovered some wind generators and then thought, why did I go to all this school  if I wasn’t going to be in cable TV?

I got a job with the system in Topeka, which was a startup, so there were three of us and we were in a pre-construction phase. What we had to do was clear the pole line so that they could build a system.

Schley:  And that entailed more than just clearing the pole line. Tell us about how you had to go about finding room on these utility poles?

Marshall:  Well, I thought I knew a lot about cable TV.

Schley:  From your academic work.

Marshall:  Right. And you know, I think government documents can be considered primary resources for research and they do a pretty good job of explaining things and I’d read quite a few of them. But none of them really that I recall had a term called “make-ready.” And make-ready was what you are required to do to clear space on utility poles. Utility poles are generally owned by the electric company and the phone company and they attempt to suggest that they have 50% ownership each of them, and so they don’t transfer money back and forth to one another.

When cable comes along, then you have to create a foot of clearance above existing communications, which in most cases is telephone. And depending on the size of the power, normally about forty inches from power. So what that entails is looking at a pole, deciding whether or not the clearance is there. If you suspect it’s not, then you have this stick, and you run up the stick, which is graduated, measured, and look and measure it. Then you draw up a sheet that has a picture of the pole. You show what’s on the pole and you make a recommendation of whether you think power ought to raise or telephone ought to lower.

Schley:  You’ve got to do this pole by pole by pole.

Marshall:  Every pole. So it’s cheaper to lower phone but not always the best construction-wise. It turns out the electric companies and the telephone companies aren’t very happy about having someone else on what they consider their pole line even though we always made the case that they didn’t pay for this pole line. They’re a regulated utility. They’ve built it into the rate base and everybody that pays for their telephone or their electricity paid for that pole line.

Schley:  But they’re possessive nonetheless or they were.

Marshall:  Very possessive. And also, mean-spirited sometimes. I’ll give you an example. These things exist in rights-of-way and easements which oftentimes are in people’s backyards. The phone company and power company would occasionally send people out to check on your work, see if what you were doing was what they wanted to have done. They’d run you back into the pole that sat inside a dog pen with a junkyard dog in it, you know? Or put you into rosebushes or something. That’s a well-known thing. It happened to me.  The National Electric Safety Code is a national standard which requires these clearances for safety. So at the root of it, this is to save lives.

But in some cases the poles were already in violation. So I would bring that to their attention and they told me, “Those standards are goals for us, but they’re criteria for you.”

Schley:  Nice. OK.

Marshall:  So the situation would arise for example where there wasn’t anything you could do to create space on the pole to build cable. Then you had to replace the pole or go underground. If there’s not space on it, oftentimes the reason is because they have a lot of stuff on that pole. Might be in an intersection, and over time, it’s aggregated all this stuff on it. So what they need is a bigger pole. Contractually you’re bound, if you want to attach to this pole, to purchase a larger pole, pay for them to exchange their facilities onto the new pole, give them the pole and then turn around and pay rent on it.

Schley:  The question I have—I think it’s essential to understand what you guys were encountering in Topeka was being encountered by this budding cable industry all over the nation.

Marshall:  This is from the beginning. If you read about the early cable systems in Pennsylvania, they talk about attaching to fence posts. And my guess is that they attached to fence posts because the utilities wouldn’t allow them to attach to poles.

Schley:  But you had to get those wires dispersed. I mean, it was a non-starter if you couldn’t.

Marshall:  The first thing the cable systems do after deciding that this is where they want to build a system and raising money and so forth, is get a franchise. The second thing they have to do is get permission to be on the poles. And historically this wasn’t an easy thing to do. As I said at the outset, the phone companies and the electric companies were antagonistic at least and more than occasionally wanted to be the provider of the service. So I had read there were existing cross-ownership rules. And telephone companies had to divest themselves of the cable systems that they owned. A lot of them did, a lot in our region did because they were bad actors. It wasn’t unheard of for them to go into the city and say, well, there’s no reason to give them a cable television franchise because we’re not going to let them on the poles. If you want to be responsible for having another set of poles in town why then go ahead and give it to the cable company. Or later on there was an issue where there was a company in Oklahoma where the local phone manager was also the mayor of town. And the cable guy went in to get the franchise and the mayor said, “Now I’m going to take off my phone hat and put on my mayor hat and call for a vote on who gets the franchise.”

Schley:  If I can take you down to the micro-level of Topeka—you said you were three individuals building this system. Were you climbing poles yourself?

Marshall:  Not in Topeka, because we were pre-construction. But they did send me around. This system was owned at the time by Telesis. Telesis was a cable company that was fully funded by the Central  and Southwest States Teamsters Pension Fund. There were people who had a problem with that. Anyway, they had systems in Nebraska too and they would send us up to—the guy was behind on his installs and so they would send us up to do installations and disconnects. I’m glad that I did that because it’s an important part of the industry to understand. I climbed poles. I was never formally trained to climb poles. I told you earlier that I burned a pole, shell-rotted pole and it showered sparks. I mean, splinters  and the guy came around and tore my jacket open to be sure I hadn’t pierced my heart with a splinter. I realized this was a dangerous thing but other things happened that were interesting, too.

I don’t know if you’ve ever been around when someone gets their cable disconnected, but I have. And I did the disconnecting and all of a sudden, this entire family was on the front porch. I mean, little kids and the mother. “What are you doing? It’s our TV.”

Schley:  Right. It’s our connection.

Marshall:  Historically it’s a terrible problem for the cable industry to overcome. If your electricity or phone goes out, your electricity or phone goes out. It’s not that big a deal. If you’re watching your favorite television program, or a movie or a sporting event—

Schley:  It hits you in the heart.

Marshall:  —and it goes off, you have an emotional response. That’s a much different type of outage to deal with. And in the case of a disconnect, I felt terrible disconnecting that cable even though they hadn’t paid for who knows how many months.

Schley:  What I think is interesting about that is your on the ground exposure to cable in the building of cable systems and as you said, the disconnecting of television. You would later go on to sort of be a voice of the cable industry in the Midwest, but did that instill in you a sort of a sense a commitment or affinity to the medium at large, to cable, or what did that do for you?

Marshall:  As I said, when I was a student, I chose cable television. And I was on fire. I loved cable TV.

Schley:  What about it did you love?

Marshall:  Television of abundance. I had a vision. It took 25 years for it to happen, but it happened. As a result of my schooling, the FCC had a field hearing here in Kansas City. We went to that; they asked me to come and as a result of that, eventually they hired me to be the executive director of the Mid-America Association. The Mid-America Association had been around since 1958 formally. It was set up in my opinion by Larry Boggs. For many years, the top award at NCTA was the Larry Boggs Award. I always had the feeling and maybe when Larry Satkowiak writes his book on the cable history, he’ll verify this, but the cable industry was unique in a lot of ways. When they froze the broadcasting industry and cable started, everyone thought, well, this is going to be an interim technology.

Schley:  Really.

Marshall:  So the big electronic companies didn’t start manufacturing equipment. The cable industry had to bootstrap the manufacture of its equipment. So we started not only to build this business, but we took the raw materials and made the equipment to build the business. In those early days, it was difficult to get equipment. You know, the trade shows now, you look out there and you’ll see every kind of thing there is—

Schley:  And big names behind them.

Marshall:  —and in the early days, that was, “Do you have any cable? Where can I get an amplifier? How do you do a drop?” They were building small systems, I think, in Pennsylvania and Oregon, but in Oklahoma and Kansas and Texas, they were building big systems. I think they would support the manufacturer of equipment, cable and equipment. So in that regard—because out here, you could put a stick up in the air—and they did sometimes, 1500 feet, I mean some of these towers were incredible and they would collect a signal off the air that wasn’t much of a signal, but people would watch a snowy picture because television is such a fascinating thing. I mean, go into a restaurant or bar  with a TV and try to have a conversation.

Schley:  What was attractive about the Mid-America Association role or position?

Marshall:  Well, it was perfect for me. I guess it was destiny.

Schley:  Maybe so?

Marshall:  One of the first things we did…they sent me to an NCTA meeting, which I think was in Las Vegas as I recall, and hooked me up with Walter Kaitz and Bill Kenny. Bill ran the New England Association and they had hired him to come out and determine whether or not they should have state associations or regional associations—what would work. Walter Kaitz from California  ran one of the more successful associations from the beginning. We sat down and they asked me about it and at that time, I think I had $1400 and a rented Mercury Monarch. They said, “Run the other direction. Don’t do this.”

Schley:  Really.

Marshall:  Yes.

Schley:  Why so? What was the…

Marshall:  There wasn’t the industry support. But we persevered. As I recall, we billed people and whether or not they chose to pay.

Schley:  You billed the operators in the area?

Marshall:  We billed the operators. As I came on, there were copies of bills. So I started writing a newsletter which I wrote monthly for over twenty years. And we sent that with the bill. I had had people complain. “Why are you billing me? I’m not a member. Don’t send me a bill.” Ragging on me. But what had happened was, Monty Rifkin, who at that time ran ATC, paid his back dues.

Schley:  It gave you a little cash in the bank.

Marshall:  Yes.

Schley:  What were you writing about in the newsletter in the early days?

Marshall:  Pole attachment. I have a mentor, Bob Weary, who’s dead now. He started early in the cable business and had trouble with pole attachment early and set his own pole line in Salina, Kansas. So when we got the Pole Attachment Act passed, then the FCC had to figure out—you know, nothing’s ever done. As we said, there’s still pole attachment problems. I think one of the reasons is that governmentally-owned and maybe cooperatively-owned utilities were exempt, got themselves exempt from the Pole Attachment Act. But Bob was familiar with it and when the FCC came out they talked about that twelve inches of usable space. So out of a 35-foot pole, which they used as the standard average, one foot doesn’t turn out to be a lot of the usable space. I think it came to be like 7.4% and 7.4% of things isn’t a lot.

So when  the FCC’s regulations were issued, we had, for example, Kansas Gas and Electric. The pole attachment fee from Kansas Gas and Electric was $6.40 a pole per year with increases tied to the transportation group of the Consumer Price Index, which in the Seventies, was the fastest rising indicator.

Schley:  So that was the one they chose.

Marshall:  Yes. We decided we would negotiate with them after the FCC rules and regulations came out. Bob was a superior negotiator. He was a Harvard-trained lawyer and he was a World War II pilot; very amazing guy. So we went down and it wasn’t just the rate. The agreements were terrible in the sole discretion of  licensor, everything. We didn’t hold their feet to the fire, we didn’t go for the lowest rate. We negotiated a rate: $2.25, not $6.40, and we changed 18 of the contractual provisions. These guys were tough. And later on, AT&T in the form of Southwestern Bell, was tough. You had to have your act together. Who were the licensees of Kansas Gas and Electric? Who do you represent? Are these all your members or are just your members going to get—I mean, it was an endless string of requirements which we were able to meet. So after we did Kansas Gas and Electric, we did Kansas Power and Light, Oklahoma Association, bless their hearts, those guys down there were so independent. They decided they would try Oklahoma Gas and Electric themselves and failed. So Bob and I flew down and successfully concluded that negotiation.

Throughout the territory, we improved the contracts and lowered the pole attachment prices successfully.

Schley:  Kind of proving the work of the Association, I guess. It was almost like the pole issue was this rallying point for representation.

Marshall:  It wouldn’t have happened otherwise. That was a good thing.

Schley:  Fast forwarding in your career a little bit, I wanted to talk about the establishment of the NCTC and how that came about, why that came about and what your role was in helping to shape that organization. What was its purpose?

Marshall:  As I say, we started out as the Oklahoma-Kansas-Texas Association—OKT—and then became Mid-America. It was housed in a law firm in Oklahoma City, Holland and Meacham. CATA started in Oklahoma; Kyle Moore and those guys, and one thing they did for the cable industry was initially you could only have a 10-meter satellite dish and they got that changed to 3-meter. CATA was the Community Antenna Television Association, which was for independent operators like the ACA is now. My point is these Oklahoma guys were very independent and aggressive and we had board members from all four states: Oklahoma, Kansas, Missouri and Nebraska. There was a guy from Oklahoma, actually a couple, who had been in the theater business. Actually a number of our owners at that time had run motion picture theaters. They had been squeezed to death by the motion picture distributors. You know, they were in these little towns and all of a sudden, they have to pay through the nose for the movie and then they also have to show it for three weeks or a month or something. In   a little  town this just wasn’t feasible—they would comment, well, you know, if we’d known what it was going to be like, we would have sold dinners. At  first we were too proud to have food in  our theater, but later on, it was hard  to make money. As I recall, there were a number of reasons for the co-op. The first was, the old boy John Thompson, the theater owner, his vision was that the cable industry was going to wind up negotiating with the Motion Picture Association of America. He thought that they would need an organization that was big enough to do that. It also turns out that a number of the very small operators who were extremely loyal to programmers like HBO, found out that they were paying retail prices and the corporations were paying wholesale prices.

Schley:  So the big guys were getting better deals.

Marshall:  Volume discounts and so it was not only more expensive for  smaller cable operators to operate, but they couldn’t grow their companies. Because when they went to bid for a system that was for sale, the large corporation that had such a good deal on programming, could bid higher and make back  the higher price paid  for the system in short order, afford to pay more than  the smaller operator could reasonably pay for the system.

So there were a multitude of reasons that these folks got together and said, well, what are we going to do about it? And they decided that they’d throw in some dough and start a cooperative with the idea being that they could act cooperatively like an MSO.

Schley:  Pooling their purchasing power.

Marshall:  Pooling their subscribers and buying as one entity. So that’s what we did.

Schley:  This was when, Rob, early 2000s for the formation of NCTC?

Marshall:  Isn’t this the 30th anniversary or something now? 1984?

Schley:  1984 was when the organization was launched.

Marshall:  I’m guessing, I mean, you’re asking—

Schley:  No, I’m trying to get just a general sense. You told me once an interesting story involving a makeshift poker game at which the subject of a cooperative came up. Is that legend true?

Marshall:  We played a lot of poker.

Schley:  And you talked about this possibility. Did it work? What was the upshot?

Marshall:  We still had some very good individuals involved and they thought once it was pointed out that these programmers would do the right thing—of course, they didn’t—it was business. So it was a struggle to get it working properly and as I said, with the pole attachment, with a lot of other things, being an organizational force was helpful. We put out a monthly newsletter; we knew where everybody was, we knew how to contact them and so we were able to bootstrap the thing so that it would have enough behind it that it would go forward. I think they had to kick in another time or two, but it turns out that to satisfy some requirements of the programmers turned out to be the way that the co-op could fund itself without requiring dues. It turned out pretty well.

But all of these guys in some sense are competitors. It’s a problem; on the one hand, de Toqueville said that America was unique because people with common interests could get together and organize and make things better, things that they couldn’t do individually. When you have competitors together, sometimes it’s hard to get everybody pulling in the same direction. Eventually there were those who were getting, I think, some kind of pressure that maybe the co-op should be dissociated from the Mid-America Association. We had common board members and so on. We hired Mike Pandzik, who had formerly worked for HBO and was a pretty good hand and he took off with it and the rest is history. It’s been a very successful operation. I don’t think yet that they have taken over the negotiation for programming per se, but for programming services, they’ve done pretty well for the small operators is my understanding.

Schley:  If you think about your multi-state organization and association, how was cable different? Were there challenges in the Mid-America geography or topology that were different from what other operators faced? You kind of think about the Midwest, I think the vast stretches, you know, populations…

Marshall:  We’re pretty provincial out here. I recall that time that we put the kibosh on that—turns out that the guy that took off his hat and put on his mayoral hat, that co-op was in the process of receiving an enormous grant to provide cable to rural areas. So that’s OK, but the way they were going about it wasn’t OK. We pointed that out and NCTA would contact me and they’d say, quit waving the bloody shirt, we’re out here trying to do this and nobody wants to hear about that problem out in Oklahoma too much.

Schley:  Did you discover in your tenure as leader of the association, did attitudes among policymakers, legislators, regulators begin to shift or change over that time period? And if so, how?

Marshall:  Politics is a very particular endeavor. There’s nothing easy about it. Prior to my tenure, there was a copyright fight, a big one. And my understanding is that these guys sat down with Tip O’Neill in the House and some other guys and said, you’d better take this deal or you’re going to get something you don’t like. So they agreed to a copyright deal, which caused these same guys in Oklahoma to go, “You know, we hate that! You shouldn’t have ever done it, you know we’re not subject to copyright, it’s wrong,” and so they got crosswise. But I think Carl Albert was the Speaker of the House at the time so he was helpful in that deal.  It particularly stuck in the  craws of the Oklahoma guys, their guy (Rep. Albert) was part of it. We had Bob Dole and Bob Dole was off-and-on in charge of the Senate. I have lobbied but more in an educational fashion. I’d go tell them a story about big systems, a story out in Oklahoma and Kansas, and helping start the industry and they should be proud of that. But politics comes down to getting the vote and it’s so tricky because they might trade your vote for something totally unrelated to your issue. You have to build some momentum and find champions and get the key guys on board and just keep pushing and pushing and pushing and then, when you get it done, you’re just starting. Because then you’ve got regulation, you’ve got lawsuits and it just takes forever.

We knew who owned every system and we knew in particular every political district, both statehouse, state senate, federal house, and so we could go talk to people from their constituents’ point of view and oftentimes we took their constituents to go talk to them.

Schley:  How many different operators at the peak, maybe prior to the consolidation wave, did you represent at the Mid-America Association? Dozens of them, or hundreds?

Marshall:  Hundreds, easily.

Schley:  Because you had a lot of independent guys, independent operators.

Marshall:  We did, in a lot of very small systems. In order to do that, they had to aggregate those systems near each other.

Schley:  Who were some of the more innovative or interesting or influential cable operators in the Mid-America region, would you say? I always think of Sunflower Cablevision, for instance, as being an interesting company, but I’m sure there were others.

Marshall:  Sunflower was owned by the Journal-World, which is a newspaper. The system in St.  Joseph, Missouri was owned by the Press Gazette and I think that’s the name  of the newspaper in St. Joe. I had board members, I had a nuclear physicist who just came back to run cable systems. We had such a wide variety of talented people and they weren’t all owners or even managers. We started a number of Society of Cable Television Engineers chapters. I can remember being at a meeting where Dave  Pangrac, who at that time worked for the cable system here in Kansas City—

Schley:  I remember Dave.

Marshall:  —talked about the migration from a tree and branch system architecture, which means you have a headend, you have a supertrunk, you have a trunk, you have feeder, you have drops and if something goes out here, everything behind it  goes out, . Not a very reliable architecture. He talked about a grid and node system architecture. Just blew me away. He said that and I almost fell over in my chair. What a concept. He’s  also a guy who I think buried a little fiber optic cable in his construction and didn’t have permission to do it or budget to do it, but just went ahead and did it. We had a lot of characters who were willing to take a chance to do what they thought was right.

Schley:  I think you had some eclectic people and I thought it was interesting what you what you said earlier about the presumption at one point that the industry would be negotiating with movie studios. It didn’t turn out that way because there were these  intermediaries like HBO and Showtime…

Marshall:  If an entrepreneur had been squeezed by an entity, he had no control and no power to negotiate with.

Schley:  One thing that strikes me is that you worked in cable and you led this regional association at a time when there was such amazing in innovation you just touched on. The beginnings of fiber. Thinking about your being captivated by this notion of television of abundance way back. You actually saw that come across. I think that’s kind of cool the vision you had early on actually did come to pass…

So you were captivated by this notion of abundance before there was television of abundance; you actually witnessed it come to pass. Just talk about some of the bigger progressions or the kind of inflection points that you witnessed in your role.

Marshall:  We have perennial problems. Pole attachment was a big one. It was nice to get that more or less settled. Some negotiated ultimately in good faith and I think for those that we got that settled, that’s settled. There are plenty that aren’t and I heard this morning about one here in Kansas City. You know, the copyright thing was a perennial. It kept coming up, but we only had a minor if any role in that. When we started getting programming, we had, oddly enough, public access in New York. They had a guy named “Ugly George” who appeared nude or something on his public access program. We had leather lunged guy from the Moral Majority come out and introduce legislation to change—

Schley:  I forgot about that.

Voice:  [“Ugly George.”] That’s a name you can’t forget…

[PAUSE]
 
Schley:  Was it a requirement of most franchises that you had to open up channels to program, that was the public access idea, right?

Marshall:  Yes. The “electronic soapbox.”  That was something that was the condition of franchising because that came up and these guys would demand that you have a public access channel. But one of the upshots of that was a guy like Ugly George in New York. Then the Moral Majority would use that to come out and introduce a bill in the legislature to change the standard from obscenity to indecency. You know, you have to remember that in the Sixties, Kansas had a commission in the State Legislature that approved movies.

Schley:  I did not know that.

Marshall:  I mean that once you start the slide backwards in that deal, why, speech can be restricted in a hurry. So we had the free speech thing and we had to go—and some of these issues would just keep coming up because the people are determined to get their way.

Schley:  It strikes me that there was always something.

Marshall:  I had a CEO tell me one time he didn’t know how I did what I did because I was always facing problems. But there were other things. Everyone says that one era of cable began with the addition of satellite programming. In the initial stages, I subscribed to a newsletter that kept track of who was on and I would put that in the newsletter because there were a lot of guys that didn’t know what was there. And we’d have the show and we’d line them up on the stage and there would be twenty guys up there that were programmers that wanted to tell people what they were offering. So these changes happen over time when you’re in it but later on, when you look back and look at it, why it seems like they happen in a hurry. Rate regulation by franchisors was a huge issue, huge issue. We had bills repeatedly introduced to make cable television a utility and put us under the regulation of a state agency.

Schley:  In various states, Kansas, that happened?

Marshall:  Missouri. Nebraska was interesting. Nebraska is the only state in the country that has a unicameral legislature, 49 senators. It doesn’t have two houses. But you know these things would surface and I would subscribe to legislative reporters from every state and I’d go through them religiously to see if anything related to cable. You see, these guys, if you take the telephone companies, for instance, they live in the legislatures and government agencies, and have for decades. And have attorneys and relationships with all these people. That’s just part of doing business for them. We had me.

Schley:  Well, you probably logged a lot of miles.  

Marshall:  The state associations hired an attorney lobbyist in the State Capitol, but they weren’t doing what I was doing in terms of what could be a problem. But we worked together and over time, I think we did pretty well.

Schley:  What was fun about that job?

Marshall:  Oh, man, the people were just a lot of fun. It was hard work. I was obsessed with my job. Seven or eight years in, they took me aside and said, “We want you to take a break and re-discover what a weekend is. Take a vacation. We don’t want you to burn out.” I was out there. I had to put myself away. I was giving talks to the National Association of Regulatory Utility Engineers, municipal leagues—I was just all over the place. But part of the job, I think, or part of the benefit of having an association is putting a face on the industry. And we were pretty successful at doing that.

Schley:  For a long time, I think you were that face for cable.

I was going to ask you about any parting thoughts. You mentioned Bob Weary earlier, but who were a couple of people who were particularly influential in your career in cable? Bob, I suspect—were there other folks you would identify?

Marshall:  There were a lot of them. Dick Feiss was a fellow who knew politics very well.

Schley:  Who was Dick?

Marshall:  He was hired by the company that Bob Weary started—Communications Services, Inc. He had been in the utility business and he was a system manager but he was assigned early on to train me. They hired the guy before they hired me who they trained for a year and then he hired back in to the industry, which greatly upset the people  who had trained him. We had bimonthly board meetings and we had great attendance at those board meetings. We had a program on the first day and then a dinner and  some of us played poker at night and then met in the morning and then they  went home. That took a lot of organization and I attempted to keep them as up-to-date on the industry as a person could be. We had an annual meeting and at that meeting we had  educational seminars. Sometimes people would complain to me because we’d have concurrent sessions and they’d want to go to both of them and we didn’t record them. You had to be there to do it. We generally cooperated and had a good relationship with the National Cable Television Association. I had a good relationship with quite a few of my colleagues who ran state or regional associations. Whatever was going on, we learned a lot about it and it was a broad range of things. I mean, taxation. We covered the waterfront when it came to issues and our members were always responsive in terms of coming up with the money to deal with an issue that was going to hang them. Whether they were aware of it or not.

Schley:  From pole attachments to television of abundance to taxation: for many years, the voice and face of cable in the Midwest. Rob Marshall, thanks for taking some time to visit with us today.

Marshall:  I appreciate the opportunity.

Schley:  Thank you for watching the Cable Center’s Oral History Series. I’m Stewart Schley.

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Jerry Offsay

Jerry Offsay

Interview Date: January 9, 2004
Interview Location: Encino, California USA
Interviewer: Ray Richmond
Collection: Hauser Project
Note: Video is in two parts.

RICHMOND:    I’m Ray Richmond and we’re talking today with Jerry Offsay, the long-time President of Programming for Showtime for The Cable Center’s Oral and Video History Project.  We’re sitting in Jerry’s plush home in Encino, California and it’s the morning of Friday, January 9, 2004.  So, before we get into your fruitful tenure at Showtime, maybe just talk a little bit about your background – where you grew up, what you did for a living before your nine years…

OFFSAY:    Before cable TV?

RICHMOND:    Before cable TV came and rescued you.

OFFSAY:    I grew up in the Bronx and went to school in New York.  I was going to be a lawyer from the age of ten, an ambition that I successfully achieved by going to law school at Columbia and in 1977 I moved immediately upon graduation from law school to California to work for a law firm called Loeb & Loeb where, at the tender age of 28, they graciously made me a partner in the firm and I had lifetime tenure there but I really was bored with doing deals and the law.

RICHMOND:    Contract law?

OFFSAY:    Yeah, entertainment law.  I was putting together independent movies before anybody talked about there being independent movies.  I represented the big foreign sales companies, the brand new video companies, independent investors that wanted to put some money into the movie business, the crazy millionaires - Jim Robinson, who founded Morgan Creek was one of my clients in those early days; Joe Roth was a client of mine in those days.  I just looked for the right opportunity to get out of the law and do something else and at 31 I got offered a job as President of Production at RKO, which was one of my clients which had largely been out of the movie business from 1958 until the mid-80s but had decided that it wanted to get back in the business on a controlled small investment basis and in the first year at RKO I put five movies into production including Hamburger Hill and Eight Men Out.

RICHMOND:    For which you were credited as executive producer.

OFFSAY:    Right, on both of those, and after that, what I thought was successful, one year the company that owned RKO, General Tire and Rubber Company, was informed that they were losing their broadcasting licenses because of some evil deeds they had committed fifteen years before and they had decided if they weren’t going to be in the broadcasting business anymore they didn’t want to be in the movie business anymore either, which then led to my buying, through management buyouts and LBOs and other things, the company twice with two new sets of owners from them and going from making five movies in one year to two movies in four years as I got thrown back in a room with a bunch of lawyers and bankers and investment bankers and the like.  Then in 1990 I got rescued from that by Brandon Stoddard when it became legal again for the networks to own their own programming.  ABC decided it wanted to start its own programming company and I went in to be Brandon Stoddard’s partner.

RICHMOND:    ABC Productions?

OFFSAY:    ABC Productions, which I did for four years and then in the fall of 1993 Matt Blank was looking for somebody to be the new head of programming at Showtime and in December of ’93 they gave the job to me on my 40th birthday.

RICHMOND:    Did you always know that this was going to be a nine or ten year job for you because I know…

OFFSAY:    I told it to Matt Blank on the phone the day that I accepted it.  The mantra is “ten and out” and all my contracts at Showtime were negotiated with that end date in mind and my producing deal was scheduled to start January 1, 2004.

RICHMOND:    He may have been thinking “Ten years?  Who said anything about ten years?  You may be here a year, buddy!”  

OFFSAY:    Right, and probably they did.  In the early days a lot of people laughed, especially when I walked in sixty days after he hired me and said we’re going to go from making eight movies a year to forty movies a year and that’s my plan.

RICHMOND:    That was Matt Blank’s idea?  That was your idea?

OFFSAY:    No, that was my idea to go from doing that.  I think Matt Blank’s idea at that point in time was is this guy crazy or what?

RICHMOND:    Yeah – quintupling!

OFFSAY:    To his credit, for which I’ll forever be grateful, he listened, maybe he thought well, it’ll be his funeral, but he said, “Go ahead!”  And over the objections of other Showtime execs in New York as he’s pointed out to me a number of times, he supported it and backed the notion and we went out and embarked on putting an original movie on every week, which took from January of ’94 when I started to August of ’95 when Showtime launched an original movie every week.  

RICHMOND:    That’s just unbelievable!  You created nearly 300 movies?

OFFSAY:    I think something a little above that.

RICHMOND:    Over 300.  That’s almost 35 a year, which is completely unheard of.  More than 70 of them were nominated for Emmys.

OFFSAY:    Yeah.

RICHMOND:    What was your thinking with that?  

OFFSAY:    Somewhat facetiously it was, hey, if you get enough turns at bat even a blind man gets a hit, but it was based on a couple of things.  Number one, it was based on the premise that Showtime’s business and premium television had fundamentally had changed and that when premium television was launched in the late ‘70s, early ‘80s, the second place that you could see a movie was on premium TV. It went from the theater to your pay channel. There was no home video at that time, there was no pay-per-view in your living room. Movies weren’t playing on airplanes they way they are now, and they definitely weren’t in your hotel room. By the time I got the job, a movie that was coming to Showtime from Paramount or MGM, or whoever it is, we were the sixth window to see that movie. If you cared about that movie you had seen it …

RICHMOND:    Twice already.

OFFSAY:    Before it could get to us, and if you didn’t care enough to see it then it wasn’t going to be a very compelling selling tool to say, oh, good news, now you can see this movie that you had already chosen to pass up in the theaters, in the video store, on your airplane, in your hotel room, and now even in your living room on pay-per-view, so you needed something else. You needed to be able to have a compelling sales proposition. Another one of the tenants of what was underlying is that people watch TV every week. They don’t watch it monthly. HBO put on a movie every month, Showtime was putting a movie on every month. Sometimes it was the first Saturday of the month, sometimes it was the first Sunday, sometimes the second Saturday – people who were in charge of programming couldn’t tell you when the movies were on Showtime, and so we wanted to have something that had regularity and that promise to the subscriber that said every week, Sunday night at 8:00 there’s going to be something new that you’ve never seen before. It’s going to have good stars in it, it’s going to be written by theatrical writers, directed by theatrical directors. It’s going to be just like the theatrical movies that are the mainstay of the channel. It’s going to fit very nicely with that programming except it’s going to be brand new. Those were really the underpinnings of that, and it was also something that we knew that with the studios making only rollercoaster ride, at that time 80 million dollar movies, which are now 120 million dollar movies, that the richest treasure trove of material that was going to be available was the small, personal, intimate, dramatic film, the thought-provoking story, the intelligent drama that networks didn’t want to do because they were doing the teenage cheerleader who had an affair with the coach and tried to kill his wife, Amy Fisher times three. And the studios were doing blockbusters, and so there was a hole in the marketplace where we could get big name people to do important pieces that the press would write about that would promote the network, and bring credit to us. So it was a combination of seeing an opportunity in the marketplace where there was material available and wanting to give people something on a regular basis and needing to give them something that wasn’t a theatrical movie.

RICHMOND:    So you didn’t come there with marching orders to amp up production or to push the envelope creatively? They didn’t say, “Here’s what we want you to do, Jerry.” This was all Jerry Offsay.

OFFSAY:    Yeah, what they said to me is you have a reputation for being able to get more bang for the buck, and you’ve done it at other companies, and you know how to find other sources of financing and bring those skills to us.

RICHMOND:    Because you came in as a money guy.

OFFSAY:    Yeah, I mean I came in as the head of programming, but I came in as someone who had put money…

RICHMOND:    That was your history.

OFFSAY:    Yeah. I knew where to find other people’s money and put it to good use. So I was going to be able, if I was better at putting the money together than the people beforehand, I was going to be able to do more than they did because I at least had as much money of Showtime’s to work with as they did, and if I could find more money out of international or video or some other place, then I could expand to the extent that the money would stretch. I came in and said I can spend the same money and make 40 movies as you were doing to spend eight, and it was close to right. Maybe we spent 120% of the money that they did to do 40 movies.

RICHMOND:    Besides Matt Blank, were there others who questioned the sanity of this whole arrangement?

OFFSAY:    Yeah, no, in fact Matt was the least of it. He was the most supportive of them all, but there was a day, not a day, there were three Fridays in a row in 1995, a year after I got there, where I had to fly to New York and sit in a room with every senior executive in Showtime, all of whom were in New York except for me, and let them grill me on whether this really was going to be the strategy or not. At that time I had 30 pictures in production, but the notion was we could take those thirty pictures and put them on over two years or three years rather than all in one year, and it became a make or break. If we were going to go in the summer of ’95 with a movie every week, everybody in the company had to sign off on it, and Matt, I think, had always said, you know what? Let’s go see if he can do it. Let’s go see how good they look, and if he can do it and they look good, then maybe we’ll actually go with this strategy, and there was always a way to pull back which is to space them out over a longer period of time. Go back and put them on one a month for three years, and I would have just made three years worth in the first year, and people could have rested for a while.

RICHMOND:    But, I mean, this is four, five, six times as much production as any cable entity had ever done before. That’s what I think needs to be realized here is that this wasn’t just doubling or tripling, it was a mind-boggling undertaking.

OFFSAY:    Yeah, and the naysayers were legion. You’d go to the television…

RICHMOND:    How can you make quality stuff if…

OFFSAY:    Yeah, they would say he’s never going to get them done, if he does get them done they’re not going to be any good. He’s never going to be able to finance them. Nobody’s ever going to step up and put up the money for them, and you’re going to end up with a lot of crap. We lived with that for a year and a half until they hit the air, from the time we said we were going to do it until people could actually see them we lived with people saying this stuff isn’t going to be any good. Fortunately we came out of the gate with some strong entries. We launched with John Voight in Convict Cowboy and Jim Belushi in Sahara, and Harrison Bergeron and Hiroshima were the first four movies that went on the air. TV Guide gave two of them a nine out of ten, and Hiroshima a ten out of ten.

RICHMOND:    Which I recall raving about at the time.

OFFSAY:    You did. It was the week after you trashed me for putting on Howie Mandel, so this whole interview is about showing that I don’t hold a grudge because nobody ever wrote a nastier article than that first article.

RICHMOND:    Or more of a rave than the second.

OFFSAY:    But after you proclaimed me an idiot one week, you proclaimed me a genius the next week, neither of them was correct, but we had the goods at that time. Those films were good. We started out with the notion that we were going to do four different kinds of films – family films, sci-fi films, thrillers, and classy Hallmark Hall of Fame kinds of movies, and we stuck to that for three years and did the movie every week for three years through the end of ’97.

RICHMOND:    What ultimately led to the need to curtail that pace?

OFFSAY:    Well, before we curtailed it we actually upped it, but we made a strategic shift.

RICHMOND:    Yeah, you were doing 50 a year for a while.

OFFSAY:    Yeah, we actually went into the 60s at one point in time because in ’98 and ’99 I did 35 for Showtime and 26 for The Movie Channel, but what we found was that the genre thrillers that we were doing were cannibalizing the goodwill for the family movies and the classy ones because the critics, you and other people who wrote about these things, didn’t want to see the 27th version of Body Heat or Fatal Attraction with lesser stars even if they were good. They would write, “We can’t believe that Showtime, who last week brought us this great piece about South Africa with Arthur Penn, and next week has this great movie with Tom Selleck, this week has this piece of thriller crap. What are they thinking?” And so after you read that, it took a long time to sink in to me, but after you read it 20 or 30 times you realize that there may be addition by subtraction. So we set up two different brands: we set up the classy brand on Showtime and we only did the family movies and the Hallmark type movies for Showtime, and we took all the genre movies, the sci-fis, the comedies that we were doing with the National Lampoon, the thrillers, and we put them on The Movie Channel. We made that the popcorn channel and now you had two very distinctly different brands of programming on the two networks and we went with a very fun campaign on The Movie Channel around these popcorn movies and Showtime… the air was cleaned up on Showtime. You just had things, whether you liked them every week or not, they aimed high. They aspired to be high quality, the family movies took off and just became a machine that led to six Emmys in a row for best family film, actually seven in six years because one year we tied ourselves for best picture, and you ended up with important subject matters, gay-themed movies, African-American-themed movies, significant dramas, things based on books, and family movies on Showtime. It drove the ratings for the movies down because the thrillers and the sci-fis actually…

RICHMOND:    Are what get the masses to watch.

OFFSAY:    Yeah, got the masses to watch, and I remember going in to tell Sumner Redstone at the time, and Phillipe Domain and Tom Dooley at the budget meeting for 1998 that I was going to drive the movie ratings down in ’98 and it was going to be the best thing that ever happened to us because we were going to have this consistent positioning in the marketplace and appearance of the films, and that they were all going to pull in the same direction instead of fighting each other, and we started to get far more credit, far more award nominations, far more buzz for those slates of films.

RICHMOND:    And less viewership.

OFFSAY:    Yeah, and lower ratings.

RICHMOND:    How important are ratings to a premium cable network? I’ve always kind of wondered what the…

OFFSAY:    Well, Matt always told me, and I’ve said this before and he doesn’t mind my saying it, that my job was not to make home movies, and so you walk that fine line between how much viewership is enough and how important.

RICHMOND:    Because it’s all about subscribers.

OFFSAY:    Yeah, how important is it to get the people in there, and part of it is that the movies had two values. One is you actually watched it, and the other one was the gee, maybe I’m missing something if I don’t have Showtime factor, and that measured itself in… if you pick up your Sunday newspaper and you pull out the TV section and Brian Dennehy’s picture is on the cover from Death of a Salesman and it says “only on Showtime this week – Dennehy, Death of a Salesman in his Tony-winning performance, if you’re the thinking viewer you may not be there at 8:00 Sunday night, but you say, hmm, you know what? That thing has value, that subscription, and I have to make a decision every month whether I’m going to shell my money out or not, and I’m trying to convince you that you don’t want to give us up because maybe, just maybe, you’ll be missing something if you don’t have Showtime, and so a movie, Death of a Salesman is a perfect example – it was the lowest rated thing I ever put on the air. Brian won the Golden Globe, he was nominated for the Emmy, he was nominated for the Screen Actors Guild Award, and we won the Producers Guild Award for best television long-form production of the year, best long-form on television. Nobody watched. Was that a success or was that a failure? The answer is that we got nine million dollars worth of press and publicity and it only cost me a million and a half million dollars to make it. So the programming was free…

RICHMOND:    Did you have to make that argument with your superiors?

OFFSAY:    You know, I went through it with them. Matt completely got it and was supportive of it, and Viacom was in those days supportive of that notion and recognized the value of that, and in our first meeting with Mel Karmizan, Death of a Salesman was going on that next weekend, I was able to walk in and lay on the conference table in the board thing the New York and LA Times Sunday television supplements, both of which had pictures of Brian Dennehy on the cover, and say this is what we try and do. The New York Times and the LA Times decided that the most important thing on television this week was on Showtime. We’re only in 12% of the homes. There’s a bias against giving you that cover because 88% of the viewers out there can’t watch what you have on the air, and so what you’ve got has to really be special if you’re going to get it. And if you can get New York and LA the same week, you’ve hit the grand slam homerun if you’re doing what I’m doing. And then the viewership becomes less critical because it’s serving other purposes for you. But, obviously, you don’t feel good when you wake up on Monday morning, or Tuesday we get our ratings, and find out that nobody has watched this thing that everyone has written about and said how wonderful it is and make sure not to miss it.

RICHMOND:    Well, that leads me to another point. I think it’s safe to say no one has done more to keep TV safe from censorship and dedicated to free expression than Jerry Offsay.

OFFSAY:    Thank you.

RICHMOND:    You took politically incorrect rejects that no one would touch like Bastard Out Of Carolina off TNT’s hands, and the remake of Lolita, which couldn’t get released, and you aired movies about child sexual abuse, childhood rape, Gulf War Syndrome, the obscenity charges against Robert Maplethorpe – how does a guy manage to fight the artistic integrity and no limits battle while operating inside that construct of the profit driven business?

OFFSAY:    Actually that was easier than you would suspect because there the leadership came right from the top. Sumner Redstone is anti-censorship, he is a champion of freedom of speech and freedom of expression. Mel Karmizan backed Howard Stern in his battles against censorship. When I wanted to do Strange Election, which is another project that two networks had run away from – I’m sorry, Strange Justice, about Clarence Thomas and Anita Hill – I actually, Matt Blank said to me, you know what, maybe this time we ought to ask somebody because we’re going to be pissing off a Supreme Court Justice. So I picked up the phone and I called Phillipe Domain and he said, “God, Jerry, I’m so sorry you made this phone call!” And I said “Why, you don’t want me to do it?” He said, “No, I’m not going to give you an opinion on whether you should do it or not. I believe in freedom of expression. I’m only worried that you might decide not to do it and that somehow in the story about you’re not doing it, it will come out that you called and checked with us and that somebody might think we told you not to do it.” And so they weren’t upset that I was doing it. They were upset that I had asked the question. They trusted us to know our business and know what the ups and downs of it were, and they weren’t going to meddle in, and we went ahead and did it, and not only did we go ahead and do it, but Paramount’s own production company, our sister production company, produced it with us. The whole company was behind making that thing, and when we won the Peabody Award it was one of the great triumphs to have been able to put that on when Warner Bros. and Fox had decided to censor their programmers.

RICHMOND:    I mean it’s such a PC era now, and everyone’s so running scared of offending any single group. Did you ever feel… you probably didn’t even get that much flack for doing this stuff. I’m sure people weren’t…

OFFSAY:    You know, I had the people calling me when we were putting Lolita on the air who were trying to get past my trusted and able assistant Carole, which they found out would be impossible, radio televangelists calling up and saying, “We want to speak to Mr. Offsay and find out why he thinks it’s okay to put child molesters on his air.”

RICHMOND:    People, of course, had never seen the movie.

OFFSAY:    Of course! They’d never seen the movie and during those days we got at least four or five calls of people who wanted me on live radio, wanted to grill me on the air. We had tons of people who wanted to press their agenda against us. We got some letters that objected.

RICHMOND:    As if you’re advocating child molestation.

OFFSAY:    Yeah. As if they had read Lolita like the book advocated it, but I sat there with two things at my elbow during the Lolita thing. One was a speech that Sumner Redstone had given to what was then called the National Conference of Christians and Jews talking about the responsibility of the media to not be comfortable, to push the envelope, to do the shows and the programs that people might feel uncomfortable about but that would expand the horizons, and not to play it safe. I had that next to me so that any reporter who I talked to wanted to know what Viacom’s opinion would be I would say, “Well, I never called and asked them about this, but here’s what Sumner told the NCCJ.” And I also sat there with the two lists – one of them was the Modern Library List of the 100 Greatest Novels of the 20th Century, which had just come out, this was 1999.

RICHMOND:    Lolita had to be one of them.

OFFSAY:    Lolita was number four, and the other one was a list where Lolita was number one. And they said to me, “Why would you put this on?” I said, “Well, somewhere between the most important and the fourth most important book of the last 100 years, according not to me but the editors of the Modern Library or whatever, so I thought that if the book’s that important than maybe a film about it could also be that important.” Of course it was the highest rated thing we put on the air by 50% that year, as was Bastard Out Of Carolina when I put that on in the year that we did that movie. They were quality works by quality people that were seriously minded, that were promoting no agenda except dramatizing a quality piece of fiction, and allowing people to see it. The great thing about a free country and freedom of speech is if you want to watch it you can, if you don’t want to watch it turn the channel. If you don’t want to subscribe, turn off your subscription. You don’t have to go to that extreme, you could just… it’s on at 8:00 on Sunday.

RICHMOND:    You can choose not to watch it.

OFFSAY:    In the case of those movies, they weren’t on at 8:00, they were on at a later hour because we thought the subject matter required them to be on at a later hour, have them less accessible to kids, but whenever it is that we put them on you could tune in or you could tune out, and that’s you’re freedom. But I don’t know of any place in the Constitution where anyone has their freedom to impose their view of what someone should watch on somebody else.

RICHMOND:    Try though they might.

OFFSAY:    And so I was on the side of the angels, and it was good for business and in Hollywood it was a popular position to be on. I was that lawyer from the age of ten years old. I agreed with the late Justice Douglas when he said that the First Amendment says Congress shall make no law abridging the freedom of speech, and no law means no law. You can debate whether yelling fire in a movie theater is something people shouldn’t do, but censoring paintings, which was the issue in the Maplethorpe movie that we did, we won the Golden Globe for best picture for that movie. It was one of the single two greatest moments of my career was winning that, and not just because we won the Golden Globe, but because we won it for that movie, which was so embedded in me, in who I was from the time I was ten years old, as that liberal lawyer who wanted to be in the movie business. It was the perfect synthesis of what it is that turned me on.

RICHMOND:    Did you see any drop in subscribers when you ran these movies? Probably not at all.

OFFSAY:    No, we saw up ticks in ratings, we saw up ticks in press, we saw up ticks in…

RICHMOND:    There’s the hypocrisy of the marketplace is that the defenders of the public’s morality thing that people are going to turn it off, and it only makes them want to watch more of course.

OFFSAY:    Yeah. We went through these battles, and the battles come in different shapes and sizes. We took on the Pentagon on Thanks of a Grateful Nation.

RICHMOND:    So, the million dollar question, do you feel it’s the responsibility of cable TV in general, and premium cable in particular, to travel into controversial and socially relevant realms where the over-the-air guys won’t tread?

OFFSAY:    I don’t think it’s their responsibility. I think their responsibility is to put on programming that will distinguish themselves in the marketplace and draw subscribers in. I think one of the places they can go is to go to the places where the broadcast networks won’t go, and that certainly was one of the major premises that we operated on and led to a lot of our greatest successes. So Soul Food could have been done on any network because it’s just a family drama. It may be a little sexier than it would have been if it was on ABC, but it’s basically about three sisters – in fact, it’s a black version of Sisters – and it just wasn’t done on any network because they’ve never done a successful black drama and they’ve stopped trying.

RICHMOND:    So they think it’s the skin color that’s the reason.

OFFSAY:    Yeah, and you know, Resurrection Boulevard could have been done on any network, but no one ever even tried to do it once, to do a Hispanic family drama. Those shows won us numerous prizes, got us big audiences. Soul Food’s the highest rated, or tied with Queer as Folk as the highest rated thing on the air. Now Queer as Folk couldn’t have been done by anybody other than Showtime or HBO and it made sense for us to go into the arena and occupy a space that nobody else could because it was edgy premium subject matter, and it wasn’t going to be done by anybody else. But there was no responsibility. We didn’t have to serve the gay community or the black or Hispanic community. We just decided that it would be good for business, and in fact, it turned out to be very good for business.

RICHMOND:    Resurrection Boulevard was the first Latino-themed show to feature Latinos primarily on both sides of the camera.

OFFSAY:    Right.

RICHMOND:    Soul Food, the first successful black drama ever, the biggest in TV history.

OFFSAY:    Right.

RICHMOND:    And Queer As Folk, the first successful entirely gay-themed show, I don’t know, with apologies to Will and Grace.

OFFSAY:    We were there first.

RICHMOND:    You were there first, but obviously you have a huge commitment to diversity. It’s hard to believe in this day and age that it would be such an issue, but it is. So why do you think you’ve felt such commitment to make diverse kind of programming that would feature minorities that way? Do you feel like your Jewish background comes into play at all in that?

OFFSAY:    You know, I think that there are a lot of answers to that. The simplest and most blunt one is that we thought it was good for our business, that there were audiences out there that weren’t being served by anybody else, and people can call it a niche strategy, and it’s interesting to see as Showtime launches yet my latest gay series, The L Word, it’s a niche show but they’re trying to push it out into the mainstream, which they should. The black audience is 12% of America, the Hispanic audience is 12% of America, and the gay audience is 6-10% of America, and obviously there are some overlaps with gays and blacks and gays and Hispanics, but that’s pretty close to 30% of the people in the country amongst those three groups. One of the notions was maybe we didn’t have the marketing muscle and heft to be the most important show in America, but maybe we could be the most important show to 30% of America by having this show that would be most important to black people, most important to Hispanic people, most important to gay people, and if you cume all that up you’ve got a huge segment of America that says, gee, the show that means the most to me is on this network. So part of the answer is it’s good for business. Part of it is that you want to do what the other people aren’t doing. If I do the 47th cop show or the 12th lawyer show or the 5th hospital show, why pay $10 a month to get Showtime? What’s different about mine? I can have more language, I can have more sex, and I can have more violence, which is something that we never look for in any of our shows, but otherwise what else can you have? And the answer is that you can have content that the other people didn’t have. So if nobody was doing a black drama that was a good place for us to go. If nobody was doing a Hispanic drama then we would have something that was unique. If nobody was doing a gay show then we would have something that was unique. Yeah, I think that there is that – going back to your question – there is that part of you that comes out of my background that says that your aim, that you’re put on the earth, that the world is broken but it can be fixed and the only way that it can be fixed is each person does whatever they can do and that you’re God’s partner in trying to fix the world, and so you can do something that can lift people up or you can do something that can tear them down. If you do these shows and you get the thousands, the thousands of letters that we got back from gay men, from black families, men, women, kids, that they’d never seen themselves on TV before until they watched this show, from Hispanic families. If you go to the cable operator and listen to the Hispanic and African-American people that work there that say, “Thank you because I’ve never seen anybody like me on TV. I’ve only seen myself depicted as a gang member.” You’re not doing it for that because this wasn’t a social action network…

RICHMOND:    You’re not doing it for the kudos.

OFFSAY:    You’re not doing it for the kudos, but the reward that comes back to you, the kudos that do come back to you were sort of astonishing when they did, but it became part of the thing that we’re doing programming that was good programming and it was good for your soul. In 2001, the week before 9/11, Matt Blank and I got the Governor’s Award from the Television Academy, their highest honor.

RICHMOND:    And it’s sitting right there.

OFFSAY:    It’s sitting right there. For doing more to advance diversity on television in one year than the rest of the networks combined. They said that, we didn’t say that. But we had launched those three shows within a 12 month period of time and they were all successful and it felt pretty darn good because it had helped our business and we could feel really good about what we had put on the air and the contribution that it had made. So it was a win-win on every level.

RICHMOND:    And I guess you never really felt a need necessarily to do a Jewish-themed show since every comedy in TV history probably has a Jewish staff of writers.

OFFSAY:    Well, I won an award from the newly formed Jewish Image Awards, actually a lifetime achievement award.

RICHMOND:    There is a Jewish Image Awards?

OFFSAY:    There is a Jewish Image Awards. It’s had its third go-round and I was their second lifetime achievement award winner, which I think went to the fact that I actually made eight Holocaust movies, which must be some sort of record.

RICHMOND:    You made eight in nine years?

OFFSAY:    Yeah. I made three with Streisand, three Rescuers movies, which were actually two stories per film, based on a book that my rabbi inspired to be written which was called Rescuers: Portraits of Moral Courage about Christians who had saved Jews during the Holocaust, and Barbra Streisand exec-produced them, and Peter Bogdanovich directed two of the stories and Tim Hunter directed one and Tony Bill directed one, with good stars. So we made those three films, then we made The Devil’s Arithmetic, Dustin Hoffman exec-produced for us, that also won us the Emmy for best family film, and we broadcast the Island on Bird Street, which won the Emmy for best family film, which is another Holocaust film, and we made Varian’s War about Varian Fry who went off and saved the intelligentsia of Europe from the Nazis with Bill Hurt and Julia Ormond that Lionel Chetwynd wrote and directed for us. And then we did Gisella Perl with Christine Lahti this last year. It was my last Holocaust film, and she did a brilliant job about a doctor who survived Auschwitz and worked for Mengele there, and how she made it through that harrowing, harrowing ordeal.

RICHMOND:    You understand, of course, you have a completely photographic memory.

OFFSAY:    Yeah, it’s a blessing sometimes, sometimes it’s a curse, and I was just going to say and I know there’s one more, but I just remembered that we also did In the Presence of Mine Enemies, a remake of Rod Serling’s Holocaust piece. The great thing about this job, the great thing about the toy that Matt Blank gave me and let me play with for those 9 ½ to 10 years was that we got to do everything. When you get to do 300 movies there is no rock that you can’t turn over. There is no subject matter that you can’t explore, and largely nobody else was doing it. So I was the proverbial kid in the candy store, which is “Oooh, Rod Serling did this Holocaust piece? That looks great, oh, we could do that again. Or Inherit the Wind, let’s go do that again, or 12 Angry Men,” so it wasn’t all…

RICHMOND:    Death of a Salesman.

OFFSAY:    Yeah, Death of a Salesman. But you can also do 47 African-American themed movies.

RICHMOND:    Is that how many you did?

OFFSAY:    Yeah, and it was gratifying this week, six months out of the job, to see the Image Award nominations come out and find that Showtime has more than any other network and three to five movies nominated are Showtime’s and four of the five actors nominated are Showtime’s, and in that case particularly gratifying because those four actors are really friends of Showtime – Forest Whittaker and Danny Glover and Lou Gossett and Ossie Davis.

RICHMOND:    Who have been in probably collectively 15 or 20 movies for you guys.

OFFSAY:    Well, Lou’s been in nine, Danny’s been in three and directed one, and Lou directed one, and Forest has executive produced one and been in two or Three. Forest executive produced Feast of All Saints. And Ossie’s been in seven or eight himself. So, yeah, probably 25 of them, and we gave Lou and Danny their directing debuts. Those people are my friends. I had breakfast with Forest Whittaker yesterday morning which was great because I got to tell him that he had this nomination for his Deacons of Defense film.

RICHMOND:    You were always able to get a huge number of A list people.

OFFSAY:    Because nobody else was doing the subject matter. We put the time and the effort in. I visited the set of 275 of those 300 movies, and had dinner with the director and the actors. If they were going to leave their home for five or six weeks, I could leave my home for six hours to let them know that I cared about it. We didn’t have as much money as the other guys, particularly as HBO, so we had to do something that gave us some, not competitive edge, but at least enable us to compete, and some of it, I think, was the personal touch, some of it was the fact that they got to do stuff that nobody else was going to let them do.

RICHMOND:    You didn’t have the money HBO had but yet you did 10 times the number of movies they did in that same period.

OFFSAY:    Yeah, it was a different philosophy.

RICHMOND:    Indulge me for one moment though, since I do not have a photographic memory, I was doing some research on some of the great projects you’ve been involved with and it was pretty astonishing, kind of a ground-breaking and impressive list: Hiroshima, Strange Justice, Twilight of the Golds, Thanks of a Grateful Nation, The Baby Dance, Dirty Pictures, Jasper, Texas, Out of the Ashes, The Day Reagan Was Shot, The Passion of Ayn Rand, Soldier’s Girl, Things Behind the Sun, 12 Angry Men, Death of a Salesman, More Tales of the City, Further Tales of the City. The list just goes on and on. You’ve got Emmys, Peabodys, Golden Globes, Screen Actors Guild Awards, GLAAD Media Awards, NAACP Image Awards, Humanity Task prizes. You always…

OFFSAY:    You’re going to make me miss this job if you keep that up.

RICHMOND:    Yet you always seem to be operating in HBO’s shadow with your originals. How frustrating was that and how unfair do you feel it was? This is filed under leading question.

OFFSAY:    Yeah, you know, was it frustrating? It was definitely frustrating some days to know that the work that we were doing was every bit as good as the work that they were doing.

RICHMOND:    And often better.

OFFSAY:    And get a lot of credit for it, but somehow never be able to take that next step up to being considered to be an equal. There must have been 15 different articles over a six or seven year period that said finally Showtime has stepped up to be on the same footing as HBO. Some of those same people had written almost the same article two or three years before when we had had three or four movies that they liked and then even they forgot and we had to go and remind them all over again. The flip side of it is that you can dwell on the negative or you can dwell on the positive. In my last month on the job, May and June, I put on The Roman Spring of Mrs. Stone, which is nominated for the Golden Globe for best picture. I put on Soldier’s Girl, which is nominated for the Golden Globe for best picture. I put on Jasper, Texas, which is nominated for the Image Award for best picture and which I hope will next year get some recognition in the Emmys and in the other places. And I put on Out of Order, the series. That was a month’s worth of programming, including those three films. Who else had the chance to do that?

RICHMOND:    HBO comes out with Carnivale and everybody loses their lunch, like oh my God, oh my God, it’s Carnivale, they’ve graced us with another hour, which was a piece of crap to my mind anyway.

OFFSAY:    They do very good work. They do very good work. They advertise brilliantly. They have more money than God himself and they spend it generously to promote their programming.

RICHMOND:    Marketing and perception.

OFFSAY:    They’ve done very good work for a very long time, and my premise never was… I don’t have to be better than them, I don’t have to supplant them in your home. I think everybody in America is missing something if they don’t have HBO. My job was to make them feel like they were missing something if they didn’t have Showtime also. It didn’t have to be either them or us. It was us and them, and in fact since generally we’re sold together Showtime’s premise always was that a stronger HBO helped our sales because you’re more inclined to buy premium television if they’re strong, but conversely, a stronger Showtime would help HBO as well because the pricing on one premium channel, 12 bucks for one but 16 bucks for two, it sounds a lot better to get two but nobody wants the second one unless it’s a fairly compelling buy, and our aim was to do something that was going to make us a compelling buy. That list of movies that you went through was just the weekly manifestation of that overarching picture, which is to make people feel like maybe, just maybe they were missing something if they didn’t have Showtime and to do something that would get press and get publicity, which was subject t matter that would make noise, that would draw in the stars. When Jon Voight and Lou Gossett said yes to doing Jasper, Texas within 12 hours after getting the script, why? Partly because I had a relationship with them, mainly because it was such a compelling piece of drama, it was such an important story that it was hard to say no, and both of their reactions were we can’t believe somebody’s making a movie about what went on in that town but thank God that you guys are doing it. So you let the subject matter sort of call to the talent for you, and then how much money we had or how much money we had to promote it, we had almost no money left to promote Jasper, Texas with this year, but it made some noise, it make its mark, it got a lot of press and publicity, it brought credit to the network, and we were pleased to have done it. But did if it had been on HBO…

RICHMOND:    They would have promoted it as the second coming.

OFFSAY:    Well, would it be one of the pictures that’s nominated for a Golden Globe now? Yes. Is it better than some of the stuff that they have that is nominated for a Golden Globe? Yes. I’ve been doing this for a long time. You said it. I’ve made 79 movies that have been nominated for Emmys. I know when I’ve made something that’s good, when I’ve made something that’s really good, and when I’ve made something that’s great, and some of the stuff that we made that was great just didn’t get as much credit as it would have gotten if it was done someplace else, or done there.

RICHMOND:    Marketing? Since your quality is every bit as good as theirs, if not better in many cases, is it all marketing and image?

OFFSAY:    It’s not all marketing. It’s halo effect. They have a very big halo effect, which they’ve worked hard to earn and deserve, and which I was working hard to earn and thing we deserved as well, and I think if you look at the pictures nominated for the Golden Globes this year they’re only from Showtime and HBO. The networks still make a lot of movies, all these networks do. They don’t have any nominees. But if you look at how much money we spent on marketing one of our movies and the fact that they spend five, ten, 15, 20 fold what we did on some of those movies… Jasper, Texas went on the air with a $125,000 advertising budget. We took an ad in TV Guide and an ad in the LA Times Television Book and the New York Times Television Book. We let the publicity lead the way for us. What we could get for free, and Jon Voight and Lou Gossett, they did interviews, and people wrote about it and it was an important subject matter and it got covered, but we couldn’t compete in the advertising budget and we didn’t have quite their halo effect, but the movies were recognized for the quality of what they were done. I think the cable operators clearly recognized them which got us a lot of credit. I think the press clearly recognized them, and that translated into us getting column inches for them, and hopefully that was able to translate over to our subscribers so that they realized the value of what it is that they had.

RICHMOND:    And so if Resurrection Boulevard and Soul Food are on HBO, completely different audience awareness, image, everything, these things, would it have the same image as say The Sopranos does?

OFFSAY:    Yeah, they certainly would be much more in the public consciousness than they are on Showtime where I think Queer As Folk is probably the only series that we put on, and maybe Stargate – we did Outer Limits and Stargate so it wasn’t all high-minded dramas…

RICHMOND:    And Chris Isaak.

OFFSAY:    Yeah, and we created two big franchises in Outer Limits and Stargate which have gone on after they outlived their usefulness on Showtime after five an six years they’ve gone on to be very successful on the Sci-Fi channel, but it’s hard to become part of the popular culture, which HBO shows have been able to do and very few others do, and which maybe Queer As Folk has to a lesser extent, but nothing else has popped the way you would have liked it to. If Chris Isaak was on HBO would he have been nominate for the Emmy, or would the show have been nominated for the Emmy? No question about it. Howard Rosenburg wrote that in the LA Times several times and a bunch of other people have written it in other newspapers around the country and it just never, even with all that critical acclaim went it went on, it didn’t catch fire the way we would have liked it to and it became a critical success and not a mainstream, commercial success. 90% of television shows don’t become successes so our batting average was way, way above the norm, but you still regret the shows like Beggars and Choosers and Chris Isaak, which I think may be the two best series that I put on the air, and certainly had the critical reviews and people who wanted them to get Emmy nominations and thought they should.

RICHMOND:    Beggars and Choosers was wonderful, and that was with Brandon Tartikoff, right?

OFFSAY:    Yeah, yeah, it was Brandon’s last creation about people who do what he and I did for a living, and now that I am no longer the chooser I guess I must be the beggar. I didn’t want to be the chooser anymore, but I’m not really sure I want to be the beggar either.

RICHMOND:    No. But you’ve earned the right not to beg. Just to get back to the volume issue for a second, was it economics in the business and at Viacom in general with the change that forced the huge curtailment in the number of movies you did? And that was about ’98, ’99?

OFFSAY:    Yes, it was in ’99 and 2000 we phased out the movies on The Movie Channel, so that went away first. By 2001 we had come down to 30 movies on Showtime and in 2002 we came down to 24 movies on Showtime. In 2003 we were going to come down to 18 or 19, but in fact it came down faster than that probably to 13 or 14 movies. And it was partly to be able to shift more of the resources to series, which HBO had had huge success in series and we’d had huge success in series, but the feeling was we didn’t have enough resources to service them both at the level that we were at and we needed to put more of our chips on the series side and less on the movies. It was partly the fact that the unit cost of everything that we were making was going up dramatically because the foreign revenue was going down dramatically, both in movies and in series. So if you made a movie for five million dollars and you got 2 ½ million out of international and now you can only get a million 750, guess what? You’ve got to make fewer movies because every movie’s costing you ¾ of a million dollars more even though you didn’t do anything wrong that day, the marketplace just changed.

RICHMOND:    Right.

OFFSAY:    And in fact, as we sit here today, you’re lucky if you can get a million and a quarter for a movie, which will necessitate ramping down the number of movies you do even more because every movie now costs you a half a million. Even if you’re only doing a dozen, that’s six million dollars. Where are you getting that six million from? Hmm, let’s see, the movies are costing about three million a piece, probably just have to do two fewer movies now because they each cost you half a million dollars more. So that will squeeze things more. On the series side it was even more dramatic. Where studios used to put up 600 thousand an episode, 650 and episode, to do shows…

RICHMOND:    For an hour?

OFFSAY:    For an hour. On The L Word, the show that’s going on right now, MGM’s putting up 250 an hour. Now Showtime owns the domestic rights which are valued at about 100 thousand, but even let’s just say from 650 to 350 is a 300 thousand dollar per episode change.

RICHMOND:    That’s about 20 or 25 per cent of the budget you’d find on a network show, a broadcast network show.

OFFSAY:    You mean their contribution?

RICHMOND:    Yeah, yeah.

OFFSAY:    Well, the show, let’s say The L Word costs a million four an episode. In the old days, Showtime would have put up 650, the studio would have put up 650 and they would have gotten a hundred thousand in tax credit. Today Showtime puts up a million one-fifty and the studio puts up two-fifty. That’s a 400 thousand dollars swing in Showtime’s bottom line per episode. There are 15 episodes. That’s six million dollars. Showtime has eight shows on the air. If each one of them costs them 6 million dollars more times eight, that’s 48 million dollars more to make the same number of episodes of series television. Where are you going to get that 48 million dollars from? A large chunk of it came from the movie budget, and when you combine that with the demands to grow at a certain pace, grow your revenues at a certain pace, your programming budget which fortunately has been able to withstand contraction doesn’t necessarily get to grow at the rate that you’d want it to. So if you have a flat budget, let’s say, and your series costs you 50 million dollars more for the same number of episodes, you’ve got to get that 50 million from somewhere. So partly you do fewer episodes of each series, partly you do fewer movies, and then you try and make the numbers all add up together.

RICHMOND:    Did you see any appreciable change in the subscriber base with the change in philosophy?

OFFSAY:    Well, you know, I don’t think that the change in philosophy would be readily apparent to the consumers until very recently because we had enough stuff in the pipeline to perceptually make it look like there were still at least two new things happening a month, and then there were series launches, so some months you would have a documentary and a movie and a series launching, so it still looked like almost every week there was something new coming, but that will be harder and harder to do as the volume of movies goes down. But they’ve got some new initiatives there and they’re going to be doing more documentaries.

RICHMOND:    I’m just going to go back into your past a little bit again, in fact in to your deep, dark childhood. Do you recall being fascinated with television as a kid? What’s your earliest recollection of TV?

OFFSAY:    Actually as a kid I was fascinated with movies, and my parents were huge movie goers and they would take us to anything and everything, whether it was age appropriate or not. I remember seeing The Carpetbaggers at eight and being sent out for popcorn during what I now understand would have been the steamy segments of it, but they weren’t going to stay home just because they had two little kids. So my sister and I got dragged out. I had an older brother and sister and they were out of the house by then, but my younger sister and I saw everything and I literally saw one or two movies a week in a theater probably from the time I was six until I went away to college.

RICHMOND:    Whether appropriate or not for you.

OFFSAY:    Right.

RICHMOND:    I recall my parents taking me to see Lord of the Flies when I was about seven and that staying with my for way too long.

OFFSAY:    A long time! Oh, yeah. That was a creepy picture. But I saw Midnight Cowboy with my parents.

RICHMOND:    Wow. You would have been a teenager then?

OFFSAY:    I was 16. That was uncomfortable. I didn’t know what a gay person was when I saw Midnight Cowboy for one thing.

RICHMOND:    It was rated X, as I recall.

OFFSAY:    Yeah. I didn’t have a clue, and then I’m sitting there next to my 14 year old sister and myself and my parents. It was interesting. But it instilled a love in me for that experience of sitting in the dark for two hours and being totally transported out of your life by the power of film, that there was nothing else that you can do in a public forum that can provide that kind of magic. I’m a huge sports fan and I go to ballgames and whatever. There’s nothing like…

RICHMOND:    The communal experience of being in the room with a group of people.

OFFSAY:    Yeah, and feeling an audience react to something. The only thing that was better than being part of that is having given the go to something and sitting in that room and feeling the audience with it that way, which I felt the other night at The L Word premiere, most recently. But to be at Sundance with Frank Pierson when Soldier’s Girl played for the first time and watch 1,500 people stand up the second the movie ended up and start applauding, or at Salma Hayek’s movie, Maldonado, where she got the same reaction. We premiered those on the same day last year. That’s one of those three or four days that’s the best days of your career because you know you have moved an audience and you have moved them, in the case of those two movies, in such divergent ways, with the ugliness and the tragedy of the one, and the hopefulness and the believe in God and spirituality of the other, and we made both of those pictures. I’ll say it again, Matt Blank gave me this toy and let me go out and play with it, and he basically left me alone to do it with and some weeks we picked the wrong picture. Nobody bats 1,000. But a lot of weeks we picked the right picture. Every week you got a report card. Every week there were reviews in every city in America. Either we did get the Guide covers or we didn’t get the Guide covers, and then there were the ratings that came in. So you not only had report cards, you had them in different ways. Did it work with the public, did it work with the press, did it work with the cable operators? And all of those different constituencies had to be serviced and try to find the value in what it is that you’re doing. And then there are weeks where I’m sure there were people on the steps saying why did we make that movie? Some of the weeks, they were right.

RICHMOND:    I don’t think I know anyone in the history of the entertainment industry that took their projects and the films done on their watch more to heart than you did. You can recite quotes and reaction and buzz and vibe about virtually everything you’ve done. Besides having a photographic memory, I think you wear your heart on your sleeve with regard to your output, and I always thought that was one of your great strengths.

OFFSAY:    Well, thank you. That’s sweet of you to say. These aren’t my children, but once we made a film… nobody was forcing us to make any of these things so we made them because we thought they had something to say and they were going to contribute something to the subscribers’ experience and help the network. Once we put the time and the effort into it, we took it really seriously and no one sets out to make a bad film but we set out to make quality films.

RICHMOND:    And important stuff, too.

OFFSAY:    They were my kids, they were my cubs, and I was the mother lion and I was going to protect them. People are going to disagree with you and they’re not always going to see the merit in what it is you’re trying to do, but you at least want them to give you the credit for trying and understand what the motivation is that’s behind it. And yeah, I took it very personally, every one of them I took personally. I would frequently sit there and read a review where somebody would say, they said it was true but it couldn’t possibly have happened that way and they just changed it for dramatic purposes, and I wish they would have picked up the phone and called me because I never changed anything, never changed anything in 300 pictures in true stories for dramatic purposes. Not one single time. In fact, my people were expressly, absolutely, totally forbidden from doing that and when we found sometimes in a film that there was a mistake and something didn’t happen the way that we were told, we had to wrestle with how do you fix that and how do you pull it out of the movie, or how do you do the least violence to the story and still not misrepresent. What would happen? We did The Day Reagan Was Shot with Oliver Stone, who is known for being somebody who had a point of view and wants everything he does to fit that point of view. He was brilliant to work with, he was collaborative, and he didn’t try and change one of the facts as we knew them, but interestingly because his name was on the film everybody assumed that we had changed the facts of what had happened to try and embarrass the Republicans or be embarrassing to Reagan, or something, and saw stuff that just wasn’t in the movie because his name was there. In the same way that happened when we did the movie about inside the White House on 9/11, and they saw Lionel Chetwynd there, who is a Republican, who is an avowed George Bush supporter, and who was forbidden from putting anything in there that he couldn’t support two or three times, and we had the movie vetted by left, right, and center. But when we went out and said that to the press that we double and triple checked everything that Lionel had to say, including with people of different political persuasions, a lot of the articles came out and said that we got three Republican ideologues to vouch for what Lionel was saying. Well, maybe they should have checked who those people were, or maybe they didn’t want to acknowledge the fact that other people, more liberal minded people like me, and the people that we hired, and my entire staff of to the left of the little red schoolhouse, practically, of programming execs I had all were able to find common ground with the fact that we may not support Bush or his policies, but that for ten days in 2001 he rallied a nation behind him at a critical point and gave one of the great speeches that any of us has ever seen or ever will see. That’s what we chronicled in that 10 day period, and what happened afterwards in Iraq or Afghanistan was totally, completely irrelevant to it except for the fact that you could see the seeds of everything that was going to happen right there in that movie because we laid it all out for you. We showed you the debates that were going on, and the policies that came out of it were self-evident. If you watch the movie, instead of appreciating it for the inside view everyone came after it with an axe to say, oh, this is this Republican ideologue’s point of view and as if it had never been put through a filter. I hired the most liberal director that I could get, which was ignored by them, and they made a lot of that in the Reagan’s mini-series where it was a liberal director and a liberal writer, and they got credit for having nobody to balance it out. Well, we had a bunch of liberal producers and a liberal director, and all anyone would write about was the fact that the writer was a conservative writer who was a friend of the President’s, which is true, he was a friend of the President’s. He still did a brilliant job and gave us a really insightful piece of drama that people refused to watch for the merits of the drama and had made up their minds before they went in. That’s the kind of thing that can make you crazy. It happened in death penalty movies where people would come out and say… There’s one movie that we did called Beyond the Call, Sissy Spacek and David Straitharn, one of the first very good movies that we did that Tony Bill directed, and I remember getting up and reading in our own paper here in Los Angeles from somebody who I’ve gotten a lot of other good notices from that we must have changed… the only thing that was changed there was that we had to change the state that the case took place in, and the names of the people because the woman who’s story it was had given us her permission, but her husband, who she ended up divorcing out of what happened in the movie had not given us permission and could have sued us. So we changed the names and the state and we told the story 100% factually accurate about a guy who ultimately was executed, a damaged Vietnam vet who had post-traumatic stress syndrome and was executed as a murderer because when he tried to kill himself in police custody with handcuffs on they missed the gun in searching him, and he wrestled it out of his pants and he pulled it up and he wanted to blow his own brains out because he was so traumatize by all that was going on, and when the cops saw him in the backseat of the car, he went to wrestle the gun away from him and the gun discharged and hit the roof of the car, it ricocheted down, it struck the policeman, and he died. That’s a tragedy, it’s an accident, it’s not a murder. That guy was executed. And to find five newspaper reporters in responsible papers that would come out and say that obviously no one in those circumstances could have been put to death and that therefore we just wanted to put our liberal agenda against the death penalty out there, and we had manipulated the facts to make the case so compelling that any idiot would see that you can’t do this, it’s just not factually accurate. What happened in that movie is what really happened, and did I take it personally when I read those five reviews? I couldn’t think about anything else for several days and I wrote those people letters. They get to do what they do, and they get paid to do what they do, and I do what I do, but before you go trashing what I do, why don’t you ask the question? Because maybe if you actually were informed you would have written something different.

RICHMOND:    I imagine you have a database up here with good reviews on this side of the brain and bad reviews over here.

OFFSAY:    Fortunately the good ones outweigh them. I’ve got them in my head. Otherwise I would have been lopsided.

RICHMOND:    But you realize how atypical you are in taking this stuff sometimes as personally as you do?

OFFSAY:    You know, I don’t get why everybody doesn’t? What are they doing? I was never going through the motions. That’s part of why I said that it was going to be ten and out. It was part of why I knew that you couldn’t keep up this pace forever because it was 85-90 hours a week to read all this stuff, to do all this stuff, but how could you spend months and months of your life working on something and sweating, did we get the financing, did we get the right actor, did we get the right director, and going over the script 27 times, and going through three, four, five cuts of the movie, and going to research screenings with the director, and fine tuning the ending, and sitting in a room with six people with six different points of view on how you end the movie, and you finally get to a place where it’s done and you put it out there, and then somebody just dismisses it and it’s like, all right, on to the next one. That’s not me. I had my blood, sweat, and tears invested in the movie, and I wanted it to get a fair shake. That doesn’t mean that frequently I’d look at something and read the review and they’d say that this didn’t work that well and the music wasn’t that good and the performance was lousy and whatever, and I’d say, you know what? They’re right. And you fold up your tent and you walk away. And occasionally you get something where they’re completely polarized where people will say it’s the greatest thing since sliced bread, there are people who absolutely hate it, like Out of Order, and then you’re completely flummoxed because so many people are seeing what you’re seeing, and then there are other people who are missing it, and frequently those are people who you have great respect for who usually agree with you. When you think something’s good they think it’s good too, and then they didn’t get it this time. How come they didn’t get it? What are they missing here? What am I missing here? But it made the job never dull.         

RICHMOND:    Were you ever accused of micro-managing, having your hand in every part of the production process?

OFFSAY:    You know what? I didn’t have my hand in every part of the production process, in fact I…

RICHMOND:    You let your people work.

OFFSAY:    Yeah, I mean, you’d have to go ask my staff that question. I had a couple of rules, like after a couple of years of looking at rough cuts where I would say, “Where’s the scene,” this is the photographic memory thing, but “Where’s the scene with the guy down by the river where they have a conversation about he lost the dog and whatever,” and they’d say, “Oh, we needed to cut three pages to make the day or something and so we never shot that scene.” And sitting there and saying, “Well, the movie doesn’t make logical sense without that scene, and that was really critical and why didn’t somebody ask me?” So about five years ago I said, “You can add whatever you want and shoot whatever you want in addition to what’s in the script, but once I’ve signed off on the script you can’t take out more than a paragraph without my say so, and if it requires spending more money because we’re going to go a day over, that’s my job to vote on that. Don’t protect me and say I’m going to save 50 grand, we’re going to finish on schedule with a damaged picture, rather than be $50,000 over with a film that will be much better because it has no logical holes in it.” And so I managed that part of the process, but I only watch the first two or three days of dailies and then I stop because with the volume of pictures we were doing…

RICHMOND:    That would be you’d work 24 hours a day.

OFFSAY:    It wouldn’t be a good use of my time. And secondly, somebody had to have the big picture view when the movie was done, and the directors watched every foot of the dailies, the producers watched every foot of the dailies, my execs, both the production and creative execs have watched every foot of the dailies, and they’re sick of these scenes by the time it starts getting cut together. I’m the person who knows the script, who’s passionate about getting it made, and who hasn’t seen it and I’m the fresh eyes coming in. And that was very valuable a lot of the time to have somebody who was as invested as all these other people but wasn’t as burned out about the movie as they were, and frequently would re-energize people because they would be unhappy, and it wasn’t that good, and they were seeing all the flaws. In Jasper, Texas, I remember getting from Pearlena, one of my best executives, “Oh, the movie is, I don’t know, I don’t know how we’re going to get it there,” and whatever. The movie was spectacular. The movie was too long. The movie needed stuff to come out of it. Actually when I saw it, it wasn’t too long. When she saw it, it was too long. When I saw it, it was too short. They had taken it from two hours and six minutes down to an hour and 35 minutes. I said, hmmm, where’s the scene with this, where’s the scene with Jon Voight battling the Klan, where’s the scene with that? 15 minutes went back into the movie. Then we had people, both Voight and Gossett, who said, “And I still think we’re missing this one and I think we’re missing that one,” and the movie was actually locked already. Each one of the actors was passionate about a couple of scenes and it was going to cost $15,000 or something to unlock the movie, and I listened to Jon and I listened to Lou and I put back two scenes in the movie because they were right and my execs were wrong. One of the things that I was always doing at the end of the movie is after I’d watched the rough cut, I’d say now I want all the stuff that the director didn’t cut into the movie, frequently the stuff he wanted to take out of the script that we didn’t want him to take out of the script, and now he gets to do the rough cut, and guess what? All of the sudden it’s gone! Remember the scene that so-and-so didn’t like? Where is that scene? I knew that scene wasn’t going to be in the rough cut and now I have to see it. Frequently I made them put that scene back in. But I think that by and large our filmmakers felt that they were pretty supported. The fact is they came back and they worked for us again and again. Frank Pierson doesn’t have to do three movies at Showtime. He can do whatever he wants, but he did, including doing his first pilot as I was walking out the door. He agreed to do that. And Earnest Dickerson doesn’t have to do four movies with me, but he did. And Roger Spotswood doesn’t have to do three movies with me but he did. So the experience must have been good for them and it must have been good for the actors because they kept coming back also. The combination of a good experience and good material brought people back.

RICHMOND:    Was there every a situation where you really had to go to the mat to push forward maybe something that was especially controversial because you were getting resistance from your superiors?

OFFSAY:    You know, I think that… I would say that everything that was controversial required a well marshaled defense or argument. You don’t go put the channel and company at risk with Strange Justice or Bastard Out of Carolina or…. When we picked up Tales of the City it had already been a multi-Emmy nominated mini-series for PBS and practically an Act of Congress of issued to get it off PBS’s airwaves. They were going to cut off the funding for Public Broadcasting if they keep putting this homo-friendly programming on the air. So we were able to go and do that. You can’t just blithely go in there with powerful Congressmen saying this shouldn’t be on the airwaves, and they weren’t just saying it shouldn’t be on the public’s airwaves, they were saying it shouldn’t be on the airwaves…

RICHMOND:    Anywhere.

OFFSAY:    … without going in and talking to your boss and saying here’s why I think this is going to make sense for us, and to Matt’s credit he was receptive, he listened, and there was a year where he won the award for People for the American Way and I won the award for the American Civil Liberty’s Union, and he deserved his award more even than I deserved mine because his job wasn’t necessarily to stick our neck out, it was to navigate the waters but he let me stick the company’s neck out and it worked every time. But were there moments there where I thought that Queer As Folk would never make it on the air? There were moments I thought I’d never actually get it to the airwaves. I think that… harder with the stuff that we created internally that didn’t have that patina of class and pedigree. Once you say we’re going to do Lolita…

RICHMOND:    It’s a classic.

OFFSAY:    Or The Believer after it’s won the prize at Sundance, Bastard Out Of Carolina because it’s based on such a big selling book there are protections that you feel that you have that if you’re creating something out of whole cloth like Queer As Folk…

RICHMOND:    Although Queer As Folk had the European pedigree.

OFFSAY:    That’s right, and that helped us enormously including the ability to call it Queer As Folk because they had called it Queer As Folk, which was a much, much, much debated…

RICHMOND:    Whether you wanted to put “queer” in the title of a show.

OFFSAY:    Yeah, whether you could put queer in, whether we were being insulting, whether or not people would get it, whether we were rubbing it too much in other people’s faces. So every one of these things gets the consideration that you would expect, that groups of eight and ten and twelve people sit in a room and let everybody… an Matt was good that way. He’d say,  “I don’t want to hear anybody in the hallway say we shouldn’t have done that or we’re screwing things up with the cable operators, whatever. Here’s a room, here’s your chance, here’s what Jerry wants to do. Let’s hear everybody’s opinion. We’ll kick it around.” And if the decision wasn’t made in that room, sometimes the decision had already been made, but you were giving people a chance to vent. Some of the times it was announced in the room and some of the times he and I and one or two others went off and caucused and then told everybody what we were going to do. But on the big issues, on these big, important subject matters there was no project that he did not ultimately back.

RICHMOND:    When you took the flack for making Dirty Pictures, I remember you were quoted at the time as saying, “It’s not our job to make people feel comfortable, it’s our job to do what we think is right and to protect freedom of expression.” Do you fear that too few of your contemporaries feel that way?

OFFSAY:    You know what? I think few of my contemporaries feel that way, but few of them had the license to feel that way in their jobs that I did in my job because if something didn’t get a good rating one week and you’re on CBS it costs you money because you have to give money back to your advertisers. If it doesn’t get a good rating on Showtime, it’s disappointing, and as I said earlier, I wasn’t there to make home movies but it didn’t cost us out of pocket money to an advertiser so I could take chances and risks and push the envelope.  

RICHMOND:    So which of Showtime’s series and movies would you say that you’re the proudest of, or is it impossible to choose among your children?

OFFSAY:    Yeah, I think that…

RICHMOND:    I bet you could remember the name of each and every one here if we gave you five minutes.

OFFSAY:    Probably. You know, the great moments are winning the Governor’s Award and going up on the stage to get that, which came for the three shows – Soul Food, Resurrection, and Queer as Folk. I think if you look at what Showtime’s greatest contribution to society in the ten years it would be those three shows because they – we talked about this earlier – they did allow people who had never seen themselves portrayed on TV in an even-handed dramatic fashion to have that reflection of their experience and to the extent that that shapes how people see the world and how kids will see the world, then those shows, I think, have a social importance, probably, that nothing else did. I think that probably with all the people and things that we took on, I think Thanks of a Grateful Nation where we went dead against the Pentagon and said you’re lying about what’s wrong with these Gulf War veterans, we don’t know why but we know you are, and here’s three true stories of three people and how they intertwined along with the Congressional aide that was out there trying to change things for them, which they took seriously enough to have Colin Powell come out on the day before the movie aired and state that there was no such thing as Gulf War Syndrome and six months later they passed a 550 million dollar allocation through Congress for Gulf War Syndrome.

RICHMOND:    For the thing that didn’t exist.

OFFSAY:    Which they were still striving to… and we dramatized in the movie that they couldn’t get 50 million dollars through then, but I know that that movie moved people in Congress and had an impact there. I think Strange Justice, being the reformed lawyer that I am, has a special place in my heart, and as I struggle now to get somebody to make Strange Election, which is the story of what happened behind the scenes….

RICHMOND:    Which is crying to be made.

OFFSAY:    Yeah, well, if we don’t make it soon it won’t be relevant anymore, but if you can put on the story of the 2000 election in the fall when the ’04 election is happening, I think people would be interested to see what went on behind the scenes even though they suspect they now.

RICHMOND:    Do you have a script for that already?

OFFSAY:    Yeah.

RICHMOND:    But are you having trouble finding a producer?

OFFSAY:    Yeah, at the moment we are. My guess is at the end of the day I won’t get it done, but we’ll give it one more shot. So Strange Justice has a special place in my heart. And then I think that the all ages pictures as a group, as a collection, which I did with my partner Ann Foley, the most gracious and brilliant person and collaborative colleague that I’ve ever had… there was a run of time where over a four year period we had 19 of the 20 pictures nominated for the Emmy as best family film, and we had articles written in The New York Times and Newsday saying what do these people at Showtime think they’re doing? Don’t they know that parents and kids don’t watch TV together, and is this some sort of social experiment where you’re going to try and force mothers and their kids to watch movies together? The fact of the matter is that we thought that these movies might just be that kind of thing that could cross over that way. We didn’t do them for that reason, we just thought we were doing another flavor of quality programming and that it would help our business to be able to say, you know what, it’s not Nickelodeon, it’s not the Disney Channel, it’s not the Family Channel that has the best family entertainment in America. It’s that no limits network, Showtime, that gives you Queer As Folk and whatever. Guess what? We also have the best family films in America, and it wasn’t us saying it after awhile. It was the Emmy voters saying it, and they were saying it in spades, that it was every movie that was an Emmy nominee in that group, and the tough part of that thing was having to close that group down after those 19 out of 20 Emmy nominations that at that time had only won five years in a row.

RICHMOND:    You had to close it down for funding reasons?

OFFSAY:    We were doing fewer movies and it was harder to justify having a slate that was separately family-oriented and smaller volume, and we had to repurpose the money to series, all of which were right things, which prompted somebody in the group to say to me at the time, “What would the reward have been if we’d done a bad job,” as they were being show the exit from the premises. So the triumph of that group, and especially the crazy way that they do it because it’s part of the daytime Emmys and so you’re there with all these crazy soap opera people and then there’s this moment of quiet and sanity where they’re giving out the awards for these family films. But the satisfaction of doing, again, something that nobody else was doing, doing it really, really well, and that notion of going back to those early days which is you’re not going to get them done, if you do do them they aren’t going to be any good. You know what? We put the lie to that, and so those as a group, I think, hold a big place in my heart as well.

RICHMOND:    Growing up as a cinema hound like you did, it’s interesting to see just how much more important cinema and filmmaking you did at Showtime than has been made in the feature film and theatrical film world. They get of course all of the glory and the Oscar nominations, but I can’t name five that have been truly important films during your tenure at Showtime, whereas you probably have 50 or 60.

OFFSAY:    Yeah, well, I guess it’s a question of definition, but again, I had the luxury of being in a different business. At the end of the day, quality is mainly what counted in what we were doing. We were doing these things for the image of the network. We were selling you a subscription and it had to look and feel special, and feel wonderful and feel worthwhile, and feel like my God, we’re giving up something if we don’t have this, or I’m missing something if I don’t have it, and so that having everybody who wrote about these things say “this is wonderful” enhance that perception. So I was able to go after something whereas the people who were making theatrical movies have to put asses in chairs. That’s the only thing that matters at the end of the day. Now we made Gods and Monsters. If you look at the box office…

RICHMOND:    Which was nominated for an Oscar.

OFFSAY:    Yeah, it was nominated for a couple of Oscars – McKellan and Redgrave – and it won for the script. If you look at that from its box office, it’s a failure. If it had premiered on Showtime… it did get three Oscar nominations so it’s a success on that level, but it only did 5 ½ million at the box office. If I had premiered that movie on Showtime it would have been my biggest hit of the year, but we allowed it to go theatrically. Again, it’s not that I’m not proud of the 50 or 60 or whatever number of important films we did, and my number would probably be higher than anybody else’s because they’re all important to me, but there’s a lot of social commentary, a lot of weighty subject matter, a lot of important issues that we dealt with, but I had a license to do that that nobody else did and it couldn’t come back and hurt me because if the rating was no good it didn’t cost us money and the other people had to either get a number for an audience on the broadcast networks when they had to get asses in chairs at the studios, and then there was us and HBO who could just make movies because, you know what? We thought, boy, that’s a good script, that’s a good story, that would be interesting, people would like to write about that and maybe it will spark some conversation. So we were in a different business and the luxury of that different business is just something that you can’t compare to what anybody else has.

RICHMOND:    You had to feel like you had the best job in Hollywood.

OFFSAY:    I did have the best job in Hollywood. Maybe the second best job because the guy at HBO gets to do the same thing I did and he had an unlimited budget to do stuff with and unlimited advertising money. So I’d be lying if I didn’t say that their job wasn’t better than mine because I spent a lot of my time chasing around after money, and a lot of time….

RICHMOND:    Was that the biggest challenge of the job, trying to shoehorn this budget into that?

OFFSAY:    Yeah, we did a lot of that.

RICHMOND:    Doing a lot of the juggling.

OFFSAY:    We did a lot of juggling, we did a lot of things where we said to people if you can’t get the budget down from 6.4 to 5.5 we’re not making the money, and then we did a lot of my production people saying, well, you know what, you can do a quality job at 5.7 but I can’t get it down to 5.5, and then I have to decide am I coming up with the extra 200 grand if they can find the 700, and a lot of time in those meetings, and then a lot of time looking for how I was going to finance the 5.7 million dollars. The other guy just says I want to make that movie and he goes and he makes that movie. But for the variety of subject matter that I got to touch, for the freedom that Matt Blank gave me to do it, for the range of issues that we could do, nobody else was able to do that. You can go from those family movies to Queer As Folk to Dirty Pictures to take on the Pentagon to take on Clarence Thomas to save Lolita, to work with Allison Anders on Things Behind the Sun, and then go back to the wacky world of Chris Isaak and Stargate and even Dead Like Me. I think The L Word is my latest legacy of a hit that I’ve left behind, but I left a week after Dead Like Me premiered and we knew that we had a hit on our hands.

RICHMOND:    Could you have made it easier on yourself by not tackling some of as controversial material as you did? I mean it seemed like you were…

OFFSAY:    Well, I could have made it easier on myself if I’d given up the volume on the movies earlier on because at some point in time it wasn’t just that we needed to make the numbers and everything cost more, it was that the rest of the company felt that the volume strategy had outlived its usefulness and they wanted to be more like the other guys and have one thing a month to talk about, and put more emphasis on one. Frankly I fought that battle down to the end because I still don’t think that’s the way people watch TV and I don’t think it’s the right strategy for Showtime, especially if you didn’t have the money to promote the stuff into events. If you did, then that’s a different story, but if you’re still going to have relatively modest advertising budgets for each picture you put on and you only put one on a month, then you’re betting a lot of the farm on each one of those movies without having… it’s never going to look or feel like what the other guy’s doing because he’s going to have so much more behind it than you are. So now you’re playing his game. That was part of what we did, we knew that they were way, way, way ahead of us, so at no point in time did I want to play their game. I want to play my game, by my rules, and if I set up to do volume and they’re doing one a month, then we’re doing two completely… and they want to spend 20 million dollars to do 61 or 25 million dollars to do 61, and I spend 2.8 to do The Baby Dance and they’re both nominated for the Emmy…  

RICHMOND:    Did they spend 25 million on 61?

OFFSAY:    Those are the reports. Maybe it was 18, maybe it was 22, maybe it was 28, you know? But I never spent more than… I made one movie that cost more than 6 ½ million dollars.

RICHMOND:    Out of all 300+.

OFFSAY:    Yeah, and that movie we only were able to spend more money on because I went and got a deal with NBC in advance from Don Ohlmeyer to say he would buy the movie when it was done and give us 2 million dollars, and so that movie got expanded to close to 8 million because there was…

RICHMOND:    Which was?

OFFSAY:    Inherit the Wind.

RICHMOND:    Inherit the Wind.

OFFSAY:    Again, you think about the things that are great thrills, but the only two times Jack Lemmon and George C. Scott worked together they worked in movies for us.

RICHMOND:    12 Angry Men.

OFFSAY:    12 Angry Men and Inherit the Wind. We did very well from ripping off the Stanley Kramer playbook and we made several of his pieces, but I remember taking my kids to be on the set at the end of Inherit the Wind and watching George C. Scott get up to give a speech and being there with Jack Lemmon and George C. Scott. If you’re a movie person that’s a thrill. That’s a thrill that’s going to last you a lifetime. And then watching them both get nominated for awards in each of the pictures, which was no great surprise, but sometimes you take a chance because when you touch a classic you’re taking a chance. This afternoon they’re presenting Patrick Stewart and Glenn Close in my last remake chance where I remade Lion in Winter, which is a multiple Oscar…

RICHMOND:    The Kate Hepburn movie.

OFFSAY:    … winning film. People would say to me, and I remember this question with 12 Angry Men, “Why would you remake 12 Angry Men? What a classic, Jerry.” And I’d sit there and I’d say, “Jack Lemmon, George C. Scott, Hume Cronyn, Ossie Davis, Armin Mueller-Stahl – how many Oscar nominees would you like me to get to because I can keep going before you’re going to say that’s enough. Those are enough good reasons. But the answer is – Eddie James Olmos – they were all in that room. Courtney Vance, Tony Soprano – who was the only person who wasn’t really a well-known guy.

RICHMOND:    Gandolfini wasn’t known then.

OFFSAY:    Gandolfini wasn’t known then, but that movie… Bill Peterson is in that movie, Tony Danza. Bill Peterson and Gandolfini are now way bigger than they were when they made it. They were the also-rans. They were the guys that were lucky to fill out the ensemble for the rest of these people. What a thrill to be able to just pick up the phone and call Beau Bridges and say to him, “You know, Dan Petrie is directing George C. Scott and Jack Lemmon in Inherit the Wind and I want you to play the Gene Kelly role.” He says, “I’m in!” I said, “Well, don’t you want me to send you the script?” “I’m in Jerry! Dan Petrie, George C. Scott, Jack Lemmon, Inherit the Wind – I’m in.”

RICHMOND:    Well, but you had that kind of relationship with these guys.

OFFSAY:    Well, I had done six or seven things with Beau beforehand, and the truth be told the fifth thing he said was “and you, Jerry.” But Beau came to my 50th birthday party three weeks ago as well. But you know, just think of if you’re somebody who likes film being able to make that call to Beau Bridges and say to him, “And by the way, I need you to work for $150,000 less than I paid you the last picture that you did.” He said, “That’s a lot more money than you paid Jack and George and all those guys on 12 Angry Men.” Well, the truth is that on that picture everybody worked for 100 grand because there were 12 of them. On this picture we were able to pay everybody like 350, or something like that.

RICHMOND:    So it was 12 penniless men.

OFFSAY:    Yeah. Hume Cronyn, I remember, who did six movies with me as well, and the last one of which is still in the pipeline, Separate Peace, where he did what he told me he would never do, which is he said, “I don’t do cameos, Jerry,” but he did a cameo in Separate Peace because he said, “I’m 90. Nobody asks me that much to do anything.” We had said at one point in time that we were going to do seven movies together and I reminded him he still owed me two. Hume Cronyn cornering me on the set of 12 Angry Men and saying, “Now you’re sure, Jerry, Jack and George are getting $100,000 a piece? Everybody’s working for $100,000. I’m not getting jobbed here, am I?” I said, “Hume, if I was going to job somebody it would be the people that I didn’t have a good relationship with. I’d be paying you the extra money and cheating the other guys.” He said, “All right, I’ll take your word for it.” There’s a lot of great stuff that comes out of that. Of course then you get to the jokes that came around that said we were the death knell for these people because George C. Scott did his last picture for us, Raoul Julia did his last picture for us, Hume did his last picture for us, C.G. Marshall came back and did The Defenders, was the last thing that he did for us, and I think that…

RICHMOND:    So are you poisoning people?

OFFSAY:    Yeah, what were we putting in the water on the set? But maybe it was just that we were the only people who would work with people that were that age and still thought they were important and thought that drama with people that age…

RICHMOND:    I think that’s exactly it is that you continued to realize what a great resource they were and they weren’t just washed up.

OFFSAY:    It was an enormous, enormous privilege. It was.

RICHMOND:    Do you fear with economics the way they are that it’s going to be tougher and tougher to get casts like that together for projects on cable? Are the economics becoming impossible?

OFFSAY:    If you only do four or six pictures a year, which is what Showtime’s likely to do than you can harbor your resources to try to make each one of them bigger and more special, and I think that’s what Bob’s strategy is going to be, to try to make them pop.

RICHMOND:    So it’s going to take 50 years to equal what you did in nine.

OFFSAY:    You know, I haven’t asked anybody to go and check the statistics, but certainly in the last little while nobody got to say yes as many times as I did to long form, and that comes back around to something that sounds trite and is boring, but it was a lucky spot to be in and it was a privilege.

RICHMOND:    Is that what you feel like your legacy is for cable, for the industry, is that you sort of managed to…

OFFSAY:    You know, I think that I’d like my legacy, which is presumptuous and arrogant…

RICHMOND:    It’s my word.

OFFSAY:    I would like people to say, you know, that he did really good work and was not afraid to go where other people would be afraid to go, and that he left the place better off than when he got there. Especially as you sit here having left the job and six months out of it now, there’ll be all sorts of things that I did wrong that I never knew, but I’m sure I’ll hear about as revisionist history is written, but the fact of the matter is, you know, the transition has been handled incredibly classily and when the Golden Globe nominations came out, Bob Greenblatt’s memo to everybody said I want to thank and congratulate Jerry Offsay and the staff of people who worked on these movies, which was incredibly gracious and the right way to do something. And so I think I’d like to get the credit for what I deserve credit for, and not get blamed for stuff that wasn’t my fault, but that’s not the way Hollywood is and I’ll get some credit for stuff I didn’t do and I’ll get some blame for some stuff I didn’t do. At the end of the day, I think I walked out of there… what I said in March when I said I was leaving is that I thought that the shape of the network was never in better shape than it was, and that I had consistently the best lineup of programming that was going to come. I had just put Family Business on the air, which was a hit. I had just put Penn & Teller on the air, which was a hit. Both of which have been… well, I renewed Family Business.

RICHMOND:    Penn & Teller Bullshit?

OFFSAY:    Yeah. My successor renewed that show. I was just about to put Dead Like Me on. My successor renewed that show. We had Out of the Ashes and Roman Spring and Soldier’s Girl, Jasper, and Salma Hayek’s movie all sitting there in the pipeline. That’s as good an array of films as we’d ever done. We had The L Word in the wings. We had great pilots that were ready to go; Huff, which my successor has ordered, and Spike Lee’s show, which he’s ordered additional episodes of, at least to turn into a mini-series. That’s two out of three of my pilots that he’s decided to go forward with. I think that we’ve gotten a very good shake out of things, and that Bob has been incredibly classy and supportive of the efforts and has given credit to me frequently where it was my work that was now coming to the fore, and so I think all things being equal I think I’ll survive this transition very nicely since I have no ambitions to go and do anything else it won’t matter much anyway.

RICHMOND:    You are semi-retired.

OFFSAY:    I am semi-retired. I have a little production company that Viacom pays for with a couple of development execs for the next couple of years. I exec produced a slate of movies for Showtime on my way out the door, these little million dollar shot on video movies, three of which we’re taking to the Sundance Festival next week, one of which has already been bought by Sony Classics – Mario Van Peebles story of his father making Sweet Sweetback’s Badass Song back in 1971 and its cultural significance, but it’s the zany adventure of making that movie. And I’ve got a few more of those pictures that will go to other festivals after Sundance and hopefully some other of them will be bought. I’m going to make Maya Angelou’s next movie at Lifetime with her directing. She made her directing debut for me. Again, another one of those little pleasures. Maya Angelou comes and directs a picture for you, which we also sold as a theatrical and didn’t get to premier on the air. So this time we’ll make to for Lifetime and we’ll see what else we can get done.

RICHMOND:    Thanks Jerry Offsay for doing this for The Cable Center. I’m Ray Richmond and thanks very much.

OFFSAY:    Thank you, Ray. Thanks for doing this. Thank all you guys.

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Ruth Otte

Ruth Otte

Interview Date: Tuesday July 13, 1999
Interview Location: New York, NY
Collection: WICT 20th Anniversary Collection Project

OTTE: My name is Ruth Otte, O-t-t-e, and I work for Scholastic here in New York.

INTERVIEWER: Could you tell me how you initially began your career in the cable industry?

OTTE: I started in cable in 1980. I had been working at Coca-Cola and a really trusted friend of mine, who was very frustrated with bureaucratic tendencies of Coke at that time, left and joined Warner-AMEX, which was a joint venture between Warner and American Express, and he just convinced me that as a woman, I was going to get much further coming to new industry than in a much more established business that Coca-Cola had at the time.

INTERVIEWER: I know you joined Discovery in 1986 and at the time, I read in an article that there were only 27 stock numbers in one Apple computer. I wonder if you could tell me a little bit about what it was like to start a new network?

OTTE: I joined Discovery in 1985 and at the time, we had only a few million customers, and there were other much more established cable networks at that time and it was quite an amazing process. On one hand, we felt really small and kind of like us against the world, and on the other hand, we just had such a deep and committed belief that we could bring higher quality television to U.S. audiences, that people that wanted to invest time and learn something out of the process would be devoted to us if we could just build our subscriber base and our advertising base and put on great programming. So we attracted just an outstanding team of people to a large extent to bring a new kind of educational and entertaining experience to TV.

INTERVIEWER: What kind of challenges were there to starting up?

OTTE: Well, like any start up in the cable business, your first challenge is to get subscribers. So everyone has to dedicate themselves quite fully to that cause and once you begin to acquire a subscriber base, then you can invest more in your programming and begin to build your advertising sales, revenue stream. So everyone you talk to will tell you the same thing - that you have to dedicate yourself to building relationships with the cable companies and telling how you're unique, what you're uniquely going to provide and why you're going to bring value to their cable service. So we spent a lot of time figuring out our story and telling it.

INTERVIEWER: Did you ever predict the success that Discovery would have in its early days?

OTTE: You know, we really had a sense that we could become a company that provided opportunities to discover on television and through other media. We certainly at that time hadn't anticipated something quite as directly as the Internet, but we had this sense that via museums or theme parks where there were many different kinds of diverse experiences, we could bring people the chance to discover something about themselves and their world and the wonder of the world. So sometimes you kind of felt like, who are we kidding? You know, we're just the smaller team trying to build a cable network here but most often, we really had that belief and that sense that we were doing something that could be historically important.

INTERVIEWER: A lot of women were successful when they entered the cable industry during its formative years because there were no definite rules. Would you agree with this? Was it easier to enter the cable business in the mid-eighties then perhaps it might be now?

OTTE: Was it easier to enter the cable business in the eighties? I'm not sure about easy to enter because there definitely was a lot of hiring going on, and I remember a distinct belief that there were no rules, that we were trying to figure out how to market cable television. First of all, just the concept of an uninterrupted movie was a really big deal in 1980 and 1981. It's obviously commonplace now, but just how to position what we were doing, how to speak about what we were doing was totally new, and we were trying all different kinds of things in different languages and it was very inventive. I think it's certainly comparable to what is happening with companies today with the Internet, but I remember going around to cable companies in the southeast, which was my territory where I was selling MTV and trying to explain that it was music and pictures and, you know, just finding language for something new is always a fascinating moment, right? And I remember people just being absolutely like, "What?" "I like to make my own pictures when I hear music", some of these guys would say. In terms of the sense that there were no rules, the early eighties were for me the most exciting period in my career because before that, I had been with large companies where there definitely were a lot of rules. I mean at Coca-Cola, they knew practically what color nail polish people wore when they picked up the six packs, you know. We started to market the Movie Channel in 1980 and Nickelodeon, and nobody really had a sense of how to do this. Even what we were selling was a very different concept to explain to an audience who was used to really having the three networks, and having 24 hours a day, I mean it was hilarious. It sounds hilarious now, but the concept of an uninterrupted movie was a big deal, like you would tell your friends you could get movies without commercials and it was a big deal.

So anyway, it always gave the sense that your ideas were as good as anyone else's ideas, or that you could take a stand and really take a risk in defending what you thought was the right way to go because it was new and it resulted in a sense of great invigoration and innovation that we were all swept up in. I think it created a very strong sense of teamwork among people working together. We knew we were a part of making history while we were making it, and I think that's what a lot of people today working in the Internet obviously feel, but I don't think it's that common in life to feel that way and it was very exhilarating.

INTERVIEWER: Well obviously cable and telecommunications has changed drastically since you began your career, do you have any predictions for where the industry is headed?

OTTE: Well, in terms of where the industry per se is headed, I've not been involved in cable now for a good five years so you might be able to find observers better than I. The part that I'm most excited about is obviously the blend of what we know today as television and the Internet for what the broadband world will make possible. I think it's going to revolutionize our lives even more than what's already happened between cable and the Internet. I think the prospect for community and communication and education are going to be staggeringly interesting, and the prospect of what might emerge in terms of new opportunities to connect people and bring ideas forward I think is, I just want to be part of it, I think it's going to be amazing.

INTERVIEWER: Can you talk a little bit about what you're doing now? I know that you're in educational software.

OTTE: I work for Scholastic which has a long history of providing materials to teachers, and all kinds of books and multimedia experiences to kids. So I run the Internet division of the company and we're creating all kinds of resources.

INTERVIEWER: Would you talk a little bit what you said about choice? I mean you mentioned earlier that cable offered people more choice, was that the most exciting thing to you about cable when you began in your career there?

OTTE: Well, some of the most exciting things that I remember from the early eighties were first this notion of really empowering audiences by bringing them choice because it seems so obvious to us now with the array of choices that we have in so many different kinds of media, but it really wasn't that way. And the notion that customers could find their niche and tune in at their convenience was a very powerful notion. We, and I guess the industry, really exploited that obviously in our marketing but beyond that the people that we were on the Warner-AMEX team had a lot of vision and they got it real early that by super-serving a targeted audience, you could not only delight the audience but have a very salable advertising story to tell and capitalize on that audience fully, and that that would translate to different kinds of media for merchandise. They were very ahead of the time I think in terms of deeply understanding that, and that today you have the kind of powerhouse that you have with MTV and Nickelodeon is a testimony to that vision, but they were speaking that language in 1980 and recruited a really outstanding team of people that have ended up in many different parts of the business since then. That was, I feel, a really major career opportunity for many of us.

INTERVIEWER: At MTV and Nickelodeon, did you have any model while you worked there of what you wanted the network to be or were you just sort of forging anew?

OTTE: Well, in terms of models that we held up, it was really to deeply understand our audience and to offer to them with a certain attitude what they would really appreciate. So part of what I learned there that stayed with me to today was the sense of defining a personality for each channel, and making that personality come through in all the different on-air elements: the promotion, the way the logo was utilized and the way the merchandise was created. We and the teams that did that took a tremendous care in defining that personality which again, seems obvious today but was not obvious then at all. There wasn't that kind of thinking going on or anything close to it at the three networks at the time, and it resulted in just so many different kinds of breakthroughs which have been well documented in terms of use of logo and the way that on-air promotion was done and the way that standards were set for how you communicate with an audience even for different kinds of day parting strategies, something that I think you can see today living in many different media.

INTERVIEWER: Looking back at your early career in the cable industry, did you have any role models or any contemporaries that you thought to model yourself after?

OTTE: Well, in terms of people I modeled myself after, I would say my colleagues at Warner-AMEX at the time were definitely in that group. I was, I think, about thirty when I joined the cable industry and up until that time, the companies I worked at all of my colleagues were male and at Coca-Cola when I left there were only a few women in the PR and Human Resources area and it was very unusual to go to a meeting and have another woman in the room, it was very unusual to walk through a suite of offices and see any women's faces other than in secretarial positions. So entering cable at Warner-AMEX was my first experience of really having a much more balanced team, and some of the people that I worked with there were definitely my role models. So I had the first sense in my career of a team of men and women working together that were competitive in the sense of having a high standard for performance, but who were also very supportive and felt that the whole team would benefit if one of us learned to do something better. It was just a turning point in my career of seeing what deep trust and professional and mutual respect could yield in terms of achieving a lot, and it really set a standard for me that I wanted to have for the rest of my career, and some of those people I would still consider my role models today.

INTERVIEWER: So do you think then that cable was really ahead of the curve in terms of allowing women to advance?

OTTE: I think cable was somewhat ahead of the curve in terms of women's advancement because we were a new industry. Again, as I said, I think because the rules weren't fully scripted and we were as an industry making up a lot of things as we went and learning and literally inventing a reality, I think it gave us a certain opportunity and from what I read and understood at the time, I'm not sure it was at all present in other businesses. Nonetheless, it wasn't that easy. I mean there were still many, many times when I'm sure that I certainly felt and I know that my colleagues did that there were certain conditioned tendencies that some of our male colleagues had and ways of seeing us that we didn't think were fair or we didn't appreciate or we had to have conversations with them about. I mean it was a time when attitudes toward women were changing a lot in society and like anything, you could look back and see amazing change but it could feel very incremental in the moment.

INTERVIEWER: How did you overcome some of those rude conceptions that your male counterparts made?

OTTE: Well, I went through a lot of different eras in my own private narratives about what it was to be a woman in business. Having started in my career in 1971, I actually started as a secretary and worked my way up through many different positions in marketing and sales. So I had plenty of experiences, plenty of times of feeling absolutely patronized and diminished and treated as though I didn't have any kind of real capability. And I know the pain and the anger and the distress that being treated that way can bring, I certainly experienced it many times. So I went through my kind of submissive phase and I went through my very militant phase then I went through my other phase. I think as I grew older and by the time I got into cable, I began to see that if men treated me that way, it was often, it was really never because they deliberately intended to diminish me or be disrespectful, but that there was either a blindness that they had as to how they were coming across or no one had ever talked with them and said that if they spoke in this tone or said these kind of words that it would end up producing tremendous resentment. Even so, I practiced a lot of different things. Sometimes I just took it and simmered and festered and was mad at myself for not taking a stand, other times I would get my courage up and find a way to speak to them. I mean I quickly learned that it did no good to have an angry response, but I practiced and tried many different kinds of responses. Over time as I got more confident and older and also as I could really see that it wasn't deliberate, I could then approach someone and make it clear that the way they acted would not make us able to work well together as partners and that if there was something that bothered him that much, I would want him to tell me so. Therefore, I was going to tell him this because it would affect our working relationship and the results that we could produce, and I found that most of the time having that kind of conversation, I would say every time, brought us closer together rather than the opposite. So I'm sure that probably a lot of other people that you'll talk to in this interview would say something similar, but I guess I'm kind of glad that my militant phase mellowed. I think I got a lot further in let's work out, but this is unacceptable kind of phase.

INTERVIEWER: Do you think that opportunities are different for women today then they were even ten years ago?

OTTE: Well, from how I see the world, I think opportunities for women are dramatically enhanced over what they were ten years ago, and certainly twenty and almost now thirty years ago when I started my career. I mean there's just no comparison to the possibilities that young women see for themselves today, the array of possibilities. The dimensions of what they see that they can do are so much more diverse and so much richer than we could have ever imagined, and that I just think is incredibly exciting. When I went to college, almost every woman I knew saw her choices to be a choice to be a teacher or a nurse, and I in fact became a teacher out of that view of the world. However, today it's obviously almost limitless what many young girls think is possible for them. At the same time, I think a lot of young women still struggle with what do these jobs really mean, how do I get started, what will I do, what will I like, how do I sort this all out, and I think there's still a tremendous need to have better advice and better mentoring and better guidance and better exposure, like take your daughter to work day and things like that. I think also that the young women today, at least the ones that I'm exposed to, appear to really be studying our lives, what we traded off, what we gave up, what we, you know, the price we paid in many ways, and I think they are really looking at these issues of balance and how do I have a satisfying life with my children, marriage with my husband and a career, and I think they are wrestling with the whole array of that balance in a more, you know, looking at all three domains and how they're going to deal with that younger and in a deeper way than we possibly did. Everyone I knew was so focused on this whole career side because it was such a big deal to be taken seriously and to get opportunities, and it was so rare for that to happen that we kind of got skewed a little bit more on the career side than I think today's women are willing to settle for, and I'm really happy for what they I hope have learned from what we went through.

INTERVIEWER: Early in your career, in the eighties, was there even talk of balance or is this a discussion that you found more recently with women of recent generations? Did you think about balance early in your career?

OTTE: You know, I mostly always thought about balance and that whole issue because everybody was always telling me how unbalanced my life was, what a real kind of disaster I was in that realm of being able to achieve some type of balance. But I don't really think the discussion was as prevalent. I was just so determined to keep my promises, make a contribution, achieve what I was working on whether it was with MTV Nickelodeon or at Discovery, that I was sort of a more driven type, and I don't think I engaged with it as seriously as I really wish I would have. You know, that would be something that I always talk about with young women when I see them because it's extremely hard to decide what for you is going to feel like balance, and I just think a lot of the lip service that's paid to that topic doesn't really empower you to make these kinds of choices and to figure out what you want to do. I think a lot of the articles and stuff recently written about it aren't that helpful so I really encourage young women to have personal conversations with people that they admire on how they've achieved it, and ask them a lot of questions about how they do it and why and what was the reasoning behind the choices that they made and how settled are they really with the choices they made. I think it's crucially important to have some serenity about whatever your choices are as opposed this level of underlying concern and anguish about I'm not giving enough here and I'm not giving enough there that a lot of women still feel.

INTERVIEWER: I want to ask you a question about parity within the cable industry. I know you've been away from the industry for five years, but did you have a sense that it was possible to achieve parity or has parity been achieved in cable?

OTTE: Well, I think in terms of parity in the sense of accomplishment and recognition and earnings and whatever standard you would use for that, I think that tremendous progress was made in the time that I worked in cable from 1980 to 1994. I wouldn't say that real equality in the sense that we've always aspired to and know that we deserve was achieved, but I think tremendous progress was made. I mean I think the kind of recognition of the accomplishments of someone like Gerry Laybourne or like really a lot of women on both sides of the industry, the accomplishment of hundreds and thousands of vice presidents and directors and managers. It began to be much more widely understood and appreciated by the time we entered the nineties then it might have been in earlier years. So I guess I would say I think that we made tremendous strides, but I wouldn't say that we achieved what I would be satisfied with to call a parity or real equality in the sense of all the dimensions in which one could measure that.

INTERVIEWER: Do you think parity between men and women in a professional world is attainable within the next five or ten years? Do you think parity is a realistic goal?

OTTE: Yes, I think parity between men and women is an achievable goal. I'm not sure in five to ten years because I think any societal and cultural change of that magnitude is going to take a lot of years. All of us as human beings have automatic ways that we see the world that we don't question that are the sum total of how we are conditioned and how we were raised and our experiences and the way our nervous system has been configured given the experiences we've had and, therefore, we're still going to have automatic ways of seeing the world on the part of men and women that are going to be limiting for us. On the other hand, it's so much better than it was. And I think the ways that women have appropriated what in the early seventies, when I started working, were the exclusive domain of men, you know, how to run a big meeting, how to run a company, how to handle a tough negotiation, how to organize an office, how to run a team, how to coach an employee. I think we have taken those things and molded them to make our own way of dealing with those kinds of situations, and we've earned the right to do that and we've earned the roles that have led us invent that, and that to me is one of the most rewarding things to look back and see. I struggled and went to courses and tried to learn how to do all those things and watched people who did it well, watched people who did it poorly and tried to create my own style, but now you can look around and you can see women who definitely have created entire cultures within companies with their mark, and I think that that happening over and over within a culture makes us see today what we're seeing and that over time can and will shape a culture. So I'm very optimistic for the future despite the fact that I think there's an enormously long way still to go.

INTERVIEWER: Can I ask you just a couple of questions about your management style? Did it change over the years or did you ever reach a point where you thought that it was perfected?

OTTE: Well, I think the whole notion of designing one's management style and one's way of behaving with the many different constituencies that you deal with never gets perfected. I think anyone's who dealt with other human beings on a consistent basis knows that it never stops being incredibly challenging, and for me it is the single most interesting, rich area of exploration of my life. I started out in the early eighties, late seventies, constantly immersing myself in some type of course. I've done six month courses, three year courses, two week, you name it, in California. I believe that you have to constantly keep building and learning from your experiences in how you respond to others, to a team, to a group, to a company or to an individual and how you bring out the best in that person, how you truly hear their concerns and respond to them and choose when to be a sister and when to be a mother and when to be a tough coach and when to be Patton or all the different moves in your repertoire that you need to have to be an effective leader. Those are very tough choices to make in the moment, on the spot, and to then look at the consequences of that on that other human being and see what happened. To me it's why I'm still in business, it's why I love sales, it's why I love everything I'm doing because human beings can be both incredible and generous and magnanimous and difficult and challenging and small minded and it's the whole gamut, and I think that working in a company it is more and more understood that you have to recognize the emotional consequences on another's self esteem and dignity and personhood when you are making decrees and talking to them about their career or creating a new business initiative. And so I guess I think that evolving that is an area that is just crucial to one's development as a leader in managing. I can't imagine anyone ever honestly believing they perfected that.

INTERVIEWER: I was wondering how you see WICT influencing the industry at large, and did you notice its presence while you were evolving Discovery?

OTTE: Well, in terms of WICT's impact in the industry, there's just so much I could say. For me the relationships that I built through participating in WICT events, the opportunity to ask these kinds of questions that you're asking today of other people, how do you cope with this, what do you do when you're treated like this, how you ask for the raise, how did you get this last promotion. I mean just to have the unlimited opportunity to not feel shy about asking those kind of questions because it was okay to seek out that kind of support in the context of an organization like WICT, I just am left with a sense of tremendous gratitude toward that. I think that there's a tendency when you're building your career to be very focused on your company and the things you're trying to create and what you've been asked to do or what you've promised to do, and going to WICT events always gave me an umbrella, a chance where I could step outside of my own concerns of the moment swirling around, and stand back and see how other people dealt with the same issues and again, not having a shyness about asking that because this was the context in which you were supposed to do that, I will always have a tremendous sense of gratitude to WICT for that.

I think secondly, the different forums that were created for speakers to just speak about industry events and all that, I learned a lot from the many different events I participated in. I think that the organization took its share of little jokes and jabs in the early years about, you know, aren't there men in cable? Just kind of remarks like that that were made. They stayed steady and true to what they were trying to do for women. And I think now in terms of the large number of chapters and the recognition that they have, I think the organization really earned it and I appreciate what it stood for and it meant very much.

INTERVIEWER: Do you have anything you want to add? Anything more about WICT or Discovery or the industry?

OTTE: Let's see. In a way that it was really hard at times, and in another way it was so fast moving and you had the sense that you were changing the world really, the simultaneousness of both of those things. Coming from a meeting with some guy, some MSO that really beat you up and at the same time, standing back at an annual convention or event and seeing the number of new channels, the increase in ratings, the increase in ad sales, the increase in identity of when you first used to carry around a Nickelodeon bag in an airport and nobody knew what it was to where a few years later, anybody you saw wanted to pay you $100 for it. So it was this amazing time when you felt like what you were doing was important and was going to lead to something much bigger, and yet you were having to still as a woman fight your way for every inch you got. Both of those senses were always there. Does that make sense?

INTERVIEWER: You had two different impulses really at work. Like on one hand, you had the sense of purpose, and on the other hand I'm a woman, what does this mean, where am I going with my career. Is that what you're saying?

OTTE: Not so much what am I doing with my career, but I guess this is how I would say it. I think that for me, the notion of blending and partnering, as a woman, was my natural orientation, and it was easy for me to be a good team member and work well with others, but the issue of my own boundary, what I would tolerate in terms of indignity or not being treated fairly, that's what I had to really develop. My own personal issues were around and still I think probably always will be. We have to have the capacity to blend and team up and cooperate well with others and if you blend too much that you lose a certain portion of yourself, it becomes an issue of now where's my boundary here and where's my stand and what is okay with me or what is the treatment I won't tolerate - the tone of voice or the dismissive, little, hey, honey, or whatever thing happens.

So for me the years in cable were a constant dance with that, a constant experimentation of my own strength, my own boundaries, who am I and defining myself while this whole industry was defining itself. I'm not sure to what extent that's an issue for everyone, but I suspect that it is.

INTERVIEWER: That's interesting how you phrased it before like in your narrative, your identity as a working woman shifted and that's interesting. Your militant phase versus another phase versus another phase, and that to me was really interesting to hear about.

OTTE: Most of the women I know that were in the cable business, and there were a lot of women that I knew, I could feel them and myself trying to define what's the mix of femininity and power that is right for me. I went through a phase many, many years where I didn't wear any jewelry, anything but gray suits and little white shirts and this is what all the books told us to do, right? And, you know, there was a tremendous trade off in our femininity in an attempt to assert ourselves and to achieve a certain recognition and to have the capacity to take a powerful stand, but I think that the eighties, particularly the women I knew in cable, were looser in that way. We certainly didn't wear all gray suits by that time any more, and this blend, I think people like Gerry and many others began to show that you didn't have to trade off your femininity, that in order to be powerful that both of those are compatible and in fact desirable. Yet you could see, I worked with women who were very tough and you could see why they took that stand, and I worked with other women who were quite flirtatious and a little sexy most of the time. And that wasn't really me and the other one wasn't really me, and we all had to find, maybe this will be how it always is for women, I haven't really spoken about this with young women, but I think finding that comfort level, the degree to which your own femininity can co-exist with your own sense of power and your own stand in the world is a very rich area of exploration for women, and certainly was when we didn't have people to show us the way. You know, we didn't have people we could look at. I mean I certainly could look at some of these really sort of police-like, more militant women and say, "I don't want that, I don't think that even works," but I could also look at women who were way too submissive, where they traded off a lot of their power by pursuing a more flirtatious kind of way of being, and today I think women can look around and see people who have adapted that, you know what I mean? We didn't really have anyone to look at, we were kind of making that up and I think a lot of us tried different approaches in different moments.

INTERVIEWER: Did you ever talk to each other about this issue or did it sort of silently move over to the relationships with other women? Would you actually say, I don't think I can survive in this culture with this attitude?

OTTE: Oh, all the time, constantly, right. You know, many, many women had to work in situations where their bosses were condescending or who occasionally did things that were quite demeaning. So it was a constant topic of conversation certainly at Women in Cable events, but a lot of times to what degree could you shift the culture you're in and men around you or to what degree couldn't you, and then maybe you should find an opportunity somewhere else or in another department or something, and I think that that's probably not that unusual. I think that maybe not so much because of men's attitudes today, but to some extent I think people still struggle with that exact notion, to what degree can I shift this culture versus do I have to accept that I alone can't or to what degree can I build an alliance for let's have a different way of being. That was to me the most exciting thing about going to the Discovery channel, having been affected by many different management styles, some of which were terrible, some of which were excellent, I had the first real opportunity, since there were only 27 people, to say, "What are the values that we're going to declare for how we're going to treat each other and our customers?" I literally wrote them up before I started there and everyone that we asked to join the company we asked, "Can you sign up for this - these values of commitment and concerns for others, to mutual respect?" I knew that a lot of money and time and waste exist in companies because people can't get along and don't have principles or real values for how to treat one another. So we took a stand about that and said, "We're going to be the kind of place where we treat each other in these ways because it's going to make us more innovative, more productive, more efficient." So for me that had been carefully honed over many tear laden nights over the years. Then I had my first opportunity to declare it and make an invitation to others to come and create a different kind of work place, which I could do in my little group where I managed before, but now I had the first chance to do it in a company. So that was probably one of the most memorable career moments for me.

INTERVIEWER: Do you recall that the networks made an attempt to create a new kind of culture? Because I know there's a lot of talk about that particular culture at Discovery and maybe that's one way that cable really changed the landscape of work for women. Were the networks deliberately trying to create a specific culture?

OTTE: Well, I certainly know at MTV and Nickelodeon that--

INTERVIEWER: Could you just tell me about, I know MTV tried to create a distinct culture, could you tell me a little bit about that?

OTTE: Yes. MTV and Nickelodeon took the notion of culture very, very seriously. I mean they defined a set of attributes for the channel that permeated into the culture of the company. I mean now, what, some fifteen years later, I can still spell offers, you know, funky, zany, slightly illegitimate, rock and roll, irreverent, zany, I forget. There were a co-host of attributes like that about defining the channel and its attitude that permeated into the culture. I mean they had such a high bar for creativity and for a fresh idea and for an idea that we really deliver on the MTV attitude or the attitude of Nickelodeon to be kid friendly. I can't remember all what they were now, but definitely I think a strong declaration from the leadership in terms of the creative platform and the creative stand for the channels was history making. That made the channel what it was, and also permeated the culture that the ways things were done, the fast moving nature of the company, the creative championing that happened there. They had ruled that nobody below VP could wear a suit and make sure that everybody stayed fresh. I will always admire Tom Freston and a number of the other people there very much for that stand. I think it really brought out some tremendous imagination and very original thinking.

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Nick Nicholas

Nick Nicholas

Interview Date: June 11, 2002
Interview Location: Unknown USA
Interviewer: Steve Nelson
Collection: Hauser Collection

NELSON: Nick, why don't we get started and just take us back to your early days, your upbringing, your childhood; where'd you come from?

NICHOLAS: Well, I grew up in a military family. My dad was a Naval Academy graduate and a submariner, and so we lived everywhere. I mean we lived in the West, in the East, in Europe on the coast somewhere, a peripatetic upbringing. God Almighty, I mean, you'd make a few friends and we'd be moving again. But at any rate, it stabilized towards my high school years, high school and college and grad school.

NELSON: Were you alone a lot at that point when he was off on duty?

NICHOLAS: Well, you know, sure. During World War II, of course, like anybody whose old man was in the Pacific, he'd be gone for a year at a time, but that's the way it was. We all got through it just fine, I think.

NELSON: Okay, so you said it stabilized around your high school years. Where were you at that point?

NICHOLAS: Well, we had been living in Europe in the late '40s and early '50s, mostly in Copenhagen, Denmark, and I had learned the language, went to the Danish schools, the whole nine yards, but when we came back to the States, my parents decided to take my brother... my older brother and my younger brother and I, and lock us away in prep school for a couple of years. I went to a place near Boston called Andover, and then after that to Princeton.

NELSON: And weren't you from New Hampshire originally?

NICHOLAS: Well, I was born in New Hampshire. There's a submarine base in Portsmouth, that's why I was born in Portsmouth.

NELSON: It's still there.

NICHOLAS: My old man was on a sub based in Portsmouth. Absolutely, it's still there. So, then off to grad school at Harvard, business school, and then to Time, Inc. in '64.

NELSON: Well, let's just stop at Princeton. What did you study as an undergraduate?

NICHOLAS: I started off as an engineer and after six weeks of that I learned real quickly I wasn't cut out to be one. I went into economics, got interested, particularly in underdeveloped economies in the world, in Africa, sub-Sahara, Asia, East Asia, kind of how did you make an economy grow, how did you improve the standard of living of the people. What worked, what didn't? Real practical kind of stuff. I wrote my thesis at Princeton on Puerto Rico and the economic development of Puerto Rico – why it prospered on a relative basis compared to the rest of the Caribbean.

NELSON: I assume because you started out in engineering and then went on to economics, you always had a facility with numbers.

NICHOLAS: Well, you know, I could add and subtract, but I know we're going to get on to the cable industry later, but...

NELSON: Well, I know later, but I see you did have a facility with numbers in terms of some of the positions you held.

NICHOLAS: Well, you know, but I mean you can't be in the business without having some facility with quantitative things. I mean you've got to understand relationships, and relationships are often expressed in numbers, so I don't think that's that big a deal.

NELSON: But it was something you were comfortable with, numbers.

NICHOLAS: Sure, sure.

NELSON: Alright, so Andover, Princeton, and then Harvard for your MBA?

NICHOLAS: Right, you know in those days...

NELSON: And what year is this?

NICHOLAS: I got out of Harvard in '64. In those days I was really one of the youngest kids on the block. Harvard liked you to be out in the real world having had experience. My experience was summer work, fundamentally. I mean I had worked every summer – gosh, probably since I've been twelve years old – in my life. I've worked in shipyards and prisons and you name it, anything to earn a buck and have an experience. At any rate, I left Harvard and went on to Time, Inc., which was purely a journalistic company at that point. It had a few television stations, but fundamentally magazines and a big landowner in Texas.

NELSON: And this was just a job you got from interviewing as a student?

NICHOLAS: No, actually, like most people coming out of school at those times, I asked these existential questions, which was "what do I want to be when I grow up?" and I looked at all the standard stuff, you know, the P&Gs, the oil companies, the really classic American large companies that hired people out of B schools, and none of it really intrigued me. Finally a friend of mine, who may or many not have been interviewed for this project, Tony Cox – Tony died a couple of years ago and it may not have happened – but Tony was a year behind me at Princeton and also at B school, and Tony one day came up to me at Harvard and said, "Hey, Nick, there's this great place, Time, Inc., I've worked there in the summers as a mail boy pushing a mail cart. Great products, great people, interesting future, take a look at their annual report." And I did, and I said, "This sounds great." I went for an interview, they offered me a job, I got lucky, and then I went to work there.

NELSON: And what was that first position?

NICHOLAS: Gosh, I was a numbers cruncher. Do you remember those great Monroe adding machines that you'd punch these keys and the damn thing would actually dance across your desk? Basically I was an apprentice job, like everybody that comes into a company, I was doing whatever they asked me to do, and as I figured out later, I learned a hell of a lot in that early job just kind of by keeping my eyes open and paying attention to what was going on around me, I learned a lot about the company. I learned a lot about what worked and what didn't. I learned a lot about people. Who were the leaders that I would follow and who were the ones I wouldn't, and kind of how people made a difference.

NELSON: So you started moving up through the corporate hierarchy there. Was this a result of somebody...?

NICHOLAS: Barely moving up. Barely moving up.

NELSON: I suppose at first progress was slow, but was this as a result of just your own initiative or had you in fact, you talk about the people to follow, would that have been part of your career track?

NICHOLAS: Well, I mean you have to be lucky to move up when you're young, so I got lucky. But I also was not politically correct, I guess is the way to say it. I used to ask "Why do we do it this way? Why do we do it this way? Certainly there's got to be a better way to do this." And occasionally I'd even suggest a better way, and pretty soon these sort of unasked for memos, I guess they call them emails today, got the attention of some people up the line who kind of said, "Geez, we ought to pay attention to this guy." So there was a journalist named Jim Shepley, and Jim had been – "brass knuckles" was his nickname – he'd grown up in the UPI, he was one of George Marshall's key aides after World War II, he eventually became president of Time, Inc., which I followed on years later, but he became sort of a surrogate father to me, and he really enabled me. He was the guy who said, "More of this, Nick, not less. Whatever it is you're thinking I want to see more of it." He had a very interesting role actually in building the cable side of Time, Inc., if not THE leadership role, and I'll get to that later.

NELSON: But when you joined, Time, Inc. was still the classic company going back from Henry Luce.

NICHOLAS: Yeah, we were Eastern, WASP – at least that was sort of the picture – white shoe, you name it, establishment publishing company, and tons of great people, I could give you a zillion names of journalists who I got to know over the years. One of the best things that happened to me in my early years, Steve, is a guy named Marshall Loeb, whose name is known to many, managing editor of Fortunate, and on and on and on. Marshall, at the time I got to know him, Marshall ran the back of the book, the business section of Time Magazine, and Marshall asked me to kind of leave my business job on the publishing side of Time and come down and join him in the magazine and become a writer about business. I wish I'd done it for a couple of years, looking back. At the time I was having trouble making the mortgage and car payments and all that stuff, so I couldn't take the risk.

NELSON: Being a writer didn't seem to be the career track?

NICHOLAS: Well, it wasn't anything I thought I had any skills at.

NELSON: With all these memos – they must have been reasonably well written.

NICHOLAS: Who knows? Who knows?

NELSON: So you started making some waves merely by asking questions, and that caught the attention of some people who started saying, "Send us more of these, not less."

NICHOLAS: Right, right.

NELSON: So sort of follow along that thread how you started moving through the company.

NICHOLAS: Well, you know, I joined Time, Inc. in '64. In 1970, Shepley became president of the company. Jim Linen, who had been president before, died of a heart attack, and this was all sudden, unexpected, and they put this guy named Shepley in charge. I'd never met Shepley at the time, but he'd been reading these memoranda of mine – I don't know how the hell he got them, but...

NELSON: Who did you write them to? Just your boss?

NICHOLAS: Well, I wrote them to people who... depending on the subject, I wrote them to somebody where I thought maybe it would get some attention or whatever. I got a call one day from his secretary saying, "Mr. Shepley wants to have lunch with you." I said, "I wonder what the hell that's about." So I showed up in the private dining room and he didn't mince any words. He said, "You're coming to work for me starting Monday." I said, "Oh?" He said, "Yep, you're going to be my assistant. You're going to kind of help me think about things. This company needs a makeover and I'm not sure what to do, but I need somebody who can help me think about it." So that was really the break. I mean that was kind of the... I suppose you could call it my intellectual curiosity, "Why do we do things this way?" Lots of people have the thought, it's just not as many people express it as should.

NELSON: Or maybe just over a beer later as opposed to a memo?

NICHOLAS: Yeah, whatever, yeah. I mean we have too many companies in America, as we all know today, and have for years, where the CEO is kind of in a corner and omnipotent and all thinking and whatever, when it shouldn't quite be that way, you know, isolated. A good CEO will surround himself with young people who ask questions and are politically incorrect and challenging him all the time. But it ain't that way.

NELSON: So 1970, at this point, did Time have any cable interests?

NICHOLAS: Yeah, we did. In the late '60s, we'd owned a bunch of VHF television stations in Grand Rapids, Denver, San Diego – God, there was another one – Indianapolis, and the guys who ran those stations participated in some of the local cable franchising activities, who knows why, they just did. This wasn't some big corporate plan, and so we ended up with some small cable franchises in those territories, in Indiana and Michigan.

NELSON: Even though you had broadcast stations there.

NICHOLAS: Yeah, in those days we did, and we had, actually, the San Diego station manager picked up half of what is now San Diego, California back then, and it's still a Time system today. So, at any rate, those existed. We had 40-50 thousand subscribers. That was the whole thing, and usually we didn't control the system. We'd own half of it with a 50/50 partnership and somebody else ran it. Basically it was a non-event, a non-issue, I guess, is the way to say it.

NELSON: But did this start to have some impact on the company, or was there some resistance because it still was a classic Time...?

NICHOLAS: No, it was like nobody even paid attention. This was beyond left field. This was a non-event. I can't even express it. This was something under the rug somewhere.

NELSON: A footnote.

NICHOLAS: Meaningless. Less than a footnote. A year or two after I went to work for Shepley, I pointed that out to him. I said, "We have these cable things and it's a footnote, or whatever, and we don't run them, and I don't know what they're worth, but I'll tell you what. Why don't we find somebody who wants to buy them who will take them over in exchange for stock in their company, and maybe we could have a small toehold in a real cable company. Maybe we can get a seat on the board and kind of watch the development of the industry." So he said, "Okay, go do it." This was Shepley. It was a five minute decision. So we scudded around and there were two companies that we spoke with. One was Continental Cable, Amos Hostetter, who I'm sure you've spoken with, and the other was ATC, Monty Rifkin, American Television Communications, and for reasons I don't totally remember, we chose ATC as the company we liked to connect with. So I called him up – I mean we didn't know these people – and introduced ourselves and said, "This is what we'd like to do. Would you like to buy them?" And they said, "Well, we might. Let's take a look." Short story, they did. We took a 5% interest in their company; Jim Shepley took the one board seat, and we, for the next couple years, cruised along. The industry started to grow and he liked what he saw. But it was a static 5% passive position in a new business, and Monty was running a good company, and it was really one of the, I'd say, three or four really good companies in the industry.

NELSON: So how did your Time's involvement in that deepen in cable?

NICHOLAS: Well, going to a different place, and then this all comes together a couple of years later, but starting also in the late '60s, maybe around 1970, the people who ran these television stations I talked to had a boss in New York to whom they all reported, that is the various stations, a guy named Wes Pullen, and somehow he got seduced into investing in something called Sterling Communications, which owned the franchise for providing cable TV in the southern half of this island, of Manhattan, and I guess that's roughly what it owned. So we became a 25% owner of that along with Chuck Dolan, of course, who everybody in the cable industry knows. Chuck was really the entrepreneur. He was in charge. And then the Lear family, which I guess is the Lear jet family, and the McCaw family of Washington, and so these were the owners. The company eventually went public and the stock traded over the counter, it quickly became a disaster. At any rate, it was early urban cable, and everything that worked in the country, amplifiers up on telephone poles, didn't work in New York where you had to put them inside the manhole and the steam corroded the amplifiers. I used to go around in Manhattan at night sometimes with amplifier crews who would open manholes and go down in there and sniff out the gas, and go down there to tune amps, just to see what it was all about. But at any rate, the story – a voracious appetite for capital, much more than budgeted, a long time to break even, the banks shut off Sterling Manhattan Cable from capital, Time, Inc. was the bank of last resort, the next thing you know our 25% is 75% because we had to keep kind of shoveling the money in. A lot of people thought we were nuts. Shepley kind of believed in it.

NELSON: So this was a kind of intuitive...

NICHOLAS: Yeah. I hate the word visionary; people who call themselves visionaries to me are suspect. I think he could just imagine the possibilities of a lot of things. At any rate, so in 1974 – it was '74, maybe '73 – he called me into his office one day and he said, "Nick, you're going down to run Manhattan Cable, Sterling, you're going to run it." Let me back up because something else happened that just occurred to me, and to be fair to some of the people in the industry...

NELSON: Yeah, get it on the record.

NICHOLAS: In 197..., I guess the year before that, it could be '73, we were fed up with Time, Inc. advancing capital to this thing, and it was getting deeper and deeper and deeper into trouble. By then there was another little company called HBO, which was owned by Sterling Manhattan Cable. It was eating capital, it had really just begun to get under way, and we said, "Look, if we're going to continue we want to own the whole thing. We're going to own it all." So there was a series of complex financial transactions. We bought out Chuck Dolan, the other shareholders. Chuck ended up buying from us a couple of franchises in Long Island, which became really the seed bed for his enormous success in the cable industry. So he owned Long Island, which was all of maybe 100 cable subscribers, something like that. We had 50,000 in Manhattan, we had HBO, which maybe had begun, maybe, but I'm not quite sure, and Chuck Dolan was running that as well. So, at any rate, we bought it all and we owned 100% of it, which allowed us to make decisions without going to a board and minority shareholders and public, and all that kind of stuff, which can be a pain in the neck when you're in trouble. So Shepley said, "Okay, we own it. You go down there and you run it. You figure out what to do. If you can't figure out what to do in six months we'll just shut it down, and sell it." So, oh God, there are more stories in here. I've got another one, which kind of comes back around and around and around. Maybe that's why we do these things.

NELSON: That's right. Exactly, exactly.

NICHOLAS: Before we bought in 100% of Manhattan Cable we said, "You know, we don't know what to do with this thing. We don't know how to run it. It's got 50,000 subs. We'll take HBO in, we'll take 100% of that, play around with that for a couple of years."

NELSON: And what did you see as the difference?

NICHOLAS: HBO was a programming company. Time, Inc. was more of the editorial, journalistic, software company. The hardware stuff, we didn't think we got that.

NELSON: Wires and poles and that stuff, yeah.

NICHOLAS: We just didn't kind of get it, for whatever reason. So we said, "Well, who the hell will buy us. Maybe this guy, Steve Ross, at Warner Communications. Maybe he'll buy it; maybe he'll buy it." So Shepley and I went over to see Steve Ross, and finally we had a deal. Steve said he'd buy it. I think the price was a million bucks. What's it worth today, a billions? 2 billion? I think it was a million bucks. Steve said, "Fine." We signed a deal, subject only to their doing the obvious due diligence. They went and did the due diligence; they came back and said, "We can't pay a million." They tried to give us a haircut, maybe it was we'll pay 800,000, and Shepley bristled and he said, "No, a million or nothing." And Steve wouldn't back down, he wouldn't give us the extra two hundred grand, so we ended up owning the damn thing. That's really what happened.

NELSON: Couldn't get rid of it.

NICHOLAS: Couldn't get rid of it. So that's why Shepley then said, "Okay, we now own it. You go down there and run it." '74, I'm pretty sure. 50,000 subs.

NELSON: Were you feeling like maybe we're stuck with this thing, it's a leftover, now they're sending me to do this?

NICHOLAS: Well, no, I didn't feel that way at all. This was my first command. You know, in the Navy you get your first command it could be a PT boat.

NELSON: Whatever it is you take it.

NICHOLAS: It's yours. You get to run it.

NELSON: You get to be captain.

NICHOLAS: Exactly. You're accountable. So after kind of brushing aside whatever kind of concerns I had, I went down to Manhattan Cable. You know, like all businesses, if you sit back and think about it a little bit, nothing's that complicated. There's no rocket science here. It's basically good equipment, good engineering, good installation, good customer service, I mean these are not unknown kinds of things. Good commonsense. So at any rate, there were a lot of good people down there.

NELSON: Where were their offices?

NICHOLAS: 23rd Street in Manhattan. They're still there. The local 3IBEW, the B card guys, they were really busting chops down at Manhattan Cable. We had a lot of problems and service calls. So one of the first things I did when I got there was to meet with the union guys and say what's this all about? What's going on? I learned pretty quickly that it was just normal kind of human stuff, that management down there treated the union guys like a bunch of, you know, dregs, like non-entities, no respect, no nothing. Well, that wasn't my style, that's not who I am, but at any rate, we got that fixed up right away and restored some pride in just kind of normal everyday work. I offloaded most of the management and brought in Glenn Britt, who's now chairman of AOL Time Warner Cable, was our finance guy, Thayer Bigelow, who at one time was president of Time Warner Cable, I don't know if you've interviewed Thayer. A one time president of HBO brought him in as my number two guy. We didn't know a thing about this business, and we had one holdover from the old regime, Frank Chiaino, who is a very knowledgeable guy. He knew how to get things done in New York City. He knew how to get trunk cable strung through the Empire City subway ducts. He understood these things, and was a class act. So together we figured out how to do it. It was a combination of... Well, there was one other thing. The relationship with the City of New York was terrible.

NELSON: Who was mayor at the time?

NICHOLAS: Oh, well, the mayor – who the hell was the mayor? I don't even remember. Beam?

NELSON: Beam, I think.

NICHOLAS: But we had a guy named Morris Tarshis, who was in charge of regulating us, and Morris was an extraordinarily decent civil servant who was just fed up with promises unkept. So it was much like the new Dick Parsons coming into AOL Time Warner, where Dick is saying to Wall Street, "Hey, I'm not going to make a promise we can't keep. I'm just not." So we adopted the same strategy, although I'm not sure we thought of it at the time. That's kind of the way people should behave. And we delivered and Morris finally said, "Okay, you guys are back in the pile of good guys again. I'm going to help you anyway I can." So with the help of the union, with the new management, with the City of New York, in a year we had it in the black, and it was a very exciting time for me, because we were survivors. We would've had to shut it down, all these guys were going to lose their jobs. It was a survivor. The rest is history. After you kind of break even you don't have to worry about being on the umbilical, taking cash from somebody else to make it. Then you just grow.

NELSON: So at that point, then, it started actually spinning off money into Time.

NICHOLAS: Well, you're talking nickels and dimes at the time, but that's survival. When you're losing money and all you've known are losses, all of the sudden you're no longer losing money, that's like victory, at least in any business I've ever been in. It gives you breathing room, it gives you time to figure out, you're not going to meetings up at the Time Life building every week with Jim Shepley saying, "Now, Nick, how about this, how about that, how about this?" Not that he was second guessing, he was pulling along with us, but it allows...

NELSON: A different dynamic.

NICHOLAS: Yeah, it's more money you can invest in upgrading, quality, programming, software, people, you name it, everything. So, you get the virtuous circle going. We were followed by other managements who just did a great job.

NELSON: And how about, where was HBO while you were working on the cable side?

NICHOLAS: HBO was struggling. This connects too, because HBO was a struggling start-up pay television company, and it basically had competition in what was called a stand alone business, which is fundamentally there would be a bunch of tape machines at the headend and people would plug in cassettes and there would be the movie. The only difference is we had one big tape recorder somewhere and microwaved the signal out, in effect a network, and half the time cable operators preferred having the stand alone network because they could decide what movie plays at eight, what movie plays at six, as opposed to taking the HBO feed, which was programmed. At any rate, it was barely making it and there was a falling out with Chuck Dolan. Chuck left HBO and went off to Long Island to kind of build Cablevision, and Levin was promoted, who was his programming chief. Jerry was hired by Chuck. Jerry became head of HBO. So, this is now mid-70s, '76, HBO is failing, and the same Jim Shepley is overseeing that at Time, Inc. and he is very upset because budget after budget after budget HBO has missed its financial targets and the company is having to do the same thing it did with the cable company, which is shovel to the cash in as the sole owner. And so I was given another call saying "You are now reporting to duty at HBO. You're going to takeover, and I want to know in six months whether this company can make it." It kind of sounds unbelievable today where HBO's profit is well in excess of half a billion dollars, its profit!

NELSON: And your role was...?

NICHOLAS: CEO. I was president.

NELSON: And where was Levin?

NICHOLAS: A very interesting transaction, and I will say it for this camera. What happened is Shepley asked me to come to HBO, to leave Manhattan Cable, and the cable was in the black, so I felt okay about leaving that, and I said, "Jim, I can't work for Levin. He's the guy who's presided over what is a disaster, and this isn't personal, but I'll only come if I can actually run it." He said, "I understand that. That's a reasonable request." And he wasn't quite prepared to do that at the time, but six months later he called back again and he said, "You've got to come up and you can run it. Levin's going to stay there as chairman, but you're the boss." And that was totally understood, by Levin, by everybody that worked there, so I went to HBO and I did the same initial thing. I cleared out all the management who worked for Levin, who were all, I would say, very intelligent thoughtful people who were basically yes men for Levin. They weren't independent minded people who would tell you what they thought about whatever it is they were in charge of. You can see what's going on here, right? You're a journalist. This is a long story here. It covers a lot of years.

NELSON: Well, this is a chance to get it out.

NICHOLAS: Yeah, this isn't going to be in the Wall Street Journal next week.

NELSON: Now at this point at HBO, and I want to let you continue the story, but just to sort of set the stage, had HBO done its first satellite feed yet?

NICHOLAS: HBO had gone on the satellite around Halloween of the prior year.

NELSON: Yeah, '75.

NICHOLAS: '75. And we had roughly 400,000 subscribers, and the thing I remember – how could you forget – is every week we lost more subscribers than we gained. This is called churn. While cable itself had a very low churn rate, basic cable, and was growing, growing, growing, and growing, cable had about 6 million subs at the time, the total industry. Today it's 60-whatever million. HBO had less than half a million and every week we lost subs, every week. So the business was going backwards, losing money. I mean that's why they sent me there. Figure it out or shut it down. If you can't figure it out, shut it down. It may not be a business. So, at any rate, I made a number of key hires. One was Austin Furst, who was responsible for the circulation launch of People Magazine, an iconoclast if there ever was one, as my programming chief. He didn't know anything about programming, but he was a hell of a businessman and he learned a lot about programming. A guy named Tony Cox – Tony was actually an old friend of mine from Princeton and Harvard. Tony had gotten fired by the magazine company, quietly fired, he worked at Life Magazine where he was general manager, and Tony called one day and he said, "I need a job." I said, "Come on down. I don't know if it's 30 days, whatever it is, but come on down, help me out, and see if you can find a job in the company."

NELSON: And he had first turned you on to the idea of going to work for Time.

NICHOLAS: Yeah. A wonderful, wonderful guy. Tony, let's see, Sean McCarthy, who I brought in as the finance guy, Jimmy Heyworth, of course, was there. Jimmy was one of the holdovers. Jimmy was a stalwart. Eddie Horowitz was there, but we moved him into the satellite and engineering function. Peter Frame, lots of...

NELSON: When did Michael Fuchs show up?

NICHOLAS: Okay, the Michael Fuchs story is one of my favorites because I'd been commuting on the Hudson River line for a lot of years and had gotten to know a guy named Neil Pilson over at William Morris, and I thought that Neil should come in and run what we called our special programming, which was everything but films, feature films. I talked to Neil one day, I talked to him about coming over to HBO and he thought about it and said, "CBS is recruiting me." He eventually became president of CBS Sports, but "CBS is recruiting me. I've got two kids and a mortgage, I can't take the risk, but I've got a guy right under me at William Morris, who doesn't have a mortgage right now. His name is Michael Fuchs, he's a great guy. He's terrific, you all ought to interview him." At any rate, Michael shows up. Michael, by the way, recruited Frank Biondi, six months, maybe a year, after Michael joined. So it was a fabulous crowd. I could probably sit here and name another 50 people because it was a fabulous team of people we put together. I've got to tell you one other thing I did pretty well, which is I tried to be very sensitive about Levin, and what would it feel like if I were in his position with some other guy in there running the place. So I behaved the way I think most of us would have tried to behave, invited him to meetings, tried to keep him very much in the loop. Used appropriately, he's a valuable guy. So, at any rate, we got Austin Furst in there negotiating with the film companies, he's bringing the costs down, he was a fabulous negotiator. When you negotiated with him and you were at a film company, you had to know that if you didn't make Austin's deal, we were just going to leave you out. We weren't going to play your movies, and we couldn't afford to do that with too many studios, but we could with one or two. So we got the prices in line, and the other thing we did was consumer research, can you believe it? In the first couple years of HBO history they never once asked their consumers "What movies do you like? How would you like us to schedule? Do you like what we're showing you?" In a sense, research. The kinds of things big networks do everyday and have done for years to kind of check the pulse of the consumer. So Lee Deboer was hired by Michael and Austin from Cox, from their media buying service in New York, and pretty soon we had a hell of a lot of intelligence about the consumer. Austin used that to tremendously modify the way we scheduled and promoted this service. That's what made the difference. That made the difference. The consumer – all of the sudden the attitudes began to shift, fewer disconnects, and pretty soon we were actually net gaining. So that's one part of the story. The other part is Malone.

NELSON: John Malone?

NICHOLAS: Yeah, it's Malone, and really, Gene Schneider. I talk mainly about the programming side – that was the product, right? And then there was the affiliate side; that is having relationships with the cable operators for the distribution of HBO, and you can imagine if we were losing subscribers every week, they weren't just our subscribers, they were fundamentally cable system subscribers, and they were losing the subscribers and they were desperately unhappy and nobody was more unhappy than Gene Schneider. And I had never met anybody in the cable industry. I was not a cable industry person at that time. So their big system was in Tulsa, Oklahoma and I climbed on a plane and I joined Bill Hooks, who was HBO's regional manager out of Dallas, I guess at the time, and we went to Tulsa and this guy named Mark Savage was there at the time running the system and we kind of went through everything. I listened, I listened, I certainly didn't have answers, but it was clearly about the product, and they were courteous, but it was clear that we had a big problem, again, the product. Let's say two months after that, I called John Malone – I did not know John. TCI probably had a million subs, I don't know, a small cable system. Again, we're talking '76, and I said, "Would you like to meet? We'll come out and meet you anywhere." And John said, "How about the Holiday Inn at Stapleton Airport?" I flew with another guy out there to Denver. John and Bob Magness – I mean, good old Magness. I loved Magness. At any rate, we met at the Holiday Inn; it had to be nine o'clock at night, and we ordered meal after meal after meal that never came out of this kitchen. We might have been the only people in the dining room. I remember Bob eating his cigars, they would get smaller... he never lit them... they would get smaller and smaller and smaller. Meanwhile we were having beers and scotch, and God knows what, but John and Bob made a lot of really terrific points about our business model, about the product, about the scheduling of sports.

NELSON: You're in the Holiday Inn at Stapleton Airport and Malone, Magness, yourself... they give you a lot of ideas or suggestions about what you should be doing with this thing – HBO.

NICHOLAS: Yeah, a critique, what we're doing that's a problem. It's really fascinating, up until this point, the management of HBO was paying a lot more attention to kind of what was on the air as opposed to what our cable affiliates were saying, and our cable affiliates were the customer, you know, and they were smart people and they were out there in the field, as it were. But at any rate, New York always sort of knew what was right. It turned out to be not so right, but I'm sure the same relationship exists in many ways between the big three over-the-air networks and their 200-odd affiliates all over the country. At any rate, I took it to heart. Malone and I began a friendship and relationship... actually, he and Magness even suggested I join them in Denver on the joint TCI at one time, which I'd forgotten about, but at any rate, a relationship which lasted many years, we had a lot of fun, and we did a lot of good things together. We compared notes almost daily about what was going on in our various operations, how we could make it better. Later on we did quite a few deals together. At any rate, between kind of listening to the consumer with the research and listening to the customer, the cable MSO, you finally got enough ideas to begin to experiment in change, how we programmed HBO in rather dramatic ways. We got our costs under control, really led by Austin; Michael started developing some rather unusual and interesting and very impactful non-film programming. I mean I remember the first time I ever saw Robin Williams was on HBO, and the first time I ever saw Steve Martin was on HBO – brilliant, brilliant stuff that never could have been done on commercial television. Those are classic, just classic events. Bette Midler. Others too numerous to mention. So we're now kind of '76-'77, and believe it or not, in the middle of, I think it was late '77, I got to go to Shepley's office and say, "Jim, we're actually making money." A year later we had turned the animal, and it was clear as soon as we had turned that disconnect rate down, it was clear that we were going to make it. The momentum had shifted in a positive direction, and ultimately profits...

NELSON: So how long did you stay there, now that you'd gotten things going?

NICHOLAS: So that's 77, I stayed there a couple more years, and my concern at that time shifted in a way. We were growing and it was like... I watch people take credit for the growth of their companies – this was like holding on to the tail of a tiger. This was how do you manage growth, not how do you grow it. We had climbed on a wave we didn't even know existed, this pay television wave, and it was going like that and we happened to be the leading surfboard perfectly positioned on the wave, so we had a hell of a ride, and it was very hard to differentiate how much of it was due to our brilliance and how much is due to the size and strength of the wave, but we knew we were on one, and my concern shifted. I began to think, "Geez, we've got this amazingly talented group of people. How do we keep them all interested? We don't want them getting raided by other people." And so there were other issues that went on. I spent more damn time trying to persuade people like Matt Blank from leaving; he's now running Showtime. It was endless.

NELSON: So you had a lot of talented people there.

NICHOLAS: Yeah, we had a lot of talented people, and you know, I was getting bored. I mean, a silly thing to say, but I was getting bored. I guess maybe I'm at my best when there's a big problem and kind of a team needs to be built to kind of figure out what to do and then just do it. I think my old man was that way, my brother is certainly that way. It's a thrill. But in the late '70s, Jerry went off. He left HBO – I'm trying to remember the timing, I can't remember the exact timing of all this – and he was put in charge of the area of Time, Inc. that oversaw its cable TV operations... no, actually, there's something else that happened that's really important from a cable industry point of view. You asked me what happened in the '70s. Before I got thoroughly bored, which I never did get bored at HBO, in 1977, I think it was, '78, after we got HBO into the black, I went to my boss and I said, "You know, we own 5% of ATC. We ought to own the whole damn thing." So he said, "Well, that's a good idea. How do we do it?" I said, "I don't know, but let me talk to Monty Rifkin." So I talked to Monty – actually what I did was... I know what it is – I called him up and I said, "We'd like to buy some more of your stock in the open market. We have 5% and we don't want to be unfriendly about it. We'd like to own 20%; it's a magical number for accounting reasons." He said, "Well, you're not going to be able to get it. It's hard to find on the market, etc., etc." I said, "I don't know about that, but we've got your permission. Thank you." I went to a brilliant guy named Dick Rosenthal at Solomon Brothers and explained the whole situation. He said, "No sweat." Well, we had the stock in three weeks, four weeks, whatever, and so we then owned 20%. Now let's say this is '77. '78 I went back to the chiefs at Time, Inc. and I said, "We ought to own the whole thing." And they said, "Okay." We were taping a Michael Fuchs special in Denver, Phyllis Diller, the Phyllis Diller Comedy Hour where she could talk about whatever she wanted at some comedy club in Denver. So I flew out for that and I asked Monty if he would join us at the show, but I wanted to chat with him about ATC, and it was at that point I said, "We'd like to buy the whole company." He said, "Let me think about it." But within 24 hours he said, "If the price is right we'll consider it." I polled my board, short story, six to nine months later we bought the whole company. I'll remember to this day we paid $300 a sub for ATC, it was like 150 million dollars for the company. None of us knew we were getting the bargain of a lifetime, but it wasn't a bargain at those prices, those were the prices of the day. Monty didn't sell below market, as a matter of fact he got a good price, but you can look back to '77, '78, $300 bucks a sub. Today it's $4,000 or whatever. So, we did that while I was still at HBO – I was sort of a sideline, and nor really part of my HBO job – and so ATC came in and Monty Rifkin stayed with the company, then Levin was moved to a job overseeing HBO, which was me, and Levin, which was cable TV. I didn't feel that was terrific to have Levin overseeing me, obviously, since it was my team that kind of figured out what to do at HBO, nonetheless, that's what happened. I applied for an exit visa out of HBO, in 1980 they gave it to me, and they put me in charge of strategy for Time, Inc. overall, and that's the end of my HBO time period. While I was in the strategy job, just real quick, we owned a rather large forest products company in Texas, land, timber, huge, very valuable. It did make sense in my view, in most people's view, for a publishing company to own it, but it was a huge political issue in the company. We had board members who came from the forest products side. Ultimately, though, we prevailed. The company got split in two, and our shareholders were given two pieces of paper – a media piece of paper called Time, Inc., and Temple Inland, which exists today, a fine company traded on the New York Stock Exchange. The largest landowner in Texas, a big deal company.

NELSON: You make it sound very simple, but I assume this was a major...

NICHOLAS: Oh, it was very complicated at the time, and of all the letters I got from people who appreciated what we did, the one I have that I've saved is from Warren Buffet, who had become a stockholder of our company before that happened and really believed that was the right thing to do to simplify and clarify the company. Also, right around that time that John Malone and I are still having our conversations about things, which continued for years, I'll get into the Turner stuff later, and one day he said, "You know, Magness and I would like you to come out to Denver and join us at TCI. You can have any title you want, you just name it. Just come out and join us. The three of us will be the little band of musketeers and that's what we'll do." And I thought about it because of my respect for John and for Bob, but my family was rooted in New York, my kids were all in school, my wife had a practice going in psychology, she's a therapist, which she started later in her life. I just couldn't do that. So it is kind of a regret that I couldn't have worked with those guys for a couple years. I think it would have been a blast, but at any rate...

NELSON: So you stayed at Time?

NICHOLAS: I stayed at Time. I was CFO for a year, for one year in 1983, and then something happened again that had happened before. Levin had problems in his job, in his oversight of both HBO and cable. Monty Rifkin resigned and Trygve Myhren came into the job. At HBO Frank Biondi had been made chief, and Frank and Michael and Tony Cox were fighting it out like biblical brothers down there, and they had made an extremely unfortunate transaction with Columbia Pictures, which damn near bankrupted Time, Inc. I mean it was a serious error in judgment, serious.

NELSON: Just gave away too much of the store?

NICHOLAS: Yeah, half a billion to a billion, which in those days was big money. Today, maybe they throw it away, but in those days...

NELSON: Some do.

NICHOLAS: In those days it was gigantic. So Gerald Levin was told one night he was out of that job, and I was put in that job. Again, "Fix it, Nick." So we fixed it, and the fixing... I have tremendous respect for Frank Biondi. A whole lot of things didn't work. Frank left, Michael came into the job, and of course Michael's history is Michael's history, and anything he tells you I'll probably agree with. He did just a phenomenal job at HBO, making it into the household name that it is today.

NELSON: In this time period what is your title in the company?

NICHOLAS: I was, whatever, Executive Vice-President at Time, Inc.

NELSON: Okay.

NICHOLAS: At ATC we had 600 people on the overhead in Denver headquarters. Tryg was moved out, I moved him out. Tryg will never speak to me again. Joe Collins went into the job. There were some interim moves. I had moved Joe to president of HBO under Michael temporarily, and Thayer Bigelow out to Denver as president, but then we swapped again. Thayer came to HBO and Joe took over from Tryg and we shut down the Denver headquarters and we moved ATC's headquarters to Stamford, Connecticut, 60 people, 10% of the staff. We were too centralized in terms of the way we ran the company. The whole idea was to have stronger managers out in the field running systems whether they be in Memphis, San Diego, whatever, and less power and control in the center. What Joe did there is legendary. He took the margins from 35 to high 40 percent in a number of years. A real class act.

NELSON: And Time Warner Cable, of course, still has a very strong regional structure.

NICHOLAS: Absolutely, absolutely. So at any rate, that was '84, '85, '86, in '86 that's what happened. It was fix-it time again.

NELSON: So what was next?

NICHOLAS: In '86 I was made president of Time, Inc. and anointed successor as chief executive of the company.

NELSON: Now you're overseeing the whole company.

NICHOLAS: Everything.

NELSON: And how was the company doing at the time?

NICHOLAS: There were three of us; Kelso Sutton was running magazines; Levin was now running strategy, the job I had had earlier; and myself. We were all directors and they kind of removed those two guys from the board, they the board did this. They said, "Nick, you're the president. You're going to succeed as CEO." And that was it. The company, overall, had been flat. The earnings per share had been flat for five or six years, not distinguished, not down, not up, not as good as it could be. By the way, I've got to go back to these two years, because this is the thing that I just somehow have had a knack for – '84 to '86 – I didn't sit there and fix ATC and HBO all by myself. As soon as I got the job and these things needed fixing, I found two young guys, Glenn Britt and Jeff Bewkes, and said, "Will you two guys be my deputies for a year? Just help me figure this out." Jeff is now running HBO; Glenn is now running Time Warner Cable. And so, I just want to make sure that these guys get the credit for whatever happened there because that's how you do things. You surround yourself by people who are bright, but also willing to take risks, willing to tell you what they think and what they believe, and willing to go out on a limb. So at any rate, I became president and I bought Thayer Bigelow back once more. Thayer is the all time utility in-fielder. He can play any position and play it well. It's astonishing how good this guy is. So we brought him in to be CFO.

NELSON: Thayer Bigelow: Utility Man.

NICHOLAS: Yeah, I mean Thayer came up to be CFO. Thayer Bigelow – I've mentioned him several times – if you were a manager or owner of a baseball team, you'd want him on your team to play almost any position. He can start, he can pinch hit, he can pitch, he can catch, he can catch fly balls, and people love working for him. But at any rate, that was '86, and all we did was do the same thing we'd done everywhere else. We just took a look at all the different operations at Time, Inc. The publishing area was too fat; it's good old Time, Inc. publishing and I loved it, but even for me there was too much fat, so I decided we were going to have to tackle that big time, and believe me I wasn't loved for that. All the nicknames I picked up, "Neutron Nick" and this, that and the other...

NELSON: "Nick the Knife".

NICHOLAS: Yeah, "Nick the Knife", and what I did – real simple – I sold all the perks, all the corporate planes, all that stuff that would be seen as entitlements of corporate people like me, sold them all. Not one person went off the payroll before all that stuff went first, every last bit of it. My job wasn't to be loved, my job was to do the right thing for the company, for the shareholders, and not to worry about my place in history.

NELSON: But there were people let go as well as the airplanes.

NICHOLAS: No question about it, yeah, but you know, it's like anything else, you've got to set a tone. You can't pay yourself some ridiculous amount of money while you're laying off 4,000 people. I mean, that's insane, that's absurd. It happens everyday, we know it. We see it. We don't pick up the paper without that happening. I don't want to point the finger at anybody other than American business as a whole, for the most part.

NELSON: There is a real disconnect there.

NICHOLAS: Big time, big time.

NELSON: This is a subject for another day, nonetheless, but you had a direct experience with it.

NICHOLAS: Absolutely, Steve. Absolutely. So at any rate, we went through things, we changed management in there at the top, and again we brought in a scrappy guy who wasn't part of the club, and bingo, things started to happen, and the next thing you know, we have three record years of earnings in a row – '87, '88, '89. And '90. Everything going into Time Warner. We set consecutive earning records. It wasn't so much what we did that was different, it's what we didn't do that was different. We made choices. We said, "We can't do everything." We had to be more selective about where we'd invest, where we'd dis-invest, where we'd prune the weeds, where we wouldn't. We applied the same lessons to the rest of the company that we'd learned at HBO. It's all common sense stuff. Again, none of this is rocket science. It takes a will and it takes a discipline, but financial discipline is the least of it. You've got to have it, a strong balance sheet – nothing substitutes for a strong balance sheet, nothing – but if you've got one and you can discipline yourselves to keep it, all the other stuff is common sense. There's lots of different ways to skin a cat. No, I'm not going to say we did it the right way, it could have been many different ways, the fact is we did it.

NELSON: So, you're running Time, Inc., it's the late '80s, the company's doing very well, at this point in time, how much is the cable operations starting to contribute to that?

NICHOLAS: Cable is a big part of the company. I'm guessing a quarter, maybe even 30% of the company. Not only is it large just in terms of scale, but Joe has done quite a job of ramping up the EBIDA, you know, the operating margins, and it was in all likelihood, in my recollection, the fastest growing part of the company at the time, maybe HBO was right after that. But it was right at that time that I remember, you undoubtedly remember, that Turner – this was '87, '88 – had gotten himself in trouble when he bought MGM. He basically took on all this debt. Remember this preferred A stock he got from Kirk Kerkorian or Drexel or whatever the hell it was, but believe me, it ate him alive. I'll never forget being at the, I think it was the Beverly Hills Hotel... no! We were at the MGM Studio when he closed the deal, and it was myself, Tony Cox, John Malone, I think John Sie, Turner, Terry McGuirk, and we're in this big Cecil B. DeMille room of the studio, and the deal is about to close. At any rate, Ted had the right idea, he just didn't get financed correctly.

NELSON: Getting ownership of his content.

NICHOLAS: Yeah, getting ownership of the content, of the MGM content. So, he got in trouble, remember Ted had owned 80% of the company, 20% by the public. John decided to mount a rescue. I think Malone was afraid that we were going to beat him to the rescue. So, John offered a rescue package to Turner of half a billion dollars. Basically he would buy out all of these other interests and I remember calling John and saying, "John, I'll tell you what, we'll split it with you. Let's do it half and half. Maybe we can persuade some of the cable guys to come in." John said, "Okay, let's do that." So here we had basically, what turned out to be 60% of Turner, and we offered it around to Chuck Dolan, to Continental, to Ross at Warner, whatever, they each took five and ten million dollar chunks... Comcast... nobody really stepped up to the plate. So Time and TCI ended up owning most of it. John and I took board seats and we worked really well with Ted. Things went very well, and Ted was accumulating land at the time. You know, Ted would leave a board meeting and he'd walk back in and he'd say, "Gee, I got this chance to get this land somewhere in Montana and I need 50 million bucks in a hurry. I just checked the stock price and the stock is $14, does anybody want to buy 15 million in stock?" And Malone's and my hands would go up and we'd split it. That's how it happened. This was not some hire Merrill Lynch or whatever to get it done. It was very informal, everything was done on a handshake, a lot of trust around in those days, and we'd do it. So the TCI and Time ownership of stock kind of crept up, and in this deal, by the way, which TCI and Time did with Ted, there was a provision in the deal, which if Time and TCI ever became the controlling shareholders of Turner, that Time was allowed to be the managing partner with respect to CNN. In other words, it was something that John conceded to us, saying that we wanted journalistic control over CNN because that's why we wanted CNN to begin with because it was a journalistic enterprise, a one-of-a-kind and a fabulous entity. So I'll come back to this later – mid-90s – but at any rate, so I enjoyed being on the Turner board, and those were good meetings in Atlanta, and soliloquies from Ted Turner over dinner, soliloquies from Hamlet. I mean, ask Ted sometime, it's amazing what he can tell you from memory. He can go on for a half an hour, Shakespeare...

NELSON: But you know Ted very well, and it's been reported here and there that sometimes he chafed under this relationship because he was used to being 100% owner and entrepreneur...?

NICHOLAS: You know something, I think a lot of things have been reported, but I think if you ask Ted, how did Turner himself and the company do in the years, '87-'92, before he and Levin had to start dealing with each other, after I left Time Warner, I think he'd say we did great. I can't think of a single thing, major initiative that Ted wanted to do... now, if there was a problem Malone and I would have lunch or dinner with Ted and we'd kind of figure things out. None of this hostile stuff, none in the press, it was collegial, what's best for the company. We admired Ted. We weren't thinking we had a lousy businessman on our hands. After all, he invented CNN, we hadn't. He started TBS, we hadn't. So, a lot of respect for Ted.

NELSON: Now what about when he was after CBS. I think that was around, if I recall, around 1990. Because that seemed to be one place where he was frustrated. Maybe that was an unrealistic thing to be reaching for.

NICHOLAS: You know something, he wanted CBS, it was an unrealistic thing to do. Had it been realistic we might have been interested. I mean realistic financially. I laughed, I remember when he came in, I said, "What do you need for this, Ted? Your Visa card?" At any rate, he came in at the same time he wanted to buy CNN he was in financial trouble, he said, "Do you want to buy CNN from me?" I said, "Yeah, sure, you got some numbers?" He pulled them out of his briefcase, we made an offer, but he didn't really want to sell it. Murdoch apparently made him an offer as well. I mean there were so many things going and coming at the time there. I mean, I think Ted's desire to own a network is a good idea. It's hardly a bad idea. The question is how do make the numbers work so that the deal can be done and everybody wins.

NELSON: Speaking of deals, we're now approaching the big deal.

NICHOLAS: Time Warner?

NELSON: The Time Warner deal. So I guess it's time to get into that?

NICHOLAS: Yeah, sure. I...

NELSON: Just give us a little bit about how that started. You had mentioned some relations with Steve Ross way back when.

NICHOLAS: Yeah, I'll tell you how it happened. I had started kind of thinking, and we put it in the maybe the '87 or '88 Time annual report, we began to see technology creeping in and affecting the media businesses in ways we hadn't previously understood, particularly as personified by Intel and the chip, and things digital. It was only 13, 14 years ago, but it was eons ago in many ways. So we began to think about, you know, at Time, Inc. fundamentally our business is a print based business, and people in the world – I remember kind of the statistics – 70% of the information and entertainment that people in the world obtain they get from the screen. In those days there weren't a lot of laptops around either, so it was a film screen or a television screen. So we thought, you know, we ought to have a stake in those businesses. That's really how... it wasn't any more complicated than that. We ought to have a stake in those businesses. Interestingly I can date this back to a trip to Africa I took with one of my children and my wife in '87 to East Africa, and for whatever reason there was a stopover in Zurich on the way home, and we got to Zurich at three in the morning and we went to some airport hotel and they slept and I couldn't sleep, and I went down to the bar, there was nobody in the bar, and I wrote, I remember very lengthy scribbles on these little hotel pads, I wrote the game plan for putting together Time and Warner. I came back to New York, I was in New York the next day, and I gave it to a guy named Phil Lockner, who was our counsel, and I said, "Phil, would you kind of write this up as a memorandum and put it into good English," and this, that and the other. Maybe it was Levin, I gave it to Levin.

NELSON: And why Warner? Why did you focus on Warner?

NICHOLAS: Well, because you look around at the different companies, they had the right collection of assets that we thought fit better. Paramount had all these other things attached to it, we thought that basically Martin Davis was an operator, while Steve Ross was much more tuned to the content of the business itself, that Davis was just an operator. I mean he could have run anything, and we wanted to be allied with somebody who was kind of more in tune with the actual content itself. So, again, it's personality, I mean presumed personality. At any rate, we hashed this around, Dick Munro, Jerry Levin, myself, some other guys, we convened a strategy group at the company of managers from different parts of Time, Inc. We considered this in a very broad way throughout the company at the higher levels. Not the Warner part, but the putting together of... Warner was just the chosen partner, so one day when I was in jury duty in Manhattan, I got out early, I called Steve and chatted with him and he said, "Why don't you come up and have coffee?" And I did and the rest is history. We negotiated a deal with all the ins and outs and they're all over the place. The stories are everywhere. We negotiated a transaction, Paramount jumped the deal. These were the days of junk bonds, you could call up your bank, "Sure we'll lend you the money." Paramount jumped us, we turned a merger – a stock for stock merger – of two equal sized companies into an acquisition of Warner by Time, in retrospect could have been a mistake. We should have said, "Okay, Paramount buy us." That company would have probably gone under, too much debt, who knows, hard to know. But in retrospect, the guy – I mean I consider myself most responsible or accountable for Time Warner – Levin was the mechanic, kind of lawyering the deal, and looking back, something I've never said for public consumption that I've said to friends of mine who've asked me, I'm not sure. You look back today, it's always easy to be a quarter back on Monday morning, the Time, Inc. businesses were thriving, the Warner business, the music business is not doing well, digital, as you know, erosion, too much management turnover in the music division, the film and entertainment is doing well, but from a return on assets point of view it's a lousy business. It really doesn't help the other businesses, it doesn't help HBO, it probably doesn't help Turner's businesses that much. Should we have done it? I would say... I could easily make the case it was not a smart idea.

NELSON: Do you think that sometimes, and I suppose we could reflect later on the AOL Time Warner merger, are some of these mergers maybe in the long run turn out to be not as productive as they looked at the time with the excitement of "let's merge, let's get bigger, let's have more product lines."

NICHOLAS: Most of them. The ones that make the most sense, I mean if two cable companies are merging and you're putting oranges and oranges together, those make sense. It is clear to me in retrospect, the one we should have done, back then, if Malone would have agreed to it, would have been Time-Turner because you have CNN, you have the cable programming channels, we were in the cable programming business, we were in the cable business, we were simpatico in many ways, kind of the journalistic thing, we were definitely simpatico with journalistic independence, don't corrupt the journalist – definitely a Time point of view, historically. So, if I could go back, Steve, and re-write history, I would, if pushed to the wall, not have done the Warner deal, forget about all the other stuff that happened or I was there or not there, just on the merits, the deal itself, and I would have tried to combine Time and Turner. That would have been, just as is, a fabulous company, and then since I know you're going to go ahead and ask me, no, I wouldn't have made the AOL deal, and I'm on record in Wired Magazine a couple of months after it was announced saying "I don't get it."

NELSON: Alright, well, we'll leave that for now, since that brings us up to date. But the Time Warner deal, obviously, as we know, did go forward. You and Steve were co-CEOs with the expectation that you would be his successor.

NICHOLAS: There was a signed agreement. I mean it was a signed, supposedly bullet-proof agreement that in five years he steps down and I'm sole CEO. That was the deal. You know, I'm one of these handshake guys. You shake my hand, you've got it, you've got my word. I know it's naïve, but I like to believe other people are that way, and I'm a grownup, I know they're not always that way. You know what, Malone was that way, lots of people are that way, most people are that way, but not Ross, not Levin.

NELSON: I think a lot of the cable industry from my observation grew up that way, on a lot of handshakes.

NICHOLAS: Yeah, you know, it was really easy. It's a very contract intensive business. The first contract we did with Malone, I think it took three years to get the thing lawyered and signed, but everybody lived up to it. There were many, many opportunities to escape these things. Story – here's the story of all time. Turner's acquisition by MGM from Kerkorian. I was on a plane from New York to LA to Hawaii for an HBO affiliates meetings. I had a 250 page prospectus of the Turner deal with MGM. I read through it – not line by line – I came to a point on there that was a clear out for Turner in what was a disaster deal. I got off the plane to change planes in LA. I called John Malone, and I said, "John, you got that prospectus sitting around? Turn to page 100 and whatever," I said, "Look at this line. I think Turner's got a clear out here." He looked at it and he said, "I think you're right." I got to Hawaii and called Ted. He said, "You're kidding! Show me." He said, "I can't do it, Nick. I gave my word. I gave my handshake." Enough said. Gotta admire people like that.

NELSON: Now, speaking of people, Steve Ross. What was your relationship with Steve Ross?

NICHOLAS: I had a good relationship with Steve Ross. Steve Ross was a dying man when we did the deal. He didn't like to talk about it, he would deny it...

NELSON: And you did not know that?

NICHOLAS: Oh, we knew that.

NELSON: You knew that?

NICHOLAS: Yes. We knew that, our general counsel knew it. The only people I told were Levin and Munro. We had irrefutable... don't ask me how, but in this world, today, unfortunately, there is no privacy. We knew everything; we knew what his life expectancy was. I asked Steve pointblank about this and he denied he had it, and I said, "Okay, what am I going to do?" But some of the real names... I'm not going to use... well, I will. Felix Rohatyn of Lazard said, "Hey Nick, just duck for a couple years. Just duck. Let this stuff fly over your head, you'll be running the company, Steve will be gone." But I couldn't duck. I mean, that was my downfall. My downfall was... it was the same characteristic that was an advantage early in my Time, Inc. career, which was I said what I thought. I said, "Why are we doing this? This is idiotic. There must be a better way." And I attacked... one of the big problems I had was with this thing called TWE, Time Warner Entertainment, which today the company is struggling to get out of, and I am on record as saying "There is no reason to do it. It's dumb. It will be the most expensive financing on record, huge inflexibility." Steve, who was dying, in retrospect, was not his normal self. Steve was a conservative financially, he liked strong balance sheets, this was not a typical Steve Ross deal, it just wasn't, but he loved it and it was so complicated and Levin kind of bowed down to everything that Steve said, and thought Steve was brilliant. Dumb deal.

NELSON: So what was it that attracted Steve to it? Just the notion of bringing this large amount of Japanese money? Was there something in that that...?

NICHOLAS: I can't even begin to tell you because you're talking about psychology now. You're talking about the psychology of a dying man who's looking to leave a legacy and Steve wanted bigger and grander. I wanted smaller, more targeted, more agile, and Arthur Lyman, who was his lifelong friend and lawyer and accomplice, came to see me about three years after Steve died, and he said, "Nick, you were right. You were right about everything. You were right about all this stuff." But he said, "I didn't think you were right. I just had this blind belief in Steve because he was right my whole life." But it is clear at the end with his cancer eating away at him, with the pain, something else was going on. Who the hell knows? I'm not a shrink. So I ran into that. Levin took advantage of it, "Nicholas is against you. Nicholas is disloyal." Disloyal – hell! I didn't work for Steve. I was trying to do the right thing for the company, and so it was a strange time, and Levin was extraordinarily adept at playing both sides of the fence. Extraordinarily adept at coming in and saying, "You're right. Ross isn't telling you..." You know, this kind of behavior. I regret to have to say things like that, but it's on the record. It's well known. It's just not well written about. So you know, the Time Warner story's been documented and written about. There's a book by Connie Bruck. I mean, I was away skiing; one of the Time directors who was the key guy – we had an even board, eight and eight – died, Jim Beré. And so they pulled a coup. But I didn't fight, I said, "Screw it. I'm not going to come to the board and try to justify myself versus Ross. You guys want to take it over, take it over. I'll go on with the rest of my life."

NELSON: So was it the Time Warner Entertainment deal you think that basically undid you because of opposing it.

NICHOLAS: No, it was opposing anything that I thought didn't make sense. Basically, they were looking... let's put it this way, I don't know what the hell they were looking for, but they weren't doing things the clean, straight ahead way. Today it's a big problem for the company. When Parsons says, "Look, I've got to simplify this. I can't get out of this, I can't get out of that." That's what he's talking about. It's the legacy of Levin and Ross. It truly is. Somebody will write about it – some journalist, you know, we're talking cable.

NELSON: So you got the word... you're out in Vail... basically snowed out, so to speak.

NICHOLAS: So I got the word that Steve Ross is at home, he's dying, he is telling the board over the phone that he will be back in a month or two. Meanwhile the doctor said he's dying, so there's an outright misrepresentation. I mean, this was all written about. So at any rate, I said, "Okay," I said, "I have one request." "What's your request?" "My request is that the board ask for my resignation. I will not resign." Captain's go down with their ships unless they're asked by the admiral to abandon ship. I don't want the record to show that I left. That I just walked away, because I didn't.

NELSON: So you preferred the record to show that you were...

NICHOLAS: I want the record to show we want you to walk away.

NELSON: Okay.

NICHOLAS: Right.

NELSON: That's a big difference.

NICHOLAS: Yeah, it is.

NELSON: So what did you do after that? All of the sudden you've gone from...

NICHOLAS: Well, since I didn't expect to be unemployed...

NELSON: Most of us don't when it happens.

NICHOLAS: I just said okay, what do you want to do with the rest of your life. You can probably tell from some of this conversation I love entrepreneurial things. Problems, problems are really opportunities waiting to happen, and the high risk stuff – it appeals to me. So I began, slowly but surely, to get into all kind of private equity kinds of things, and eventually the Internet showed up, and I ended up in the Internet big time. I had my big wins and I had my big losses, like everybody, but fortunately I came out ahead.

NELSON: Well, if you came out ahead it's pretty good.

NICHOLAS: I came out ahead, and I've had a lot of fun along the way with a lot of very interesting people kind of plowing new ground.

NELSON: Priceline – that was one of your Internet...

NICHOLAS: Well, Priceline's one of them. That one is because you look it up and it's put there, but there are a lot of them. There are a lot of them. I'm involved in one now I'm very excited about called Trip Advisor, a private company based in Boston, and there'll be various spin-offs of that. So there are a lot of interesting things going on. But that however, that kind of stuff is receding as a part of my life and has been. Two other things have really taken over because business is now not the dominant thing. I'm still on a bunch of boards and all.

NELSON: Do you want to just tick off what they are for the record?

NICHOLAS: Boston Scientific, Xerox and DB Capital, Deutsch Bank, and then private ones, ones that aren't public. But the love of my life now is really not-for-profit, and since the late '80s when George Bush the first appointed me to his commission on the environment I've gotten increasingly interested in environmental issues, and I've been fortunate enough to hook up with Fred Krupp, who is executive director of a group called Environmental Defense. For old timers it's Environmental Defense Fund and deals with major issues, very practical, entrepreneurial organization. They're not anti-regulatory, but prefer to design solutions that work in a free capitalist marketplace, which to me is incredibly appealing, and 200 people on the staff doing really exciting work, and I've been a trustee and I've recently been appointed chairman and I'm going to be devoting – I have been devoting and I will be devoting – an increasing amount of time. Seven grandchildren, more coming. I love that. How could you not? So, life is good, life is full. A few regrets. Not many.

NELSON: So clearly there was life after Time Warner.

NICHOLAS: Oh, yeah. You know, for anybody who happens to come by this tape who gets knocked off a pedestal, my advice is dust yourself off, pick yourself up, and write a new chapter because they're out there to be written, and you'll probably write a better one.

NELSON: I just want to come back to one story. You were going to talk about the acquisition of Turner Broadcasting.

NICHOLAS: Oh, Turner. You know, God, about a year before Time Warner acquired Turner, Levin, for some God knows reason, was trying to sell his interest in Turner that, as I said earlier, we had acquired this along with TCI to where we owned 30-35% of Turner, it was worth a couple of billion dollars. Sure, we didn't pay much more than 200 or 300 million for it. Levin wanted to sell it, and I kept scratching my head. I didn't know what was going on inside of the company. I said, "You ought to be doing the opposite." Well, a year later, thank God, they announced acquisition of Turner. I can quibble with it and say I think they overpaid – maybe they did, maybe they didn't – it was still the right thing to do, but the great story for me was there was this big announcement in New York, Time-Turner, Levin and Ted Turner doing their high fives and all that stuff, at any rate, about three hours of the conference I get a call from Ted and he was in his plane, and he said, "Nick, did you watch the press conference on TV?" And I said, "God, I missed it Ted. I wasn't even aware it was on." And he said, "Well, I want you to know, I'm Jerry Levin's new best friend. I'm replacing you. I'm Levin's best friend." I said, "Yeah, good luck, Ted." True story.

NELSON: And just since we had mentioned earlier, you were going to comment on your thoughts about the merger of AOL Time Warner, and obviously you've already said that maybe Time and Warner wasn't such a hot idea.

NICHOLAS: Well, yeah, you know something, I've been an AOL subscriber since '92, since I left Time Warner. I didn't even know what email was. It was a great service for me for a long time. I bought the stock back then, fortunately for me, but basically it was a kind of bet your company move, and what I didn't understand about it, I could understand taking an interest in a smaller Internet company, but what I couldn't understand was selling out this collection of irreplaceable media assets – Time, Sports Illustrated, CNN, Warner Bros., and so on, HBO – for wampum. For wampum. The bet was too big. In other words, you were basically selling out the 100 year building and accumulation on the premise that this thing called AOL was something bigger than all of them put together. That had to be a long shot. Had to be a long shot. So I had real questions about it. Sure, it was true that they had failed at Time Warner to do anything grand on the Internet, but so had everyone else. So had Viacom, so had Disney, so had CBS, it was unclear what the right strategy was here.

NELSON: They still have, by and large.

NICHOLAS: Yeah, so to kind of bet your company and your history and your traditions on something like this, I don't know. Same comment – I just don't get it. I don't get what went through the head of Levin, I don't understand the board of directors, I don't understand why they came around to vote for it. I know that Ted had real misgivings about it. He's told me many times, he eventually went along, he said, just to go along, not to be a party pooper, but he really didn't get it either. So, who knows? History isn't over yet. They're in a bad patch now. I have a lot of confidence in Dick Parsons. I think he's got good advisors in Case and Turner and others, and we'll see what happens.

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Sheila Nevins

Sheila Nevins

Interview Date: Tuesday July 31, 2001
Interview Location: New York, NY
Interviewer: Steve Nelson
Collection: Hauser Collection

NELSON: Sheila, we're going to talk about your career, primarily at HBO. You've been here for many years, but I really want to start and ask you the following question. You've talked a lot about, in some of your documentaries, your approach in terms of getting the audience involved, giving them the context, like the whole question of Holocaust footage to open up your survivor story – the torso washing up on the beach, showing things like the dead children – so I want to ask you, just to get started, to give us something that puts you in context, so when we go through your career we have a sense of who you are, who we're talking to.

NEVINS: You mean why do I open provocatively?

NELSON: Yeah, right, who are you, what drives you?

NEVINS: Well, I mean, if people wear two bracelets, I wear five.

NELSON: Do they have labels?

NEVINS: No, I think that if you don't notice what's about to happen that probably it won't happen for you, and I think I've always felt that a television program has to open in a very arresting way so that you can grab an audience that has a refrigerator and a washing machine and a telephone. It's not like the theater where you're sitting in darkness and you're captive, or like a theatrical movie. You have to demand attention and you have to be different and you have to be out there and direct and affronting and honest and brash, otherwise it's very easy to go to any of those other things in someone's home, because after all you are a somewhat uninvited guest in a home, or at least you're auditioning all the time. So I always try to make the opening of all shows arresting so that you won't leave.

NELSON: Now I know you have a somewhat theatrical background. You went to High School of Performing Arts in New York, Yale Theater School. Talk a little bit about your background.

NEVINS: Well, it's interesting because it's the differences that make me feel differently about television. When you go to theater you have a captive audience. They've paid and they're in the dark, and they have only one place to look. When you do television you really are in a sort of whirling dervish business. You have to stop it, stop the turning dial, stop the surfing, somehow. So it's the differences that make me approach television in a different way. The things that are similar, I think, are that the television is a theater, it is a stage, but it's a stage with a lot of competition, and so I approach it differently, although I approach it in a way that stresses the performance of the people, no matter how real they are and no matter what they're going through. I look at people almost as actors in their own life, and I'm most moved by people who play the part of their life with bravado – negative, positive, heroic, dangerous, sexual. So I think the theater has been very, very influential. On the other hand, I think it has both made plusses – things that I've carried with me – and things that I have known I couldn't carry with me. The people that go to the theater in the main, other than musicals or whatever, it's the top percentage of people, or people on holiday. Television is everyday. It's like cereal and milk, and you have to make that every day occurrence spectacular, and yet at the same time you have to keep that humanity going. So I think theater, but I live in television, and I try to make the marriage as compatible as possible.

NELSON: But unlike most of your television audience, you say you grew up practically without television.

NEVINS: I never watched television. I mean I didn't really. I sort of looked down on television because I was an intellectual, although I did watch the Milton Berle Show at my friend Elaine's house, and my mother wouldn't allow us to have a television because she thought I wouldn't get good grades in school if I watched television, but on Sunday nights I used to watch the Show of Shows and the Milton Berle Show on a tiny little television set. I thought it was magical and I was sorry I didn't have one, but I did get better grades than Elaine, so my mother must have known.

NELSON: So she was right.

NEVINS: Well, I didn't watch it weekdays; I wasn't allowed to watch it weekdays. I don't even know what was on weekdays. I used to listen to the radio.

NELSON: Okay, so you're a kid, you're growing up without TV; you're getting good grades...

NEVINS: Very good grades.

NELSON: Okay, anything else about your childhood we should enter on the record?

NEVINS: I liked dinosaurs, I read the dictionary because I thought then I would be smart. That was all.

NELSON: And then home life? Anything noteworthy?

NEVINS: Home life? Secrets – home life are secrets.

NELSON: Home life are secrets, okay. So you go off to college, Barnard, studying English. Obviously at this point no notion whatsoever of either being in television or filmmaking.

NEVINS: No notion of television, but very interested in films. We didn't watch television; we just studied all the time. We read books and it wasn't until years later that not everybody read every page of every book. I thought that was what you were supposed to do. So like if somebody read Thackeray, they would have finished it over the weekend and I would still be reading it on Monday and I thought that I was especially slow until someone told me that you skim. I still don't skim. I can't skim tapes, either, because I think somewhere there might be something that I want. So if I take home four hours of screening, I tend to screen four hours even if it's pretty horrible.

NELSON: And sometimes I'm sure it is.

NEVINS: Sometimes it's horrible, but even in horrible you learn.

NELSON: You're looking for things.

NEVINS: Yesterday I watched an entire documentary about two Russian Siamese twins in Russian.

NELSON: Subtitles?

NEVINS: No! Just in Russian. But I thought I was supposed to watch only ten minutes of it, but then I thought maybe I'd learn something about language if I watched the whole things without knowing what they were saying – not the language, but the language of the pictures – so I watched the whole thing. So I guess I haven't changed much since the days of Thackeray. I'm very thorough.

NELSON: And was that true of your stint at studying theater at Yale, post Barnard?

NEVINS: Yeah, I was a directing major, and that was a very different experience because all the directors except for one other woman, who was about 400 pounds, were men, and it was in the '60s and it was very hard to be a female director. It was different. I skimmed more there because I really had to puff my feathers to get through that, and it was hard reading Greek tragedy – Aeschylus and Euripides – it was hard to be a theater intellectual. So I must say, I used to skim plays because I got the characters quickly, but it was very hard for me to skim novels, and it's still hard for me to skim tapes. I rarely fast forward.

NELSON: So just moving forward a little bit here...

NEVINS: Fast forward.

NELSON: Well, maybe not too fast, maybe normal speed. You finished up theater school and now you're ready to go out? You didn't become a director after finishing theater school. Was it just that nobody was going to hire you?

NEVINS: No one was going to hire me. I was actually a very good theater director but no one was going to hire me, partly because I married, at the time, I married a man from the Yale Law School, and he told me that there were certain requirements to be married then. One was that I could not work on weekends, and I couldn't work nights. I thought you had to be married and maybe that was what you had to do to be married, so if I couldn't evenings and I couldn't work weekends, then I couldn't work in theater.

NELSON: What year was this, just to set the social context?

NEVINS: '63, that's the context. It was 1963, and so I made that compromise. I didn't know what to do with my life because all I knew was theater and English Lit, which is what I had majored in at Barnard. Before he left I had been a dancer and also an actress, I had switched from one to the other. So I really didn't know what to do, but I was married and I thought that was something you do until I found out it was so boring.

NELSON: And all the things you did primarily take place at night and on weekends.

NEVINS: Everything I did was nights and weekends. So I tried to find a job – we lived in Washington – and I tried to find a job and I thought maybe I should look in television, and maybe I should work for the government and television because I had read – this was pre-computer – but I had read all these job descriptions about doing film research and things for the USIA, which was the United States Information Agency and they provided video information on how great America was to foreign countries, and then there was Voice of America that did audio information. I thought video – that's sort of close – so I looked at all the job descriptions and I was on my way to a job interview for archival research and downstairs in the lobby of the old post office building I saw a sign, which is where my interview was, and it said, "Auditions" and it had an arrow.

NELSON: And you knew what auditions were.

NEVINS: I knew what an audition was more than I knew...

NELSON: What an interview was, maybe.

NEVINS: ...a film archive. It said Nitrate Film, you know, anyway that was the job I went for, but when I saw the thing that said "Auditions" I figured I'll go to that arrow. So I went to the arrow and it turned out that they were auditioning for someone to teach English on camera.

NELSON: And you were an English major?

NEVINS: I was an English major, but I was certainly not an actress. There were women my age auditioning and so I asked how you get an audition and I filled out an application, and I auditioned for this part, which was to play "Jean" in a tape called Adventures in English, and there was a man called "Professor Richards" and it was based on maybe a 1,200 word, or something word, vocabulary that the U.S. government was teaching in foreign countries. I got the job! It was like a joke, and it was very well paying at the time.

NELSON: Was this a leading role?

NEVINS: It was a leading role because this was the role – "What is an adverb? An adverb is..." and then there would be three vocabulary words, or two, each half hour show, and you would use them again and again. So you would have to say them "Do you see the cow, Jean?" "Yes, Professor Richards, I see the cow." "Where is the cow, Jean?" "The cow is there, Professor Richards." "Do you like the cow?" "Yes, I like the cow." So you would repeat that word that was the important word maybe 30 times. I don't remember the details, but it was all done in a very specific way, and I did that for two years.

NELSON: So a lot of cows, right?

NEVINS: (Laughter) We made like 150 shows, and it was insane. We did insane things. We just talked nonsense, like Pinter. I would tell my friends in the theater, you're not going to believe what I did today. Today we put out a fire, and we said the word "fire" maybe 61 times. "Did you put out the fire? There is a fire. Put out the fire..." and the graphics were these old fashioned kind of things, but in the process I got very involved in television because they were making this on 2 inch video and then they were sending it overseas. It just seemed like theater. I mean, it just seemed so interesting.

NELSON: Did you have any sense of the production side of it other than being the lead role?

NEVINS: Well, yeah, there was a director there named Don Mischer, who later on became a very well-known television director, and Don was... I don't know if he was the director of Adventures in English, but I eventually would work with him and for him at USIA. I switched from in front of the camera – I think I was a PA and a floor manager, and AD, and I worked with Don a lot at that point. And then he became my contact...

NELSON: Assistant director?

NEVINS: Yeah, I did anything, everything, anything, everything. We worked for Bob Squire too, who was a guy who went on to do – he's now dead – but he went on to do political commercials for various candidates, but Don...

NELSON: Very, very upstanding political commercials.

NEVINS: Yes, Bob Squire and Don Mischer and I sort of worked together at USIA during that period, and it was in the middle '60s, late '60s.

NELSON: That's an amazing breeding ground for...

NEVINS: It was a GREAT breeding ground, because Don, you know, is so brilliant and so technically capable, and I learned a lot from him even though he was a contemporary and had gone to University of Texas, and I was this sort of New York theater person. I really learned a lot. And then I, of course, very quickly left my first husband and then decided... we worked in Mexico on a film together – I mean USIA did a film about how good it was to be an American, you know, or something, but we did it in Mexico for people so that they would know how great America was, and I got a little fed up with USIA, and I decided not to go back to Washington. So I went to New York.

NELSON: From Mexico?

NEVINS: From Mexico.

NELSON: And your husband was in the past at this point?

NEVINS: Oh, gone, gone, long gone, gone, gone, gone, gone.

NELSON: So you could just... off to New York.

NEVINS: In the '60s what was a husband, in the '80s was an affair, or in the '70s maybe that was an affair. No, no, that was long gone. I don't even remember. But then Don knew Al Perlmutter, and Al Perlmutter was producing some stuff at Channel 13 in New York.

NELSON: Which is the PBS station.

NEVINS: Yes, and then I started to work for him and then I wound up working on the Dream Machine, which was probably the seminal experience in my life because it was television without a narrator. See, we made these pieces about various subjects about America and we were waiting to find who would be the narrator, and we decided we didn't have enough money to find a narrator, and I had seen a film that was the History of the United States in Three Minutes by Chuck Braverman. It was real fast. At the end we'd spent so much money we couldn't afford a narrator so I said to Al one day, "Why don't we just do that ttt, ttt, ttt, ttt, ttt in between the pieces?" And he said, "Okay, let's do it." I said, "I'll go out on the street and I'll interview people about what they think about the American dream." And so I did the American dream interviews and then we did these quick cuts about American history, or whatever the subject was of the story that was following.

NELSON: Just to bridge?

NEVINS: Just because we didn't have a narrator. It wasn't like a lot of ideas, it's not like somebody said, "Oooh, I have a great idea." It's usually this doesn't work, and this doesn't work, and this doesn't work, and that seems to work, and then it really works well. I don't know if that's how they discovered penicillin. Well, they did! It was an accident. It was in the mold.

NELSON: Well, a lot of discoveries are accidents.

NEVINS: And all the critics talked about this brilliant bridging device that we had on the Great American Dream Machine, and it was an accidental, last minute, ditch effort to bridge pieces because we couldn't afford, at that time, the likes of a Walter Cronkite or a Dan Rather, so rather than compromise with a narrator, we wound up visually and with ordinary people on the street. And I think that's when my love affair began with ordinary people, because I would go out and ask them all kinds of questions. I would go up and down 72nd Street with a film crew and just ask them questions, and I hired the Maysles because I thought the greatest film I'd ever seen was The Salesman, so Al Maysles and David Maysles was then alive, I mean I think they thought I didn't know what I was doing because it wasn't real verite but I would just talk to people on the street.

NELSON: And you hired the Maysles to do "man on the street" interviews.

NEVINS: Yes, yes. I asked Al Perlmutter if he would let me hire them because that was the only name I knew in the real people business. I didn't know really very much at that point. I still don't know very much, but I really didn't know very much then. So we went back and forth and we went to Washington and we went to California and we just talked to people about their dreams, and it was phenomenally interesting because if you really wanted to know the answer they told you some amazing stories, and I think that was probably the most important experience.

NELSON: The Great American Dream Machine, you had a lot of experience doing these so-called "man in the street" interviews – you would find people would open up under those circumstances?

NEVINS: Yes, people want to tell you something. Everybody has a story and everybody has a struggle, and life is very, very difficult, even for people who laugh all the time, and I think that you know, the fascination with reality programming for me, or at least the kind of reality programming that we like to do here, is that the way people live their lives is worth telling and retelling, and all kinds of people are interested in how people live their lives. You don't have to be... we never do the lives of celebrities, not because they're not interesting, but because the man next door has an equally interesting life. The trouble is how do you make the audience interested in the man next door? I mean that's the challenge because once he starts telling the truth about what he's had to live through, or what he's lost or gained, or laughed at or cried at, you can hook somebody. But that's the thing – getting them in there, getting them to watch it.

NELSON: But you left PBS, just keeping the narrative going...

NEVINS: I didn't leave, the show ended.

NELSON: The show ended. So you just, were you just...?

NEVINS: I never left anywhere. Things just ended wherever I went. I only left one job. I left – what was it called? Who's Who.

NELSON: Well, we'll get to that.

NEVINS: Okay. I was going to leap to that!

NELSON: Well it's not that big of a leap because there's just one stop in between, and that was ABC. You actually worked on 20/20.

NEVINS: Yes, I worked on 20/20, but I left.

NELSON: But you did leave that?

NEVINS: I left because Bob Shanks told me that I couldn't edit my own pieces. He wanted me to go out on the road... I couldn't believe that I left because I needed the job so badly, but it was really... He wanted me to make pieces on the road and then send them back to New York, and the way that show would work – it doesn't work that way now, but this was at the very beginning...

NELSON: What year was this?

NEVINS: I don't remember. Whenever 20/20 began – it must have been 25 years ago, or 30 years ago, maybe. '70s?

NELSON: Early '70s?

NEVINS: Yeah, probably early '70s. And I was very excited that I got the job and I had worked with Bob Shanks on The Dream Machine and when he called me I thought I was a Rockette, I was so excited. I thought this was really the big time – a network – and he explained the procedure and I acted okay about it. I thought, "Okay, I'll do these pieces and then I'll send them in, and then somebody else will edit them." But I didn't want to do that.

NELSON: But you had that edit control when you were at Dream Machine?

NEVINS: Well, I mean, the whole process of putting it together, it's like someone... I can't explain how horrible it was. First of all, it was very horrible to leave the job because I needed the job and it was the most money I'd ever made, having come from PBS, but I'd just spent so many sleepless nights that I just couldn't imagine getting involved in a story and then sending it to somebody else to finish.

NELSON: Were there any stories you worked on you remember in particular?

NEVINS: You know, I think the first one was on some... it was just a... I shouldn't say "just" a musician... Elvis Costello, and I didn't even know anything about Elvis Costello, but I got to know him and he was just beginning in the business, and I just did the pre-interview and the correspondent was about to come and I thought, "I can't let go of this. I can't send it in for somebody else to edit." And I remember the day – it was Washington's Birthday because there was no work that day – and I called Bob and I said, "Are you in?" And he said, "Yes." And I said, "I have to talk to you." I thought when I tell him that I can't send the pieces in he'll let me edit my own pieces. So I went in and I said, "Bob, I can't do this. I have to edit my own pieces." And he said, "Well, then, leave."

NELSON: Not what you were expecting.

NEVINS: Now, this is of course remembering something from x number of years ago, but it's pretty close to the truth because I was so devastated it must have been close to the truth. He didn't make any compromise. In other words, he was the kind of person who used to write letters of rejection... like, we tried to write letters that said thank you for your thing, your idea is a good one, but it's not right for HBO at this time, and we wish you the best of luck with your project, and you know, thanks for thinking of HBO. You know, we just had euphemisms. But this guy, he'd say "We're not interested in your proposal. Sincerely..."

NELSON: Boom. And he wasn't interested in your proposal either.

NEVINS: But I didn't think he would treat me that way, and he el dumpo'd me. I mean, within ten minutes I didn't have a job. I was devastated. To this day I'm devastated. I have a friend who still works there and she says they still talk about that day that I walked out. But I didn't walk out; I mean, they've made it like a Pentimento Joan of Arc story. I walked out like a bag lady. I didn't feel at all heroic. I was devastated because I didn't have a job, and it was hard to get jobs then. There was not that influx of magazine shows, reality television had not... I mean now it's a very competitive business, but at that time it was not at all a competitive business.

NELSON: And there were very few openings.

NEVINS: There were none. There were just none, and I was desperately miserable and I didn't have a job.

NELSON: So how did you wind up working at CBS, and Don Hewitt, of all people?

NEVINS: Well, then I went to CTW, and worked on children's shows and wrote children's shows for them. I joined the Writers' Guild and I wrote stuff for children's shows, and did research – we did research and research and have meetings and bagels and experts and meetings and meetings, and I like to do things so I didn't last there very long. I mean I didn't leave, I never left, but the show was funded by the National Science Foundation and I remember thinking when I bought furniture for this little house we had in the country that it had been funded by the National Science Foundation. It was like two years of research before the show happened. This show actually did happen when I was gone – maybe it happened because I left, and it was called 3-2-1 Contact. But I went from that, CTW, I heard about a job at CBS, and I had to get out of there, I couldn't go to anymore meetings, and so I left 3-2-1 Contact right after this kid that I was filming found a dinosaur fossil, which is very bad timing because I think it was a real fossil, but I did leave and I went to CBS to work on Who's Who with Don Hewitt.

NELSON: So you got hired there, obviously.

NEVINS: Yes! And I was so excited to be hired by Don Hewitt. It was exciting!

NELSON: But you weren't working on 60 Minutes at the time.

NEVINS: No, but he says I'm the only person who ever turned him down because when Who's Who was over he asked me to work on 60 Minutes and I said no. He said I was the only person who'd ever done that.

NELSON: What were you doing at Who's Who?

NEVINS: I was doing personality pieces. I would go and chase stars like Richard Burton and Diane Von Furstenberg and Lily Tomlin. Isn't that funny? They're both my friends now. Huh! And Richards Burton was... I was so nervous. It was the first piece I'd ever done for Don and we shot with 16 millimeter film and there was light leak in the camera, and I brought back the film that was no good and I thought it was horrible, and I had to call Richard Burton directly – I knew his pseudonym at the hotel – and I called him. He was in Toronto shooting Equis and I had just done this piece with him, and I called him and I said, "Richard, this is Sheila Nevins. I'm the woman..." "Oh, yes," he said, "I remember you." I said, "I ruined the interview. There was light leak in the camera." He said, "You poor darling, you must do it again." And he was the sweetest, sweetest man. So without telling John Springer, who was his PR guy – because he had told me when I called him first that I could never interview Richard Burton again, so of course I had to do what I had to do. I re-filmed him in New York, and John Springer dug his nails into my arm and he said, "Don't you ever do it again – call Richard directly."

NELSON: You went right around him, right?

NEVINS: Well, you know, but I got the interview and I got him to sing "How to Marry a Woman" again.

NELSON: Was there a lesson in that in terms of really going for what you're after?

NEVINS: You've got to do what you've got to do, especially when you're not hurting anybody. Just because someone's mean doesn't mean they're right.

NELSON: But you said that you turned Don Hewitt down to work on 60 Minutes. You were the only person to ever do that, he said. What happened?

NEVINS: Well, maybe that's like my apocryphal memory, but that's how I remember it. I would never turn Don Hewitt down; he and Mike are probably my mentors in this business, and they're certainly my mentors in aging, but I couldn't go around with a correspondent. There are certain things you can't do. You've go to do what you've go to do, and then there's certain things you can't do. It was very difficult for me to go around with a correspondent; to do all the research, to do all the pre-questioning, and then have someone come and ask the questions off what was then TelePrompTer, because your heart would go out of you. I mean, like, I had this very close relationship with Lily and then Barbara Hower would come in and ask my questions of Lily. I didn't want to be on camera, but I began to think you didn't need to have a correspondent, just like we learned on The Dream Machine – that's why I asked if you were going to ask me questions – that the person being questioned is the star of the show.

NELSON: You are, you are.

NEVINS: No, but I mean the star of a story does not have to be interpreted by a correspondent. You know, you don't have to have somebody say, "And then we went to find Jenny Smith and she was sitting by the fire mourning the loss of her son in the Gulf War." You don't have to do that, you just simply have to have Jenny tell her story, and the 60 Minutes style, which was so brilliant and was based on those great super stars – at the time it was Mike, and it was Dan, and I can't remember who the other ones were – Morley Safer and Harry Reasoner, and these people were super stars, and the television audience wanted them. But I wanted the stories, I didn't want the correspondents, and that was why I thought that wasn't right for me. The model of The Dream Machine – the accidental model and purpose of The Dream Machine, which was stories told without interpretation began to be what I really wanted to do, and then I knew what I wanted to do.

NELSON: So now we're at the point in the narrative, finally...

NEVINS: Unemployed again.

NELSON: Unemployed again, but finally we're about to get to HBO, so tell me how that happened. You knew what you wanted to do; you wanted to do this particular kind of program.

NEVINS: I'll tell you exactly what happened. Who's Who was in the process of being canceled and Don was looking for people for 60 Minutes, and he'd interviewed a few people of which I was one of them, and I was afraid to turn him down although I ultimately did. Simultaneously I heard that there was something called Home Box Office, which I didn't know what it was, and they were looking for a Director of Documentaries, and the truth is that I thought – this is very honest but I'll go for it – I thought... I was a member of the Writers' Guild and I thought that if I could be a member of the Directors' Guild then I could get total psychiatric coverage. Instead of 50% I could get 50% and 50%. So I thought, well, why am I going to stay at 60 Minutes? I don't really want to do that; I like these correspondents, I love them, but I don't want to make a story and then turn it over and then interpret it. I'm not the right producer for Don. So I interviewed at HBO with Michael Fuchs, and he was sort of brash and interesting and I found out what HBO was and they wanted a Director of Documentaries. I thought that meant – because I'd never been in a corporation – that I was going to direct them and then I'd be a member of the Directors' Guild and the Writers' Guild and then maybe I could get more jobs, I'd get great health coverage and all that stuff. So I left CBS, and I bought very, very comfortable shoes for walking because I figured I'm going to be directing documentaries.

NELSON: So you're going to be out on the street...

NEVINS: Yes! I'm going to be directing documentaries for this cable thing that I read about. I didn't really understand what a cable was, but I knew it was clear...

NELSON: You didn't have one of those things.

NEVINS: I mean, it was eight hours a day and it was something called cable. I'd seen a lot of public access stuff, but I didn't know it was the future. I'd love to say I read about it and I knew this was the future and I thought I'll start anywhere because it will be the... I had no idea what I was doing. I thought I would be a member of the Directors' Guild and that would be a good thing. So I came to HBO and we were at the Time... it was in the Time Life building and I was there about two hours and this man came in and he said, "We'd like 40 documentaries at the end of the year, and you can pick any subjects you want." And I said, "Oh, you mean I hire the people?" This was Austin Furst, who was then the head of HBO. I think Jerry Levin at that time was the president of HBO. I said, "You mean I'm the one who hires the people to make the documentaries? I thought I was directing them." "No, no," he said, "you're the Director OF Documentaries." So that was how I knew what kind of job I had. So it started at 13 weeks, and I started calling all the people I ever worked for, you know, "Can you make 13 parts on war?" I didn't know... I knew nothing about how to make a whole one. I'd only made a few magazine pieces on The Dream Machine and I'd done a lot of the man on the street stuff, and so I started to hire people. We had no business affairs department; they needed 40 shows because they were going to go from eight hours to twelve hours. They thought documentaries were a cheap form of programming, and I thought they wanted documentaries like Winston Churchill and Hitler, and World War II we did, we did a show with Consumer Reports. We did very pedantic, dry documentaries, and that's how I began at HBO. I had no idea what I was doing. I would call people up and they'd think I was calling them for a job and I was calling to give them a job, but I'd just been their associate producer or their line producer on some little project somewhere. And then, we didn't have Neilsons then, but I being a very competitive person – as everyone who knows me will tell you – I noticed that the movies were doing better than my documentaries, and I thought why should what I'm doing not be doing as well as something else.

NELSON: From a ratings standpoint?

NEVINS: Yeah, I mean we had different ratings then. They were called, I forgot what they were called... TSS, they were called, Total Subscriber Satisfaction. I saw what they liked, they liked the R rated movies and they liked the adventure movies, and they certainly didn't like the historical thing, and I thought, you know, I like real people, they like stuff that's in the movies, why don't I drop Winston Churchill and put those two things together and make stories about real people that are like movies. And so again, almost accidentally on purpose, you know, I took A and Z and got together the middle... what's the middle of A and Z? I guess it's the 13th letter.

NELSON: M? N?

NEVINS: M, N, whatever. So I decided to make a marriage between reality and the excitement of movies or theater and forget Winston Churchill and Hitler. I did so many of those, and they were fascinating and I was so well-read, I read books – it was like Barnard had come to HBO, but maybe I should put theater and film together with reality and see if we could be more successful, and we were. I started to do R rated documentaries, I started to do documentaries that were about things that were volatile, about drugs, about teenage pregnancy, but not in the way the networks were doing them. Not with correspondents, but you know, the story of a 16 year old girl, or the story of a murderer, or a show called Coupling about unusual sexual practices among various couples. I started to use the R of HBO to the reality advantage and create sort of limitless boundaries for what reality could do, and that meant we could do everything from a program about the Second World War and the woman who had survived it to something about hookers and prostitution. So I've kept that going.

NELSON: But when you started this, you came into HBO to do the documentaries on Churchill and the...

NEVINS: No, they didn't tell me what to do. No one ever told me. They just told me 40 – I remember the number 40.

NELSON: So they just said, "Do them." Whatever it is we need to fill time.

NEVINS: "We need to fill time, we don't want to spend a lot of money, just do it."

NELSON: What kind of money did you have per production?

NEVINS: We didn't have budgets. We didn't even have an original programming business affairs. They were doing the polka festival somewhere and a few standup comics. It was really the beginning, beginning of HBO. It was so exciting. It was like just anything could happen. I mean it was scary exciting because maybe some people knew what they were doing, but I can tell you, I did not know what I was doing.

NELSON: But that didn't either inhibit you nor did anybody else at HBO inhibit you.

NEVINS: Well, I had at this point begun to believe that the truth of all things was probably that nobody really knew what they were doing.

NELSON: Not just you.

NEVINS: I'm sure there were some people that know what they're doing, but at least I thought people knew as much, maybe sometimes more, but not much less than I knew about what they were doing. I thought that I had the right background to make something of real people and that I could do it as well as anybody else could do it, and I certainly had been trained by very good people – Al, Don Mischer, the experience at CBS – just watching the stories that worked. I once heard Don Hewitt say, he was in an editing room, it was very, very late at night, and I heard him say to someone, "That isn't sexy enough." And it was an interview with Kissinger.

NELSON: And what did he mean by that?

NEVINS: I don't know. I was too afraid to... at that point those names like Don and Mike were scary to me. I would never say what did you mean by sexy, but I think I know what he means now. It wasn't hot. It wasn't anything that people were really going to watch. It wasn't different. 60 Minutes is a cowboy show. It was three cowboys who go out to right wrongs, or four, now they have a girl cowboy. Those were boy cowboys when I was there. And everything that works has a theatrical or a movie or a plot association with something that has been successful before, there probably aren't that many stories anyway.

NELSON: Was there something, when you started this change in direction, a particular documentary that you did that stood out, as you felt that you were starting to do that?

NEVINS: You know, I'll tell you something interesting that happened. It happened with Winston Churchill. You wouldn't think that that would have been the one, but it was around Winston Churchill, because Winston Churchill, I read somewhere and we had it in our half hour, which was not an exceptional half hour, when he was asked what his deepest regrets were he said that his father had not been able to see him be a success, and when you see a great man have such a small human request it's sort of the key to what matters and you don't have to chase down Winston Churchills or superstars to find those kinds of lines. So I think... I always remembered that because to me it was the high point of his life, just like it was the high point when I found out that Hitler had one testicle. You know, when you try to imagine... and that he was a mediocre architect. The things about famous people that made them crazy or interesting were the things that happened to real people, the deficits of character, the imperfections of their physical selves, the need to be loved by their parents, all these things seem to be things that would happen to everybody, if I could just get them and tell stories about them. And to me the most exciting stories and the best documentaries are really the ones that are about people that do extraordinary things, and by extraordinary I don't mean climbing Everest. It may be murder, and it may be dying nobly, but it's not necessarily what you think it is. But I learned from those shows that we worked on. I learned mostly from the movies and how well they did. I learned a lot from theater, and I learned from really my three mentors, Mike and Al and certainly Don Hewitt. And Don, because of the vigor, the incredible vigor and spirit that he would infuse in people... when I did the Richard Burton piece that finally came through he called me that night to tell me that it was the best piece he'd ever seen on a personality, and the next day I said to Andy Lack, who's now the head of NBC, I said, "Andy, Don called me last night and told me that my piece was the best piece he'd ever seen!" He said, "He told me that about my Lillian Hellman piece." Don has a childlike (I can't explain it) energy – I don't know if he has it now, I haven't worked for him for a number of years, but occasionally we've been on the phone about things – for what he does. He has a vigor for the experience of life, and for the way people live it and do it. And although they do do celebrities, they do all kinds of people on 60 Minutes. And you know what else is great about Don and Mike? They were my super heroes, but they're just guys, you know? And you really can't in this business, because you're relying on real people to make your living, you can't become arrogant in what you achieve and those men are not arrogant. There are people in our business who become very, very arrogant. They leave aside the person who sweeps the office at night, but the fact is that that person could be the source of their next story, and also jobs are very fragile. I mean I've had this job for a long time, but it's very hard for me to take it for granted. I still think, although I'm not afraid, I still think I could lose it, and I know when you don't have the job you don't have the power. That they day you leave HBO, your phone doesn't ring anymore, and so many people mistake the power of their organization for their own power, when in fact – and I've seen it here – the next day they're out of work and nobody calls them anymore. So I've been a great survivor here. I've watched many empires fall and known people topple, so you can't really be arrogant. One thing about Al and Don and Mike, they're not arrogant people. They still call people that worked for them on the phone and tell them they did a great job. When we did the depression show, Mike called me at 6:00 in the morning to tell me something he didn't like about that show with the ferocity of a 25 year old man who had just made his first documentary. "I think this is too long, and I think this is too short..." I mean he was 80 at the time when he called.

NELSON: This is just the passion for what they're doing?

NEVINS: For the truth – as they see it, as they believe it.

NELSON: And doesn't that motivate you too, the passion for the truth?

NEVINS: I guess, as close as you can get to it. Maybe if we all told the truth we'd all shoot each other.

NELSON: Well, the truth can be...

NEVINS: I think the passion to get as close to what motivates behavior as possible and not bore people. Remember, all this stuff sounds real good if I was teaching a course in psychology, but I'm not, I'm in a business, in a corporation, and I have to make money for them and I have to make people watch. What is that term – there are no atheists in a foxhole? There are no boring people in a hospice. No one dying is boring. I mean I've done so many shows about dying. There is no Alzheimer's person who isn't fascinating. There's no young person dying of cancer who isn't Joan of Arc. Even in fear, you know, there are certain situations that bring out in people the most extraordinary qualities. Psychopaths are interesting. People with a missing limb...

NELSON: You have to be open to see it.

NEVINS: You have to be willing to listen.

NELSON: Just coming back to something you said a moment or two ago about if for some reason you left nobody would call you. Here are a few reasons why they call you: productions you've worked on – I have to get this in here – 39 Emmys (I think these numbers are right), 17 Peabody's, including one for you personally as a career recognition, and 10 Academy Awards. So I think that's kind of...

NEVINS: They still don't call.

NELSON: They still wouldn't call?

NEVINS: Yeah, they still wouldn't call.

NELSON: And not so you can rest on those laurels, but that's...

NEVINS: You can't rest on anything.

NELSON: ...an impressive achievement, I mean for you as well as for HBO, because obviously...

NEVINS: Hey, listen, I'm happy! I'm glad to have those things. I shine 'em and I leave 'em and I like them, but I'm just telling you, nobody calls you when you don't have a job. When you don't have the money to pay for that person's project, nobody courts you. As a matter of fact... no, no. I left HBO for three years to be an independent producer and the phone did not ring.

NELSON: What time period was that in?

NEVINS: My son was small, '79, '80? '80 ½ to about '84, and I didn't make a living because I poured over my subjects too much, and I did two shows. I did Eros America, which was a sex show, and I did Braingames, which won a Peabody, which I got the idea from a placemat. My son is very hyper and the placemat was the only thing that would keep him in place, you know, complete the dots and do all that. I was doing Eros America for Cinemax then; it was the first sex reality show and I knew it would be a success and I didn't want to give it away.

NELSON: This was as an independent?

NEVINS: Independent producer, and I had my own little office and everything was very charming except that I wasn't making a living that was the only problem. I mean I REALLY wasn't making a living. I wasn't smart enough; I didn't know enough about finance. HBO owned everything and I was really a producer for hire. I liked the work so much I wasn't smart about the deal.

NELSON: And why was Eros America on Cinemax versus HBO?

NEVINS: Because HBO was tentative about sex programming at that time, but I wanted to do it so badly and Michael let me do it on Cinemax. I had gathered these books from the '60s that had been banned, Eros, and it was a very successful show on Cinemax, so when I came back I transferred that to Real Sex on HBO. And then Braingames I did really for David, for my son, because I felt that I spent so much time at work and I wasn't really... and it seemed to be the only thing that interested him was the placemat, and so I brought the placemat in to Michael, I think, I can't remember who was my boss then.

NELSON: You mean literally the placemat?

NEVINS: Oh, yeah. Literally the placemat. And I made a show out of that placemat. I went out and got Victorian rainy day books and I did "Do you know what's wrong with this picture" and an airplane would fly over or something... I mean it was all kinds of things. I did sounds and you'd try to figure out what the sound was just by listening and seeing the sound go up and down. I did "Whatchamicallits", which were things where you'd see little pieces of a picture like the Statue of Liberty and as the picture was filling up the kid would try to yell out at the television what it would be. It was a great gift to be able to make that show because it involved me, sort of two worlds combines, personal and work, and then it won a Peabody and when it won a Peabody – I couldn't get back to HBO in those four years. The phone never rang, I didn't make any money, Eros was a successful show, they wanted me to keep making Eros America but I wasn't making any money on it, and my world was pimps and whores and hookers and strippers and they would call all the time, and I knew everybody's name, and I thought this is ridiculous and that's why I said you'd better let me do Braingames because I'll never work again. I'd meet somebody on the street and they'd say, "What are you doing?" "I'm doing a show about ho's and pimps." So then I did Braingames and when Braingames won a Peabody...

NELSON: Was that your first, by the way?

NEVINS: My first?

NELSON: Peabody.

NEVINS: No, the first Peabody I won for HBO, but this was... HBO had not submitted the show; they didn't think it was good enough. I submitted it myself, just out of spite, and it won. So the day that it won, I didn't know it had won, Michael called me to tell me it won, and it hadn't been announced yet but he always would hear things before anybody else would hear them, and he called me in my office and I hadn't heard from him in a long time. I said, "Michael, please let me come back to HBO." And he said, "Okay."

NELSON: We'll take you back.

NEVINS: We'll take you back, but you'll do family and you'll do docus, and so I came back. And then the phone rang! And I got flowers, and people called me, and I was popular! I was popular! People liked me. I was different on Wednesday then I was on Tuesday because I had a job, and HBO was a big machine, and still is a big machine.

NELSON: So you said you came back here doing documentaries as well as family stuff.

NEVINS: Right. And the documentary, by that point, had been liberated because of Eros America on Cinemax the R rated documentary now could take full swing and I went for it. I mean I did Real Sex, and I did Taxicab Confessions, and I did Shock Video, I did Private Dicks, and I did... I mean I just let the human body just have a good time. I just thought, you know, the first sex show we ever did here we had a sex consultant and her name was Shirley Zowsner.

NELSON: So you could get it straight?

NEVINS: To make sure we weren't being prurient, and slowly I began to believe that sexual freedom and First Amendment issues are very tied because the more I read about sex and the more I read sex in literature, I realized the freedom of literature and the restrictions of television, and then since HBO, you could select when you wanted... a kid didn't have to watch sex. I mean they had burning bodies at 7:00 on network news but you couldn't have two people, especially if they were black and white, hugging each other at night or being naked, so I came to be sort of a sexual zealot. Michael always said that I was the least likely person to do sex programming, but once I started doing it I became the most likely person to do it because I thought it was fun, I thought it was great. I thought how great that society is so repressed or they wouldn't be very successful.

NELSON: And of course a lot of this involves real people, not just...

NEVINS: It all involved real people and it involves behaviors of real people, and people who are sexually free, interestingly enough, are some of the most honest, nicest people in the world. Sexual repression seems to be at the core of so many peculiar behaviors. The wonderful thing about the show was we'd go out and test it and everybody would say they didn't see it, and yet the ratings were sky high. "Oh yeah, I think I caught it once." "It's not for me. I think I watched it and..." But times have changed now. People say "I watch it and I like it." There's a whole new... I guess Sex and the City has had a lot to do with that, but maybe Real Sex has had a lot to do with it too, G-String Divas, all this stuff. I mean what's the big deal for Christ's sake. Do you know what the networks do? Like if it's sweeps they suddenly get very interested in date rape. They do all these programs on date rape and sex killers, but really what they're doing is they're trying to get ratings because we're seeing women in bikinis running around. Here I worked at a place where we could have women in bikinis and they could take them off, and I didn't have to pretend it was a piece about date rape. It didn't mean I couldn't do a serious documentary about date rape, but...

NELSON: And you could do it besides just doing it in May and November, too.

NEVINS: Yes, I could do it besides May and November.

NELSON: Well, really, one of your signature reality sex confession – and I've already given away what we're talking about – is Taxicab Confessions. Talk about the genesis of that and where that came from.

NEVINS: Taxicab was another one of those accidents. TelePictures had a syndicated show that they were trying to sell on taxicabs, and it was a daytime show in which taxicabs would pick up people, and they brought it to us. It was really boring. I mean it was little girls going to school, maids going to work, people going to school.

NELSON: And they'd talk about their lives?

NEVINS: Yeah, and the cameras were kind of... It was, you know... but the concept to me of hiding a camera in a taxicab, having this R rated thing that we had, I thought was very interesting, and on the original Taxicab that they brought us there was one ride which could not be in the show because it was about a transsexual and they were looking for a daytime show. That one transsexual who talked about her parents rejecting her and she really had a dick – I would say that she was the blueprint for Taxicab. It was a fluke that she would be out in the daytime and so I thought, why don't we send them out at night on a pilot and see what happens. Go out around 9:00 and keep filming until like 5:00 in the morning in New York, and that's what we did, and it was unbelievable what came back. Not all of it, and certainly not every ride, but it was the nightlife of New York, it was the sad people who worked through the night, the sex workers, the cops. It was interesting. I mean it may be tired now, I don't know, but for at least three years it was a really good show, very surprising. We got kicked out of New York by the Taxi and Limousine Commission under Giuliani. The original Taxi and Limousine Commission was very sympathetic to the show, but we went and pleaded our case in front of the Taxi Commissioner and she was – I guess I could say she was vile. She didn't think it was befitting the image of New York.

NELSON: Of their very high class cabs in New York, right?

NEVINS: And she said it wasn't safe for the taxi drivers, or whatever. So we were kicked out of New York, which was a tremendous blow to me because the New York taxi driver is like the Statue of Liberty, you know, he's a really important thing. But nonetheless maybe we'll be able to get back to New York. So the last three years we've been doing it in Las Vegas, which is okay.

NELSON: Why Vegas?

NEVINS: It's a one-party consent state, and they like us there.

NELSON: Which means?

NEVINS: Oh, we're good for tourism, I guess.

NELSON: No, I mean one-party consent.

NEVINS: Oh, it means that a person can be taped without giving their permission, but you can't use it without their consent. If it's a two-party consent state and you have to tell them beforehand that you're taping then you can't do Taxicab, and there are only four states in the United States, New York being one of the most liberal, where it's one-party consent.

NELSON: So, New York, Nevada, and some others.

NEVINS: New York, Nevada, New Orleans, and Washington D.C., and I think one other, but they don't take taxis there so it didn't matter.

NELSON: And in Washington nobody's going to confess to anything.

NEVINS: We did a Washington show. It's on the shelf. It's so sad because the people who take taxis in Washington are really down and out and poor. I mean I think when we finish with the series we'll run it because it's more of an archeological, sociological study of people who don't have cars in Washington, although now I think there's more public transportation but we did it about three years ago and we've just saved it because it's so sad.

NELSON: Now when you started you said you would tape them from 9:00 at night until 5:00 in the morning.

NEVINS: 7:00, somewhere in there.

NELSON: That's a lot of material for somebody as thorough as you in terms of looking at it.

NEVINS: That was the beginning. Now the guys can pretty much do it. We probably narrow it down from 20 or 25 rides to eight. I mean we know what we're looking for, and a good ride, you know, we have the vocabulary now. In the beginning that wasn't true.

NELSON: Did people ever suspect? Were the cabbies kind of cuing them a little bit?

NEVINS: Sometimes. Sometimes they recognize the driver. Yeah, sometimes, we don't use them.

NELSON: Yeah, because you can see that they're performing.

NEVINS: It's interesting because people don't trust that show and yet it's one of the most honest verite shows. I always hear Howard Stern saying "They know. They couldn't get in the car without knowing." But they don't know. All you have to do is ride around in a car behind it, which is really interesting. They don't really know.

NELSON: And just see. So beyond Taxicab, we've talked about Real Sex. How about some of your other...

NEVINS: The serious ones? Because I wouldn't be on this tape if I just did that, right?

NELSON: But we want to keep it balanced because there's quite a bit of other work that you've done.

NEVINS: What would you like to talk about?

NELSON: The one that I remember from, I guess about ten years ago, which was Abortion: Desperate Choices. Talk about that.

NEVINS: That was the Maysles, and that was... the trouble with doing a show about abortion is that people know what they think, so no show is going to change their mind. That may be true of a lot of issues, but some things you don't know anything about, like you might not know anything about global AIDS and you might see a show about AIDS and it might change what you think about AIDS in the world at large, or make the world closer. But people know what they think about abortion, so it was really... because I thought that there weren't enough classic documentaries about the issue. I thought that Al Maysles and Susan Fromke were the right people to make it, and I think it has some great scenes in it. In a strange way it's historic because it's not really about the issue, it's about the people.

NELSON: In this situation.

NEVINS: It's about how hard it is to have an abortion and survive it for some women. It's about the people who really want to save lives and see this as a life, and it doesn't have any spokespeople or experts; it's just the life of an abortion clinic and you just watch the people coming in and going out, the protestors, but nobody's interpreting it, you just experience it.

NELSON: But jumping ahead because you then later did Soldiers in the Army of the Lord.

NEVINS: Soldiers in the Army of God, but the difference is I think Soldiers in the Army of God, you know, when you get very close to evil, like when we did Confessions of a Hitler Youth or The Iceman or Paradise Lost, if you want to say evil, although you don't know who committed the evil, you see evil done, it's so banal, so familiar. That's the scariest part. If the person who did these terrible things was so unlike you it would be easy, just like if the person dying from Alzheimer's was so unlike you, or the person who had lymphoma was so unlike you, you know. But it's a very thin line between what makes somebody hate and love. Like dogs, you know, they can be your pet and they can chew somebody to death that comes down the hallway, mostly they love you, but how people turn out is just a source of great... And going back to Soldiers in the Army of God – I'm just rambling – but Soldiers in the Army of God, the central characters in that are hateful for what they stand for, to me, but they're not hateful people, per se. Their philosophy is not mine, but their motivations are possibly insane, but nonetheless pure to them. It shows you how complicated it is to rectify something like the abortion issue because these people are firm believers and what they believe is life. How, if somebody believes that God wants this, can you tell them they're wrong? If they hear God – I mean the worst people are those who hear him directly, but nonetheless – these people hear him telling them what to do.

NELSON: I suppose for Soldiers... what you do is you go...

NEVINS: Soldiers... is a scary film because the central character, I wish he were... Confessions of a Hitler Youth is a scary film. Alfonse Hecht, the central guy there... I saw a show on A&E once about the charisma of Adolph Hitler and it was fascinating, and in it was a man who was a Hitler Youth and he was sitting on the steps of some building in, I don't know where they took it, in Germany of whatever, and talking about the banging of the drums and the uniform he wore and his eyes were glistening and all that. About a week before a bunch of kids in my son's class had asked, they wanted to be Cub Scouts, and when I said, "Why do you want to be Cub Scouts?" because mothers have to do that, and I thought, "Oh God, I'll have to leave work and be a Cub Scout mother once every six months or whatever," they said we want to beat a drum, we want to wear a uniform, we want to march in parades and do all that. I thought, "Holy Shit! These people are..." I mean I just saw that guy on television and now here I am at Allan Stevenson on 78th and these kids want to beat a drum and wear a uniform. So I thought wouldn't it be interesting to find out what went through the mind of a Hitler Youth at the time. So I tried to reach Alfonse Hecht, who was the person, and I tried to call the producer and he was in Zaire or something, and he didn't call, we didn't connect, and finally I found him and he called me back and I said, "How do I reach that guy? I was fascinated with your documentary and I'd like to just do this one person." He said, "Oh, he's a bus driver in San Diego." This was before I insisted on getting credit for my shows, because I once ran into, I think it was Don, in Gimbles' on 86th Street and he said, "What do you do at HBO?" I said, "I don't know. I'm a programmer." He said, "What's a programmer?" So I said, "This is ridiculous, I've got to put my name on the shows." So when I came back I did. But this was the last of those shows that I had sort of birthed and the credits would roll by, and I had interviewed him and I had found the idea, I just let it vanish. So I didn't do that anymore. I got a little bit more arrogant about my involvement. But Alfonse became a friend of mine, this Hitler Youth. He became a friend! He came to my son's bar mitzvah!

NELSON: Wasn't that shocking to you?

NEVINS: That he was my friend? It was more shocking to the people at the bar mitzvah.

NELSON: Well, that's for sure!

NEVINS: But the thing was that Alfonse, although I've lost contact with him, I had him speak to the little boys at Allan Stevenson because I thought it would be interesting for them to see how quickly you can go the wrong way. First of all, they wear uniforms there, so all these little boys sat in a circle and Alfonse was in the center and he started talking about the day that Hitler gave him the Iron Cross, and he started to cry in front of all the little boys. So that was a scary experience, because as everybody here said, "Once a Nazi, always a Nazi." But I don't know. Alfonse is a nice man, but he shot down American planes at the age of 15. I don't know. But these little boys, if they had grown up in Nazi Germany they might have wanted to be part of the Hitler Youth, and go on trips, and bang the drum, and wear the uniform, and go to camp and have bonfires and roast marshmallows, and hear Hitler, the Fuhrer, speak, and he would meet them, and he would come... I don't know. I don't know what makes people good and evil.

NELSON: Are you seeing in your documentaries this... you're seeing both sides of a lot of people.

NEVINS: I think it's very complex. I think that nobody knows who they are, what they are, why they're here, where they're going. So those are four great things; to leave those aside and go on and make make-believe stories seems to me to be nonsensical because after all some people think they're going to heaven and some people think they're going to hell and some people think they're going to get deathbed confessions and some people think they're going to rot into the earth and be flowers and some people think they're going to come back another time. I mean we live everyday and we don't have any idea what we're doing. We waste this whole thing called life, and then horrible things happen to people, and good things happen temporarily, and then horrible things take over, and life just keeps spinning, and then it's over. Not to try to interrupt it for these little films, not that they're historic or belong in some Smithsonian or somewhere, but that they are really of great interest to people. I mean, Hospice, if you should see that film, that was probably one of the most painful films I've ever been involved in because it was what nobody wants. It was watching people face the end because to be in a hospice you have to sign something, or your doctor does, saying you're not going to live more than six months, and that was a Maysles film too, and it was probably one of the most provocative. The other that was the most chilling was Gerda: One Survivor Remembers. I met her on a piece of film in a museum, the Holocaust Museum, and I was so...

NELSON: You were just visiting and you saw her?

NEVINS: I was just visiting and I saw a little piece of her in a Hall of Survivors and I came back and I said to Michael, "Please let me do a film on this woman. Please, please, please. I know it's not what HBO does, but..."

NELSON: Why do you say that?

NEVINS: Because we don't do historical films, really, and it was the 50th anniversary of the Second World War.

NELSON: Not since the Churchill days, anyway.

NEVINS: Yeah, we did Hitler Youth. Every so often I give myself a little present. I beg for a film because I really want to do it, and I've worked so hard on things that I know are right for HBO, I figure that will be my bonus, that I can make the Gerda film. So we made Gerda in-house, and it was very hard to get her because we did it with the Holocaust Museum. I just totally fell in love with her. I thought she was the most charismatic woman I'd ever met in my whole life, and I had to have her, I had to meet her, I had to bring her here, I had to do this film, and it won an Academy Award. Everybody was doing these big films about the Second World War, and of course I'd already done those when I came here, so I thought I'd do just one person's story, so we just did Gerda's story, and to this day Gerda haunts. I mean I think of Gerda all the time. I think of the Iceman all the time. I think of pimps and ho's and people I meet on the street.

NELSON: You've quite a cast of characters. If you lined them all up together...

NEVINS: Somebody once said if I ever had a party and invited all these people, I would have the most virtuous and the most deadly. Sort of Dante's inferno.

NELSON: That's what I was thinking. Right! But isn't a little bit of that both sides in everyone? Isn't that what you're seeing?

NEVINS: Yes, I think so, but I think that what happens to you in life is one side... well, I don't know. The Iceman was hit on the head with a broom by an abusive father. A colleague of mine, Nancy, always says that all films are about frontal lobe damage, but I don't know.

NELSON: Speaking of some of these mini characters in your productions, Dr. Peter?

NEVINS: Well, I got a fax one day that was sent to all broadcasters about a doctor who had died in Vancouver of AIDS, and they said that they had 130-something odd interviews, not interviews, newscasts of his – that he had for 2 ½ years delivered these newscasts. You know, it's amazing, I'm so close, I feel like I'm talking about, like I'm working on it now, because I really liked him so much.

NELSON: Now when you say newscast, he was on TV?

NEVINS: Yeah, he was a great man, and he had AIDS before they really had anything for it. He was a physician in Vancouver, and there was a lot of prejudice against AIDS, and I had read his obituary in the New York Times. I don't know when in relation to when this fax came, but I was curious to see some of these tapes and the documentary or whatever that they had made about him and all that. They were offering broadcasters the ability to make a documentary about Dr. Peter. It just said, "Dear Broadcaster:" I don't even think it was to me. It was the early days of the fax machine so I used to read them. Now you can't, between email and fax you just have to hide under the desk. Anyway, we sent for the tapes. He was the most extraordinary man I'd ever met. I mean I never met him, I met him on tape, and I called the producer of the news show that he was on – he'd done these five minute segments for 2 ½ years – and I said, "Do you think we could make a documentary?" And so the producer came, he was a news producer, he'd never made a documentary before, and I couldn't let Peter out of the house. He had to be made here, and so for weekends and evenings we looked at the 200 – I don't remember how many tapes there were of Dr. Peter – from the day of his diagnosis, all his broadcasts, and we made an hour documentary called the broadcast tapes of Dr. Peter. It was the most extraordinary experience because we knew as the numbers increased the Peter would have to die, and yet at the same time we knew that if we didn't get to the end Peter might not die because he would have these sort of ups and downs while he had AIDS. He skied when he was blind, he learned to play the piano, he fell in love, and his lover, I can't remember his name, built a hospital for him in Vancouver. Anyway...

NELSON: So you basically just took these on-air tapes...

NEVINS: He wore Peter's underwear to the Academy Awards. Why can't I think of his name? Because I've lost contact with him. But he was an amazing guy. At Dr. Peter's funeral – the most extraordinary piece of footage was Dr. Peter had this dog and when Dr. Peter died, and while he was so sick, the dog had terrible ulcers, and at the funeral the dog is lying at – Andrew! Andy, that's his lover, Andy is something – Andy delivers the funeral service and the dog is at his feet – Dr. Peter's dog – and when the audience stands up to sing, the dog stands up with the audience. It was so incredible. And I have Dr. Peter in my office, I have his picture, but that was one of the great... I think that's probably one of the best documentaries we ever made. Only because it was the beginning of the crisis, and I got a letter from a subscriber and it said that he was a Marine – I don't even know what I did with it; it's too bad you can't save everything in life, right? But he said that he was a subscriber and that he really didn't care about gay people and that he accidentally caught this show in the middle of the night – I mean this was not a high ratings show, nobody was going to watch this show really – and he said when he met Dr. Peter on HBO he changed his attitude towards what gay men were like, and that he would never look at them the same way again. But I think Dr. Peter was just... I can't believe I never met him because I feel like I met him. But if you see one show you should see that one. That, and One Survivor Remembers, they're the two. And The Iceman.

NELSON: Why The Iceman in that mix? Not a pleasant character. It's just another side of the human nature?

NEVINS: Because he's evil, but he's not hateful. Evil should be hateful, right? The devil should be red with a pitchfork, but I'm afraid, unfortunately, you can't always spot them. Like a cancer cell, probably, right? You don't spot it until it's so malignant that it destroys you.

NELSON: Well, so often when the murder occurs in the street and the TV news crew shows up to interview the neighbors, what do they all say? "I can't believe he did it! He's such a nice guy."

NEVINS: Well, this isn't a nice guy, the Iceman, but the audience loved him.

NELSON: Let me ask you about another guy.

NEVINS: Who?

NELSON: You did a documentary on Lenny Bruce.

NEVINS: Oh, Lenny Bruce.

NELSON: And I have a feeling that he's an influence on you. I can see from your reaction.

NEVINS: I didn't know much about him until I looked at Bob Weide's footage. First of all, Bob Weide, the producer, becomes an experience unto itself. We've been having this crazy email thing. He now does Curb Your Enthusiasm on HBO. Lenny Bruce? I wish I knew him.

NELSON: Is he, perhaps, a testament to the problem of going too far with telling the truth?

NEVINS: The problem with people not receiving the truth. The problem of hypocritical bureaucrats who don't allow people to just tell their story or sing their song. I mean Chaucer was way out there compared to Lenny Bruce. He could do it just because he was on his way to some kind of pilgrimage, you know? But repression of society when it comes to creative truth and creative freedom, and the great opportunity of television to share people that you would never know. I'm not a very social person; I don't like to go places, but I feel like I've been invited to a lot of homes and they've let me stay. Maybe that's why I'm not so social; I've been to too many homes. I mean one rating is like 200,000 people. That's enough dinner parties. But I don't have a feeling that my audience has dinner parties. I think they have more beer and pretzels, which is great.

NELSON: Is it you want to aim for a broader...?

NEVINS: People who don't know that story, who don't know who Lenny Bruce is, who don't know how he shut down so he couldn't breathe, who don't know that he probably had attention deficit disorder and they didn't have drugs for it and he used cocaine to treat it, and he really died from an overdose, but he really died from being shut and locked up because he couldn't speak. He couldn't say what he was. The only way to release his fire was to be a comedian and they wouldn't let him. I mean the police, the powers that be, wouldn't let him. All First Amendment issues are issues like Lenny Bruce. I remember, I was at Barnard at the time, and Lenny Bruce was somewhere in the Village, and I remember saying, "I don't want to see some dirty comedian." But the real thing is I was probably reading Thackeray line by line while everybody else was skimming.

NELSON: So they skimmed, and they went down to the Village while you stayed back in the dorm?

NEVINS: If I'd known that then I would have done dirty shows here the day I arrived. I wouldn't have had to go through this experience of Hitler and Winston Churchill and World War II. Well, now there are channels that do that.

NELSON: There's probably some development that benefited from that.

NEVINS: There must have been some developmental phase, right.

NELSON: So let me bring you to sort of a wrap up point, because I think the major evolution of all this was...

NEVINS: Like a boil, bring me to a boil.

NELSON: Well, perhaps something more pleasant, but sort of the major evolutions you get finally American Undercover...

NEVINS: America Undercover.

NELSON: Right, becomes a full-fledged weekly, branded documentary, which is very different from most of the stuff you've done in the past, which shows up here, shows up there, but it doesn't have an identity.

NEVINS: True.

NELSON: Talk about how that affected your work.

NEVINS: Well, I owe that to Chris, because Chris said to me... you know, you have to fight for at HBO because there are big shows and there are our shows, and our shows really clamor to be noticed. We don't have a lot of marketing money, we don't have a lot of advertising. We're really on our own, which is bad and good. Good because when we're good we did it all by ourselves, practically; and when we're bad, no one notices. So it has its ups and its downs, but Chris said, "Why don't you do a series? Why don't you put the shows together? Why don't you make some noise with these shows? You read a review here, and a review there, you get an award, you get this... Put them all together." I said, "Okay! I'll do it." So we did. We followed The Sopranos, which was very, very exciting – that sounds so, "very, very exciting", it sounds like a cliché, but it was very, very exciting, but it was television and I think that although I've worked in television, I didn't know the television game of getting a thing ready every week and getting the advertising, not that we get advertising, but getting the releases out, and hacking Atlanta about calling the reviewers, and each producer being separated and wanting attention and love and attention for their show, and yet you can't get a review in the New York Times every week, and then if you got a review for this, you wouldn't get a review for that, and then how did you explain that to the producer. You know, my producers are not like other producers; this is a reparatory company of people that are mostly assigned topics, or come to us with a burgeoning idea, and then we cast them in that role. It's not like a news department or a network where one day you're doing Bosnia and then the next day you're doing Eartha Kitt. We have our Eartha Kitt producers and we have our Bosnia producers. We don't mix people. People have passions and we match the passions in reality to the subjects that they then do.

NELSON: And are these people mostly...

NEVINS: You couldn't put Bob Weide... you couldn't give him Hospice. You couldn't give Lenny Bruce to the Maysles. You couldn't give Dr. Peter to John Alpert. These people have an emotional vocabulary of communication that they translate into their reality programming that you have to feed right into. You have to cast the documentary producer just like you'd cast a movie or a play or whatever.

NELSON: And these are largely outside people, when you say cast?

NEVINS: Yes, but they've become a kind of reparatory company of recidivists, and so it's pretty hard to break through. But people break through, like Edet Belzberg, who just did Children Underground. I mean there's a first time producer who comes through. Kate Davis who did Southern Comfort – their first attempts are so extraordinary that they knock all rules away. So there is room for new producers, and then they become part of the cast. But it is a repertory company, it just is, it is. Competitive – they all want the main parts, but some parts aren't right for them. Not everybody can be Macbeth.

NELSON: And then that becomes your role to keep all these people...?

NEVINS: That's what I am – I'm a casting agent!

NELSON: Let me ask you this, one thing that really has marked the change in cable in the last few years has been the proliferation of digital channels. When you came to HBO, there was one HBO, and now there are several HBOs of various flavors. How does it affect you from a production standpoint? For example, you talked earlier about stuff you did as family programming, but then there's actually now a whole channel that's HBO Family.

NEVINS: The way it's affected me the most is there are many more submissions of material because of digital equipment. But excellence is still a needle in the haystack. Extraordinary works... just because everybody can make a documentary doesn't mean that there are more good documentaries, it just means that there are more documentaries.

NELSON: Is the barrier to do it lowered because of digital cameras and the like?

NEVINS: Yeah, there's more product, but then again there are more outlets. But the number of works that push you, that really make you gasp for air, are probably the same. I guess if you screen 200 maybe you'll find five, and maybe now you screen 250 so you find 5.2. There's more product, but not everything's very exceptional. As a matter of fact, there's so much imitation. I mean, something works and then everybody does it, and then it loses its value just by the fact that everybody's doing it. To find the niche that's HBO, to find the thing that is special, not necessarily a high watch special, but that marks you as different in some way, even if it's a subject that everybody's doing, but something that finds an access to that something that's slightly different: those are still very, very hard to come by – to conceive and to come by. You know, most of our projects are co-ventures with producers; we have a little of an idea, they have a little of an idea, or they have a big idea and we have no idea, or we have all the idea and they have no idea, but usually there is a kind of blending of what we need for HBO and what they choose to spend a year and sometimes two years of their lives making. This is a very difficult business. Nobody gets very rich in this business, everybody works very, very hard, and the best producers in documentaries are those who don't want to go into features, because they believe the best storytelling comes from the real world. I sort of stay away from people who say that they're using the documentary form as a sort of audition for features, although after documentaries on HBO, invariably, people who make movies call and want copies of the docu and all that sort of stuff, but that's okay, it's after reality. But if you're going to use this as a training ground for movies, then I'm not the right person to work with. If you believe that the best storytelling comes from real people's experiences, then this could be your playground. That's kind of how we approach it and I think we're purists in that way. Not purists in that we believe that shooting 30 to 1 is the ultimate truth, because obviously if you're shooting 30 times what you're getting, or you're not using every ride of everybody that walks into a taxi, then you are editing reality in some way, but the belief that if you stick to it and sit long enough that that session with a real person, or a real experience, will produce something very valuable is kind of our motto, and we are very patient for a very impatient medium.

NELSON: Speaking of impatient medium, you talked earlier about having to grab and hold an audience and stop that dial spinning, now is that getting harder with a lot of people trying to push the envelope?

NEVINS: Well, everybody pushes...

NELSON: More channels out there?

NEVINS: Yeah, sure, there's a lot of competition. But when people say I'm competitive, I think they don't mean that I'm competitive with all these other channels because how could I be. I mean I know what they're doing, I watch it and all that, I'm more competitive within the frame of did we do the very best that we can do with that subject. The most discouraging thing is to do something... like I thought we could do a great show on tornadoes. I don't know where I got that stupid idea. I thought it could be like grand opera, that I would quote Sophocles, because to me there was nothing more brutal than a tornado. It took poor people living in poor houses that didn't have roots, they didn't have basements really, and it blew them into pieces, it tore their cattle and their cows and their trees and their children, and I thought, "The Weather Channel can't do this, nobody can do this, only HBO can make grand opera out of God's wrath, or whoever's wrath." We made a verite Weather Channel show. No matter how I put quotes in it and no matter how I had people raging against the storm and no matter how I made the music heroic and look... well, the footage came from the Weather Channel. I mean, I could not bring it to a level of... I could not make it different. It was a regular documentary.

NELSON: It was still a tornado story?

NEVINS: It was still a tornado story, and it was sad and it was painful and it was all that, but other people had done it just as well as we had.

NELSON: So what lesson does that leave you for the future?

NEVINS: Well, you can't always be sure that just because you think you found an angle that's slightly different it marks you as being different enough to be worth paying for. After all, this is pay television, most television is free or basic, or network and advertiser supported. Someone is paying for this reality. I mean, can you imagine if I went out to one of those groups and I looked through that one-way mirror and somebody said, "I wish they didn't have that reality stuff on HBO." I mean, my God, they'd write it down and bring it home again. So essentially I have to make reality worth paying for. I have to not compromise it, but squeeze it and somehow produce it and get my producers to understand who we work for, ultimately, which is the paying audience... In that way, HBO is like theater because people are paying for this. If I'm going to put a documentary on after The Sopranos, it sure as hell better give them something. Not the same numbers, I'll never be The Sopranos, but the people who watch it as sure as hell better like it, otherwise what am I doing here? I might as well be doing Fantasy Island, which I don't think is bad really, I just don't think it belongs here. Let me tell you what we do. We do all kinds of shows, every show has a different expectation. If I do a show on AIDS, global AIDS or whatever, and I go to foreign countries, I know that they people here are not going to watch that in large numbers, but I feel that it's a privilege to make a show like that that people can see and it can be on HBO and help the reputation of HBO and make a difference in some way. It nudges reality of the world a little bit. If I make hookers and pimps, or Shock Video or Taxicab Confessions – and I'm not demeaning these shows – or Real Sex, or Nerve.com, if I make those shows I'd better get numbers – G-String Divas – otherwise I'm a moron. I have to make those shows as hot and as sexy and as different and as jazzy and as volatile and arresting as they should be, because that's what they are. They say what they are. I don't do shows that don't say what they're about. That's why I asked you about the title of that show. If it's Real Sex, it's real sex; if it's G-String Divas it's about g-string divas. I don't like to hide behind a title. I like to give them what they think they're going to get. Shock Video – it's shocking video. It doesn't take a brain scientist. Hospice – it's hospice. Now, if I do Hospice I know I'm going to get a low rating. If I do G-String Divas I know I'm going to get a high rating. So my job is not... it doesn't take a brain scientist to figure out that Hospice can go where Hospice has to go, it doesn't ever have to try to be popular because it's never going to be popular, but the people that watch it, the couple of hundred thousand or a million, that watch that show will be deeply affected by it, and HBO will be valuable to them because of it, but they won't go into Hospice thinking they're watching another show. I'm not going to call it a Time to Remember, or Daddy Loves Me, or one of those kind of euphemistic titles. The same is true of G-String Divas. I'm going to get a rating on that show, I'm going to sell it hot, I'm going to sell it mean. I have a show on now called Size Matters, it's a Real Sex repeat. I'm not going to call it anything but what it is. If I do a show about penises I call it Private Dicks. If we do a show about breasts we call it Breasts.

NELSON: Is this a truth in packaging kind of...?

NEVINS: No, it's a truth in expectation, I guess, coming from a truth in packaging. To be really disappointed here the expectation for a show has to be not what you expected. However, if Hospice did as well as G-String Divas, I would not mind being disappointed in my expectations, however you deliver what you have to to keep the balance going. I think the first show we did, Hookers at the Point, was a very, very fine documentary. I think the music was great, I think the life of the women was interesting, I think why men were there was interesting. We're trying to get a hidden camera now into a bordello, not to show the sex, I want to call it No Sex, Please, It's a Bordello, because the irony about men that go to whorehouses is that a lot of them don't even want sex. They want to talk about sex, they want to talk about their problems, they want to feel aroused, they want to rat on their wife or their girlfriend, they want something different. So it doesn't have to be sex to get a good number, but it has to be in that area of out there-ness, and it has to say what it is. Taxicab Confessions is taxicab confessions. We have probably the most unimaginative titles in the world, but we labor and labor over these titles so that they get what they're paying for, they know what they're getting. Yes, I guess that's truth in packaging. I never try to call a show something hot so that it will fool the audience into getting something cold. I just tell them what it is. And I try with the promos too not to court them into the wrong arena because I don't want them to be disappointed. I mean you could sell some shows, like the Iceman, I'm going to sell a killer and I'm going to go to town on him and I'm going to be really... I mean the promo for that was way out there, but I'm not going to sell Hospice that way. "Be with them at the last moments before they..." I'm not going to do that. I'm going to say, "If you dare to feel what it's like in a hospice, if you have the courage..." but I won't sell it any other way. It's a very complicated and fascinating and always interesting balancing act between being in the business of television, being in the business of caring about people on some level, and being in the business of being entertaining, ultimately, which is what it all is.

NELSON: What's ahead of you as a challenge? I mean with all these accomplishments, what still fires you when you come in here in the morning? You seem pretty fired up when you come in here.

NEVINS: Listen, I'm always fired up. I don't know, I seem to forget. You know, you forget pain – I forget pleasure. Didn't Freud say you forget pain? I mean I know that we've won a lot of awards, I do, but the minute the award is done I can't tell you what it is.

NELSON: That's it for you.

NEVINS: Cooked. The goose is cooked.

NELSON: You're only interested in the upcoming project.

NEVINS: I would say so. I don't like losing – I remember everything I lost more than what I win, but when you win something... I mean we do so much, I would think we'd have to win after a while, and we spend so much, and we're so luxurious here, and we have so many perks, and we have so much money, and so much time. If it's not ready in October... well, that wasn't true with The Sopranos, but generally HBO docus, if it wasn't ready in October, I'd say, "If it's not ready in October I'll deliver it in January. Good-bye." And I'd labor over it for three more months. Who had that luxury in television? That's some kind of gourmet thing – I don't know what that is. So we couldn't afford not to be good. We really couldn't. We had a lot of breaks to be good. We had no advertising, we had the resources, we didn't have the pressure of a continuing schedule. I mean I marvel at people who make weekly schedules. These magazine show people must kill themselves – and I know a lot of them – to crank out this stuff. But they're all doing the same thing! They're all running after the same story, you know, "Woman Kills Her Six Children" everybody's got to do that story. Who's going to get the angle?

NELSON: "Congressman's Girlfriend Disappears."

NEVINS: Ohh, so sad. So sad. Monica's confusing. That's an interesting show because it combines both politics and high voltage.

NELSON: I was wondering that. It seemed like you were getting into some territory that you pretty much stay clear of, namely politics.

NEVINS: It's interesting. We just came up with the title – you know I like titles to be about... I don't know if it's a good title, but we're sort of working on Media, Mayhem, and Monica because she is truly a creation of the media and the mayhem, and she... I saw Clinton get a standing ovation somewhere... oh, opening his office in Harlem...

NELSON: Yeah, yesterday.

NEVINS: But she gets hoots and hollers when she walks down the street. Grown man, little girl, both did the same thing. Grown man gets standing ovation, little girl gets hoots and hollers. I mean it's not Auschwitz, but it's an interesting imbalance.

NELSON: Of course he didn't get an entirely a standing ovation with certain members of the opposite party.

NEVINS: Well, people have forgotten that. It's the Lewinsky affair now, not the Clinton affair.

NELSON: So she remains notorious.

NEVINS: Why has the media held on to this scarlet letter for so long? Why has the public, so unforgiving and so ordinarily forgiving of fallen heroes – not that she was a hero, but interesting. It must be something very deep in the American psyche that allows people to hate for so long, and to be so vitriolic for so long, and to forgive so quickly. It's just very interesting to me.

NELSON: Depends who's who, right? Unequal treatment.

NEVINS: Yeah, I guess, I guess. Maybe if you pick a President you can never really blame him because you picked him, but if someone is an intruder, and a woman, you can always blame them. I don't think I'll ever know the answer, really.

NELSON: HBO – I mean they've been incredibly supportive of what you've done...

NEVINS: How do you know?

NELSON: Well, you probably fought for some of it, but at least publicly they are happy to take the credit for it, and did deservedly.

NEVINS: HBO's a good place, they leave me alone. Great boss.

NELSON: And do you think that will change at all, the way the whole industry is changing?

NEVINS: Not unless they see this interview it won't. You know, this is a very strange... we're like the off-Broadway at HBO. We don't have big advertising, we build our own sets, we send out for lunch, we don't have elaborate parties and big spreads in newspapers. It's nice being off-Broadway in such a big corporation because you have the warmth and the comfort of "big daddy" all around you, and at the same time, you have this incredible freedom to be as close to yourself as you can ever be when you're trying to make things work. So it's just the right size; it's just the right thing. Nobody said to me here – nobody! Can you imagine? – "Why didn't you make a reality show like one of those shows?" Nobody said that.

NELSON: It's probably the only place in the world of television that nobody has said that.

NEVINS: Nobody said that. I keep waiting for someone to say, "How come you didn't come up with that? How come you didn't think of those shows?" Well, I didn't.

NELSON: But in relationship to what you're doing, they're not reality, they're game shows.

NEVINS: But so what? Why didn't I come up with it? It had to do with real people. I'm supposed to push the limits. Why didn't I push them in that direction? It didn't even occur to me. It didn't occur to me. When I saw Survivor the first time I thought it was a joke. I didn't think it would catch on. I am just in a very strange off-Broadway business, and yet popular, so I'm a peculiar duck, you know.

NELSON: And you expect to continue to be one?

NEVINS: Yeah, yeah, but I'm disturbed that I didn't think of it. I wouldn't have minded rejecting it if I'd thought of it and it being a success somewhere else, but it never occurred to me to put people in a make-believe place, real people, and have them go after gold. I just never thought of it. And thank God nobody proposed it to me! Can you imagine if I turned it down? Oh my God!

NELSON: You'd never hear the end of it.

NEVINS: Well, I would hear the end of it; it probably would be the end of IT.

NELSON: Well, speaking of the end, we are at the end of the interview.

NEVINS: Yes.

NELSON: I really appreciate you taking so much time and letting us know more about what you've been doing here.

NEVINS: Thank you.

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  BACK TO ORAL HISTORIES

Marc Nathanson

NathansonMarc2010

Interview Date: November 8, 2011
Interview Location: Westwood, CA USA
Interviewer: Tom Southwick
Collection: Hauser Collection

SOUTHWICK: It's November 8th, of the year 2001, and we're with Marc Nathanson in his office in Westwood, in the area of Los Angeles, and this is a part of a series of oral histories for The Cable Center that we're doing on leaders of the cable television business. I'd like to start, if I can Marc, by asking you a little bit about your family background, where you grew up, your parents, and early education.

NATHANSON: Well, I grew up in Highland Park, Illinois, but I was born in Los Angeles. My father was trying to be a screen writer in 1945 when I was born here, and he was unsuccessful as a screen writer, so he wrote radio soap operas, like Suspense and Norah Drake, and then he went back to Minneapolis where I lived for the first four years of my life or so, and he became an advertising man, which he was for the rest of his life. He was a very good copywriter and headed his own agency eventually that merged into Grey Advertising. So I was raised as the son of an advertising man.

SOUTHWICK: When exactly were you born?

NATHANSON: I was born May 12, 1945 in Los Angeles in Cheviot Hills, but when I was six months old we moved to Minneapolis, and then in 1949, when my dad was with the Toni Company as head of marketing and advertising, it was sold to Gillette and he moved to Chicago where Gillette told him he would continue to run the advertising but he should form his own agency and he did that and formed North Advertising, which the major account was Gillette, and it stayed with Gillette for about 40 years.

SOUTHWICK: And that's where you grew up? In Chicago?

NATHANSON: I grew up in first Glencoe, and then Highland Park, Illinois, but I think why it's important is my father was very involved in the media. As a matter of fact, his family was involved in the media if you considered film distribution media. His father was a film distributor. His father's brother started Famous Players, which was a large Canadian movie theater chain and also started the Odeon chain, which is now part of Cineplex Odeon Theaters. So they were always in the media business, or the entertainment business, so in a way it was in our blood. My brother Greg went into television; I went into cable TV, but we were urged to do that by my father, who started investing in the radio and TV business with Burt Harris and his cousin Irving, who was my father's best friend, in 1952. So that's when they bought their first radio station and shortly thereafter – that was in Casper, Wyoming – they bought a television station and they got into cable in the '60s.

SOUTHWICK: So this was conversation around the dinner table for you.

NATHANSON: Yes. I used to read Broadcasting Magazine and Advertising Age, I can remember vividly reading it when I was twelve years old, maybe before that, but it was just part of our daily magazine weekly reading that we had. So we were raised where media was discussed – radio, television – my father, even though he was an advertising man, as I said, invested on the side in the media business and most of his advertising was on radio and television. As a matter of fact, years ago he used to publish a magazine called Radio Showmanship, which was about how advertisers would use radio. So he went way back with that understanding of the media business, which both my brother and myself were raised on.

SOUTHWICK: Do you remember getting your first television set?

NATHANSON: I remember we had it very early because my father would get them for free from NBC, which of course was owned by RCA, would give gifts every year to the big advertisers on the different networks, and one of the gifts we got, in I think the early, early '50s, was one of those big console television sets, which was given to him by RCA as a Christmas gift.

SOUTHWICK: And you graduated from high school where?

NATHANSON: Highland Park High.

SOUTHWICK: And what after that?

NATHANSON: And I went to the University of Denver, and I went to the University of Denver not because it was later the home of cable television and The Cable Center; it was because it had a very good radio and television school, and I was looking at that. My brother went to the University of Southern California for the same reason. They also had – they didn't call it the Mass Communications or whatever the euphemisms are today, but in those days they were called radio and television, so you could major in radio and television and still get an undergraduate degree. So I went to DU, and I started in 1963 and I graduated in 1967.

SOUTHWICK: When you lived in Denver... was that when you went to the first cable show?

NATHANSON: Yes, I went to the first cable show while I was in college.

SOUTHWICK: Your first cable show.

NATHANSON: My first cable convention... which was in Denver,. I actually tried to buy my first cable system in 1966 or '65. It was really part of a class assignment and you could do it on buying and selling of a cable system, or a radio property, or television property, and I chose cable because I was very interested in cable, and of course I went to Bill Daniels' office in Cherry Creek. I had an appointment. I put on my only suit that I had at school, and believe it, back then I was very skinny, and I went in for the appointment. When the receptionist saw me she said, "I'm sorry, Mr. Daniels is busy, but another one of the brokers will see you." So I waited about a half an hour, obviously they were disappointed at this potential buyer, and finally a young broker came out and he tried to sell me Elk City, Oklahoma, a system which I might add has not grown since that time, and his name was Monty Rifkin.

SOUTHWICK: Aaaah. This was not successful?

NATHANSON: Well, no, I didn't buy it. I was really only doing a paper on how to buy and sell a cable system, but I was playing I was buying it. I didn't tell Monty Rifkin that I wasn't serious, but it was part of how to buy and sell a cable system, so I did a paper in undergraduate school on that subject.

SOUTHWICK: Very good. What particularly led you to cable as opposed to broadcast or radio?

NATHANSON: I wasn't sure – we talked about all the media business and my father also taught at school in media at Columbia College in Chicago and we talked about the whole business. Cable, I thought, would be more growth, because most of the kids in undergraduate school in radio and television wanted to go into television. They wanted to work for the network or else be talent or be a DJ or go into radio, and I had worked on a campus radio station and had a wonderful teacher in Noel Jordan and Harold Mendelssohn, who were all professionals in the business...

SOUTHWICK: This was at DU?

NATHANSON: This was at DU. These were professors in those days. Mendelssohn had been head of research at McCann Erickson, Jordan had been an executive at NBC, and in talking to them and listening to them as they were all talking about, of course, the business as it had been. But when we got talking about the future, nobody was talking very much in those days about cable TV. And as I said, I went as part of a class assignment, or maybe they gave us free passes, or whatever, to a cable convention, and I noticed that most of the people at the cable convention in Denver in '66 or '65 were not very sophisticated. They were very nice people and very friendly people. There weren't a lot of college educated people, or a lot of young people, in those days, in the business. I said, "This is perfect for me." There'll be less competition, I won't have to go fight with all these other students who are much smarter than me, much brighter than me, much better looking and will all go into the networks, and I'll go into cable TV. I went to graduate school before that, and I did write my master's thesis on the regulation of cable television and the television industry, so I did some studying and I'd worked over the summer while I was in college. One summer at a CBS station as an ad salesman in San Diego, KFMB TV, which was owned by Augie Meyer at the time, and two summers as a door-to-door salesman in cable TV in Wisconsin, Minnesota (Janesville, International Falls, Prairie du Chien, and so forth) and I learned a lot about the cable business as a door-to-door salesman working with a crew.

SOUTHWICK: Talk a little bit about that, if you will. What did you do?

NATHANSON: Well, it was a summer job and we had really two different jobs. In International Falls and Fort Francis, at that time, the Canadian and the American cable system were one. They were owned by the same person, and later they were separated as you know. We just tried to increase sales to cable both on the American side or the Canadian side of the border. When we went to a smaller town called Viroqua, Wisconsin, the operator in Sparta hired us to do a survey of all the people in town to see if he should build cable to this next town. So, I and a crew worked there and we went door-to-door, and in those days you didn't do a sample, you interviewed about 80% of the people in town, and they were very friendly in these small towns in Wisconsin – German ancestors, most of them were in that part of Wisconsin – and they'd let you in their house and give you a cup of coffee or whatever and you'd say, "Would you pay four dollars a month to get Minneapolis independents and an educational television station?" In those days there was no PBS, and that would be added to the one station you got off the air from Eau Claire. "Would you pay four dollars a month to get the missing networks and the PBS?" And the answer was universally, "No, we wouldn't pay four dollars a month." So after talking to all the people in the town, I reported that information to the operator and he thanked us very much and went on and then built a very successful cable system, to which most of the people subscribed. So it told me something about the public and cable and when it came to money. The public, until they saw cable, until they witnessed it at their neighbors' homes, were saying, "I'm satisfied with the television I got," whether that was one station or multiple stations, and we had that same experience when we built Kern County, California, when I was working for Burt Harris. Now, this was later in 1968 and '69 when I first started in cable, and again, there was a question whether cable would be successful in Bakersfield because they had all three networks. Why would people subscribe to cable? Why would people pay six dollars a month, or whatever it was at that time? And of course, once they saw it, I learned, the public had an insatiable appetite for more entertainment, more information, and I was taught that in the early days of door-to-door selling, by just interacting with the public to see what they liked, and they were reluctant to part with any money for "free television", but once they saw the wonders of cable, which in those days were just some independents and educational stations, they gladly would part with the four dollars, six dollars, seven dollars, a month.

SOUTHWICK: So you graduated from DU in...?

NATHANSON: '67.

SOUTHWICK: And then graduate school was at...?

NATHANSON: I got married, went to graduate school, I got a National Science Foundation fellowship, so I got free graduate school, and I got a choice of three schools because the National Science Foundation – in those days, this was in Poly-Sci – gave you the choice of schools where they had funding for their fellowships. One was Minnesota, one was Georgetown, and one was University of California at Santa Barbara, and I visited all three and I decided without question to go to Santa Barbara.

SOUTHWICK: (Laughter) Not a hard choice, I think.

NATHANSON: I just don't know why. And I had been an intern in Washington, and so I wanted to get out of Washington anyways, so we went out to Santa Barbara and that's where I went to graduate school. But I did it very rapidly. I essentially doubled up on all my courses, I TA'd and I got out in a year, and I wrote my thesis while I was out of school, because you could do that in those days, and then had to submit it to the committee and have it approved, and that was, as I said, on the regulation of the cable industry in television. And that was an interesting project because I interviewed a lot of interesting people from Newt Minow to people at the NAB to people at the NCTA and so forth, in those days. I got opinions, and of course I came to the conclusion, just as the writer of the document, that cable was artificially being held back by regulation controlled by the networks, essentially, to keep cable out of the top markets. And again, that was another reason I wanted to get into cable because I thought those regulations would eventually be lifted. I didn't know when, but I thought that it would be a good field to go into.

SOUTHWICK: You had an interest in government and politics, along with this interest in television, I guess from a very early age. How did that start and how did it develop?

NATHANSON: We always came from a political family. My great grandfather, my father's grandfather, was a politician in Minneapolis. He was sheriff of Hennepin County, which was the county there, which was an elected office. It wasn't law enforcement. It really had to do with the court system and the jails, and it was elected, and so when the Democratic Farmer Labor Party was in office, he and his six sons and one daughter would have food and when they lost they would starve, so politics was part of their life in those days in Minnesota. And so we were always raised, and people say, "Well, why are you a Democrat?" and I say, "Just because it's in my blood going back to those days." My father was active in politics, he ran many political campaigns – Senators Paul Simon's, Birch Bayh's, many other people – and so it was natural to go into politics, and that was really my first love. I had worked in the summer as an intern for Gale McGee, the United States Senator from Wyoming. I then, in between graduate school and undergraduate school, I worked about three months as a press aid for him, and then when I went to graduate school, I actually worked part-time for Robert Kennedy as an advance man in Santa Barbara and San Luis Obispo counties as he was running for President. But, my wife got pregnant, I had to earn a living, and politics was not a way to do it, plus Bob Kennedy was assassinated.

SOUTHWICK: Were you there when that happened?

NATHANSON: A group of us were on the way to Chicago to work at the convention. I actually worked the convention and so forth, and so that was a very disappointing and traumatic experience. It also showed that probably politics was not where I wanted to make my living or could afford to make my living, and I wanted to get into cable television at that time, but I couldn't get a job. I had written and contacted the cable industry at the time, the people... there were no jobs for somebody who's only experience had been a door-to-door salesman. So I got a job – as I said I'd worked in college both at a research firm called Video Opinions, and also at an advertising agency called Lorie, Lotito and Westcott – so I got a job in a public relations firm in Chicago called Harshe-Rotman and Druck, which I think later merged with Ruder- Finn, and through that I learned PR and advertising, marketing. I was eventually hired by one of the clients and moved to Montreal, Canada, and part of my assignment, which was to market a model city that was designed by Mies van der Rohe I also brought cable television to this island, which was going to have 20,000 inhabitants on it outside of Montreal. It was only five minutes from Montreal, and from I went to the West Coast to work in cable. I had a cousin, Geoff Nathanson, who was working with Burt Harris, who as I said was a partner of my father's in both radio, television, and later, the cable business, and Geoff left to go work with Miles Rubin in the pay TV business. So there was an opening for a marketing person with Burt's small cable company called Harriscope cable. It was both broadcasting and cable, but this was just the cable company, so I came out to California in '69, I think it was. I finished my thesis at the same time, went out to California and went to work for Burt Harris.

SOUTHWICK: Now, you'd known Burt since you were small?

NATHANSON: Since I was a kid. Burt's cousin, Irving, was my father's best friend. They were from St. Paul, my father was from Minneapolis, and my father was a business partner of Irving's and later went to work for Irving, who owned the Toni Company as their head of advertising and marketing. So, there's a long relationship between the Harris' and the Nathanson's, and when we moved to Chicago, we lived next door to the Harris'. This is Irving Harris, not Burt, but Burt would come to visit and for some reason he'd stay at our house, and so I knew Burt since I was a little kid and so forth. So when an opportunity opened up, when Geoff Nathanson left, that gave me an opportunity to move out to California and to do my dream, which was to go into the cable business and I was hired to be the director of marketing of Harriscope, and as I said, we built Kern County, and we already had Palm Springs and Flagstaff and Malibu. Harriscope built the Kern County system, and that was my early baptism into cable. But my first job was when Burt really sent me out to Malibu, which was called Abel Cable at the time, to become the system manager because he felt that I didn't have any field experience, which I didn't, other than the door-to-door selling. So I actually managed a cable system for six months, a very small cable system, and I learned that the chief engineer really manages the system and I was to handle the politics and the public and the marketing, but the day to day running of the system, at least in those days – a guy named Steve Streeter was the chief engineer, and he had things pretty well under control, and that was a growing system and a good experience.

SOUTHWICK: What were some of the issues that systems in those days faced? How big was the Malibu system in terms of channels, subscribers, that kind of thing?

NATHANSON: I don't remember it all. As I said, it was even called Abel Cable, you know, with the old symbols. I remember that it was around 2,000 subscribers. It's ironic because later my company, Falcon, bought that system and it became a much larger system due to growth, but it was then around 2,000 subscribers. The market was affluent. It was a large, strung-out system along the coast, so there were technical problems, how to get the signal there. I remember negotiating with trailer parks to put the signal in, and that was controversial whether they should put in there own master antenna system or they should go with us, and one was in Paradise Cove and so forth. And those were kind of the issues that you dealt with in those days. They were very mundane, but I'd be surprised if the rates were more than seven dollars a month, or something like that back in those days, and Malibu was always a pricey system because it was hard to get signals in so you could charge more for it because there was limited off-air reception.

SOUTHWICK: So you were retransmitting, basically, the LA stations.

NATHANSON: Oh, that's all you were doing, essentially. You may have had a crawl screen, or weather scan, or whatever, but it was really transmission of the LA signals. Ironically, they could get some signals from the south, from San Diego, but they couldn't get all the LA signals and they couldn't get any UHF signals at all, including the PBS station here in LA, KCET, which was a PBS station.

SOUTHWICK: Now, why would anyone ever leave running the cable system in Malibu, California?

NATHANSON: I left because I told Burt there was no job for me here; they should make Steve Streeter the manager. I had gotten all the trailer parks and all the growth but Steve took care of the day to day management. So it ran with a manager/tech at those times, which made a lot of sense, as a lot of those early cable systems did. And I went to work for Burt. Harriscope Cable was a very small cable company at the time and it grew through a merger. It bought control of a large cable company, which was public, called Cypress Communications, and it was a reverse merger, so the Harriscope people, which were Burt and his backers, mainly Irving and my father, were able to get control of a larger company through merging into a public company, and the Cypress people, which were based in Pacific Palisades, actually came to work for Burt. That was Leon Papernow, who was an old Jerrold Electronics executive, and Harvey Simpson, joined Jerry Green and myself and Burt, and that was really the core of the management team in those days of Cypress Communications, which was the fourth largest cable company in the country. And shortly thereafter, Cypress (when the telephone companies were forced to divest) bought all of United Utilities cable systems. So we were very busy in those early days – 1971, '72 – in the cable business building that up, and I had actually left marketing somewhere during that time because at a staff meeting the government had changed the rules and in the bottom markets they started opening up the markets 50-100 in those days.

SOUTHWICK: Opening up in what way?

NATHANSON: Allowing cable to be built in those markets. They were unfranchised, they changed the regulation so that cable could go into those markets so you had those much larger markets than we were in historically opened up to cable, but they were franchises and they were bidding and so forth. So I volunteered to run that operation and to become in charge of acquisitions and franchising, and we went out to Illinois and Indiana and Wisconsin, and got franchises. Frank Drendel joined us as an executive in those days; John Muir, and a bunch of other people. We had a very active team that was operating cable systems and also obtaining franchises – Dayton, Ohio; Ft. Wayne, Indiana, which we did not get; Muncie – a whole bunch of areas, and some we got, some we did not get, but we learned the franchising game. Oshkosh, Wisconsin – we beat Warner and got that franchise, so that was part of the growth of this company. We built Canton, Ohio, we bought Columbus, Ohio, part of Columbus, and as I was on the road in 1972, late '72, Burt called me. I was working the Dayton franchise, which we had pretty well secured. We had lost Springfield, Ohio to those mean people at Continental Cable. Amos Hostetter somehow got that franchise from us, which is a long story. I won't go into it this time, but we were meeting them in Dayton, or as he says, they never really wanted Dayton, they really only wanted the suburbs, so it depends on what version of history you go back to, and to make a long story short, Burt called and said Irving had sold the company to Steve Ross. Steve Ross had come in with a preemptive bid and was forming Warner Cable, and he had bought TVC, Al Stern's company, and he then offered to buy Cypress and he gave Irving Harris a price that he wanted. I don't know what the stock was selling at at that time, but it was like 30 dollars a share, and the stock was 12 dollars a share, so Irving sold the company. Burt wasn't that keen on it, by the way, but Irving was a controlling shareholder, and of course it had public shareholders, so the company was sold, and I was out of a job. I really went to work for Warner Cable – Burt became the vice-chairman of Warner Cable, but we were really a subsidiary office and there wasn't a lot to do, and I was quite bored, as was Burt. But that was the early days.

SOUTHWICK: You were here in California?

NATHANSON: We were here in California.

SOUTHWICK: And the headquarters of Warner was in New York.

NATHANSON: Yes, because TVC, had been bought before, so Al Stern was the chairman and CEO of the company, Burt was the vice-chairman, but we were more or less a branch office, and as I said, it wasn't exciting like when we were building up Cypress, and so Warner... and we had 180,000 subs at the time Cyprus was sold, something like that, and Warner, obviously, was even larger because they bought us and they bought Continental Telephone's cable systems. But it wasn't that exciting. I continued to work on the franchises, now for Warner, and eventually Burt came to me and he said he'd been approached by Solomon Brothers, by Tully Friedman, who was the West Coast partner, and they wanted to raise a cable fund to go out and buy cable systems, and start a new cable company, and would Burt do it? So Burt invited myself and Jerry Green, who had been the chief financial office of Harriscope (and then Cypress) to join him. I was the marketing/franchising guy, government bug, and we hired a seasoned cable executive named Chuck Trimble, who had been president of H&B America, as the operating head. And so the four of us went on a road show with Bob Madden, who was head of private placements at Solomon, and tried to raise 40 million dollars. We went to all the different Solomon offices to talk to institutions to form a cable company, but it was essentially a blind pool, and somewhere in the process they came back to us and said, "Oh, it's going great. We're going to raise the money." Now, we weren't being paid salaries, we were all doing this on the come, on the volunteer, and they said, "But it's hard to raise a blind pool. We need to buy some cable systems." So Burt went to Walter Annenberg, who was Ambassador to the court of St. James, through Joe Furst – Gerry Lenfest was working for him at the time – and he arranged to buy his cable systems, which were in Binghamton, NY, and Lancaster, PA, and some other places, so we wouldn't be a blind pool. Solomon assured us there'd be no problem in raising the money, and a few months later they came to us and said, "We've been unsuccessful. We haven't raised a dime." Burt had put down the deposit on the systems with his own money, and Annenberg was a real gentleman and gave him back the deposits.

SOUTHWICK: Wow!

NATHANSON: And they sold the cable systems to someone else, and as Gerry Lenfest said, it's the best thing that ever happened to him because he bought one of the systems and started as a great entrepreneur. I was out of a job. It had been a failure and we'd been on the road for 6-8 months, whatever it was. I learned a lot about Wall Street from that experience.

SOUTHWICK: I wanted to ask you, before we resume the chronological order, a little bit about the franchising experiences you had. What were the key issues, typically, in a franchising war? If you were a Cypress battling against Continental, let's say, what would a city council look for?

NATHANSON: I think an interesting story, really, is to tell you about the first franchise we went after. We did a demographic study of the markets of where cable, we thought, would be good based on reception and demographics, and so forth. Strangely enough, we chose Muncie, Indiana as the first market, which was where Lazar did his famous study of Middle America, which was Muncie. So we went to Muncie and in those days we were competing against a lot of companies. Some were local, some were national – I don't even remember... Cable Comm was one, Time Warner, Stet, through some franchise contractors were, not Time Warner, it was Time, Inc., excuse me, it wasn't Time Warner yet, was one, a number of companies. What you learned was it was based on merit, but part of the merit was really what you bid you were going to charge as rates because you essentially offered the same channel lineups that you were allowed under the law now. You had the same equipment, there may be some difference, but it was about the same. The technology was about the same in the companies. So the cities decided based on who had the best financial statement, or had the money to build the system; who had the experience of management; local programming was a big issue in those days, local origination programming, what you were going to do. And that was more promises made by the cable companies than actualities. I remember, to digress for a second, later on in Oshkosh, Wisconsin, the way we got the bid was we promised 30 educational stations for public access, that the local school would love it.

SOUTHWICK: 30!?

NATHANSON: Well, that was part of the bid requirement. We didn't suggest it, they suggested it, and we agreed to do it. We put a little caveat that they've got to used one full-time before the get the second one, and so forth, but that's how ridiculous some of these promised were, but they weren't just promises by the cable company, they were part of the RFP, the bid, required you to do this. But anyway, going back to Muncie, we approached it by being a low rate bidder and showing we had the experience. Of course with Burt and the broadcasters we did that, but it was still a political game, which was something I loved, but I was 22, 23, 24 years old at the time. I went to TelePrompTer at 27, so I was about 24, 25 in these days. So we'd go around and we'd have local consultants and lawyers – this was before the rent-a-citizen started, which later we perfected in Dayton and other places – but you went around with lawyers and with consultants and so forth, and I remember Muncie was a very democratic town, old politics, they had a Mayor Cooley, I remember was the mayor's name to this day, white-hair, and was very powerful in the town. There were one or two Republicans on the council, but five Democrats, and the mayor was a Democrat, and we got the recommendation of the citizen's committee that they council had appointed to evaluate the bids. The newspaper in town also ranked us as number one. So I thought I was really hot at this, I could win any franchise against any of these companies because we knew how to write them and we knew how to work them. It was kind of up my background because it was both cable and political science, so it was something I thought, oh, I was just great, I was just so perfect to do this, and Burt was going to be so happy. Before the final vote, I was staying at the Holiday Inn near Ball State, there's a knock on my door, and there was an older man, I'd never seen him before, and he introduces himself, I forget his name now. He says, "I'm head of the United Steelworker's Union here in town." I say, "Oh, nice." "Are you the guy representing the California cable company, Cypress?" "Yeah, I am." He says, "Well, I'm a friend of the mayor's. If you want the vote tomorrow night, or tonight, or whenever it was, you have to give me $50,000." I said, "What!??" He said, "If you want the vote, the mayor wants $50,000, and I'm here to collect it, and this is how I want it." So being highly moral, highly ethical at that age, I immediately called my boss and said, "I need $50,000." (LAUGHTER) I don't think I said that. I said something like, "What do I do?" to Burt, and Burt says, "Are you kidding? We have broadcast license." You know, Burt was a very honorable cable operator, and broadcaster before that, and knew about all the rules and said, "You tell him absolutely not, and if he does this we'll turn him over to the district attorney, and this is against the law and it's bribery and so forth, but go around and make sure you still have the votes on the council." Because I had all the Democratic votes and all the Republican votes. As I said, we were ranked number one by both the citizen's group and the newspaper that did an independent ranking. So we go to the council meeting that night or the next night, whenever it was, and I reaffirmed all the votes. The mayor is kind of sitting there, winking, and the final presentation was five minutes, they have a vote, it goes to the fourth ranked company. The fourth ranked company gets the vote, which happened to be an affiliate of Time, Inc. Now, I have no idea if they ever paid a bribe or not. We never pursued it, but we learned a lesson that we were naïve, thinking as outsiders we could understand the politics, and that's when we – and by the way, many other cable companies – started to have local citizen's groups that really got 20% of the franchise for helping deliver it, but a bipartisan group who had political influence, both Democrats and Republicans, minorities, all different, and in Dayton we put such a coalition together and that was one of the reasons we were successful. But that's what it was like. In Springfield, Ohio, which we lost to Continental, it was solely based on rates. We bid $4.00, they bid $4.75, so the council was under pressure to give it to the lowest rated company, which made a lot of sense because you could change your rates. But you were bidding for a year or two that you had to lock in your monthly rates, or whatever it was, and Hostetter, Bud at that time, later Amos, who was one of my great idols, and still is, in the cable industry, was head of the NCTA, or active on the NCTA at that time, and I, from an early age, had been on the NCTA. I chaired their public relations committee when I first was at Cypress, so I'd been active in it and I knew Amos. As I said, he was different than a lot of the cable operators. He was highly sophisticated, highly educated, and someone that we all wanted to emulate. We had Newt Minow representing us at the time, who I interviewed for my thesis, and we had Ethel Booth as an educational consultant on the programming, but essentially that we were rated higher because we had a lower rate, $4.00. Amos had asked me to appear on a panel at a cable convention about six months before, and the topic was how to get rate increases. This was in your existing systems, and this was part of government relations, something I was responsible for, and we talked about how to do this. He, then, at the hearing, played part of that tape, which was really for a different audience. That was for a cable audience and this was before the city council, where it kind of implied... And I was just furious, and they won the franchise, and he said to me afterwards – very nice, he was always lovely to me – he said, "Marc, in franchising it's like love and war, everything is fair." So we lost Springfield even though we had bid the lower rate.

SOUTHWICK: You mentioned the Muncie situation and the $50,000. Generally...

NATHANSON: That's the only time that ever happened.

SOUTHWICK: Really?

NATHANSON: Yeah. In all the years, and all the franchises we later got, because we got most of the franchises for the San Fernando Valley, the San Gabriel Valley, I mean that's a whole later story, but there was politics, and it was rough politics and people in your group and so forth, but it wasn't out and out bribery as was the case, if it was really true...

SOUTHWICK: Well, maybe the Irving Kahn experience...

NATHANSON: Oh, well, that was before, but I'm saying in my experience in the cable business. But it was plenty tough, the franchising, and politicians, as you know, and I know, make decisions based on political influence and political pressure groups, not necessarily on merit. It's naïve to think that it's all based on merit. That's not how the process works, how laws are made, or how franchises are granted.

SOUTHWICK: Well, part of merit is how the groups that you represent think about something.

NATHANSON: So we became more sophisticated in doing that, and I did that for Cypress and for Warner, but I was unhappy at Warner because you had no direct input, you were just like a field operative, and so Jerry Green had gone to work in New York for TelePrompTer, and I had been building some franchises that my father and Burt owned in Soledad and Gonzales and Altadena, and living and working at home, and it was a very down time in my life because it wasn't very challenging. We had 3,000 subscribers and that's all I was doing, but I had been an executive at a big company, and this was quite different. And I got a call from Jack Kent Cooke, who had taken over control of TelePrompTer after Irving Kahn had gone to jail, with Hughes he was able to break his old non-compete contract when he had sold his cable company to TelePrompTer, Cooke had been a great Canadian, and then later, American sports entrepreneur. He had sold his company, but he had a voting agreement with Kahn that he couldn't vote his shares, when Kahn went to jail it somehow broke that agreement so Cooke and Hughes Aircraft, controlled by Howard Hughes, controlled the company and they took it over when Kahn went to jail. Jack Kent Cooke moved to New York and he was putting a management team together; Bill Bresnan was still there, who had worked for Cooke in the past, but later worked for Kahn at TelePrompTer, and he called me up and asked me to come to New York.

SOUTHWICK: Had you known him personally prior to this or not?

NATHANSON: I did not know him personally prior to this. He knew my father slightly, but it was really through Jerry Green, who he had hired as the CFO, who I had worked with at first Harriscope, and then Cypress. I had come to New York for the interview, and Cooke had me meet him – this was in 1973 – in his hotel, and he was living, at that time, in an apartment in the Waldorf Towers. I remember, for whatever reason, I either came the night before, or whatever it was, I met him at 11:00 and he answered the door in this beautiful, elaborate, really apartment in the Towers, it wasn't even a suite, it was larger than that, and he was in his pajamas. He sits down and he talks for an hour about himself, what he has done with Lort Thompson in the newspaper business and in the cable business and in the radio business and in the sports business, and so forth and so on, and he says, "Would you want to come work for Jack Kent Cooke?" Didn't ask me anything about myself, didn't tell me what it was, what the job was, and so forth. I said, "Well, I'd have to talk to my wife," I was married and by this time I had two kids, he said, "You have to talk to your wife? Then you're not the man who would work for Jack Kent Cooke. Good bye." And that was the end of the interview.

SOUTHWICK: He referred to himself in the third person?

NATHANSON: Yes, always. He never graduated from high school, but he was very articulate, one of the brightest men I know, was self-educated, had a wonderful vocabulary. He had to support his family, is why he dropped out of high school. Anyway, I went back...

SOUTHWICK: So that was it. He just said good bye?

NATHANSON: That was it. And he had sent me a first class ticket and paid for the hotel room, so I mean, it was the most ridiculous thing and I talked to Jerry, and he said, "Well, he's a little eccentric, and this and that." So, on Sunday, around midnight, a week later, I got another call from Jack Kent Cooke. He said, "Have you talked to your wife?" I said, "Yeah, I talked to her. She's from New York, my wife Jane, so she would move back to New York if it was the right opportunity." He said, "I have a question I want to ask you. Can you get on a plane tomorrow morning and fly to New York?" He sends the ticket, I have nothing to do, so I go to New York and he says, "I have one question for you." He says, "Are you smart?" This is the great question. Again, we're in the apartment, he's in his pajamas. It may be noon. The great question, nothing about my cable background, is this a marketing job, is it government relations, franchising, I have no idea, what the pay, what the salary, what the title. He says, "Are you smart? And I said, "Yeah, I think I'm pretty smart, Mr. Cooke." He says, "If you're so smart, how come you're not a millionaire? I was at your age." Now, I'm 27 years of age, far from a millionaire, having trouble supporting my family on the money I'm earning from the little cable systems. So I turn and look him in the eye and I say, "Well, I hope to become one working for you Mr. Cooke." He says, "I like that answer, go report to TelePrompTer over on 46th Street. You're hired." Now, I don't know what I'm hired for, I don't know my job, I go over to the office of TelePrompTer, which is on 6th Avenue and 46th Street, or between 46th and 47th, and I walk in, and he said to see Bill Bresnan because Raymond Schaffer had come in as the former governor of Pennsylvania who was the acting CEO, but Cooke was going to get rid of him and Bresnan was executive vice-president of operations. I wasn't sure what my job was or title, and I went in to see Bill, and Bill saw me and he says, "Are you here for...?" We were on a committee together at the NCTA, and he thought it was a committee meeting. He had no idea, and I said, "I think I've been hired here." He said, "To do what?" When I explained how Cooke did things, he then called Bresnan and told him, I'd been hired as the vice-president of marketing and programming of TelePrompTer, the largest cable company in the country, the TCI of its time, or the AT&T of its time, double the size of the next largest company, a company in financial trouble, and I went to work there and that changed my whole career. That separated me from the men and the boys in the cable business, gave me a reputation, gave me high visibility in the industry, and enabled me to later start my own company, but it was very tough work working for Jack Kent Cooke. He was a very difficult boss, you worked 24 hours, you worked 6-7 days a week, he paid you extremely well. I had been making $20,000 working for Burt Harris when I was working at Cypress, and I was paid $75,000 by Jack Kent Cooke, in those days, just to show you how crazy it was. But Cooke was all demanding. He even had on the phones of the executives an override button, that if you were on the telephone and he wanted to talk to you, he would cut off your phone and he would be on the phone talking to you, just cut off whoever you were talking to. You had to have lunch with him everyday.

SOUTHWICK: Everyday?

NATHANSON: Everyday, five days a week, even though we may have worked six or seven days a week, and he would choose the meals. But his idea was not to waste time, and that was time to be with him and he could tell you about the business and you could talk about it for lunch. Plus, he didn't want the executives going out and eating on his nickel in New York City, which was very expensive, at the Algonquin Hotel, or wherever. So he wanted you to be in his private dining room. The only person he kept from the Irving Kahn days was Irving's chef, a guy named Alex, a great black cook from Harlem. For some reason, with all the cutbacks that he made – and when I was there, Jimmy Locker who had worked for Cooke on the West Coast, it was part of my assignment to work with him, we had to cut 200 out of 400 people out of the corporate office. So we had to cut whole departments, and people like Frank Biondi were let go. Now, Frank said later he quit beforehand, but I remember he was part of the people that were cut when the departments were cut in those days.

SOUTHWICK: Now, TelePrompTer was in terrible shape. Irving Kahn, who had founded it, went to jail; the stock had gone to...

NATHANSON: De-listed.

SOUTHWICK: De-listed.

NATHANSON: And it dropped from 110 to 2, and then the former treasurer before Jerry Green came in accused it of financial irregularities and the FCC was investigating it and the stock was held up, or de-listed, or couldn't trade, whatever you called it. So the bankers were very unhappy. It had the biggest bank line in the country, 150 million dollars. I remember going to a bank meeting and the Bank of Boston and the Bank of New York, Allan Griffith was the account officer at the Bank of New York, Ira Stepanian, later to become president of the Bank of Boston was the bank, and Cooke stood there, took out his car keys and through it to them. He said, "Do you want to run the company or do you want me to?" to the banks, and he wanted time, and part of it was he had to build up the subscribers and they had to sell off all the businesses that Kahn had put them in that weren't profitable – Filmation, which was the animation house, Muzak they owned, they had an alarm company in those days; they had a whole research, Hub Schlafly had an R&D lab – and of course I was part of the new regime that came in, and the only carryover, really, was Bill Bresnan, who, because he had worked for Cooke before, he had a good relationship. Of course I love Bill, and he is still a very good friend, but he was in operations and my job was to build up the marketing department and to build up programming.

SOUTHWICK: Did you have to get to a certain number of subscribers in order to meet the bank requirements?

NATHANSON: Cooke would lose... you're absolutely right... By the end of 1974, Cooke would lose control of the company, by the end of 1974, if we didn't have a million customers. It was a covenant.

SOUTHWICK: And you went to work for him when?

NATHANSON: In 1973.

SOUTHWICK: Okay, so you had what? 18 months to get to this?

NATHANSON: No, I had about a year. So this is what happened...

SOUTHWICK: How many subscribers did you have?

NATHANSON: 800,000 and some, but we were losing customers. We were in markets all over the country, and as I said, it was kind of chaos in the company. We had Theta Cable which was a problem, Los Angeles; we had Upper Manhattan Cable, which was a problem. Those were our urban systems. We had Peoria, Illinois; Duluth, Minnesota; El Paso, Texas – I could go on and on because I visited all the systems, or all the major systems, and so I had to put a marketing program together that would work. At the same time, Cooke was cutting my budget because the budget had been 6 million dollars a year the previous year, and it was down to 3 million. So it was very difficult times. What we did was we developed an active door-to-door sales campaign and we hired 2,000 salesmen. So you can see the enormous impact of door-to-door sales. We did extensive trades for our media buys, which doubled and tripled the existing media buys, but it was done with trades, with barter. I hired a young kid who had worked for me in Kern County. He was an outside contractor with Market Communications, and then he had gone to Sammons as the head of their marketing and sales.

SOUTHWICK: He had a beard in those days, didn't he?

NATHANSON: Had a beard, and his name was Jeff Marcus, who became a great entrepreneur in the cable business. So, I was the vice-president of marketing and programming, Jeff was the director of sales, and we put together a team, and we accomplished that goal. We reached a million subscribers before the end of the year. Now, it was very artificial and wrong to do because we would add customers by giving giveaways, by free stuff, just to get numbers on the board, so there was huge churn, but Cooke did not care. He wanted that number reached and was well aware of what we were doing, but we obtained 260,000 customers, or something, in six months, the largest number ever gained by a cable company in those days. It was a huge effort and it was very exciting, very challenging.

SOUTHWICK: Now, the door-to-door teams – would they go from one town to another? Were they sort of like SWAT teams?

NATHANSON: We had SWAT teams. We had them regionalized. We had an enormous infrastructure. A guy named Harvey Johnson, the salesman/manager under Jeff. There was a whole infrastructure; it was like a military operation. Bresnan and the operating people hated it because they were under enormous pressure to get the installs in, but the sales effort was very successful, it was very expensive, but it was all pay based on the sales coming in.

SOUTHWICK: Commissions?

NATHANSON: Commissions – and they made a lot of money, those people, but it was a goal we had to do, and Cooke's judgment was not to question him, just to get the numbers, and that's what we worked. There was enormous pressure, but it was very exciting as I said, and we accomplished that goal. As a matter of fact, in '75, when Russell Karp came into the company – Cooke was supposed to make Jerry Green the president of the company, but he changed his mind and never told Jerry he wanted somebody who was more acceptable to Wall Street, so he brought in Russell Karp, who was executive vice-president of Columbia Pictures at that time, Columbia Industries, a very experienced executive, and I was furious because I was a friend of Jerry's, and Russell came in and he knew nothing about the cable business and we had turned this company around. Now, Cooke had turned it around and we had worked for Cooke, but essentially, we were all, the group that was there – Dick Sykes, who was the controller, Jerry who was chief financial officer, Barry Simon, who was the legal officer, Bresnan and his people who worked for him, were really the team, with Jeff Marcus and so forth, that turned the company around. Unfortunately, I had to fire Jeff Marcus because Cooke made me. I really think it was over a cost cutting thing because sales were too expensive and so forth, but operations people never like the marketing people so there was always a conflict there. I managed to get along with them because I'd been system manager once in my life for six months at Abel Cable. And Russell Karp comes in, and I really resented Russell. He knew nothing about the business, and as I said, he would ask me a lot of questions and we were still trying to attain goals. I, at the time, was negotiating programming with HBO and there was a series of breakfast meetings that went on for almost a year at the Algonquin Hotel across the street between Jerry Levin and myself, to try to set up a nationwide pay TV company through HBO.

SOUTHWICK: Now, was this before the satellite?

NATHANSON: Satellites were there, and satellites allowed us to interconnect, and we had already via a microwave system had put on some pay TV, but HBO wanted – there were only six people at HBO at the time when I first dealt with them, there were more this time – but they wanted a nationwide to justify the satellite costs when Bob Rosencrans and they did it, and they needed TelePrompTer. Russell Karp came in and he wanted TelePrompTer to do it ourselves. Cooke, obviously, was the decision maker. I'd already been negotiating with Jerry, a very favorable deal...

SOUTHWICK: Excuse me, Karp wanted you to start your own pay television service and have your own satellite?

NATHANSON: Karp came in very late in these negotiations, but he came out of the movie business, he was perfectly prepared to deal with the studios directly, he said, "Why do we need a middleman?" I was convinced the cable companies needed a middleman to do it, and the best middleman was...

SOUTHWICK: HBO.

NATHANSON: HBO, at this time. And we'd negotiated a long time with this, and Cooke was well aware of all these negotiations. I had to give him a report after every meeting and so forth.

SOUTHWICK: So you were out there negotiating good faith with Jerry Levin...

NATHANSON: Almost ready to sign! Karp comes in, joins the negotiations, and Karp had a different agenda, and in the long run, Cooke sided with me, and it wasn't that I was right and Russell was wrong, it was due to money. He didn't want to invest the money to start an infrastructure at that time, even though TelePrompTer was somewhat out of the woods at this time, he still didn't want to do that. As I said, Russell and I had a very difficult relationship, and at a New Orleans convention – I don't remember the year, but it was in New Orleans – Russell brought me to his hotel and we were down at the convention and he said, "You don't like me very much. What have I done to you?" Now, this was an older man, I was a kid, and I just let him have it. "Jerry Green should have been the president, and he didn't know anything, and this and that." He was very kind and very nice, and he said, "I understand that. I need to learn the business, I understand, but I think I can help the company with my contacts in Hollywood and Wall Street." And after that confrontation we became very good friends, even though I left the company six months later, we had a very good relationship and worked together, but we had to have this kind of head to head fight about all my built up resentment, or whatever it was, and I was very stupid and very naïve, and a dumb little kid, but this is all a part of the legend of turning around TelePrompTer at that time, which was critical to the growth of the cable industry, because if TelePrompTer had gone under, I'm not sure the cable industry would be the same, after the whole Irving Kahn situation, but it was successful, later sold to Westinghouse, as you know, and I went into Cooke six months later and told him that I was going to leave the company. He thought I was going to go over to Time, Inc. and work for Jerry Levin, and he said, "If you leave Jack Kent Cooke, I'll make sure you never work in the cable business again." That was after two years of working for him, getting tremendous bonuses, doing all the goals he wanted to accomplish – my reward was that he threatened me across the table that I'd never work in the business again. He wasn't the most loyal person in the world.

SOUTHWICK: But he thought you were betraying him.

NATHANSON: He thought I was betraying him by leaving. And I said, "Jack, you taught me," and I was only allowed to call him Jack for the last three months, it was always Mr. Cooke, but at one meeting he told me I could call him now Jack because I'd proven myself or something to him, I said, "Jack, you told me there were two types of people in this world – operators and entrepreneurs. I decided I want to be an entrepreneur like you. I want to go back to California and start my own cable company." He said, "Oh, why didn't you say that? I'll invest with you." He's the last person I want to have invest with me. Two years was tough enough working for him, even though he was a good teach to me because he was very tough and ruthless and he wasn't like Burt who was such a nice person, and kind, and a family friend, Jack was purely business and tough, but it also proved to myself that I could be successful, and I was already negotiating to buy my first cable system while I was at TelePrompTer and already sent my wife back to California to buy a house without me even seeing the house. So, I left TelePrompTer in April of 1975 and started Falcon Cable TV in May of 1975.

SOUTHWICK: At this juncture, I think it might be useful to have you talk a little bit, if you will, about the relationship between the cable industry and Wall Street. You worked for Cypress, which was a public company. You were not a business major particularly.

NATHANSON: Not at all.

SOUTHWICK: So I assume you had to kind of self-educate in terms of the relationship between investors and the cable operators, and particularly cable operators and Wall Street. What was that like? What kinds of things did you learn?

NATHANSON: First of all, I never considered myself a financial executive. Fortunately I was around Burt Harris and Jerry Green and Harvey Simpson who were all financial executives, so I really was a marketing executive creative type who had this government relations background, so it worked very well with the financial executives, but I always needed to have people around me who could understand the finance and the numbers. I would do the pitch; I would go and sell the company to Wall Street.

SOUTHWICK: In terms of the concept?

NATHANSON: The concept or whatever we were doing, but it was always having the financial person there to go over numbers and to answer the questions. It was never a strength – I remember Burt sent me to a course at UCLA called accounting for non-accounting executives that I took because it was very important for people to understand it, and I did not have an MBA, I had a master's in political science, and it was critical. But Wall Street was critical because cable was leveraged. Cable was a cash flow business. An interesting story was that when I went to start my own company, Falcon, and buy my first cable system, I was able to do it because my father still owned the Altadena cable system and the two franchises I had built and sold in Soledad and Gonzales. He had bought out Burt Harris, and he had put those in the company when I started it. My father-in-law, who was in the chemical business – having nothing to do with the cable business – in New York, and who was European, he lived in New York. In those days there were gas shortages, so the chemical companies were making a lot of money and he was a chemical trading company – his name was Fred Falleck – and they had surpluses and the government was coming after the surpluses. So I convinced him, who hated leverage and banks and so forth, to put a million dollars in cash from one of his holding companies so it wouldn't be taxed as a holding company, but as an active company. My father put in his cable systems, which were appraised at a million dollars, so I started my company with my TelePrompTer experience, by having essentially two million dollars and no bank debt. So to get the bank debt in those days, you go down to the local branch of Security Pacific. You had a relationship with the manager and he would lend you up to his lending limit. In those days, they were very leery of the cable company. Only the larger companies, and the companies we were talking about before – Cypress; Harriscope was a broadcasting company, it was using the credit of the broadcasting to buy cable – they did understand cash flow lending and they didn't understand leverage, and so it was very difficult at the time to do it. If you consider today, the company I sold had several billion dollars of bank lines, where TelePrompTer, the largest company at its time with a million subscribers, because the company I sold had a million subscribers, Falcon, when it was sold to Charter. TelePrompTer had 150 million dollar bank line, that was it, and it was defaulting on it. Now, of course, rates were a lot different and everything like that, so there were not junk bonds. Mike Miliken and Drexel and the junk bond phenomena that came about revolutionized the cable business, both programming and cable. Companies coming into it, such as Time, Inc. were very important for the status of the industry. Of course, Warner had made a big difference, but it was using its cash from other divisions in order to finance cable because cable was such a capital intensive business that it really took a leap of faith. But what people needed to understand, and I continually would pitch to the banks, we don't lose customers. Once cable is there, once you offer more signals, once you have that and people sign up, it's like an insurance policy. They keep paying you month after month after month, and you can count on that and you can pay back debt with that. So that was all part of the sophistication, or lack of sophistication on Wall Street. Thank goodness for the Bank of Boston and the Bank of New York, some banks that specialized in the cable business, because they enabled it. They allowed us to have the financing to build and rebuild these systems. Especially in the era that we're talking about now. But in 1975, and I remember this very distinctly because we were a very small company. We had bought the Gilroy and Hollister systems when I started Falcon Cable TV in May, and we bought from Frank Caliri and Ben Yasuta, who had built the cable systems, Frank was a TV dealer, and they financed the sale.

SOUTHWICK: They did?

NATHANSON: So it was the sellers in those days who were financing it. There were no banks involved. When we went to buy our second system that Jerrold Electronics and Anixter, now Antec, had brought to us because a cable company had defaulted on their loans to the vendor financing, in this case, which was in San Luis Obispo County and in Sierra Video, which was Tulare County, and they just wanted their financing, vendor financing, to be paid off, so we could pick these up for a small amount of money but we had to have bank lines to do it, and I needed more than the $500,000 bank line that the local branch, right down the block from where we're sitting today, Security Pacific, could do. So, the local branch manager took me down to the downtown office of Security Pacific and Selby Crotter, or some banker by that name, famous banker at Security Pacific, turned us down for a million dollar loan because he didn't want to loan on the potential cash flow of San Luis Obispo and the Tulare County systems that we were about to buy. So I thought that was it for my little company. We owned the Altadena cable system with 3,000 subscribers. We owned Soledad and Gonzalez that maybe had 1,500 subscribers and we had bought Gilroy and Hollister, and we had bought, from John Malone, the neighboring town, Morgan Hill, which he sold to me for seven times cash flow. He didn't even know where it was, but he knew it was next to it and he needed cash at that time, and John was an old friend of mine from the beginning days of when he joined the cable industry, and so we had this little company, and they may have had 8,000 subscribers at that time.

SOUTHWICK: But you couldn't find money?

NATHANSON: But I couldn't find money to buy the San Luis Obispo and Tulare County, which I knew was a good deal. I was picking it up for $200 a sub. We just had to improve it and pay off the vendors, that was the only way we could do it. By coincidence, a young account executive of TelePrompTer, who had worked under the lead account guy, who had become president of the bank, his name was Steve Dodge, came into my office – and I knew Steve – in Los Angeles. And to show you how naïve I was at this time, I didn't know that a bank in Boston could lend money to a company in California. I didn't understand. I was dealing with the California banks that were turning me down. Steve came in and he said, "How you doing?" I said, "Fine." He said, "Do you need any money? I can loan money to you." I said, "You can loan money to me out here in California?" He said, "Oh, sure. We can loan anywhere." "Well, how do you do it?" "Oh, you use a local bank to collect and lock boxes." This shows how naïve I was. Anyways, to make a long story short, I was going to ask him for 750 thousand dollars because we didn't need the million to close the deal, we needed about 750 thousand. So, I'm hesitating whether I should ask for that or what I'd need, or what's involved, and he looked at our financial statement and he said, "We'll lend you about six million dollars." Because they were a cash flow lender. They were lending us at a multiple above cash flow that we would generate from our existing systems plus the acquisitions we were buying.

SOUTHWICK: Whereas the Security Pacific Bank was focusing on what?

NATHANSON: Bottom line profit that you were making, and not future projections of cash flow. There was a different. They later changed, and all the banks, as you know, changed, but in those days they did not. So Steve, who also became a great cable entrepreneur and then radio entrepreneur understood this and was at the bank, and it was under Thompson, the great vice-chairman of the bank who understood the cable industry, and Chad Gifford, who's now the CEO of Fleet Bank, and they understood the business. He knew me from TelePrompTer days, as I was the marketing guy to them, and they agreed to lend us the money. So besides that initial investment, and by this time, by the way, I owned nothing of my company because it was 50% owned by my father, 50% owned by my father-in-law's company, and I convinced them to sell me 20% of the company for $20,000, or whatever it was at that time, and the bank loan came in and one of the things that the bank loan put in was that I was running the company or there was a default on it because they knew me from the past. And from that, of course, we went to expand the company. I think Falcon doubled in size every year for the next 15 years. It was all done by bank loans and new partnerships. We'd get a little money or cash flow in the first partnership and then we'd take that and put the excess capital as the seed and then bring in other investors, venture capitalists, the Mutual Insurance Company of New York, Boston Ventures, later Hellman and Friedman, Government of Singapore, AT&T Pension Fund, and they would come in, we'd put in money, they'd put in money, and then we'd leverage it up.

SOUTHWICK: And they'd be limited partners in a limited partnership? So you put up a series of these?

NATHANSON: We had seven or eight of them, and that's how we got to the million subscribers. I never had a parent company with a lot of money, so I always had to go out and do deals. In one case that I remember so vividly, I can't remember the year, but Rupert Murdoch was involved in this because Warner Amex owned a bunch of cable systems, but Rupert was coming in and trying to make a hostile takeover, but there was a television station conflict because Steve Ross got Herb Segal to come in from Chris Craft, but Chris Craft owned television stations in some markets where Warner later – and this was Warner Amex at the time – but where Warner owned cable, and you couldn't own television and cable in the same market. So they had to sell off – Warner – a whole bunch of cable systems. So, we wanted to buy these systems. A lot of these were old Cypress systems.

SOUTHWICK: Also, they were focused on the big cities, weren't they, and they weren't that interested in...?

NATHANSON: No, Warner Amex at this time, even though they were in Columbus, that was our old system, and a number of others, they wanted to keep these systems because they were producing a lot of cash flow. They were good systems. They weren't the big urban systems, but these were systems that were all in the frequency area, the signal area of Chris Craft television stations, so it was Los Angeles, Atlanta, Georgia. Now these were smaller towns, but it was everything they owned in that area.

SOUTHWICK: And they were old Cypress systems that you knew.

NATHANSON: Many of them were. I knew them very well, including Malibu, California, including Lake Arrowhead, Big Bear, anything in the Los Angeles area that Warner Amex owned and so forth. Well, at this time, Drew Lewis was the head of Warner Amex. The former head of the FAA...

SOUTHWICK: Secretary of Transportation.

NATHANSON: Secretary of Transportation I mean, not head of the FAA. Famous for the air controllers, and I didn't know him at all, and I wanted to buy these systems. But I knew people over there because I had worked there and knew Aaron Fleischman and other people who had been around. I called up Warner Amex and they said, "The systems aren't for sale. We're selling them in a deal to a friend of Drew Lewis, Marty Pompadour, and this is how it's being sold." I said, "Well, I'd like to bid on them." "No, we've just told you. They're being sold to Marty Pompadour. We need to do this quickly because we don't want any problem with the Chris Craft deal with Warner," and so forth. So, I called a friend of mine, who when we sold to Warner when I was at Cypress, I was on the road, I think I told you, when I got the news. I came back to my desk, was a little depressed that the company was being sold because I was happy to stay with Burt the rest of my life – I was very happy at Cypress – and there was a card on my desk in the office. Somebody had obviously been using my office and doing diligence on the merger while I was in Ohio, and it said, "Vice-president, general counsel of Warner" and on the back it said, "Magwa". Well, Magwa was an old camp counselor of mine's name from a camp Jack Pine in Wisconsin where I went ten years as both a camper, and then later, as a counselor, and one of my first counselors was a young 19 year old – I was nine, or whatever – a guy named Marty Payson from New York, from Brooklyn, or whatever, and we became great friends even though I was a camper and he was a counselor, and he later went to law school and became Steve Ross's right had man, who did all the deals. I had no idea of this, and he knew it because he knew...

SOUTHWICK: He'd done a due diligence.

NATHANSON: And so, Marty, just by coincidence, even though he was only involved in doing the deals, he wasn't involved in operating, we rekindled our friendship and we stayed in touch. So, I called Marty, who was now executive vice-president and general counsel of Warner and on the board of Warner Amex, and I said, "Marty, I would like to buy these cable systems, but Drew Lewis," who I never spoke to directly, by the way, only his people, "said they're being sold to some ABC executive named Marty Pompadour, and I want to buy these systems. I know these systems, these are our kind of systems. Most of them were ones that we owned." He said, "Put in a bid." I said, "How do I put in a bid, there's no..." He said, "Just make an offer and send it to Steve Ross and send it to Robinson, the head of American Express." So, I knew the subscriber numbers, I knew the systems, but I didn't have any financial information. I also didn't have any money, but that was another problem. So, I put in a blind bid of 300-some million dollars to buy these systems that they had to sell. At the time I can't remember how much that was a subscriber, and Drew Lewis got really pissed, but they had a big board meeting fight about this. It happened to have been the higher number, unbeknownst to me, than Pompadour. So they opened it up to bidding, a formal bidding process with an RFP and so forth. They sure didn't want us to do it because we were a problem, but we went in and did the diligence, we knew the systems better than anyone else. We got Mutual Insurance Company of New York to put up the equity with us and we ended up buying the systems. The only reason we got it is we agreed that we would transfer the franchises by the end of the year, and if we did not, we would lose the system.

SOUTHWICK: Meaning? Transfer of the franchise – get approval from the local city councils that it would be okay for you to run it?

NATHANSON: Right, and these were like 11 systems, or whatever. But I knew the Malibu people, I knew the California communities, and that was a risk we were prepared to take the other bidders were not. So it assured them they'd get the money whenever they had a problem with this Chris Craft deal, before the end of the year they needed this. So we took all the risk, which is something I've never done since or before because you never know about franchise transfers. They can delay them, and maybe there was six months to go, and lo and behold, one city wouldn't transfer.

SOUTHWICK: Which one?

NATHANSON: Cedartown, Georgia, which was not a prior... it was in the Atlanta market, but it was not...

SOUTHWICK: Something that was a Cypress system?

NATHANSON: Something that I knew and so forth. But we had a guy in our office who had nothing to do with cable, but handled outside investments for me, who was from the neighboring community. He was a very handsome guy, southern, good looking guy, went to Wake Forest. So I sent him to do this. He was sophisticated. He was unsuccessful. They wanted to see me, and it's December now, the beginning of December. I've got to transfer this franchise by the end of the year or I'm going to lose this, and this might have been, I don't know, 6,000 subscribers. Well, that was too much to lose. The whole deal would have had enormous problems without this system, because I actually would forfeit this 6,000 subs. So I went before the city council – I flew into Atlanta and I drove up by myself to Cedartown, which is outside, but it's in Polk County, it's kind of rural. I went in to this town and there is the city council sitting in kind of an auditorium room and there's nobody else in the room. I find out it's a meeting only for us, for the city council and myself. There's one guy in a tie and jacket, the mayor had his cigarettes rolled up in his shirt, one guy was in overalls from the farm, they were on the city council. I walk in in a suit and tie. The first thing the mayor says to me – the city attorney was the guy in the tie and jacket – they say, "Are you one of these lawyers from Warner?" I said, "No, you know I'm Marc Nathanson. I'm the head of the cable company, Falcon, that's going to buy this. You wanted to see me." "Well, you look like one of those lawyers from New York." So right away it's starting very hostilely. I said, "I don't understand what the problem is. We're a qualified cable company; we have an excellent reputation. We submitted letters from all the other cities that we operate in. Why won't you transfer this franchise? I sent David Quarrels here who's from the neighboring community to come and talk to you and tell you about this." They said, "That's what we want to talk to you about." I said, "What?" They said, "That David Quarrels. We don't like him." I said, "You don't like David Quarrels? He's a very nice guy. Why don't you like him?" They said, "Because we're in Cedartown," he's from whatever this neighboring town is, "they beat us at the 1968 state football championships. We hate them, and we wanted to let you know that." So I said, "Okay, what do you want?" "We want ESPN on basic." "Okay, you can have ESPN on basic." "Okay, we vote to transfer the franchise." And they transferred the franchises to us, but that's how crazy the cable business is and the local city councils that were regulating us. It was over that we insulted them by sending not somebody from New York, not somebody from Los Angeles, but we insulted them by sending somebody from a neighboring town that built them in football, and David had played football, unfortunately, so I didn't know it.

SOUTHWICK: He scored the winning touchdown!

NATHANSON: No, I don't think he did in this team, but it was one of those crazy situations. So that's how we grew. We formed new partnerships, we formed partnerships with Warner, and eventually we got into the franchising game, and that was a critical junction for Falcon, and that was in the early 1980s. Falcon was formed in '75, it was five years later. We decided, as they opened up now the top ten markets in the country for cable, that we would apply for 14 out of 19 franchises.

SOUTHWICK: But before you get into that, could you talk a little bit about your strategy when you acquired a system? You would pay a certain amount of money, and then what would you do?

NATHANSON: Well, the key, as I always said, is to have strong people around me, and Frank Intiso, who had been our chief financial officer, he had been our accountant at Seevman and Seevman, I had convinced to join us in the company, and he eventually became the chief operating officer, and Frank, who has an MBA and a CPA, is an absolute expert at running classic cable systems. He never missed a budget in all the years we worked together. It started in '78, I think, or '77, and later Mike Mineri joined us, who had worked with Frank, and we built up a team of people who were very experienced, kind of old-fashioned, Cypress type of operations. So, we knew the cable business. We would see a system – I could go to a town and actually, I say, "smell" the town to know whether it would have growth. Bill Bresnan taught me, go into the washroom of a cable system, if they have a clean washroom, the plant will be clean. Well, I don't know if that's true, but there were all these things that you picked up over the years in the cable business, so you knew pretty well what you could do with the system, and remember, you were buying at "x" price, you were going to increase the rates, add services, and project what you were going to do, and we never missed a budget.

SOUTHWICK: And could you add subscribers typically?

NATHANSON: Absolutely.

SOUTHWICK: You'd go in and market?

NATHANSON: It was all part of it. And you could almost do it on the back of a napkin. It was done with elaborate projections that you had to submit to your banks and to your investors, but we were very good at doing this, and we were operating in 27 states and we knew most of the country. I had operated TelePrompTer systems all over the country, so you just saw where this community fit within your mix, did your projections, and that's how you determined whether you would buy it. We always bought not on a price per subscriber, but on future cash flow. What we thought we could do with the cash flow under our management. And remember, traditionally, traditionally, not every year, but most of the years from 1975 to 1999 Falcon had the first or second highest operating margins of any cable company in the country. So we could buy a system that had a 40% margin and we could increase it to a 50% margin. That was without changing subscribers. If we could add subscribers it was just gravy to us.

SOUTHWICK: And you would do that by cutting costs?

NATHANSON: Efficient management, de-centralized operations. A lot of this is attributed not to my leadership, but to the team that worked for me, and we had very little turnover in that team in all the years we were together. They just knew the cable business, they knew how to do it, they knew how to operate them, they knew all the issues, and that was part of the business. So we could buy from a Warner Amex and add five or six points to the bottom line just by operating it our way, before adding customers, before doing the other things, and that was just how we did it. And there were other operators like that who were also very good, but that was our specialty. We were not an urban operator like Chuck Dolan, who was somebody I dealt with way back at TelePrompTer, and so forth, and people like that, who I admired, but we were very aggressive marketing. We used all the urban marketing techniques that the other cable companies did, but we had this kind of very strong cash flow mentality that we had developed in these quote classic cable markets. So we increased the cash flows, we increased the subscribers, we increased the rates, it was a winning combination, and in 1980 we decided that how could we compete with the big companies – we had 30, 40, 50 thousand subs at that time in one or two partnerships. So we decided that we would form a new partnership and it would go after the franchises in Los Angeles because I was active in politics in my private life in Los Angeles and we would go after big companies who were much better financed than we were. But our pitch was, if you have a problem here's my home number, call me, and I knew a lot of the people through other civic activities or boards.

SOUTHWICK: And a lot of the communities in the LA area at that time were beginning to franchise.

NATHANSON: Didn't have franchises at all. Were beginning to franchise because the market opened up. Remember, Los Angeles had cable in the early days, going back to Theta Cable, but only in the canyons where there was bad reception. In the flat lands, which was the bulk of the Los Angeles basin, they did not have cable. Starting in 1980, they put out RFPs, they opened it up. We, with a Canadian company, had already won the west San Fernando Valley, which was a major franchise, but the Canadians – David Graham's company – financed that and we were rent-a-citizens. We owned 30% but didn't put up any money, even though I was president of the company and won the franchise. So we put experience in franchising, we had experience in politics, so we hired some young kids, Craig Erlich, John Kobara, and we put together a franchise team – Milson Cunis – and I ran that team and we said, "Frank, you run the classic systems, the northern California, and I'll run the franchise effort in southern California." Now, we needed financing, so we got two big newspaper companies to back us. Donrey, which was owned at the time by another very eccentric but interesting billionaire, Don Reynolds, who has since died, one of the largest newspaper owners in the country from Ft. Smith, Arkansas, owned the Las Vegas newspaper, and Bob Howard down in Oceanside, California, another oil and gas and newspaper magnate, both self-made entrepreneurs, and they were our partners. We formed a new company, I owned 20%, they owned 80%, and they put up all the money, we'd get the franchises. So we went after these 19 markets in Los Angeles area, Pasadena to Riverside, with this new company that we had formed. Frank ran the old company, I was also the CEO of the old company, which we called Falcon Cable TV of northern California. The new company we called Falcon Communications. When the newspaper guys came in, I bought out my father and father-in-law because the Altadena system, which was in Los Angeles, we put into this new Falcon Communications to give us some credibility and so forth, and so that was a successful venture for both of them. They'd been in five years, essentially. And we went after the franchises and we were wildly successful, even though we were fighting against all the big companies at that time, but this localism paid off, and there were of course much different issues. You were building 54-channel systems, you were putting in fiber optics, you were starting to see in the '80s – '81, '82 – the future systems. We built the first fiber optic system west of the Mississippi in Monterey Park, we went into urban areas, ethnic areas, and we were successful in doing it. Sometimes we had local groups, sometimes we did not, but these were major battles that we had to get these franchises, and we won 75% of them.

SOUTHWICK: Okay, we're talking about the growth and the franchising in southern California.

NATHANSON: So, this was another exciting era of cable. We won 450,000 homes in many of these communities. We actually bought Riverside from some people, but most of them were through franchises. We had a new company, and the manager who had chosen to run the systems, we were having problems. Not in the construction, but in those days, a new element was how fast you'd build, and there were a lot of mistakes made in that, in the operations and the turn on, and so forth. His name was Tom Lafourcade, a good guy, but I had to let him go, and we bought in Chris Derick, another old friend of mine who had been president of a number of cable companies, and we worked together, and Chris came in and it was really Chris who turned around the company, but at the time, and this was maybe '82, '83, the company was having some serious problems. It had a 100 million dollar bank line that it was in default on. The partners had put up 30 million dollars and we had to have the partners increase the bank line by another 50 million dollars, and the partners had to guarantee part of it, and they almost walked away from it – the newspaper guys – but we convinced them to stay. Chris Derick came in, we started to turn things around, changed the name of the company, and then four years later, in 1989, CenCom came and offered us 19 times cash flow.

SOUTHWICK: CenCom was a...?

NATHANSON: A cable company run by Jerry Kent and Barry Babcock at that time, and they wanted this franchise, which had 100-some thousand customers and they paid us an enormous price at that time.

SOUTHWICK: 19 times cash flow!

NATHANSON: 19 times cash flow – it was an all time high in cable – because it was a growth area, it still had a lot of growth and it now had a positive cash flow, but it was really in a break even situation, but enormous growth...

SOUTHWICK: And this was for all the southern California systems?

NATHANSON: These were the southern California systems. Remember, this was a separate partnership. I didn't want to sell. My two partners wanted to sell because they'd each pocket 100 million dollars profit at that time, and a few years before they had nothing. So we sold the company, and right after that the market crashed and the cable prices went down, so they looked very smart. For me, it was the first time I'd made a lot of money in the cable business because I owned this personally and I pocketed the money, but I never wanted to sell. Chris made some money, and we had a very good experience and Chris went off to do other things. Later he came back, which we'll talk about, to join me in another venture, but anyway, so we had sold the urban company. So, I took my money and I raised new money, and we decided to expand the classic markets, not go into any more of the urban markets because I saw how difficult they were and those were 40% margin businesses, if you were lucky. But in hindsight, it was a mistake. We should have kept it and merged everything as one and we would have had a much more valuable company because we would have been like all the other companies, both urban, suburban, and classic. But we decided to rapidly expand the classic companies, so we then went back in to doubling every year the classic cable company by forming new partnerships, by making acquisitions and we were very aggressive in doing that until we got to a million subscribers. Then we started to consolidate the partnerships, to merge them together. Glenn Jones, some other people, were doing it, even though his were more public partnerships, ours were within institutional investors.

SOUTHWICK: Well, the tax laws had changed, hadn't they? Changed the way limited partnerships worked?

NATHANSON: Yes, that's a very good point that I forgot. The tax laws changed so the depreciation wasn't as good for investors anymore. There were a number of factors, the public markets had turned around. This was in the early '90s, and we decided to go public, and we were the 10th largest cable company in the country at the time if we consolidated everything together. So we had to work out... because there were conflicts, different investors, and different partnerships, and put them all into one company, and that's what we were able to do. And just as we were ready to go public and Merrill Lynch was leading it, the Democrats won, I was very happy because I was an old friend of the Clintons. Hilary had been on the board of our cable company, and was our attorney, and we'd bought some systems in Arkansas from Jim Guy Tucker, which later I had to testify about – we did nothing wrong, I might add, but this was all part of it – and Hilary Clinton was our lawyer at the Rose law firm who represented us, and I knew her through my friend, Mickey Kantor, here in town, who later became Secretary of Commerce and Trade Representative, and Hilary went on the board of Falcon, and of course resigned when her husband went to run as President. Kind of a funny story about that – while we were working on buying these systems, classic systems, around Little Rock, we owned all the systems around the city of Little Rock, which we had purchased, some of them from the later governor of Arkansas, Jim Guy Tucker, who borrow money from Madison Savings and Loan – which had nothing to do with us, we paid cash – Bill Marks was his partner, an old TelePrompTer employee. We had bought the systems and Hilary said to me – when I was staying at this hotel one night, long day of negotiations trying to by these systems – "Do you want to come over and have dinner with me and my husband?" Now she's married to the governor. I knew that, and I knew her husband was Bill Clinton, but I had heard him speak, and he was such a boring speaker, at a convention, the last thing I wanted to work in a cable dinner was to go over and listen to a southern governor, have dinner, and talk about southern politics. I said, "No, I'm going to take a rain check. I'll have room service." So, obviously, when Clinton became President or was running, several times he was at our house for political fundraisers for him, and the first time he came to dinner, I told the story exactly like I told it to you, and I said, "Well, thank you for the rain check, Mr. President." He got a big kick out of it, told Hilary who called me on it, and it was a true story. So anyway, we bought these systems, we were very aggressive in acquisitions and competed with the other cable companies in doing this, continued to maintain our high margins, and with that Merrill Lynch was going to take us public, and we had just started the road show overseas in London and other places, and Clinton had come in...

SOUTHWICK: Your friend wins.

NATHANSON: My friend wins. My later friend, but not friend at that time, Reed Hundt, in the Washington Post, I believe it was, has a story that comes out saying the new chairman of the FCC told someone off the record that they're going to rollback cable rates by 25%.

SOUTHWICK: And of course the legislation had passed at the end of '91, right around the election, enabling Reed Hundt to do this.

NATHANSON: The Bush veto was overridden, and the whole story, and of course, all this time I was active on the NCTA and on the executive committee, and met wonderful people and friendships over all the years with cable. I never told this story – when I started my company we were going to merge with Alan Gerry at one time, and Jerry Green, who was killed in a plane crash had a small cable company, so we were going to put that all together. At another time, Leo Hindery and I were going to merge our cable companies together. We'd bought Jack Kent Cooke's cable properties when he went back into the business through a consortium, Leo and myself. So there were a lot of good stories in between, wonderful friendships over the years, but the main concentration was building one's own company, and of course we had to kill the public offering, and that was a very dim time. One thing I want to point out to anyone who may listen to this in the future is that cable is up and down, and a lot of people panicked at that time and they sold their cable systems, if you remember, and we had obvious problems like all the others, if our rates would be cut back, and a lot of people... John Kochreich got up at a Kagan conference and said Falcon would be hurt more than the others because we were an all classic cable operator. So we were very rate sensitive because we had 70% saturation. It turned out that the rate increases, which were very negative to the cable industry and artificial in my opinion, never hurt Falcon. The rates stayed the same, but we couldn't get any rate increases, but we never had major rollbacks as were predicted. We were able to avoid that by all the filings and everything else that you could do, and weathered through it, because again, one of the things you do as professional cable operators is you must deal with government, you must deal with changing government. You can't control regulation, but you have to learn to deal with it, and we learned to adjust to that.

SOUTHWICK: How did your lenders react at that time? Were they panicked?

NATHANSON: Very negative. Just like the HLTs, the highly leveraged transactions where they panicked. The first to panic are the banks. They lend to you in the good times and in the bad times they run far away, and those were problems we had to manage. But we had long relationships... the Bank of Boston has stayed with me, now it's Fleet Bank, all that time, from the first loan to '99 when we sold the company. But my partners also started to panic. After all, they'd been investors, they were running funds with pension fund money, and they didn't want to do capital expenditures because our cash flows weren't increasing, they were flat for the first time in the history of the company. For the first time we were not growing, so we weren't doing acquisitions, even though we had consolidated, and we got in big fights, and I said, "No, we have to rebuild the systems," because the technology to be competitive with the new technology coming, satellite in this case, is to rebuild your systems and they did not want to do that. They wanted to sell the company. Now, they didn't have the right to sell the company, but in two years, if I didn't buy them all out because we didn't go public, which would have rectified all this, I would have had to buy them out and I wouldn't have had the money, so they could have forced the liquidation of the whole company. But I wanted to continue to grow, they didn't want to put money in that would have returns in three or four years, but I knew it was a mistake because there was going to be a differentiation between the rebuilt system and the non-rebuilt system, but it was nothing I could control because they could block the capital expenditures. I could block the sale for two years, and as you know, Leo Hindery went over to TCI, which was similar to TelePrompTer, having some problems at that time that have been well talked about by others, but to make a long story short, one of the things Leo wanted to do – who is one of my best friends and dearest friends in the industry – was to sell off some of their systems and let other people run them. Well, there were a lot of TCI systems near us, particularly in the Pacific Northwest. So I went to see Leo. My old friend, John Malone, was in the next room, who I also saw, but essentially with Leo within one hour we agreed for him to give us all their systems next door to us – everything in Washington and Oregon except for the urban systems, some systems in California, and 300,000 subs and merge them into Falcon, and in turn we would give TCI 46% of Falcon, and part of that was to buy out part of our partners, and we bought out our partners at 8 times cash flow. I would have bought them out 100% but we didn't have the money, there wasn't enough, so they kept 30% of their interest, but they agreed that they couldn't vote, they weren't on the board, they couldn't have any control, all these institutional partners we had. So all the decisions would be made by TCI, later AT&T, and ourselves in this, and we were the general partner, we were running it. And that was really a renaissance because we improved the margins of all those systems, we consolidated, and they were all bigger systems than ours. So we had smaller systems next to theirs, but their systems, even though they were classic in nature, were larger. So they had Medford, Oregon, and they had Redding, California, and they had Yakima, Washington, and so forth, and they said, "Well, will you sell the company to us at that price?" I said, "At what price?" They said, 'At 14 times cash flow." So, I looked at that and I looked at public, and I said, "Well, Leo probably won't want to sell." They had a block that they could prevent any major event, obviously. So I talked to Leo, he said, "At what price?" I told him the price per sub, got a multiple, which was 3,800 a sub, or whatever the number was at that time, and of course Paul wanted to acquire large companies, and that was one of the reasons, and we had this million-some customers, at the time, with the TelePrompTer systems, and the TCI people – Bill Fitzgerald was working on it at the time – all agreed it was a great deal, so we agreed to sell. And so we sold to Charter Communications, the deal closed in November of 1999. Prior to that, and of course I'd known Jerry Kent from the CenComm days, Paul decided to go public and he wanted me to stay with the company, and I did not want to run another cable company. I'd done that for all these years. So I decided that I would do that, but ours was a cash deal, but Paul convinced me to take half cash and half stock, but he would guarantee the floor of the stock, so I would have no risk, as if it was an all cash deal.

SOUTHWICK: Pretty sweet.

NATHANSON: So I agreed to become the vice-chairman of Charter Communications and to be on the executive committee, and it was run by Jerry Kent and his group, and then recently Jerry left and I headed the search committee and Carl Vogel came in as our new president, and it's been a very wonderful experience. I've enjoyed the relationship. Charter is now the third largest company with 7 million customers and I feel like a grandfather. I am a grandfather, I have a grandson who is almost a year old, Andrew Sweiger, and I feel like at Charter like I'm a grandfather. I give advice but I don't have to change the diapers. So, that's really the genesis of my cable career to date, is that I've been with Charter and been involved with them, and still involved with the cable industry, but not responsible for the day to day operations of the cable company.

SOUTHWICK: Talk a little bit, if you will, about Charter and its vision. Paul Allen, it seems to me, had a theory about taking cable to kind of the next level. How does that work?

NATHANSON: Many people misunderstand somebody like Paul Allen. Paul Allen, for those who do not know, founded Microsoft with Bill Gates. He was really the brains, the engineering behind it, Gates was the marketing guy, they were high school friends, they developed it in college. Paul's two years older, he's today 47, I'm 56. But Paul's a very bright person, very much not just involved in the technology, but very involved, as I still am, in the marketing of it. He's not very involved in the government relations and the lobbying of the cable industry, which is something that I'm still very involved in, and as you know, I have another job. Clinton appointed me, six years ago, to the board that oversees all U.S. non-military broadcasting: Voice of America, Radio free Europe, radio TV Marti, Radio free Asia, etc. and three years ago I became chairman. So, as a dollar a year job, and a week a month, I'm in Washington running 3,400 people at this independent government agency today, which is in charge of all international broadcasting, which is something I enjoy. I will be replaced by George Bush, but he hasn't done it because of the Afghan situation right now. He doesn't want to make a change, but shortly, I hope, because it is taking up a lot of time, they will do that. So between Charter, being the vice-chairman, and the job as being chairman of the Broadcasting Board of Governors, it's taking up a lot of time. Paul's vision of Charter is very much that cable companies should provide full services to the consumer, and not just cable services as we traditionally see it, but all kinds of other services from when you turn on the screen, to how you navigate the screen, to what services that you provide, and obviously high-speed modems, digital cable, and that's one of the reasons Charter has nearly 2 million digital customers and is one of the leaders in bringing high speed modems, and we're getting customers hand over fist in that area, and it's a great renaissance for cable. Cable is as exciting today as any period that I've ever seen it in my life, even when the stocks are down for one reason or another, I think the industry has enormous potential and can compete with the satellite technology very effectively if they have rebuilt systems and they're offering these services, and I think there will be more and more services and they will be better and better and more consumer friendly in the future. So I think there's great growth potential for cable, but it is not a narrow vision. You can't just be a classic cable operator anymore; you have to offer a wide world of expanded services to the consumers and the lines of conversions will blur between your computer, your cable, your telephone, your modem, the services: video on demand, that you're going to buy. Charter is very much involved in all of these and has to prove them to be economically successful, but will prove them. The numbers already indicate – and I'm not talking about tests, I'm talking about actual millions of customers who like these services and we're just rebuilding all of our systems to offer these services throughout the country.

SOUTHWICK: Great! Well, congratulations on being a grandfather on two fronts.

NATHANSON: Yes, thank you.

SOUTHWICK: Anything else? I know there's a lot of stuff we could have gone into.

NATHANSON: There's a lot of stories, there are a lot of great people. I've always identified with the old timers. I really came in as a first generation of younger cable people, who are now older cable people, but we came in after the Bill Daniels and Bob Magnesses and Gene Schneiders and the engineers and the technicians and so forth. We actually formed – I chaired the 1977 national convention, and I remember – I also chaired the 1999 national convention and they were both in Chicago, so you can see kind of a span of the cable industry from '77 to '99 in my mind – and I remember in '77 we formed a group called the Young Communicators Society because there were a handful of young people in the cable business at that time and we wanted to have a party to get together, and so we formed a committee and a board. It only lasted one convention because we all networked and knew each other, but Jeff Marcus and John Malone, and all these people were part of that group who'd all come in as the second generation to the cable business, and all were great friends. It was the first wave of marketing executives to come in and later run cable companies – Tryg Myhren and others came into that business. So these were very exciting times. I remember when we formed CTAM and we were in Chicago, as others have probably told you about, and I was with that group, I don't know, 10 of us, who decided we need to do more marketing with better focus and more professionalism in the industry. I remember when we formed the southern California Cable Club, and the Addly, which was an idea to have all the cable companies in Los Angeles interconnect to sell those signals. So I remember very well starting those organizations and building it with my fellow cable operators. I don't remember really remember now when I was president of the California Cable Association, but it was many years and wonderful relationships with Spencer Kaitz, and before that, Walter Kaitz. So, I think the cable industry was not just about making money, but it was a business where people believed that they were wearing white hats. They were bringing a good service to communities. They loved the communities they were serving. They were very involved in the communities, and people don't realize that, but they really had a feel for that and for community service. They were also dealing with regulation, often unfair regulation, coming out of Washington by more powerful political groups and the industry grew in spite of it, and it had a pioneering, entrepreneurial spirit, and that's what I identified with and I relish the years that I have spent in the cable business since '69, and even prior to that as a door-to-door salesman because it still relates to what does the consumer want, and the consumer has an insatiable appetite for more entertainment and information. Whether it's Charter, or whether it was the early days of Harriscope Cable, the consumer has not changed. It's our industry job to fulfill that, and I think we've done a pretty good job to do it, but I think the future is even more exciting for the next generation to come along.

SOUTHWICK: Terrific, thank you very much.

NATHANSON: Thank you.

SOUTHWICK: Appreciate it.

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Trygve Myhren

Trygve Myhren

Interview Date: November 21, 2000
Interview Location: Denver, CO USA
Interviewer: Paul Maxwell
Collection: Hauser Collection

MAXWELL: I want to welcome Trygve Myhren to the Gus Hauser Oral History Program for The National Cable Center and Museum. This is a project that Gus generously has underwritten, and we are interviewing important people in the history of cable. I'm Paul Maxwell and this is Trygve Myhren of Myhren Media today. He's one of the few guys that's been in the operation side, the programming side, the public policy side and in parent company financial matters – all of those different things. As we start, Trygve, I'd like you to tell me a little bit about the background, where you're from, where you went to school. Then we'll take you into cable.

MYHREN: I was born in eastern Pennsylvania, a little town called Palmerton. I went from there to Dartmouth College. After my junior year I was able to get into graduate business school, the Amos Tuck School. Then directly after graduating from Amos Tuck, I was drafted by the Army, and through some slight of hand, ended up being able to apply for Naval Officer Candidate School, went to Newport, Rhode Island, became a naval officer, and spent time on a ship in the Pacific, and eventually came back from that after 3 ½ years (I got extended during the Cuban missile crisis) and went to work at Proctor & Gamble. I was there for two years and left to go with a group in Connecticut called Glendenning Companies. It was a marketing consulting company. We had lots of clients like General Motors, Coca Cola, Time Inc. which later came to play a role in my life. I left that company after four years and went with two other fellows, one of whom was a professor at Harvard Business School, and we formed Marketing Continental. We had that for four years and grew it from the three of us to 45 people. At this point, I had a heart attack at 35 years old. It turned out that there was some controversy as to whether it was just pericarditis, which is a viral inflammation of the heart lining, or whether I really had a heart attack. But in any event, that took me out of business for a period of time – actually for six months. I obviously survived it. But when I came back from it, having thought about my life to that point, I said, "You know, I'm really much more interested in media, print, film, communication – really much more interested in communication than I am in doing some of the things I had been doing which were very directed at the marketing side of packaged goods and major consumer products." I really was more interested in communications. We had an offer to buy the company that we had built, Marketing Continental, from Shell Oil. They had a whole bunch of things they wanted to do with some of the assets we had built up, including a major brokerage across the country, a brokerage of goods, not stocks.

MAXWELL: Remainder goods?

MYHREN: No. It was interesting. We set up what would be called a super brokerage. There are food brokers across the country. We took on products for companies like Kimberly Clark, Shell Oil Chemicals, Gulf Oil Chemicals, Continental Can, etc. who had consumer products but really didn't have a traditional consumer products sales force. And we sold them for them.

MAXWELL: What did food coops handle? Is it in the same kind of manner?

MYHREN: We would select the food brokers, the food sales force, in individual markets. Then we had seven people across the country who were super brokers who would select a number of brokers in a number of markets, contiguous markets, and then work through them for the good of a Kimberly Clark, or a Continental Can.

MAXWELL: Interesting.

MYHREN: So that was one of the properties that we had developed in this company. Shell wanted to buy this whole thing. Without getting into those complications, what we decided to do was to sell to them. My other two partners signed long-term contracts with them. I said, "I'm not going to do that." And I actually took a lesser part of the sale because I wouldn't sign the contract. But I went away with a little bit of money and was off to do what I wanted to do. I went into a company called CRM, Communications Research Machines, in Delmar California. We had properties like Psychology Today magazine, something which had the improbable name of Intellectual Digest, which was so improbable that we killed it off a short time after I got there. In any event - talk about a name with a conflict built right into it – but we were a major textbook publisher, we became a major educational film maker, and we did a number of other things. I went into that company as a Vice President of Marketing and ran the company fairly shortly thereafter.

MAXWELL: What were the guys' names at Psychology Today?

MYHREN: Well, it was John Veronnes who now is Veronnes Suhler in New York. Interestingly enough, John Suhler was there when I got there. T. George Harris was running the magazine part of it. The "C" in CRM, which was called Communications Research Machines for the purpose of some day maybe going public – it sounded sexy – was actually a guy named Nick Charney.

MAXWELL: Charney – that's the name I couldn't remember.

MYHREN: A fellow named Marsden, and the "R" was a fellow named Reynolds who was a psychology professor at the University of California, San Diego, where we got a lot of our texts written. In any event, we took that business – when I went into it, it was losing a lot of money – we got it turned around within a two-year time frame. Boise Cascade owned it - and I was under a contract with Boise when I went there - actually sold the company to Bill Ziff. Bill, at the time, was the largest special interest magazine publisher in the world.

MAXWELL: In the country, right.

MYHREN: A lot can be said about Bill's eventual sale and then subsequent start up in the computer magazines. Bill and I became pretty good friends. Then one day he dropped a bomb on me, walking on the beach at Delmar, he said, "You know, I really want to move the company back east and I want to sell parts of it." So the proposal he made to me was that we'd sell the books (which we ended up doing to Random House), and we'd sell the films (to McGraw Hill). Our 60 films outsold their 2,000 educational films. I think we'd found the sweet spot. In any event, we sold all that. I didn't want to sell it. And I didn't want to move. But there wasn't much choice because Bill really owned it.

MAXWELL: Bill had a way of making a decision.

MYHREN: Yes, he was quite a decision-maker. We got the whole thing moved out. Then he wanted to take the book clubs and the magazines back to New York, and he wanted me to come back and run those and then he would give me additional responsibilities. So it was at that point where I began to think ..... And the minute we made the announcement that this was going to happen, that the company was in the process of moving out some of its properties and moving things back to New York, I started getting phone calls from head hunters. One of them happened to be Russell Reynolds, in the person of Tony Thompson and Bill Long, who had been put on the case by a guy named Monty Rifkin in Denver who had started American Television and Communications. At the time, Royal Little was the chairman of the company.

MAXWELL: Yes, very much so.

MYHREN: And Monty was the President, CEO. He had worked with Bill Daniels to get ATC started, and much more on that can be found, I'm sure, in Monty's oral history because Monty knew it well and did a spectacular job in starting this thing. Anyway, he chased me down, and we started talking in late 1974. But I couldn't leave. I was intrigued, but I was looking at some other things, and I just didn't make a move. Then eventually, about February I said, "Yes, I'll do it," and agreed to come with Monty in Denver. This was intriguing to me. I looked at the skiing. I was leaving the surf but the skiing made some sense. As I looked at my other opportunities, they were primarily on the print side of things. I did have an offer as Executive VP of LL Bean, but that was a whole other thing. My then wife was damned if she was going to live north of Portland, Maine in Freeport. So I didn't do that. The Denver thing made some sense, and Monty made some sense. I talked to two people who I knew had something to do with the cable television business. One is a fellow I played basketball with in high school named Fred Reinhard from Palmerton, Pennsylvania. It occurred to me about this time that Fred and his family - who were very nice, intelligent people, but did not have an opulent life style, but always seemed to have what they wanted – that they were in the cable television business. And it never quite clicked with me when I was younger. So I checked on Fred and found out that his family, Claude Reinhard and group - Blue Ridge Cable, really owned the cable systems in the area that I had grown up in. They also owned the bowling alleys and the newspapers and the movie theaters and so on - a mini-media conglomerate. I called Fred and asked him about the business. I was a little concerned. Then I got this concern that were rumors out there that there might be some things happening with satellite. I thought, "Oh, oh. That could blow away this whole business." So I called the only other person I knew in cable, a guy I had skiied with a few times who had been a friend of my sister, Amos Hostetter. Amos and I talked. He said, "Don't worry about a thing. I understand what you're thinking about satellite, but it may help us more than it hurts us." So we talked about that and why that might be true. I came to be convinced that at least, in the intermediate term, that was true – in the short term and intermediate term, that probably is going to be true. It might not be true long-term, but certainly there was a lot of help. There were a lot of efficiencies that could be brought to cable program distribution through the use of satellite, so this was going to work. So I began to look at this more positively. I took the job in something like February, 1975. But I told Monty that I couldn't be there until May 1. He said, "That's really too bad because we're going to do this big thing....

MAXWELL: Really neat thing. Right.

MYHREN: "We're going to announce that we're going to do this HBO thing." And that got me, of course, even more intrigued. Now I knew more about what satellite was going to do. So I really was intrigued to get there. But I couldn't go because I had this commitment at the other company. In any event, I arrived in Denver on May 1. Immediately after I got here, the Nuggets signed David Thompson and Marvin Webster, and I ran over and got my Nuggets tickets. I was part of the Denver community. That's sort of how I got to ATC, and I came in as Vice President of Marketing and within a couple of months I was Marketing and Programming. Over the years at ATC, as we went through the 70's, one thing that occurred was that Time Inc. made an offer to buy us.

MAXWELL: When was that?

MYHREN: That was in very early '78 or very late '77. We turned it down. We didn't think the price was big enough. Time Inc. had come to know us because Time Inc. had four cable television systems earlier in the 70's that they had not been able to do anything with, hadn't improved them much. They were very unprofitable, and they were dragging down a public company's earnings. They eventually wanted to sell them. We bought them for stock. We used ATC stock to buy them.

MAXWELL: So they had a piece of ...

MYHREN: They got a piece. They got a 9.9% piece of ATC.

MAXWELL: What systems were those? Do you remember?

MYHREN: Let's see – Battle Creek, Michigan, Miraga, California,

MAXWELL: They were scattered.

MYHREN: I believe one was Southwest Cable down in San Diego. Yes, they were scattered – Midwest and west coast. In any event they got a fair amount of our stock for that. They put people on the Board – Jim Shepley, the then president of Time, went on the ATC Board. So they had this position. Then, of course, we ran the things really well. We ran the cable systems well, turned them around, they work. And they said, "Gee whiz, maybe there is something good about this business, and if we're going to be in the business, we ought to be in it with these guys." At least that was the ...

MAXWELL: That was the logic.

MYHREN: I'm on the other side of this, but that was as I saw their logic. So they came in to do that.

MAXWELL: They've been in and out of Sterling Manhattan by this point, right?

MYHREN: Exactly.

MAXWELL: And in parallel, HBO is beginning to be a real thing.

MYHREN: Exactly. Also, one of the things that we did that I think gave them some confidence in us followed the satellite introduction of HBO, on Sept. 30, 1975. And it happened in two places in the country. Monty had made a deal to do it in Jackson, Mississippi.

MAXWELL: So you were there?

MYHREN: At the Jackson cable system – right.

MAXWELL: I was at Vero Beach that night.

MYHREN: Vero Beach, Florida - Fort Pierce, Vero Beach, I think combined - UA, Columbia, Bob Rosencrans, Ken Gunter, Marvin Jones, the whole group doing their deal there. But the "Thrilla in Manila", Ali and Frazier followed by, I think, Alice's Restaurant – the movie with Arlo Guthrie and Ellen Burstyn, a terrific actress. But in any event, that was brought in to Florida and Mississippi, and it was enormously successful. But one of the things that we did there was to price it lower than anybody else. We priced it at $6.95. That came out of my "packaged-goods" training – the idea of sampling product or if you don't sample it, quasi sample it by getting it at a low enough price so a lot of people try it. You can always raise the price later. We introduced in Jackson at $6.95. Later when we got to Rochester, New York, which was our next launch, we actually went in at $4.95. Everybody thought we were crazy because TelePrompter at this time was going at $9.95.

MAXWELL: $9.95. I remember.

MYHREN: But our penetration of those markets was dramatically greater than TelePrompter's. And much later, of course, we raised the price. I think that, among other things, helped Time Inc. to understand that we had some fairly sophisticated people at our place, that we understood more than just how to string the wires and do the engineering and finance things. We also actually understood the consumer equation. For a whole series of reasons, Time comes in and makes this offer in '78. It's turned down. Monty was basically the guy running the train at that point and he said no. And we were all just fine with that. Then they came back later in the year, late summer or early fall, and said, "We'd like to double that offer." Essentially a deal was struck. We were convinced that we were going to need a lot of money at that point because we could see that the business could really take off. We were very willing to go out and try to raise the money. But we thought it would be a heck of a lot easier if we had a big financial partner in the game. Time Inc. we viewed as a very good financial partner – good people, good company – as long as we got the right price, which we did at that point. So we became part of Time Inc. Then as we went forward, we got into the late 70's where I actually enunciated something called the clustering strategy. This was a way to take our business forward more powerfully than the scattered cable system model. It was really to buy contiguous properties and try to fill out an entire media market. A media market can be described as something that might be the outline of the newspaper's delivery or the Grade B context of the television stations. Usually also it was fairly contiguous with radio station coverage. But basically, the footprint of the traditional media – we saw that as a cluster.

MAXWELL: That led to your breakthrough in the concept that maybe cable could sell an ad.

MYHREN: Exactly. The idea was that if you clustered yourself that way, what you could do was that you could sell advertising in direct competition with the other media. But you were also in a position, from a defensive standpoint, of being able to market competitively against satellite people. Or if telephone companies were going to end up with programming that they could offer, which we worried a lot about in those days, we wanted to be able to market on a full market. It's extraordinarily difficult, as you know, if you've only got this piece of it. A media market and your competition enjoy the efficiencies of full market coverage.

MAXWELL: Can't sell anything.

MYHREN: Yes. You can't really market because you can't buy the big media out there. They're way too expensive, and they're too wasteful, because you are advertising to a bunch of people who can't buy your product. You've got to be on a basis whereby, if you're going to compete with these people, you can advertise to the same people they can so you're advertising economies are the same. If satellite people were going to be throwing programming into the market and advertising to the whole market, and you were just in a part, you had problems. So this was the basic idea of clustering. It was also true that, on an operating basis, if you had three separate pieces within the market, you had to have three general managers. And you had to have three top technical people and three top marketing people. Well, you couldn't hire top people to do that. But if you had the whole market, you'd hire one of each and you could get the best. There were equipment warehousing and installation calls – all of those kinds of things – where the economies worked better on if you were clustered. So I actually enunciated that in 1979. It's interesting that there were other companies in the business like Cox, for example, and Continental which were operating on sort of a clustered basis. They had large chunks of things. Nobody had really grasped why that was really a good idea or had articulated it if they had grasped it. I grasped that pretty quickly, and I think it came a lot out of my marketing background and media background. So we articulated that, and we drove our company in that direction. That was why Time, now Time Warner Cable, is configured the way it is with these huge clusters. It was very efficient and very powerful. With all that going on, we eventually got to a point where Monty and Time Inc. came to a parting of the ways. That was in late 1980. I had come up through marketing, then marketing and programming, and then adding on a financial role, and eventually becoming President of the company. I eventually ended up as Chairman, CEO and President of the company. No – I'm sorry. It was Chairman and CEO of the company because Joe Collins became the President when I was made Chairman and CEO. I think that became effective on January 1, 1981 so in effect, it was sort of transitioning in at the end of '80.

MAXWELL: Let's take a tiny shift there. As you're describing ATC and then Time Cable, you called it ATC though after that for a long time.

MYHREN: Yes. We called it American Television and Communications. Even after the Time Warner merger it was called American Television and Communications. There came a time, after I had been CEO for a fair period of time, when we decided that we really should IPO the company. We IPO'd it as American Television and Communications. We took 20% of Time Inc.'s ownership ...

MAXWELL: ... and took it to the public.

MYHREN: ... and took it to the public in 1986. That was the largest IPO in the world that year, interestingly enough. It was $300+ million dollars for that piece of the company, and it created the world's largest IPO that year. They've gotten a lot bigger since.

MAXWELL: A whole lot bigger.

MYHREN: But at the time it was a big deal, and it helped to validate cable as a real player in the financial world.

MAXWELL: I'd like to shift slightly to a public policy side. As cable got more sophisticated and was clearly growing, and programming started feeding the growth of cable at that time, some public policy aspects – you got strongly involved, across the early 80's, with different groups. So talk a little bit about the NCTA, CAB, CTAM and CableLabs (which was much later).

MYHREN: Okay.

MAXWELL: Those are significant.

MYHREN: Maybe starting back in 1975 actually, when I first entered the industry ...

MAXWELL: ... CTAM was created at O'Hare Airport ...

MYHREN: ... Exactly. You were there.

MAXWELL: I was there.

MYHREN: As a matter of fact, I was fortunate enough to get asked to join a group of people at the O'Hare Airport where you, Gail Sermersheim, Greg Liptak, ...

MAXWELL: Chuck was there – Chuck Dolan.

MYHREN: Yes. It was really a good group of people.

MAXWELL: Tom Johnson from Daniels.

MYHREN: Exactly. David Lewan from Times Mirror ...

MAXWELL: Who left.

MYHREN: Yes – whose lawyers told him it wasn't a good place to be. And Andy Goldman from TelePrompter and Rod Warner from Storer.

MAXWELL: Bill Bresnan was there.

MYHREN: Yes. All these people in a room saying, "You know what – this business could be a lot bigger than people think it could be. Now we've got satellite distribution. We're going to be able to distribute signals pretty efficiently. We can start to compete in the real media world. We've got to start being better marketers. We've got to think about programming harder. What it is we're offering people. We've got to worry about customer service. We really have to take the industry to the next level." That meeting ended up with everybody agreeing we ought to form this organization which, at the time, was called Cable Television Administration and Marketing Society – CTAM. The first president, I think, was Greg Liptak.

MAXWELL: Greg was, right.

MYHREN: And then Gail Sermersheim was the second, and I was the third. That organization has become, obviously, enormously successful, and it's done a lot of good things. We started fairly early on having an annual management conference. When I was the president in '78, to go to your question, I decided that the cable industry (and there were many of us who felt this way, but I decided it was time to do something about it) needed to make it clear that we were an advertising medium to be reckoned with – and that we had another revenue stream. In addition to our stream of subscription revenues, we'd have this advertising stream. But we had to get other people to believe this too. So I invited the heads of the top ten ad agencies in the country to show up. As it turned out, we didn't get any of them to come. But they all sent (and this was a surprise to everybody) a really top person, not "the" top person but one of their key people to this meeting which we held in the Denver Marriott Southeast in Denver. We needed a speaker who would attract some folks so we got a fellow named Pat Weaver who was really one of the great innovators and statesman in the media businesses and who was responsible for lots of innovations. One of them, interestingly enough, is Sigourney Weaver, who is his daughter. In any event, Pat came and spoke. He and I had some fun because we're both Dartmouth grads, so we had a lot of back-and-forth on that. Of more importance, of course, the ten agencies showed up. So we had what ended up being the impetus which eventually ended up in creating the CAB, the Cable Advertising Bureau, which has been enormously successful. It has really sold cable as an advertising medium, but also documented its performance. Bob Alter came in, Jack Clifford who I worked with later at Providence Journal had a big influence, and Fred Vierra and others, really got into that. It all started back there in 1978 at that conference. The other industry groups that we're talking about – early 80's I should talk about National Cable Association.

MAXWELL: Yes, and then into the public policy aspect.

MYHREN: Right. Monty, of course, had been a chairman of the National Cable Television Association. I went on to the NCTA board when Monty left in the beginning of '81. I went on very quickly to the Executive Committee, and became very involved in the public policy aspirations of the industry.

MAXWELL: ATC was the largest operator at the time?

MYHREN: Well, it was us and TCI. As we came through that period in the 70's after I joined, first it was TelePrompter.

MAXWELL: Right.

MYHREN: We went past TelePrompter in the late 70's, and then TCI began to grow fairly aggressively. I would tell you that they were a bit more swashbuckling. They went out to get more subscribers by acquiring more subscribers. They didn't win that many in franchising but acquired a lot of subscribers at a period when we were a little less aggressive .... As I think back on it, I think I can see it pretty clearly, because Time Inc., as a public company, was struggling with the idea of taking on acquisitions which were dilutive to their public earnings. That was one of the things that we tried to correct with the '86 IPO of ATC. We wanted the market to view, on the one hand, ATC as an EBITA vehicle over here, not necessarily making bottom line earnings. The market would hopefully view Time Inc. separately (though it owned 80% of ATC), over here, as its old self, as an earnings per share vehicle. Before the IPO this acted as a drag to us, because we had some acquisitions that we wanted to do that we just couldn't get Time to go along with. On the other hand, we did a number of them, and we kept growing fast. TCI went by us, and John Malone was on a very aggressive path and did extraordinarily well with that through that period. In any event, on the NCTA Board, I discovered something I think I already knew, but I became much more detailed in my knowledge about which is where cable was in the overall regulatory framework in the U.S. and how badly it was being held back because of the regulatory framework. This framework had essentially been put in place by legislators and regulators who were beholden to the broadcast networks, the telephone companies and others who really didn't want cable as a competitor. It was also true that cable, as opposed to those other kinds of companies, was a potential revenue source for local municipalities. They couldn't get a lot of money out of the telephone companies. They couldn't out of the broadcast networks...

MAXWELL: Impossible.

MYHREN: ... because of the history and the way those industries' rights had been laid out. With cable, they could charge fees to have a franchise. They could charge all kinds of fees to lay lines. They could do things that they were in a position where they couldn't do with the others. So in addition to having the commercial opponents, we had a government opponent to freedom. The best they wanted for us was to have us survive.

MAXWELL: But that was all.

MYHREN: That was it. We were basically a meal ticket for the cities. When that became crystal clear to me, I began to devote an enormous amount of time trying to change that. I actually sat down one weekend and said to myself, "Where's my time going to be spent? Is it best spent rallying the troops at ATC and keeping morale high and people enthusiastic and working 110%? Yes, that's important. What about acquisitions? What about work that we can do on the operating side? Those are all important too. But what's most important?" If you really thought about the long-term health of the industry, we had to get out from under these shackles or break the shackles. If we didn't break them, we would never be anything important, and we wanted to be an industry that was extraordinarily important. So I decided that I was going to spend at least 50% of my time on this subject. So I sort of went through the Chairs at NCTA and spent more and more time lobbying both outside and inside the industry – lobbying the legislators, the FCC and the people within the industry. I had a huge amount of help. Henry Gerkin was helpful. He was our General Counsel at the company. Enormously helpful were Brian Convoy and Mike Hammer who were in the Time Inc. office in Washington. They were very adept lobbyists, but they also were terrific thinkers, very calm and insightful. They understood the industry. They also understood the regulatory climate in Washington and just gave me an enormous amount of help. I put huge hours into this thing. The bill that we were going after was a change in the communications law. It would have been the first one, were it to be passed, since 1934. It turns out we got it passed in '84, 50 years later. We went through three Congresses - three two-year Congresses - to get that bill. In the third of those Congresses, the one that ended in the late fall of 1984, we actually achieved passage of the bill on the last day of that Congress in just an enormous battle.

MAXWELL: I remember it well. We had the good luck, at that point, ... You were in Colorado. We have to say something nice about our friend from Boulder, but .... Just before you got involved with that, AT&T had, of all things, sent private investigators after one of the Colorado Congress people who had just gotten elected in the '72 reaction to the Vietnam War. He was still there in the late 70's when we got friendly with him. Tim Wirth was a Congressman from the 2nd District in Colorado. AT&T treated him like some kind of pariah because he had walked in one day and said, "Why are the rules like this?"

MYHREN: Which was a very reasonable question, but they didn't view it that way.

MAXWELL: That's exactly right. So I remember at a small publishing company _______ I had at the time. We invited you, Monty, Glenn, Bill Daniels and everybody else in the neighborhood to a cocktail party that we gave for Tim Wirth to introduce him. Later he, of course, became a senator from here and very instrumental in, while not championing so much, helping take away restrictions.

MYHREN: He was particularly helpful, before he got to the Senate actually, when he was in those Congressional days, because he ended up as Chairman of the Communications Consumer Protection and Finance Sub-Committee in the House. [House Subcommittee on Telecommunications, Consumer Protection and Finance, of the House Committee on Energy and Commerce]

MAXWELL: Or was it the Commerce Committee?

MYHREN: I'm thinking it was called Commerce but it was John Dingle's committee. Tim was the Chairman of the sub-committee that really looked at communications' regulations and a number of other things. He's an enormously intelligent guy who saw through the kinds of restrictions that had been put in place. After we met Tim through your good offices, we became very supportive. I spent a lot of time, and I raised money for Tim.

MAXWELL: We all did.

MYHREN: I talked to him a lot. He was not a handmaiden of the industry.

MAXWELL: No, far from that.

MYHREN: He was a guy who clearly had his own ideas, but he was willing to listen to reason. He understood the real frustrations we had, and he understood the importance of trying to unleash more diverse voices in the media.

MAXWELL: The first part he actually got, I think, was pole attachment.

MYHREN: That was in 1978. He was instrumental in changing the regulatory method that basically taxed cable for going on the poles along with the telephone wires, getting on those same poles. The regulation, up to that point, had essentially allowed the telephone companies to charge the cable companies anything they wanted and to take forever to allow them on the poles, and basically were able to just keep cable from doing business. Tim was instrumental in driving legislation that got that back to a more rational framework. Then, of course, he was at the center of the storm as we went forward to try to do this 1984 bill. Without going into all the details it was certainly, in my life, one of the more sustained efforts. It just actually consumed me for a few years. I wasn't the only one in the industry that was working hard on this. There were just an awful lot of people working very hard. I ended up in a position where I had a rather critical role in it because I was spending so much time and because I was with a company which had a lot of power through its own right. But I also had these terrific people helping me at Time Inc., Washington, very sophisticated people. Off that platform, I became extraordinarily involved in this thing. I ended up in NCTA Executive Committee meetings giving, in effect, position papers on what we ought to do and what we shouldn't do. I then eventually ran the meeting that was the most contentious meeting that we eventually had in trying to decide, internally in the industry, where we'd come out on this thing. There were people in the industry who, both for selfish reasons in some cases and very idealistic reasons in other cases and solid reasons in other cases, opposed the bill - opposed the way we were doing it. People like Len Tow, for example, felt that if we couldn't get everything - if we couldn't really become the First Amendment voice that we needed to become as a part of this of this bill - that we shouldn't take the rest of what we were going to get. There were people like Chuck Dolan, who for good reason, essentially felt that we weren't getting enough here, that there were a couple of other things that we had to get and Gene Schneider, who felt conflicted on it because he felt we weren't getting enough. So we had pretty raucous meetings in Washington. But the final tough meeting on this that we had, I ended up chairing that meeting.

MAXWELL: You were Vice Chair of the Executive Committee?

MYHREN: I was Vice Chair of the NCTA at the time, later to become chair. But I had not become chair at that point because a lot of things had been going on in our company. I had asked Ed Allen, who had been a terrific chairman, whether he would remain for another year. He agreed to do that. But he said one thing: "In the fall of next year, when you're doing that, I am going away for a long vacation with my wife, Gerry, and I'm not going to be there, and you're going to have to run that meeting."

End of Tape 1, Side A

Start of Tape 1, Side B

MYHREN: Well as it turned out, that meeting ended up being "the meeting". It was wild and wooly but, in the end, we got it done. A lot of kudos go to Tom Wheeler, who really brought us to that point, to Jim Mooney who I think was able to provide the sharp expertise, a lot of people who really contributed on the NCTA staff side, and a huge number of people in the industry who worked like heck on it. A number of people helped us in the Congress, Tim Wirth clearly being one. Another one was Senator Dan Inouye from Hawaii, where ATC had almost all of the cable systems. That was a big period.

I then went on later to become Chairman of the industry, and, in fact, something that people remind me of often – in the Fall, 1986 at the NCTA Board meeting at a closed session, I told the Board that I was very, very concerned about what would happen when pricing regulation, as a result of that bill passed at the end of '84, came off. The pricing regulation came off the industry January 1, 1987. I gave this impassioned talk about that. A couple of the very good operators in the business, big operators, told me I was nuts, that we'd had our prices tamped down for so long it was time we got ours back. I said that if we have that attitude, we're going to get re-regulated.

MAXWELL: Took less than eight years and we certainly did get re-regulated.

MYHREN: It was really unfortunate. And there's no question, the people that were saying that were right in their own way. The fact is that we did have a right, and you might say almost a moral right, to raise our prices some at that point. It was question of how it was done. It was interesting. I was warned by the lawyers that you can't even talk pricing. I said, "I'm talking about keeping prices down not talking about putting them up!" So I did talk about it. And people disagreed with me, and some of them completely disregarded the advice. So we ended up getting re-regulated.

MAXWELL: Yes. That made some good friends. It's a small world. Your old friend Bill Ziff's ex-top broadcasting guy turned out to be responsible for the ...

MYHREN: Marty?

MAXWELL: ... Right. ... one system where a ...

MYHREN: ... in Al Gore's ...

MAXWELL: ... a future senator's mother got a rate raised too much.

MYHREN: What was Marty's company called at that point? Was it Intermedia or something like that?

MAXWELL: Something like that.

MYHREN: In any event, their company unfortunately was in the eye of the storm when rates went up because he was in Al Gore's territory.

MAXWELL: Right. And he was tripping systems and raising them ...

MYHREN: There are those who would argue that Al Gore's home territory was a hotel in Washington and a private school in Washington. But for those who thought he really came from Tennessee, that's where he came from.

MAXWELL: And his mother's old farmhouse got like a 34% rate increase with no change in programming.

MYHREN: You're absolutely right. I remember that well.

MAXWELL: That was an amazing time.

MYHREN: We had some responsibility there too - American Television. I left American Television in '88 in a dispute with the then president of Time – a fellow named Nick Nicholas. We had some very serious issues between us. One of them was my steadfast refusal to raise rates in Honolulu, Dan Iouye's home country.

MAXWELL: You owed Dan, right.

MYHREN: Not really owed Dan, but we had a 1% franchise fee at the time there, and I really didn't want to disturb that. You can run through the economics of that and recognize what's going to happen if you raise rates – you'll go to 5% on franchise fee and so on. But my argument was much more profound than that – it was that we had made a commitment there to keep the rates reasonable. Shortly after I left the company, the rates were raised dramatically.

MAXWELL: Dramatically, if I remember right.

MYHREN: And I called back to top management, but I was no longer in the company. I didn't have any clout whatsoever, but really protested it, and was essentially told that that wasn't my business – which I knew, of course.

MAXWELL: True.

MYHREN: But I felt the obligation to protest. Inouye went crazy. Henry Juney who was the Sergeant at Arms in the Senate, and was Inouye's buddy, called me and said, "What the hell is going on here?" I said, "There's not a lot I can do about it, but I will try." As I said, I tried. The unfortunate fact is that not only was that raise made then, but nine months later another raise was put in ...

MAXWELL: Ooh, ouch.

MYHREN: ... and at which point Inouye just said, ...

MAXWELL: Yes, he got angry.

MYHREN: ... "You guys are out of control, don't live up to obligations. But in addition, you're really penalizing the people here in Hawaii for reasons we don't quite understand." It was a very, very nasty period there. But there was the situation in Tennessee, that particular situation in Honolulu ...

MAXWELL: Well, dozens of places.

MYHREN: ... and others – all over the country that have been documented – obviously led to a nasty bill. Frankly the bill that was passed in 1999, which was very tough on the industry and really hurt the industry a lot, was much tougher than it needed to be. But, it never would have passed because the Bush veto of the bill was lost by one vote. And there's no way that it would have ever been that close had these incidents not happened. So I think the whole industry learned lessons at that point.

MAXWELL: We can hope so.

MYHREN: I hope so. It really has to do with whether you adopt short-term, quarter-to-quarter earnings orientation that is absolutely inviolable or whether (because everybody has to be aware of quarterly earnings when they're in a public company situation,) within that operating theory you can adopt some longer-term thinking that you sort of graft onto that. In this case, the industry just wasn't willing to think long-term and think about the potential problems. The industry clearly needed more money because it was dramatically improving programming, and that costs money. But the problem with the '92 bill was that one of the things it did, by far the most destructive thing it did to the cable industry, was it took away cable's exclusivity. No matter how much money cable had spent on that programming, it now lost the exclusive right to use it. That was critical.

MAXWELL: It was critical, too, that it happened just as compression was invented.

MYHREN: That's right.

MAXWELL: It's changed the technological implication of that decision.

MYHREN: If cable had taken a much longer - I happen to believe this, and I'm sure there are very smart people who would disagree with me – but had cable taken the longer term view and had not gotten stuck with that bill, ...

MAXWELL: ... It wouldn't have competition like it does.

MYHREN: It would not have been in a position where it ever would have been regulated the same way because, as you point out, Paul, the proliferation of delivery mechanisms or even the vastly expanded channel capacity on cable would have diluted the monopoly appearance and made it unnecessary to do to cable something like taking away its programming exclusivity.

MAXWELL: Exactly.

MYHREN: So that, from my stand-point, was a major, major stumble for the cable industry which was unnecessary but probably, given human nature, probably inevitable. Had we avoided that at that point, it probably never would have happened.

MAXWELL: I think you're right. Let's take a step back to before you left ATC before we go onto the next step before you left Time. There was a wonderful story you told about that wound up on the wharves in San Francisco.

MYHREN: Oh, gosh.

MAXWELL: This is an unusual one, and not very many of these oral histories will have something like this in it. So I wanted to be sure you got to it.

MYHREN: Well, back in the early 80's, I received a letter one day from a person who didn't identify him/her self as a member of a group. It said, "We have all of your maps of your cable systems, and we're going to place explosives in the most sensitive parts of those cable systems. We have entree to your computer systems so that we can put messages in your billing statements and in your customer communications which are extremely offensive to anyone, whether Chinese, Black, Arabic, Hispanic. Here are the kinds of messages we'll put in that will make them very unhappy." I looked at the letter. It only demanded $250,000. I thought for that kind of effort they ought to be asking a lot. Here we are. We're a company that when I joined ATC it was about a $50 million company. When I eventually left at the end of '88, it was $1.5 billion. We're half way there at this point. I thought they should be asking for more than that. It gave me a clue that maybe these people weren't totally sophisticated. But it was scary about what to do. I went and talked to Henry Gerkin who was our chief counsel and said, "Henry, what do we do?" We talked about it, and we decided we weren't going to do anything that indicated to the people who had sent the letter that we were opposing it. So we communicated back to them fairly quickly. I had Henry make the communication which he obviously handled, in light of the way things came out, very well. We went to the Arapahoe County Sheriff's office because we were located in Arapahoe County, Colorado and had a very confidential talk with the sheriff. He put one person on the case with us, and we began to design our communications back to these people. To make a long story fairly short, what happened was that there was a decision made by the people who were extorting the money to have the pickup of the money on the wharf in San Francisco. A detective, who was made up to look like me, actually made the delivery, a detective from the San Francisco police department. This guy was probably tougher than I am because what happened – and by the way this actually was written up in the Denver Post and the Rocky Mountain News – was that there was a Russian-speaking cab driver involved as people were changing cabs and all kinds of wild things going on. It was really Keystone Cops in some way. As these two people came together on the wharf, the fellow who was to take the receipt of the money reached down into his leg and the detective didn't know what was going to happen and he just hammered the guy. Actually as it turned out, as I saw in court later, he totally distorted his face. It was an ugly situation. But at that point, a lot of other detectives descended on the scene and they grabbed this guy. The first piece of information they got was about a residence in Aurora, Colorado. When they got to that residence, they'd had my children's names, ages, schools, and the same with a couple of the other top executives at ATC. One thing led to another. These people were charged. They went to court – a bunch of funny things which I'll tell you privately – just a lot of funny things happened. In any event, the people from ATC who went to court were the only three who knew about it – myself, Henry Gerkin, and Larry James who was our chief technical officer who lives in Steamboat Springs now. Henry lives in Vail. The three of us went out and appeared in court in San Francisco in a room. It turned out that this fellow's names was Wong. It was a Chinese group. The courtroom was ringed with very large, unsmiling Chinese people as I testified. Each of us was in there at a separate time, each of the three of us. But we all had the same reaction which was very, very intimidating. But we went through our thing. We had, from time that we had discovered those addresses, my family actually had a police escort for a year. Nobody in the industry ever knew about it at the time. I doubt that anybody does today. But we actually had police shielding for a year. A very interesting sidelight here - it turned out that this same group had had people in Wells Fargo, Bank America, Union Bank on the west coast and had successfully extorted all three of those companies. The net of all that was that we stopped these guys because not only did this guy get convicted, but so did three other people who were in it with him and who had run these scams on all the banks. They went to jail for ten years.

MAXWELL: And you haven't heard from them since.

MYHREN: And we haven't heard from them since, although you do worry about those things.

MAXWELL: Oh yeah.

MYHREN: You do worry about them. It's just a little thing in the back of my mind, but it's one I've learned to deal with and my family has learned to deal with.

MAXWELL: ATC though, in '88, sort of moved to Stanford, Connecticut and left you behind.

MYHREN: Absolutely. There's no other way to put it.

MAXWELL: I don't want it to sound like they built a bridge and then didn't let you through the toll booth, but I guess there's some truth to that.

MYHREN: There is some truth to that. There's no question that Nick Nicholas, the then president of Time - who later became Co-CEO of Time Warner with Steve Ross before he was summarily fired – Nick and I didn't agree on a number of things.

MAXWELL: Rates among them?

MYHREN: We didn't agree on rates obviously. Another critical, critical issue was that I really believed very strongly that ATC, being one of the two largest cable operators and a very well-run cable operator, had an opportunity to get positions in programming services for giving carriage to those programming services. We could get equity, and I believed very strongly that we should do that. It seems that there were two reasons why Nick fought me from the beginning. Essentially one was because he never did understand, it would appear, that basic cable programming services (advertising supported basic cable) were going to be the future of the industry. My argument was – look, we've got advertising resources, not just in ATC but in Time Inc., that are excellent. We're the biggest magazine company, have 25% of the magazine advertising dollars in the U.S. We have people that really understand advertising. So running advertising - supported services is something we could be very good at. We can gain equity in all of these services in exchange for carriage. He didn't get that. He was very much on the HBO model, the pay television services, which had been very successful there. But he didn't really, as I gathered from could the arguments I had with him, visualize the future of advertising and supported services. The arguments about this created animosity between Nick and me and the decisions that kept us out of the advertising-supported programming business hurt Time Inc. immeasurably in the long term.

MAXWELL: It made Liberty stronger.

MYHREN: And it made Liberty stronger.

MAXWELL: It made TCI and Liberty stronger.

MYHREN: John Malone, on the other side of it, understood exactly what I understood, and he was able to execute it. So John got really into the programming business very successfully. They've done a remarkable job there. And it was a job that we had a better opportunity to do than TCI did.

MAXWELL: Yes, but for a decision. What was the timing of, and I don't remember now, The Fanciest Dive, the attempt, at Time Inc., to build a TV guide for cable. Wasn't that '87, ''88, '89?

MYHREN: No it wasn't. It was earlier.

MAXWELL: It was earlier – okay.

MYHREN: The "fanciest dive" was really sort of '86, '87, '88. That was a $49 million loss. That was something where, at ATC, we recommended that it wasn't the right route to go.

MAXWELL: I remember.

MYHREN: We got overridden and that was a problem for Time, Inc. But it was an understandable mistake. However, this other mistake of not getting into the basic cable programming business was a brutally difficult, bad mistake. It's funny because I think Nick viewed me, at the time, as being very parochial about ATC, wanting ATC to have these interests, when the programming arm at Time Inc was HBO.

MAXWELL: So he perceived a conflict.

MYHREN: Knowing that, I would say to him, "Look, Nick, I don't care who owns the interest eventually. You're going to have to let ATC have some of these interests because these programmers aren't going to give it to HBO and HBO has nothing to offer for it. We've got a lot to offer for it. It'll end up in our place. But if what we want to do is some cross-ruffing of management so that HBO gets some management clout in what's actually happening in these things, we'd be very happy to do that." I think Nick thought I was being disingenuous. I was being quite straight-forward, and I think history has proven that I was dead right on these issues!

MAXWELL: True. Well, you got the opportunity then to seed some actually as opposed to just take a percentage for carriage later.

MYHREN: Yes. What we did after some extraordinary arguments, was at least we got into some things. Very, very early on and before we were owed by Time – and this is one of things that I think had maybe stuck in Nick's craw – we started something called Cinema Plus. When I first came to ATC, we started this pay television service in Florida. We did, for example, the Norton/Ali fight from Yankee stadium in '76 which obviously followed Ali's "Thrilla from Manila" against Frazier the year earlier. We did that very successfully. We did a lot of other things. We bought from the studios. We used that as a lever at that time because we were doing it on our own and reasonably well. I wouldn't say we were terrific at it. But we were doing it well enough so that it gave us the opportunity to get from HBO a really good, long-term contract, at which point we closed down Cinema Plus. We had proven, at that point, that we were capable of doing these things, and that was good. But that didn't make some people at HBO particularly happy. But that was before we were owned by Time Inc.

MAXWELL: That's when Nick was the accountant there.

MYHREN: Yes.

MAXWELL: He was CFO at HBO at that time.

MYHREN: Yes. I think he had a Time Inc. role actually, but he had a lot of influence on HBO. He was, I would say in retrospect, quite partial to HBO in these kinds of things. So when I came forward with what I thought were fairly visionary views of where the programming business was going and how ATC could help Time Inc. get there, he didn't take kindly to that. It may have been something also in the chemistry between the two of us. But it missed opportunities like crazy. But also there was a difficulty here, in that as we went along, as we got farther into this and it became evident that we were going to take ATC public (and we began planning for that in 1985) something else happened. So all programming negotiations that went on from that point forward, Nick would take the simple position that we (Time) own 100% of HBO and we only own 80% of ATC as we go forward, so you guys shouldn't be owning any programming. And I said, "Gee, from a practical stand-point, we have to be doing it because HBO can't get access to equity in services owned by others. We'll do this meshing with HBO." In any event, we agreed to disagree on that. That was just another issue. Obviously consumer pricing was a huge issue. And I didn't give up on either of those issues, as I tend not to when I am absolutely sure that long term, something has got to be done a certain way. And Nick didn't give up. And in the end, with the beginning of the negotiations with Warner in early '88, (which didn't come to fruition ... It actually went through a couple of stages. There were break-offs and come-backs. It went through a couple of stages) there was an enormous drive to move ATC east. Actually, Nick and I had had discussions on that for a couple of years, and he wanted to move ATC out of Colorado and east. I said, "Cannot do. Really a bad idea." I must admit that there were a couple of reasons why I was saying "cannot do". One, I thought we'd lose our entrepreneurial flavor if we were sort of tucked in under the Time Inc. bureaucracy in the east. But secondly, I had kids in school out here. I also had a son, my older son, who was actually deathly ill. He survived, as it turned out, after a long time at the Mayo Clinic and then back here in Denver. I couldn't really move him. I also had been divorced previously and remarried. But my custody arrangements, which were joint with the children, would have been disturbed by moving east. And Nick knew that. I knew that. So my arguments against moving the company, which were very good from a business stand-point, also could have been viewed very much as disingenuous. So eventually we got to a point where, with the Warner negotiations, we were really at a stand-off. Nick was saying, "We're moving this thing." And I said, "We're not moving this thing." Basically we agreed to disagree. The company was moved, proving that they didn't value me as much as I hoped they would, and I stayed here, set up my own company and bought some small cable systems. Actually, though I resigned from the NCTA Board, having left Time (also resigned from the Turner Board which I was on at the time – Ted's Board - which is another very interesting chapter) and was elected by the small operators to be a small system operator representative on the NCTA Board – another interesting chapter. I did a number of things while I had my own company. I kept that company, Myhren Media going, when I eventually took a job in Providence, Rhode Island, after my kids were out of school and off in college ...

MAXWELL: ... your son was better.

MYHREN: ... and my son was better. I was in a position to do that, and I did it. I took a job running the Providence Journal Company, a diversified media company.

MAXWELL: Well, it got you back into print in a long way around.

MYHREN: It's interesting, Paul. I always, despite the fact that I knew that it was going to be exciting in the electronic media and I knew that my fortune maybe was there, I really had a hankering to get back to print. In print, in addition to that company I told you about, when I was in high school I was the editor of my high school newspaper. When I was in college, I wrote for the Daily Dartmouth my freshman year. Then I was selected by a senior - who was writing for the AP and the New York Times as their campus stringer - as the guy to take his job. (I figured I could buy a new pair of shoes because I had tape around my shoes at that point, the only pair of shoes.) Not to be forgotten, my mother had been an editorial writer for the Cleveland Plain Dealer back before she met my dad and moved to Pennsylvania. That was very unusual for women at that point.

MAXWELL: Yes, I would say so.

MYHREN: So I really had, to a degree, ink in my veins. So the offer from the Providence Journal, which I actually turned down the first time it came to me because the kids weren't out of school and Erik was still on the cusp, I took when they came back the second time. The Providence Journal newspaper is a terrific mid-market newspaper, Pulitzer Prize winning newspaper, and I just thought that would be neat. Plus, I could bring strengths that I have. I know about cable, and the Journal had 250,000 subscribers. I'm fascinated by broadcast television. They had four broadcast stations. Then they had minority positions in a bunch of suburban newspapers in various parts of the country. The company was in the process of selling some cellular they had gotten in to, so there was going to be some money available. They really wanted me to come in and use the money properly and try to build the company. We did that in a pretty dramatic way. I went in there at the end of '90 which, as you remember, was just the depths of the depression in the media business. We immediately set out to get things at good prices. I sold our suburban newspapers because we had minority positions in all those and we had no influence on them and we didn't like the way they were going. They weren't going well from a financial stand-point, but they were even worse from an editorial stand-point. So we just said, "Let's get out of those." So we concentrated our newspaper efforts on the Providence Journal. We then bought Rhode Island magazine and some other smaller properties in the area, so we clustered media properties. In the cable business and the broadcast business, we grew dramatically, made some purchases from Glenn Jones in cable, from Jones Intercable at what I thought were very good prices. It turned out to be very good prices. The biggest single purchase we made was that we bought King in Seattle from the Bullit Sisters, another private company like ourselves. We beat out a lot of public companies and financial companies in trying to get that. We got it for a terrific price because it was in the depths of the media depression. We bought the broadcast side for 7 ½ times ...

MAXWELL: Really?

MYHREN: Yes ... the broadcast cash flow. In broadcasting business, a funny thing happens – when times are good and the economy is good, then advertising is good and broadcasting is 100% advertising. What happens is, your revenue flow goes up, your broadcast cash flow goes up. The strange thing that happens that shouldn't happen is that the multiple on that also goes up. So it's the lemmings, you know. So it gets up to 13 – 15 times. When times are bad and the economy goes bad, advertising goes south, your broadcast cash flow drops, and the multiple comes down. So you get this doubled effect. So we went in there and bought at the low on that. We also got a bunch of cable subscribers from King. We also bought the Palmer systems, the Palmer Cable Systems in Palm Springs, California, the west coast of Florida and elsewhere. But those were the two primary wins there. We built up our cable. What we got with the broadcast side was NBC, King 5 in Seattle, KGW-NBC in Portland, the CBS station KREM in Spokane, got Boise NBC, a 40 market share on that station – amazing. We got a property in Honolulu. Eventually we grew our four broadcast stations to 14. At one point, we were NBC's largest affiliate other than their O&Os. On the cable side, we went from 250,000 to 800,000 subscribers. Beyond that, we began to get very involved in what I called venture things. We bought a piece of Peapod, the on-line grocery shopping service. We started programming services. One of the agreements I had with the Journal directors before I went there was that we had to be in the programming side of things.

MAXWELL: You weren't going to make that mistake again.

MYHREN: No. So I figured I'd make that deal going in rather than having an argument with somebody later. They agreed that I could do what I wanted there. They had enough faith that I'd do the right things. We started the Television Food Network from scratch, just as an idea on a piece of paper. Joe Langhan was so helpful in our company doing that. Jack Clifford played a big role in that. We brought in Reese Schoenfeld who had started CNN with Ted Turner to really manage things. Reese did a spectacular job. Steve Cunningham was even involved at that point. He later started the Wedding Channel, an internet channel. We brought those guys in to help with it. But we created this thing from scratch. It's probably worth $800 million - $1 billion today. It was quite a good idea. Because we had all those broadcast stations in the northwest, we started Northwest Cable News, which, as far as I know, may be the most successful regional cable news channel in the country – cable new channel.

MAXWELL: More than New York 1 even?

MYHREN: We gave some ... It's very interesting. I couldn't compare the numbers today, Paul, so that's a fair question. But I know there was a period there when we sold it to Belo when it was the most successful.

MAXWELL: Well, they're having problems in Texas today.

MYHREN: What we were able to do ... Yes, Belo now, which bought all those things, is trying to model that same thing in Texas. What we were able to do is take all our broadcast stations and use their product – Boise, Spokane, Portland, Seattle – to create the basis, a very inexpensive basis because you already have the produced product. Then we layered that over with a lot of unique product. But we didn't have to do all unique product. We put the services out there and we got all the cable systems in the area to take it.

MAXWELL: I'm sure retrans helped a little.

MYHREN: Well, you know, it was really interesting. I actually called John Malone before we made the final commitment to put that together, and said, "John, here's the deal. This will give cable something exclusive in the Northwest." TCI had a lot of those systems in the Northwest.

MAXWELL: A lot then, right.

MYHREN: This will give cable something that will be unique to cable, even under the '92 Cable Act.

MAXWELL: Yes, it is unique, right.

MYHREN: It's unique. "You guys can hold onto it. You don't have to give it to satellite. It will be powerful. And it will be powerful because not only will it be good, you gotta trust me there, but we're going to advertise it on all four of our market-leading television stations."

MAXWELL: Now John would hear that.

MYHREN: "This is absolutely not true of anything else that's ever happened with cable. So we'll do that." He said, "Phew, we'll do it." We then put it together. We went in and went through this awful situation trying to get distribution by going through the TCI bureaucracy. And we weren't making it, and we were about to go dark. I called John and said, "John, do you remember the conversation we had." He said, "Yes, I do remember." I said, "Well, you guys just aren't executing." It got executed, and we were on the systems.

MAXWELL: I understand that part.

MYHREN: Anyway, so we got that thing done successfully – both of those programming services. Then we built the company up, and then – not such a strange thing if you look at it in the broader context – happened. We had a 175-year old company at Providence Journal, which was a private company. You had stratified ownership. You had five different families which had grown into more families which were everywhere from the septuagenarians down to the teenagers. Different people in different families and at different age groups had different views of how we should run the company. There was not too much argument about what we were doing, because we were clearly building it and building it very profitably. There was a lot of argument about whether we should pay dividends or not. Those arguments got bigger and bigger, and we started to have visions of the Chronicle Company in San Francisco, Binghams in Louisville - by the way, we owned the Louisville television station so we understood that situation real well - families who had infighting and destroyed value terrifically. So we began to think that maybe if we couldn't settle this all down, we ought to start thinking about selling some things. It was about that point, of course that the telephone companies were coming into the business, the cable business. So we made a determination to sell the cable company and to, in effect, bring back both cash and stock to our shareholders. We came up with a very tax-efficient way of doing it. Without getting into all the tax ramifications, we kept the rest of the company as a whole – the newspapers, the programming, the broadcast stations, magazines - kept that over here – and we moved the cable company (we talked to TCI, Cox, Comcast and Continental). We ended up selling to Continental. We talked to telephone companies as well. I decided I really wanted to try to keep it in the cable mold if we could, because we thought there would be more than one bite of the apple by doing that. If we sold to cable, the cable guy might eventually sell again. Continental – I liked Amos – but interestingly enough, I liked all the companies. I liked Jim Robbins, I liked the Roberts, and I liked TCI although I didn't think TCI's plant was very good and that bothered me. I viewed that as sort of a hidden negative on the balance sheet. Continental had the best plant of all those people. We had a great plant. We also clustered fairly well. We ended up selling to continental. I went on the Continental board and Continental ended up doing something we sort of hoped that they would do but weren't going to try to force them to do in any way. They ended up selling to USWest so that our shareholders got this terrific deal from Continental for their cable - we took about half stock, half cash - moved it to USWest, and the stock portion got another 50% bump. Then, of course as you know, that became Media One within USWest. They did a whole bunch of reorganization over there. They then took the Media One portion, sold it to AT&T, and that stock which had been coming through, got another big bump. So our shareholders did enormously well. We took the rest of the company at Providence Journal public on the New York exchange. Shortly after we went public, we started getting bombarded by people with interest because they looked at what we had, and the numbers were now transparent to them. They said, "This is good. We'd like to buy it." Belo came in with an offer which was a low-ball. They were a company like us. They happened to be public which was good. But they were also a newspaper-based family company, very well run. Dallas Morning News is a Pulitzer Prize winning newspaper, really a top quality newspaper. So it fit. We decided to intensify our discussions with them, got the price up and up and up and sold it to them. So they took everything else. I came back to Denver.

MAXWELL: And what's next?

MYHREN: What I'm doing at this point is – I really desperately don't want to run anything. So I really have gotten into the venture capital business and accepted corporate board seats. I assiduously avoided consulting which is something I have done at various points in my life. I've set up, with my old CFO from the Providence Journal Company, a venture capital company. It's a seed venture capital venture company called Megunticook– old Indian name – in ...

MAXWELL: It's a river somewhere, isn't it?

MYHREN: Yes, it's a river and a lake, actually, near Camden, Maine where Tom's family happens to have some property. We set this thing up. Tom runs it, Tom Matlack, back in Boston on Newbury Street. I've gotten involved with all the venture capitalists in town here many of whom came out of the cable industry, so we think alike about a lot of things. I've gone on a lot of boards. I'm on the J. D. Edwards Board, a big software company, the Verio Board, although I'm about to come off that because we just sold that to NTT for $6.5 billion, a company we actually started four years ago. That was an ISP as we started it, and it morphed into becoming a web-hosting company when we saw the margins slip in the Internet Service Provider world. I am also on the board of Dreyfus Founders Funds, a group of mutual funds. I'm also on the Peapod board which is the on-line grocery shopping service - which is a kick – out of Chicago, the Advanced Marketing Services board, which is a huge book wholesaler and now we're in the publishing business, out in Delmar, California. We're one of Amazon's biggest suppliers in the book business. I'm also doing a lot of pro bono stuff. I'm on the DU board, and I'm chair of the Finance Committee and I'm on the Executive Committee and the Faculty and Academic Affairs Committee. Also, the U.S. Ski Team board, a hospital board here in town, things like that. We do a lot of work, as you know, with the disabled ski team as well – those kinds of things. My life is made up of lots of activities and people, all of whom I enjoy.

MAXWELL: Do you want to make an appeal for distribution while you're here?

MYHREN: Yes – always as a programmer, you have to do that. I'm trying to lead a life now where I don't run anything but where I'm involved in a lot of things to keep me interested. Unfortunately, I'm too involved in too many things. I'm going to have to cut that back a bit. But it's a nice lifestyle and frankly, I couldn't have this kind of life and some of the pro bono things I do, if I had not been fortunate enough to get in the cable business. I think I've told you that I've known a lot of the people in the newspaper business now. I know them in the book business. I know them in the broadcast business. I know them in the internet world, some of the new economy things. The group of people that I met in the cable industry over the years are the most exciting, innovative group of people that I have ever known as a group. I really consider my cable friends to be really good friends. They are much more exciting than those old economy folks and those old more traditional businesses. And they're better grounded in business and more sensible than a lot of the internet folks.

MAXWELL: But not risk adverse. They still try things.

MYHREN: They're very entrepreneurial, the cable guys, still. They'll try lots of things, but they've got a very good sense about them. There are so many people who are so much fun in the business. It's just wonderful.

MAXWELL: That's it. Thank you, Tryg. Gus Hauser thanks you.

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Richard Munro

Richard Munro

Interview Date: Wednesday June 06, 1990
Interview Location: New York, NY
Interviewer: E. Stratford Smith
Collection: Penn State Collection
Note: Audio Only

SMITH: This is Tape 1, Side A of the oral history interview with J. Richard Munro, recently retired co-chairman and co-chief executive officer of Time Warner Inc., now the world's largest media and entertainment company. This interview is part of an oral histories program being taken of pioneers of the cable television industry and current leaders under the auspices of The National Cable Television Center and Museum at The Pennsylvania State University. The purpose of the series is to establish a national archive for research purposes concerning cable communications.

Mr. Munro, I would appreciate it if you would be willing to answer some questions concerning your personal background for the record.

MUNRO: I would be delighted to.

SMITH: Could you tell me where you were born and when and something of your boyhood background?

MUNRO: Sure. I was born in upstate New York in Syracuse, January 26th of 1931. I think I grew up as a normal child with an older sister and a younger brother. My parents were divorced when I was only five years old, but I don't think that had a negative effect on my childhood at all. My family's history was farming primarily and land owners in central New York. My mother came from a family with a show business background. My grandfather was a Gilbert and Sullivan star. My grandmother was a chorus girl. My mother actually sang on Broadway. My father's side, as I said, were basically farmers, politicians, doctors, lawyers, etc., in central New York.

SMITH: Your father's side was of Scottish background did you say?

MUNRO: Yes. I guess the Munro clan came over from Scotland around the early 1700s, fought in the revolution and were given land in central New York as were all soldiers who fought in the revolution. That was the beginning basically of my family history back in the early 1700s in the area surrounding Syracuse.

SMITH: Your mother's ethnic and national background?

MUNRO: My mother's mother's family were German immigrants. As a matter of fact, my grandmother spoke German fluently and was quite proud of her German heritage as I recall. That goes back a long time. I knew my grandmother quite well. My grandfather, I did not know quite as well on that side of the family. When my parents were divorced, I went to live with my mother, so I sort of left the Munro side of the family at that stage of my life. The Munro side of my family has a much richer history which I have recently been learning something about.

SMITH: Could you just briefly tell us the nature of that history? I don't want to push into too much detail.

MUNRO: Well, it just was recently. The Munro's have a family historian, and I have recently been made aware of some of the history. I read in one document that at the Battle of Lexington, there were something like ninety American soldiers and something like twenty of those were Munro's. So there were a lot of Munroe back in the early days of Massachusetts. I guess every Munro will tell you that he is a descendant of our President, and I have been told that. Whether it is true or not, I don't have the faintest idea. But, it sounds nice.

SMITH: You don't spell it the same way do you?

MUNRO: No, but if you go back and track the Munro history, we are all related no matter how we spell it. It is spelled a number of different ways. My spelling, M-U-N-R-O, is sort of the purest of the spellings. But, it goes back to Manro and, of course, Monroe and Monro. There are a whole bunch of different spellings. But somehow or other, we are all intertwined. I have never paid an awful lot of attention to my ancestry, though I must admit as I said a moment ago, Strat, it is kind of interesting.

SMITH: You mentioned earlier that you have some brothers and sisters.

MUNRO: My younger brother is four years my junior--a wonderful human being and someone who is probably my best friend. He lives in West Palm Beach, Florida. He has made his life in the outdoors. He works for a fishing line company, a boat company. He is a very, very fine outdoor photographer and has had his pictures in many magazines. He is a writer for a number of boating books. He has been able to be one of those fortunate people who has made his vocation out of his avocation. He is a wonderful fellow. My sister also lives in West Palm Beach. I don't see her quite as often as my brother, but I am blessed with having a wonderful brother and a wonderful sister.

SMITH: Where was your early schooling?

MUNRO: I went to public schools in upstate New York in a suburb of Syracuse, Skaneateles to be specific. It is a small village outside of Syracuse, New York, on one of the finger lakes. A beautiful village, as a matter of fact, somewhat unchanged since my childhood. When my mother took us to Florida during the winters, I went to junior high school and high school in West Palm Beach, Florida, and graduated from West Palm Beach High School. But, I had a year of prep school at Northfield Mount Herman in Massachusetts. I went there for a year and then went back to West Palm Beach High School. That is where I completed my high school education. Then I went off to the Marine Corps, and came back and went to Colgate University in upstate New York, where all of my Munro ancestors had gone.

SMITH: I think I read in an article recently that you were the twenty-eighth Munro to go to Colgate. Is that the right figure?

MUNRO: I think it was twenty-sixth or twenty-seventh. We lost track. I assume that is the only school my ancestors ever heard of because I told that story once to someone and they said, "Well, that's got to be the greatest line of mediocrity I have ever heard. No Munro could get into Yale." I think my great grandfather was first lay trustee of Colgate, Colgate being a religious school back then in 1820. The school was founded in 1819, and my great great grandfather was a trustee in 1820. There have been four Munros that have been trustees of Colgate University going back to the 1820s. So, we have a long and rich history in that little school.

SMITH: While we are on the subject of school, what was your undergraduate specialty? What did you graduate in?

MUNRO: I had two majors, English and psychology. I was a liberal arts graduate, that's all that Colgate offered. But like many people here at Time Warner, most are liberal arts graduates.

SMITH: You mentioned your military career just briefly a few minutes ago. Would you mind telling us just a little bit more about that?

MUNRO: Well, I had a year of prep school, as I mentioned. So, I graduated from high school when I was nineteen and that was during the Korean War. I was about to be drafted during that period, and I decided instead of being drafted I'd rather join the Marine Corps. So, I went into the Marine Corps as an enlisted man, spent three years in the Marine Corps, two at Paris Island as a rifle instructor. Then, I went to Korea. In Korea, I was with the 5th Marines. I happened to be at the wrong place at the wrong time, and I ended up getting wounded three times, and ended up being 30 percent disabled. I certainly don't appear to be 30 percent disabled. Over the last, I think, thirty-five or forty years, I have been getting checks from the Veterans Administration. My feet were badly hurt. They were injured by a grenade that went off at my feet. I spent about a year in a Navy hospital. I was discharged, I think, in 1953, and went back to college. But, I am no war hero. I just happened to have been shot up a few times. I didn't learn to duck, I guess.

SMITH: Would you identify the particular engagement that was involved?

MUNRO: Well, I was in Korea during the State Hera conflict, where the North Koreans had a trench about 500 yards away from where we had a trench. Every night, we would go out that 500 yards and try to find them, and they were out there trying to find us. It was a crazy sort of a war. But, it was uneventful other than that I got hurt fairly badly.

SMITH: That's eventful enough, I would say. When you got out of the service, you went to Colgate. After graduating from Colgate, what was the next step in your career?

MUNRO: Having been a veteran, I was twenty-six when I graduated from Colgate. I'd been quite involved at Colgate. I had been president of my fraternity and the interfraternity council, and kind of a leader on the campus primarily because of my age. Everyone else was five years younger than me. So, I was able to pick and choose the jobs when it came time to graduate. I was in demand. I had fulfilled my military commitment, and a lot of people were still going into the military when I graduated. So, I had my choice of a number of what I thought were excellent job opportunities. I chose to go to work for Time Inc. primarily because of the people I met at Time Inc. back in 1957. I didn't know much about publishing or journalism. I just liked everything I saw at Time Inc. when I came down from Colgate for my interview. I went to work for them in the summer of 1957, and I have been here ever since. I was lucky to find the right job the first time around.

SMITH: Your first employment out of college was with Time?

MUNRO: Yes, it was.

SMITH: And you are still there?

MUNRO: Yes, a wonderful thirty-four years.

SMITH: What was the first position you took at that time?

MUNRO: Obviously in 1957, Time was a much, much smaller company than it is today. Even then, we were the dominant magazine publisher or a dominant magazine publisher. Other than magazines, we had a small interest in broadcast and a fledgling book division. But basically, we were a magazine company. I went to work for Time magazine. Worked in the Time magazine circulation department for a year or two. Then worked in their advertising and promotion department. Those were sort of training jobs, really, to kind of get your feet wet in the company.

My first real job was at Sports Illustrated in 1960. I went over to that magazine to become its assistant business manager which basically meant I did the budgeting and kept track of the dollars and all of that. I spent a whole decade at Sports Illustrated ... worked there from 1960 to sometime around '70. Eventually, rose to become the publisher of that magazine, and was there just as it was beginning to turn a profit after a long string of losses. But, it was a wonderful experience. I have always been involved in sports, and being involved with Sports Illustrated was really a wonderful, joyous decade.

SMITH: I was going to ask you if you were a sports fan. Was it just coincidence that you wound up at S.I. or did you make an effort to get yourself assigned over there?

MUNRO: No, it was an opportunity that presented itself. There was an opening there. I really couldn't have cared less where I worked then. Sports Illustrated in 1960 was a struggling property. There was some talk whether it would survive or not, because it was piling up substantial losses during that period. So there was risk involved there. I think it was the only job I was offered, so I wasn't in a position to be fussy. But, I did like the magazine actually at that time. I liked the subject matter. Despite the risk, I was very pleased that I was offered that job.

SMITH: In your work, were you actively involved in any way in directing the coverage of sports and the writing?

MUNRO: No. I was completely divorced from the editorial operation other than that I knew all the editors. Time Inc. was structured in its infancy by its founder, Mr. Luce, so that the journalists operated completely independently from the business people. In fact, at the hierarchy of the company, the editor-in-chief reports to the board of directors, and the CEO reports to the board of directors. So, the journalists at Time Inc. have complete autonomy. Even though I was involved with editors and journalists, I had absolutely no input into what went into the magazine. It is similar to every other business person on the magazine side.

SMITH: I read an anecdote about one of your actions when you were business manager at Sports Illustrated relative to changing the practice of reporters travelling first class on aircraft to flying coach. Would you repeat that story, if it is a true one, for this record?

MUNRO: That popped up the other day during my retirement rituals. I'm not even sure I remember that incident. But being a business manager, I was the one who had to watch the costs and the expenses. Of course, you have to remember that during that period, we were losing large sums of money. So, watching the costs was a big part of our job. I can remember one of my colleagues who was on the journalist side of Sports Illustrated telling me what a great deal it was to ride first class on a certain airline. I made a mental note of that and went back and determined that they weren't supposed to be flying first class. None of us were to fly first class. I guess I ended up being one of the initial whistle blowers. I think that was the last time anybody rode first class for Sports Illustrated for several years. Eventually, we became successful and people were able to fly first class. But back in the early '60s, we weren't doing anything first class.

SMITH: Well, I enjoyed the story as I read it. Apparently the reporter was said to have come back with a big scoop. If you flew first class on Northwest, there was no limit on the drinks. Was that it?

MUNRO: Back in those days, there was a lot of serious drinking at Time Inc. That seemed to have disappeared in the '80s. Drinking became less than fashionable here. When I joined the company back in the '50s, there was a lot of serious drinking going on in the publishing business and in the advertising business. That has pretty much disappeared.

SMITH: I understand that you also met the lady who was to become your wife while you were at Sports Illustrated.

MUNRO: Well, yes. I think as I mentioned, not long ago two terrific things happened in my life. One was that I was hired by Time Inc. which led to all the wonderful things that have happened in my life. The other was finding my wife Carol, who worked with my boss--was his secretary. We had one of those office romances, and ended up getting married, and have been married rather happily, I would say, for the last twenty-eight or twenty-nine years. I'm not sure which. I think twenty-eight.

SMITH: I just have to ask out of curiosity was her first job also with Time?

MUNRO: Yes, she came right out of college and worked for Time, and then like me went from Time to Sports Illustrated. We happened to run into each other in the business office of Sports Illustrated which was rather a small office. There were only about four. There was my boss, the business manager; I was the assistant business manager; and there were two assistants. Carol was more of an assistant than a secretary. But, we just ended up in the same spot. But back in that era, an awful lot of Time Inc.'ers married each other. I wasn't the only one. There were a lot of us that ended up getting married.

SMITH: You mentioned her name is Carol. Would you tell us her last name?

MUNRO: Carol's last name is Keeny. She was from Sewickley, Pennsylvania, right outside of Pittsburgh.

SMITH: This is a good point to get back into your family for just a moment. How many children did you have, and could you tell us a little about them?

MUNRO: We had three sons. My oldest, John, is twenty-five. I think about to be twenty-six, or is it twenty-four about to be twenty-five. John went to Hamilton College in upstate New York, right near Colgate as a matter of fact. John is a school teacher. He was married last summer. He is working on his master's degree now at Western University. He teaches in Fairfield County, so we see a lot of John and our new daughter-in-law. Then, my middle son is twenty-one. He is a junior at St. Lawrence University. My youngest child, Matt Munro, has just graduated from Salisbury School and is off to St. Lawrence with his brother. So, my children are growing up too fast.

SMITH: Don't they all. Would you just detail for us your advancement through the various positions you had at Time after becoming the general manager of Sports Illustrated.

MUNRO: Yes. I went from assistant business manager to business manager to general manager which is basically all the same job at somewhat higher levels with more responsibility. But, you are basically doing the same thing. Then, I was taken from Sports Illustrated to Chicago for a very, very brief stint to run some suburban newspapers that Time had just bought, I think in maybe 1969 or 1970. I am not exactly sure of the year. We bought two chains of newspapers in the northern and western part of Chicago. Pioneer Press was the name of that organization. I was chosen as the fellow from Time Inc. to put together these two operations and run them. I had only been there a very, very short period of time, like a month or two, when my colleague at Sports Illustrated, who was the publisher of Sports Illustrated--my ex-boss--was made the publisher of Life magazine. Since I had sort of been his understudy at Sports Illustrated, they decided to bring me back even though it seemed like a sort of foolish thing to do. They brought me back from a very brief stint in Chicago to run Sports Illustrated, which was the kind of a job I worked hard to obtain. I was very delighted that they chose not to leave me running weekly newspapers in Chicago. Not that it wasn't a good job, but my heart and soul were at Sports Illustrated. So, I was very fortunate in being brought back to run Sports Illustrated. I think I was the publisher of Sports Illustrated for two or three years. I entered the cable business after leaving Sports Illustrated.

SMITH: That was approximately when from your recollection?

MUNRO: I think '71 or so. Seventy or '72 is when I left the publishing side of Time and got involved in what was then a fledgling video side of the company.

SMITH: Was that your first introduction to cable television?

MUNRO: Yes, I had never known anything of cable television at all until I was tapped to run not just that operation but also the book operation came under me. It was a promotion obviously for me, but sort of a strange promotion, because I was absolutely delighted running Sports Illustrated which was then beginning to prosper and becoming really a major magazine. I was being asked to come in and take over something that was, I think, at best a rather confused lot of business. HBO was then just a gleam in our eye and we had Manhattan Cable Television which was then Sterling Cable which was a huge drain on us. It was kind of a disaster. Then we had a cable television operation which we weren't terribly pleased with, I mean a broadcast operation where we owned a number of broadcast stations and that was something we weren't terribly happy with. So, I got thrown into something I knew very little about, and I was thoroughly confused for at least the first several months of that assignment, maybe the first year.

SMITH: Time Inc., if my memory serves me correctly, was fairly heavy in television broadcasting for a short period, was it not?

MUNRO: Well, we had five stations and I forget exactly. I think they were Bakersfield, San Diego, Grand Rapids, Denver and maybe Indianapolis--some ABC affiliates, some CBS affiliates I believe. Yes, we had our substantive group of television stations, except for San Diego and perhaps Denver, they were really not in the major markets. I am not an historian of that period of our history but of what I inherited, there was a feeling that I really don't know how we got into that. Time and history can refresh my memory if I went back and looked at it. I think my bosses, my predecessors, were not terribly pleased with our venture into television. When I got there, I think there were some signals given to me that perhaps exiting from that wouldn't be the worlds' worst idea.

SMITH: Were you involved in ... I assume you were involved in ...

MUNRO: Yes, I was in charge of that area when we divested and sold to McGraw Hill. It is interesting that my colleague, Nick Nicholas, who was my successor at Time Warner, was the same young man who basically negotiated the divestiture of those stations to McGraw Hill.

SMITH: At that time was there any thinking in your mind that cable television offered more of an opportunity for Time than the broadcast stations did?

MUNRO: Well, that was all a part of this. I mean everything was ... In a large corporation nothing is black and white or cut and dry. There were a number of variables that played on that decision. I think we were bright enough to recognize, way back then, that there was something to this wonderful world of cable though we didn't really fully appreciate it by a long shot. I think that there was enough visceral feeling amongst several of us here that kind of said to us that the future of Time Inc. may well be in cable not broadcasting, because we had gotten into broadcasting a little late in the game and we had an opportunity to get in relatively early on cable. But, it wasn't that cut and dried. We were very frustrated with Sterling where we had minority shareholders, and had basically a can of worms with Sterling. We were really the first big urban cable system, and that was a very confusing part of it. But, eventually we worked our way out of that. I think we had some luck. And now, as I think you know, Manhattan Cable is probably one of the most successful cable operations in the country. Back in 1970, we couldn't give it away. So, there is a lot of faith involved in these things.

SMITH: When you did come over and assume the responsibilities in cable and video, where did the systems come from that Time had at that time? They hadn't built them had they?

MUNRO: No. I really draw a blank on exactly where those systems came from. But, of course, we did get an early interest in ATC. We had a 10 percent interest. We had a few cable systems and if we sit here today, Strat, I am a little bit embarrassed to tell you that I can't say exactly when in the late '60s we got those systems. We could determine that, we could go back and do our homework. We ended up putting those systems into ATC in return for 10 percent of ATC, and that's what really led to our involvement in the cable industry. My predecessor, Jim Scheffly, who I think was the first within Time Inc. to grasp the full potential of cable television, was our representative on the ATC board, representing our 10 percent. I think it was around 10 percent, maybe slightly more than 10 percent. I think as Jim sat on the ATC board for a couple of years, he began to really appreciate the huge potential of cable television. It was Jim who sort of encouraged me and my colleague, Nick Nicholas, to eventually acquire ATC, which we did as you recall.

SMITH: Do you recall the date that acquisition was made?

MUNRO: Oh it had to be, I'm guessing in probably the mid '70s. I don't know exactly what year it was. Again, we can go out and get all those numbers for you. But, I can remember how excited I was about that because by then I also was well aware of the potential of cable and well aware of what a wonderful company Monty Rifkin ran. ATC was a terrific, terrific cable company, is today, and certainly was then primarily because of Monty's vision and his leadership.

SMITH: Monty was one of the early pioneers whose oral history has yet to be taken, but is going to be.

MUNRO: Well, Monty is a legend in the cable industry.

SMITH: Yes.

MUNRO: Really, he put together a wonderful company, and we were privileged, I feel, to have been able to acquire that company.

SMITH: If you acquired the company in the mid 1970's, you were already in cable with some systems of your own at that time.

MUNRO: Well, we had sold those to ATC, and gotten that 10 percent.

SMITH: I see.

MUNRO: But our exposure to cable was minimal, Strat. We had not been a major player by a long shot. We happened to have had some systems, and as I said, it escapes me how we ended up having those systems. But, they were the systems we put into ATC in return for the ownership position in ATC.

SMITH: I presume, you got caught up in the franchising frenzy of the '70s.

MUNRO: Oh yes. We were deeply into that, and I was personally involved in that in a number of systems. It turned out that in every system I pursued, every franchise I pursued, we lost. I had a great losing streak going ... Pittsburgh, Cincinnati, Minneapolis, New Orleans. I went to perform for all those city councils, and we lost every one of them. That was a very hectic period of the cable industry, there was no question about it. Chasing franchises was exhausting, frustrating, highly politicized. But, we won our share. ATC, as you know, ended up building a tremendously strong company, which we are very, very proud to be the owner of.

SMITH: At least two of those franchise battles that you mentioned, you lost to Warner.

MUNRO: Well, those were frustrating days, particularly Pittsburgh. I recall the loss of Pittsburgh, because we at ATC had been working Pittsburgh for years and really had assumed that we would win the franchise and were practically sipping the champagne. Then suddenly Warner came in and stole the chickens, and we immediately cried foul. No pun intended by the way. But, I think we felt that, by God, Warner must have been doing something less than legal or less than ethical to have won that from us. But upon reflection and as you may recall, we sued Warner during that period. But, I think what happened is that they were just better at franchising than we were, and basically I think we were poor losers. We lost something we felt we had won. We over reacted. But upon reflection and upon investigation, we simply found out what Warner had done. They had just been smarter than we were, and wanted the franchise. But, it was one of the longest days of my life when we lost Pittsburgh.

But as you may recall, Pittsburgh was a very onerous franchise to begin with. There was even a time when we looked each other in the eye and said, "Do we really want to go after Pittsburgh?" Because the franchise was so demanding that to make money out of Pittsburgh would have been very difficult. But, we had gone so far down the road that I remember making that decision myself as a matter of fact to continue to pursue Pittsburgh and win it. We lost it, and I think about six months later, upon some reflection and some hindsight, I guess we perhaps came to the conclusion that the Lord was smiling at us, because Warner didn't have a lot of fun with that franchise, and eventually sold it to Telecommunications.

SMITH: As I recall, they were substantially involved in trying to get the terms of it reduced to get the burden off their back. TCI, I believe, made a condition of their buying it that those terms be ...

MUNRO: Yes, true enough. A lot of franchises that were won during that frenetic period were less than desirable, and a lot of them had to be renegotiated because you never could have lived with those franchises. But, you know, there was a feeding frenzy then. We were all running around like, you know, chickens with their heads off trying to get any franchise that we could get our hands on. Not only us. I'm talking about the industry--we weren't alone there. Everybody was because there were only so many franchises available. Once one was gone it was gone. So, you tried to pick the franchises you wanted the most and concentrated on them. But we spread ourselves quite thin in those days. Everybody in the organization from every part of the company was out chasing franchises.

SMITH: Well that reminded me of what I used to experience at the FCC and competitive television application hearings.

MUNRO: Oh, same thing.

SMITH: Yes, the idea was promise everything you could think of. No matter what, promise it, and then worry about it later.

MUNRO: Oh, absolutely. I think some people question the ethics of that strategy. But, I don't think it was anything unethical. It was just the only way you were going to get a franchise. The city fathers were holding a much better hand. They had five or six people willing to kill to get that franchise. They used their leverage and took full advantage of it.

SMITH: Do you have an opinion, thinking back on that period, as to who was primarily responsible for the development of that course in franchising? Did the industry bring that on themselves in your opinion, or do you think it was more the pressures of the franchising authorities?

MUNRO: I'm sorry, what was the initial point of your question?

SMITH: The point of the question is, the industry getting into this situation where they were bidding against each other with extremely, I would say almost outrageous bids, were countering each other. Did the industry bring that situation on themselves, or did you ...

MUNRO: Oh yes, I think they did. I think if there was a villain that I don't think that you can blame the cities. I mean, they were just doing what was in the best interest of their constituency, their public. Most of those people were good public servants, I think. There may have been a few rotten apples in the barrel but most of them were people who were doing their best. I think that Morris Karshas [???]in New York is a good example. He was a wonderful public servant and exerted as much leverage as he could in the cable company. The cable company wanted those franchises badly enough to promise anything that they were asked to promise and to compete viciously against each other. So, I think they made their own bed, and they had to sleep in it.

SMITH: If the cable systems said they could do it, why not ask for it.

MUNRO: They got accelerated. Each franchise became more uneconomic. Some of those franchises were crazy. But, we all kept chasing them knowing they were crazy, knowing that we would somehow or another have to renegotiate them.

SMITH: I had clients for whom I appeared in those franchising proceedings. I remember carrying in franchise applications that were six or seven volumes wide.

MUNRO: There were cities who wanted us to plant trees. It got to be crazy. It was crazy, but it was an exciting period in the history of cable television. You only go through that once, there was only one period in the history of that industry. Now there is re-franchising, but there was only one period of getting those initial franchises, and it was exciting.

SMITH: And that is a history that has to be written, too. It needs to be put down. I don't want to forget before we complete our interview to go back into some of your civic background and interests. But, since logically, we have gotten this far into cable, we might just as well go on and talk about the HBO situation. Was HBO the first of the major network cable organizations?

MUNRO: Yes. There were previous failed pay television ventures, several in the '60s, but none of them were successful, and they came and they died a brief, quick death. HBO was the pioneer in the current and successful genre of pay television. I think to a great degree, Chuck Dolan, was certainly a legend in the industry. It was his idea. He brought it to us long before anyone fully grasped the potential of pay television. It was Chuck's dream. Chuck worked at it for a brief period of time. When we sold Chuck our Long Island systems, he left, but left the concept of HBO with us. Then, it was really only a concept and a dream. I credit Chuck with having had the dream and the concept. But, I credit my colleagues at Time Inc., particularly Jerry Levin, with the wherewithal and the stamina and the energy to take a dream and make it a reality which is what Time Inc. did with HBO. I remember those days rather vividly even though they are damn near twenty years ago. I think a lot of people really never fully appreciated the magnitude of what could happen here.

Of course, it started off as a terrestrial microwave network, going along telephone lines. It was Jerry Levin, I think, who was primarily responsible for putting HBO on the satellite. Of course, that was the revolutionary step that put HBO on the map, as well as everyone else on the map. We were the pioneer in terms of satellite transmission. I think of all the things that HBO stood for, and all of its success, that obviously was far and above anything else HBO has done to put them on the map.

And those were interesting days, the early days of HBO when we were living kind of "hand-to-mouth." Within timing, no one fully appreciated what it was. I don't think anybody had any idea of its potential. I'm not sure I did at that time. I'm not even sure Jerry did. But slowly but surely, those who worked in the vineyards of HBO began to realize that we really had something of enormous potential, particularly if we could get it up on that satellite and put that satellite footprint all over America. We first did it by sending tapes around, then we went to telephone lines. But to make a national television network by telephone lines was pretty difficult to do. So, the satellite was obviously the breakthrough.

SMITH: You said you first did it by taking tapes around. Was that part of the actual early premise of HBO, itself, to bicycle tapes?

MUNRO: Yes, that was really early on when it was a newborn. But, we knew that wouldn't work, so the next best thing was to do it with microwaves and telephone poles. That was also very complicated, enormously complicated. I don't think that we would have probably succeeded in the long run. It would have taken so long to succeed that the satellite, obviously, popped up as the answer to a maiden's prayer. I think a lot of people in this building, and we were still then as you may recall or I should remind you, we were still basically a magazine company in those days. A lot of my colleagues at Time Inc., with perhaps the exception of Jim Scheffly, never fully grasped the potential of cable. Of course, HBO was tied to cable and was going to be distributed through cable systems. I think Scheffly was the one man who really appreciated the vision of some of those cable pioneers. I would count Scheffly as a cable pioneer, even though he will never be listed as one. But, in the Time Inc. history, I would think that he will be listed as a cable pioneer.

SMITH: How extensive did HBO become when it was limited to terrestrial microwave?

MUNRO: Well, we were at a point within the corporation where we were losing money. My bosses had set certain goals for us. There was a point there if we didn't get x-number of subscribers, and I remember back when it was twelve thousand subscribers, then it was twenty thousand subscribers ... We'd take two steps forward and one step back. Those were traumatic times. We really never knew when our bosses were going to say, "We've had enough of this. This is obviously not going to work, and you are a drain on the corporation, and perhaps it's time we tried something else." But thank God every time we had to reach a goal, we reached it. Now we reached it by the skin of our teeth. Some of those went into the wee hours of the morning. But, we always managed to get to where we wanted to go, and we were kept alive. Again, I think, primarily because of Jim Scheffly. Of course my job then, being Jerry Levin's boss and overseeing HBO, I had the monthly job of going to the Time Inc. board of directors meetings. I went to meetings even though I was not a director of the corporation. I went to board meetings and explained to them what we were doing. Every month I kind of had to resell the concept of HBO and the dream of HBO. We had a few people on the board who were patient enough to stay with us until we obviously were a success.

SMITH: I'm going to have to interrupt for a minute and turn over the tape. I think we have a full tape.

End of Tape 1, Side A

SMITH: This is Tape 1, Side B of the oral history interview with Richard Munro at his offices at the Time-Life Building on June 6, 1990. When we turned the tape over, Dick, you were discussing the extent to which the HBO concept had developed. I had asked you while it was in the terrestrial microwave stage, and I remembered you mentioned earlier off the record the name John Walson, a cable television pioneer and operator extensively in Pennsylvania. Was John not associated in one of those early HBO transmissions via microwave?

MUNRO: Yes. I guess I would describe John as our original affiliate. We were very close to John back in those days. I had gone down to visit John on several occasions during that period, and he and Jerry Levin had seen a lot of each other in those early days. John was a believer in what we were doing and a supporter. At that time, there weren't a lot of people jumping up and down and raising their hand to sign up with HBO. So, John was very important, he played a very important role in the history of HBO in its very early days. He enabled us to reach his subscribers. I have fond memories of John. He came up to the Time-Life Building on several occasions. I remember being with his family, visiting his offices, watching him market HBO in the early days to his subscribers. It was a very important chapter in the history of HBO. John played a major role. I miss John, I haven't seen him in a long, long time.

SMITH: John, unfortunately, has suffered a stroke, and I really don't know right now just how his health is. Do you recall which one or more of John's systems was connected to that microwave setup?

MUNRO: I know all of his central Pennsylvania systems were. I think he had Bethlehem and Pottstown. Where is Lehigh?

SMITH: Can't help.

MUNRO: It is all those original systems that John built in that beautiful section of Pennsylvania. I draw a blank on exactly where they were, but they were where John's headquarters were.

SMITH: They were those that were served by John's microwave system. Still does. He had an extensive microwave system.

MUNRO: Yes.

SMITH: Did HBO build any of its own microwave links at that time or did you utilize others?

MUNRO: No, we didn't build them. We utilized existing ones.

SMITH: Did you make any effort to utilize or get telephone company microwave systems?

MUNRO: Yes, we were in the midst of all that. I suspect, Strat, that when you talk to Jerry Levin, he can cite book and verse on that. So, I will leave that piece of history to Jerry.

SMITH: Okay. What were the particular problems, if any, that stand out in your recollection about persuading the Time board to go along with this new idea that not a lot of people had faith in.

MUNRO: First of all, we had a very understanding and, I think, thoughtful board of directors. I think they, obviously, were not adversarial, they were never adversarial. They were supportive and understanding. I think my credibility hit pretty good with them which was important. I had had a successful career to date. I think they were aware of that. I won't say they had blind faith in me, not by a long shot. But, I think they were willing to go along with my recommendations up to a point. Now, I think there would have been a point where they would have said, "MUNRO:, we have believed you so far, but boy it's not working out, and I think it's time we move on to another business." We thank the Lord, we were able to succeed in kind of the nick of time.

But, there were no traumatic moments. I think there were a couple of people who may have kind of raised their eyebrows on occasion. I think selling the board on the concept was probably not as difficult as getting the product. That was another big stumbling block we had in the early days of getting the movie companies to give us movies to put on this system. That was not easy. It wasn't easy to find affiliates who would take our service. It wasn't easy to find programming to put on the service. So you had, like any new fledgling business, a lot of obstacles to overcome. I don't think we are unique in that. I think pay television is just one of many products that gets brought to America--some succeed, some don't.

There are always a number of thorny issues to overcome with a new product. You had to convince the consumer that it was worth the price you were charging. You had to convince the movie companies that this was a place where their films should be exhibited; that it wouldn't be competitive with theater. All those obstacles ... that's nothing new. I mean that's like any new business, Strat. We were lucky to have the breakthrough with the satellite technology which sent us on a skyrocket. From then on it was basically a piece of cake. People were standing in line to get our services. We also ran into the content problem. We were the first television entity to bring an uncensored product into your living room. That was a very traumatic experience for a lot of towns, particularly southern towns.

I remember Jackson, Mississippi, where the clergy of Jackson boycotted us. We had to go down to meet with the clergy there. We were described as the devil by some. It was hard to overcome that. Four letter words had not been brought into America's living rooms. Of course, you had to pay to bring them in, and we tried to make that point. We tried to make the point over and over again that no one is forcing these R-rated movies into people's homes. They were raising their hand and purchasing it. But early on that was a very, very delicate subject. It was also a delicate subject with our board of directors. We, obviously, were never going to bring X-rated movies in, but we were bringing all those movies that were in your movie theater into your living room. It was an interesting period. Of course as you recall, it was in the late '60s, and the '70s where a lot of social mores were changing in this country. That was an interesting period in American history in terms of our music, movies, and television, and we were on the cutting edge of all that. So there were all kinds of obstacles, but I don't want to make this sound more traumatic or more difficult than it was. It was simply trying to bring a new business into the game.

SMITH: You mentioned a moment ago, of course, that satellites were what made it possible for HBO to take off and really get going. Of course, they did the same thing for the entire industry. Really, it almost took the place of microwave. HBO was one of the first, if not the first, to distribute a program by satellite, is that correct?

MUNRO: I think we were the first. We were the pioneers. Now whether the broadcast industry ... I don't think they have done anything with satellite distribution. To the best of my knowledge, we were the pioneers then.

SMITH: That was my understanding. How did the idea of using satellites develop within the company?

MUNRO: Well, I think it was basically Jerry Levin who was responsible for pursuing that strategy. We knew if we could make that breakthrough, it would mean national distribution at the flick of a switch which is what literally happened. And if we could convince a number of cable affiliates to build a receiving station, to do all the technological investment that was necessary, then we had a business. But, that was not easy either. We had a very difficult time convincing Monty Rifkin, of whom we owned 10 percent, to become a player here. In fact, it was Bobby Rosencrans of UA-Columbia who was really the guy who stood up and got counted here. I think if you have an opportunity, you ought to talk to Bob about that. I think without Bob having raised his hand to play ... we were having a tough time even though we had the satellite technology in hand. It was another chore to convince people to take this service.

SMITH: Bob Rosencrans was an early client of mine many years ago when I practiced law in Washington, and I do intend to get to him for a similar interview.

MUNRO: Well, Bob is one of my all-time favorites in the cable industry. Not only is he a personal friend and a man I hold in enormous regard, but he also was a guy who stood up and got counted when nobody else did. He was the first guy to kind of say, "I'm going to play. That was very important.

SMITH: Can you give us a little more of the detail of that particular incident, if it occurred as an incident?

MUNRO: Well, I remember when we were in his Vero Beach system. He had built the earth station to receive that. I remember going down there for the opening night. There was a big heavyweight boxing match that they were bringing in from Manila. But, Bobby was just enthusiastic about it. He understood the potential of this when others didn't. I guess I just can't say enough about how important his role was in the early days.

SMITH: Before I took my position at Penn State, I was doing some cable television consulting work for the city of Vero Beach. I learned at that time that Vero Beach and Fort Pierce, which were also under the same ownership, were the first systems in the country to receive a satellite broadcast.

MUNRO: They were. That was simultaneous. I think Jackson picked it up the same. But that was only because Bobby did it. I mean, Bobby kind of shamed Monty into doing that. That was kind of an interesting thing to watch, because I don't think Monty would have done it if Bobby hadn't done it. Bobby volunteered, and I think at the eleventh hour, Monty said, "Well, if he's going to do it, I'm going to do it." So I think that night when we put it up on the satellite, I think those two systems were the first. But Bobby actually, I think, gets the credit for really being first. We have pictures here in our archives of that first station in Vero Beach with Bobby, Jerry and myself standing in front of it. I forget what year that was but it had to be something like '73 or '74.

SMITH: It was back in that area.

MUNRO: Yes.

SMITH: This will be a nervy question but I am going to ask it of you for the record anyway. Do you think there might be some copies of some of those photographs that you would be willing to release for permanent storage in the archives at the Cable Television Center at Penn State?

MUNRO: Oh, I think we would be flattered to do that. I'm not sure who is the recipient of all that stuff in this building, but we've got a lot of this history someplace within the Time-Life Building. So, I think we would love to make that available to you.

SMITH: Well, we have a fledgling museum and we have plans for a building where we can display substantial artifacts. We are also trying to get some of the cable networks to deposit some of their made-for-cable motion pictures there for the long haul. All sorts of records. Any records that you have that are not required or desired--let me put it that way--to keep in the companies own files, we would be delighted to have them and catalog them and see to it that they are properly preserved.

MUNRO: Yes, I'm not sure how much we've got that's meaningful to you, but I think that picture of Bobby Rosencrans' satellite receiving station is a significant photo. I think, obviously, all of that wonderful programming that we did--the polka festivals. They redid some programming in the early days of HBO that are classics. I mean, you wouldn't want to miss it. Some of them were awful. But that was state-of-the-art. That was getting started. John Walson liked to polka, so I think we did a polka special.

SMITH: Is that why it was a polka?

MUNRO: I think John Walson had a voice in that. In those days Jerry was not only the CEO of HBO, but he was the programming director. He was everything. I think, again, when you have your interview with Jerry, he can shed some interesting light. You should have a copy of all those early programs.

SMITH: Well, we've got that one tape--the Pennsylvania Polka. We take it around occasionally when one of us has to make a speech at a cable meeting or something like that, and play it for them to show them the first actual program via satellite.

MUNRO: We have some others that are of equal quality that you'll love.

SMITH: Well, if they're available, we would love to have them.

MUNRO: Sure, they are available. I will get you copies of them.

SMITH: I can assure you that they would be properly cared for. What did one of those earth dishes cost in that time? You said Monty Rifkin was hesitant.

MUNRO: They were expensive. I don't have any idea what the number was, Strat, but they were not an insignificant expense. They were big receiving dishes, as you know. I mean, $100,000 ... I don't know.

SMITH: They were in that neighborhood or more.

MUNRO: I mean that's almost twenty years ago. So, $100,000 was not a minor investment. You had to have all the hardware that went with it. It was significant.

SMITH: Well, was that Vero Beach reception from satellite? Was that the turning point with Time-Life in deciding that they really had something here and were going to go ahead and put money in it?

MUNRO: Yes, I think that was a very, very significant event. First of all, you had to prove that the technology worked. When you flipped the switch, you all said a silent prayer that something was going to come out of your television set. And by God, it did. It went from the studio, 2,200 miles, 22,000 miles up in the air. It came down, and it worked. Until you actually saw it working, there were some skeptics. So, sure, the minute people recognized that this state-of-the-art technology did work, then everybody was hopping on the bandwagon. It was a gold rush thing. Everybody wanted to be an affiliate.

Those were the heydays of HBO, because we were basically the only kid on the block then. We had no competition. That was pre-Showtime, pre-anybody else. We were like the cavalry coming over the hill, because we were a new source of revenue for the cable operators--a substantial source of new revenue. Plus, it really to a degree put cable on the map. This was the first time you could get unedited, uncensored, commercial-free movies in your living room. It was a major event, it was revolutionary. So obviously, we were riding the crest at that period.

SMITH: Well, you mentioned earlier that a major problem, and it must have become an enormous one at this particular time, was getting product to program it. Could you tell us of some of the early efforts and possible breakthroughs?

MUNRO: Well, it was a difficult time. We had some people who were more friendly to us than others. It was interesting that Warner was always friendly to us way back in those days. They were always the easiest company to do business with. But, we were also getting some product out of Paramount. We had substantial problems, I remember, with Universal with whom we have always had substantial problems. But it was also a period where you kind of realized who your friends were and who your friends weren't. I can't tell you any exciting stories about that period other than it was a never-ending battle. You had to put a schedule together every month to put out your program guide, and that again was a "perils of Pauline." We would hold the presses right up to the eleventh hour not being sure of which movies we were going to get.

But again as we succeeded and the distribution broadened and the dollars grew, then obviously Hollywood recognized that it was a whole new source of revenue for them. They eventually hopped on the bandwagon, too. But again without being overly repetitive, I think none of this should be a surprise. Any launching of a new service, a new business, or a new industry really is never easy. It's always got its obstacles. We just tried to take them one at a time. We eventually succeeded. Not a terribly romantic story really, it was a lot of hard work, some of it not very glamorous, and some of it very tough. Eventually, we succeeded.

SMITH: The first program that we were talking about, the one at Vero Beach, was the boxing match from Manila.

MUNRO: The "Thrilla from Manila."

SMITH: The "Thrilla from Manila."

MUNRO: There were two big fights that we brought in. I think the "Thrilla from Manila" was the first one. That was Mohammed Ali fighting somebody, maybe Frazier, I'm not sure who it was. We did two big fights in the early days of HBO, and I remember one of them I viewed in Vero Beach, and one of them I viewed right up here in the Time-Life Building where we had a big reception on the top and put an earth station on the top of this building. But, Vero Beach was obviously the first one.

SMITH: Early on you apparently established a relationship with the fight promoters. HBO has been strong ever since, have they not, in fights particularly?

MUNRO: Yes, I think we found an opportunity there. We tried very hard over the years to be an NFL programming distributor, but that never worked for us. But, boxing ... I think, we saw an opportunity and a potential franchise, because no one was really dominating that sport. We were farsighted enough to realize that there was an opening there for us. So, we grabbed onto it early on. Of course, it has reached the Tyson proportions. We carved out a franchise there for ourselves which I think we enjoy very much. I think our subscribers have appreciated it. I think it has been very good for the health of HBO.

SMITH: How early on did HBO recognize or decide that it was going to have to produce programming of its own as well as go out and acquire the rights to use motion pictures?

MUNRO: I think when we got some competition, when Showtime and The Movie Channel came on board under the pay universe. We were all showing the same product and we somehow had to differentiate ourselves. We had several zigs and zags there. We went through the exclusivity wars of movies which really became obsolete when the VCR came around. People could now go to their rental store and bring home a movie immediately--long before it came to pay. So, I think like any new product, it went through a number of stages, a number of competitive battles. We realized that we had to be more than just movies that you could get at your video rental store. That's all still evolving, Strat. HBO is still trying to look at how it can bring the greatest value to its customer, and Showtime is. Now, we seem to be doing more and more of rather thoughtful, original programming, and our competition is doing the same thing.

But, that's kind of a continuing debate and a continuing marketing challenge. There was a time when all our research said that most of our subscribers really wanted nothing but big movies. That's what really was the magnet that brought people into HBO. If a movie we produced ourselves really had no exposure, no advanced publicity, no advanced advertising, no one could really care less about it. I remember at one period in our history that even an awful movie that got a lot of press was considered of value to the subscriber. Where a very fine HBO-produced movie with no advertising, no pre-advanced billing ... really in the eyes of the consumer didn't have any value. But, all that is evolving. The marketplace is changing all the time, as we have seen over the last decade. The big three networks are getting less and less of an audience. The basic cable channels are getting larger audiences, pay cable seems to be now somewhat static. All that is a never changing evolutionary phenomenon.

SMITH: You were mentioning the fact that the public often would not react with particular enthusiasm to an HBO-produced movie that was very well done because it had not had the kind of publicity that perhaps a Hollywood movie would have had. Your HBO movie would have been first run on cable; the Hollywood movie, of course, second, third or fourth run. That must have been very discouraging to early HBO production.

MUNRO: Well, it was, and to a degree, I think it still may be, because HBO has done some programming that Time Warner is terribly proud of. We've really done some adult programming. I don't mean adult in terms of violence and sexuality. I'm talking about substantive movies ... Sakharov, and we've done things on AIDS. We've done some programming that makes us all proud. But, sometimes we wonder if the consumer really appreciates that kind of programming. We have that problem with Wimbledon which we have brought to America for years and years and years, and we think it is a prestigious event. We are going to continue to bring Wimbledon to our subscribers. A large number of our subscribers couldn't care less about Wimbledon. They would rather see a movie.

So, I think what we try to do is balance off our programming. It is still a movie-driven business, and I suspect it will always be a movie-driven business. That doesn't mean that there isn't room for really quality children's programming, which we are very proud of. We have done a lot with Jim Henson, as you know, and the Muppets. We have done a lot of original children's programming. We continue to make a lot of original movies which we are very proud of. So all that is a mix, though some of it may be perceived as more value amongst a subscriber, I think we will continue to give him a balanced diet of programming. That makes us stand a little bit taller in terms of our image of what we think HBO is.

SMITH: Is cross-promotion on cable doing anything to alleviate that problem of not having enough subscriber interest on new original productions?

MUNRO: I think it helps, yes. I think we promote a lot of that product on Cinemax as well as HBO. Those are very strong businesses. Their growth has slowed, and it is now pretty much a marketing game because until the rest of the nation gets built out in cable, we have to market that product harder and harder. I read a quote the other day from Michael Fuchs, who runs HBO. He talked about the necessity of marketing HBO, and he said, "Coke wouldn't last very long if they didn't advertise it." I think that's true of HBO or any other product in America. You've got to keep hammering away at the value that we bring our customers, and we continue to do that.

SMITH: The television networks with their mini-series and made-for-television motion pictures have somewhat the same problem. Would you equate that to the one the cable networks have?

MUNRO: If you are a pay cable subscriber and paying for that service, I think there is a vast difference to begin with. Because I think that the paying subscriber really is demanding big movies, he wants to see the big events. On free television if you will--as you know it is not literally free--over the air broadcast television, I don't think the consumer is quite as demanding. He is willing to take whatever comes across that channel, because basically he's not paying out of pocket for it. That may be the right answer to your question.

SMITH: A few minutes ago you mentioned Cinemax which is a Time Warner channel. What motivated Time to start up the Cinemax channel?

MUNRO: We had in place an infrastructure for one channel. We suddenly had a competitor. We felt since at that period there was channel capacity, for us to bring out a sister service made all the sense in the world. We had all the people in place. If they could program one channel, they could surely program two. If they could sell one channel, they could sell another channel. I think we felt that it was a competitive response to our competitor, our direct competitor--Viacom. Actually, Cinemax was programmed slightly differently, it had a different demographic thrust. It was a little bit more youth-oriented than the mother service, HBO, and a little bit more avant garde. It did extremely well and has grown, as you know. It is now just a hair behind Showtime as the number two pay service. I think it was a somewhat brilliant strategy to launch a complementary service. We could dovetail it beautifully with HBO where if you bought HBO and Showtime, you quite often saw a lot of the same product at the same time. We were able to dovetail Cinemax into HBO where you never had the same programming playing at the same time. So, I was quite excited when it got launched, and I think it has done a hell of a good job.

SMITH: By that time, then, Hollywood had loosened up reasonably in making the product available?

MUNRO: You still had to negotiate hard on price. But, there was no question, everybody wanted their films on HBO, or Showtime, or Cinemax. But, it's never easy when you negotiate with Hollywood. They are tough negotiators, and everybody wanted the top dollar for their films. We got as many films as we could afford to get. Sometimes we didn't get them all, but we got the lion's share of them, and that's still true today. It's not much easier today than it ever was. Every studio wants the best deal. That's not surprising, that is quite understandable. But, I think where at one time they had all the leverage on their side, then we had all the leverage on our side, now the leverage is somewhere in the middle.

SMITH: At the NCTA convention in Atlanta this year, I heard John Malone, the president and chief executive officer of TCI, say that HBO was the greatest cash-flow producer in the business. Is that correct? It surprised me to hear that.

MUNRO: If John says it is, I'm sure he's correct. I know it is a significant factor to cable systems. There is no question about that. Now, I think it may be less than it used to be. But, it is still probably a terribly important part of the cable systems. It just hasn't grown as fast as it used to. Pay cable seems to, at the moment, have plateaued to a degree. But even having matured and perhaps plateaued temporarily, there's still a lot of money that's coming into cable operators' pockets. So, I suspect that John's right. Other than basic, it's a huge part of its ...

SMITH: Your answer to the question pointed up to me why I was surprised. I may have misinterpreted his comment. I wasn't thinking of it in terms of cash flow productions for the individual system. But I was looking to HBO itself and saying, "Is HBO producing for HBO? Is that the greatest cash flow producer in the cable television industry?" That is the way I understood his answer, and I don't know if that is true. Maybe that's why I was confused.

MUNRO: You are talking about all the channels of entertainment that come in.

SMITH: Right.

MUNRO: HBO has got to be the dominant, most successful by far. HBO is a very profitable company. I think that probably Showtime is very profitable, too. But, we are so much larger than Showtime that we obviously are that much more profitable. I think because of the basic economics of the two companies they are quite similar. We just happen to be larger. But, I'm sure Viacom is very pleased with Showtime as Time Warner is very pleased with HBO.

SMITH: Do you happen to have in mind what percentage of the income of HBO is being devoted to original programming?

MUNRO: I can get that for you. I think that information is not public, but I can probably give you a pretty good idea. It's not overly significant. The giant sum of money on the programming side is still going to Hollywood. I would say probably 80 percent of the programming dollars are still being invested in Hollywood products. Then there is some for sports ... Wimbledon, NFL programs, heavyweight fights. Then our original programming which would include not just "made-for" movies, but the comedies we do, and all of that. I could be wrong, but I'm not too far wrong. Seventy-five percent is Hollywood, and 25 percent is all others, something like that.

SMITH: Do you expect to see the amount of original programming by cable networks in general as well as HBO to increase?

MUNRO: Yes. I don't know how much more it will increase. You can see that Ted Turner is making a lot more "made-for" movies. USA Network is also cranking out some original programming. So, I think that everyone has hopped on that bandwagon. I don't think it will ever become a dominant thing. But, I think it is safe to say that it will grow modestly.

SMITH: What is your opinion of the relative merits of pay-per-view television versus per-channel such as HBO and Cinemax?

MUNRO: That, Strat, has been in debate since we were in the business. There were a number of people back in the early '70s when we launched HBO, that said the way to go is per-program. We just never bought that. Because I guess some of us with a magazine background thought a subscription service was really the way to go then, and we still feel it is the way to go. Now, we always felt, even back in the early days, there would be a place for per- programs. That made sense. I still think it makes sense. I still thinks it is a business. It will happen. It is happening, as you know. Several of our systems have done fairly well with per-program. But I still think, and maybe I have a lack of objectivity here, that the subscription theory is terribly logical. It is simple and uncomplicated. It doesn't force the consumer to make a decision all of the time. I think we have learned that the consumer doesn't really want to make the decision every five minutes about what he is going to watch. He likes to turn the channel and watch it. But, there is no question that there will be a market for per-programming. That will probably happen in this decade to a large degree, and I hope that we will play a role in that. So, I guess if that sounds ambivalent it wasn't meant to. I guess if I could summarize I would say that subscription pay television is here to stay. I think it is an entrenched business. I think the consumer is comfortable with it. But, I think the consumer will also buy on a per-program basis in addition to a subscription.

SMITH: Do you see Time Warner developing any pay-per-view services?

MUNRO: Yes, I think we feel that we are positioned to do that. We understand that business as well as anybody does. I think we can bring an expertise to it. So, I think you will see us as a player.

SMITH: I would like to change the subject just a little bit, and explore international cable, international satellite and cable distribution ... ask you if HBO or Time Warner, let's put it that way, is giving serious consideration to trying to market HBO type services internationally.

MUNRO: Yes, we have been frustrated in the pay television abroad. That's primarily because of a lot of nationalist feelings. It is very hard to bring a pay service to France. They feel strongly about their culture as most countries do. This was an invasion of their culture. We had a very difficult time in getting HBO abroad. We have not given up and as more satellites are being launched, not only in Europe but the Pacific rim, I think we now see some opportunities that weren't there before. So, I think you will find us trying to be as aggressive as we can in exporting HBO service to any place we can export it. We've got people abroad now working on that. I think when you again talk to Jerry, who is much more up to speed than I am because this is something that is changing almost daily ... This is an exciting opportunity for a lot of people trying to play--we are one of those. Again, I'm assuming that being the pioneer in this field that our expertise exceeds most peoples' expertise and that there will be a place there for us to play. So, I guess I would say I'm optimistic, but again, I think you need to talk to others within Time Warner who are perhaps more up to the moment on this than I am.

SMITH: Do you see Time Warner doing any franchising or building of systems themselves?

MUNRO: Well, we are competing now for some systems abroad. We have been in that market. We have Aberdeen, Scotland; we have Westminster outside of London; and we have now bid for Dublin. There have been a lot of opportunities that we have missed. We've been bidders and not won the franchise in a number of European cities. There is now an opportunity, I am told, in Hong Kong that we may look at. So, I think we would like to be players, but at the moment, I think our plate is fairly full. Domestically, we are doing a lot of things now that we put Warner Cable and ATC together. I think we are kind of preoccupied with that, but that doesn't mean we aren't interested in doing things abroad. We will continue to pursue international opportunities.

SMITH: Are you experiencing any unusual or different problems in your franchising and construction efforts over there?

MUNRO: I think they're probably every bit as competitive. I mean we are going up against Rebox and a number of foreign opportunities. I think it is in Dublin, Ireland, where we are going against Pactell. So we are seeing some new entities--some very confident entities--competing against us. It's kind of going back to those early franchise days that we talked about a moment ago in the United States. Some of that is going to start appearing abroad. But, I would hope that we would win our share.

SMITH: Do you see a significant amount of live satellite programming to Europe originating in the United States and being distributed on European systems?

MUNRO: Yes. When Europe became deregulated to a great degree, I think, we felt enormous opportunities for Time Warner software. I mean that's basically a business that we are a very major player in. I'm talking about television and movie pictures which would be Warner Television, Warner Brothers Movies and Lorimar. We think there is going to be an enormous appetite for American programming, and who better to do that than Time Warner. We look at that as a huge opportunity. Our only fear now, Strat, is that there will be some trade barriers erected over there that will diminish our ability to do that. Quotas, a lot of which exist now. I would hope that we could knock down those barriers.

End of Tape 1, Side B

SMITH: We are on Tape 2, Side A of the oral history interview with Richard Munro on June 6, 1990, at his offices in the Time-Life Building. Is it going to be the Time Warner Building?

MUNRO: No, the Time Warner Building will be across the street where the old Warner Building is. We are going to rename that the Time Warner Building. This will remain the Time-Life Building, primarily magazines.

SMITH: I see. Dick, earlier in the interview, I got diverted from recording some of your personal background and interests. To complete this record, at least this interview, I would like to go back and ask you to mention some of the civic activities that you are most interested in and the reasons why.

MUNRO: Well, I think that Time Inc. as well as Warner Communications both have a long history of social responsibility, and a recognition that businesses should be more than profit-making entities. Mr. Luce set that tone in Time Inc. seventy years ago. I think most of the leadership of this corporation has always had a rather strong social responsibility--a social conscience--trying to put back something into society. I happen to have inherited that, not only from the company, but I guess perhaps from my family.

When I was a young man at Time Inc., I found myself getting involved in things like the United Way and things in my community. I have often scratched my head to kind of figure out what made me do this more than others, but nevertheless, I do. I happen to be a liberal which puts me in a very, very small minority in my line of work. I think Fortune magazine says that 4 percent of CEO's are Democrats or liberal-minded. I don't like labels, but I tend to lean in that direction rather strongly. When I became the CEO of Time Inc. ten years ago, I really had an opportunity to see if I could help my fellow man. When you get a job of the magnitude of being a chief executive officer, particularly in a company as prestigious as Time Inc., people flock to you particularly if you happen to be liberal, because most CEO's throw liberals out of their offices. I happen to welcome them.

SMITH: The "L" word as Bush would say.

MUNRO: Yes, exactly. I do carry an ACLU card. I'm a legitimate liberal. I think what that did was it brought a lot of people to my doorstep. I have a difficult time saying "no" to the underprivileged and the downtrodden of this world. I'm telling you more than you need to know, Strat.

SMITH: No, not really.

MUNRO: A little background here is essential. So, I found myself getting more and more involved in more and more causes, probably far too many causes. If I had to do it again, I would probably be a little bit more selective. So many organizations came in looking for support either personal support, financial support ... my personal financial support or the company's financial support. They found solace talking to me. I was receptive. I have always had a great interest in education all my life. I went to teacher's college at night while I was working here at Sports Illustrated, thinking someday I might end up in education. So, I had a long, legitimate concern about education. Now it's a fad. Everybody now is interested in education. But, I've been interested in education for thirty-five years. In minorities ... I have somehow or another always been involved in minorities, particularly the Black community. So, suddenly, I was encouraged to do this as a Time Inc.'er. I think one reason I got this job is because my predecessor, Andrew Highskol [???] admired and respected my social conscience. All that is kind of less-than-articulate background of how I get to your specific question.

I am very much involved in a number of organizations that I care a lot about. The United Negro College Fund, where I have been on the board for a decade now. I care a lot about those forty-three private, historically Black, colleges and will play a larger role now that I am semi-retired. That's very close to me, those colleges. I chaired the New York Urban Coalition which is an organization that Andrew Highskol???, my predecessor, was a founder of. They were founded back in the late '60s when there were the riots in New York. I assumed that chairmanship two or three years ago when suddenly there were more riots in New York. We did not know a lot in terms of reconciling racial differences in this country, much less this city. So, I have been involved with that group.

I am deeply involved in diabetes--two of my three sons are diabetics. So, I chair the Juvenile Diabetes Foundation. We are an organization that is funding research to find a cure for diabetes. I will be involved with that as long as I live, until we find a cure and my boys don't have diabetes anymore.

In terms of schools, I'm on a number of boards of schools that I have been involved with--three college boards and a couple of secondary school boards. I enjoy those thoroughly. I have been involved in the New York public schools where I was the initial chairman of the New York City Partnership Education Committee. I'm involved in the New York Council for the Humanities. I'm involved in some things I don't even know that I'm involved in.

But, I guess I care a lot about this. I think the point I would like to make, Strat, is that my colleagues here at Time Inc. encourage me to do this and enable me to do this. I think that's a very important point I would like to make. I felt it was part of my job to represent this company outside of this building in a number of areas, and I have just touched on a few. There are a whole bunch of others that I have been involved in or where I have represented this company. But, I was able to do that because I had an awful lot of strong colleagues here who both encouraged it and enabled me to devote the time to it. There were times when I said to myself, "I'm doing more of this than I should be doing." Even though we are a highly decentralized organization, there were times when I thought, "By God, I should spend more time running Time Inc." Colleagues were helping me run Time Inc. very well, and we were thriving. Now there were times, some years, in my ten-year stint as CEO where I gave up the outside activities, because there were problems inside and I recognized that what enabled me to be influential outside was a successful Time Inc. If Time Inc. became less than successful, then I wasn't going to be able to do these other things. So, it was a balancing act. I tried to do the best job I could running this company, but also tried to find as much time as I could to devote my energies to outside interests. I've rambled on there, forgive me. I'm not even sure if I have answered your question, but that's a starter anyway.

SMITH: No, we are very interested in developing a record of these activities. I noticed in looking at a press release type biography of you, a number of honorary degrees from universities. With your permission, I'll have it printed in the record and won't ask you to repeat all of them. But, I noticed most of them were Black, and then I saw the Negro College Fund thing, and tied the two together.

MUNRO: Yes, I'm not sure that they are all listed there either. Some of them got lost in the rounding. I think one of the great thrills of my career has been giving commencement addresses at small Black colleges where it is literally a thrilling experience to see whole families come up and get their diplomas. These are all southern Black colleges, and they are all pretty much in poor cities and poor areas--rural and urban. They are kids who have made enormous sacrifices to get a college diploma.

(Break in tape)

My father was sort of a maverick--I think he was before his time. He came from a relatively wealthy family, and he was the black sheep of that family. Kind of an introvertish fellow who spent a lot of time really being Robin Hood. He supported a whole bunch of families in upstate New York that I mentioned earlier. My parents were divorced. I lived with my mother, but I used to visit my father who lived nearby. I remember, he would stop by one of his several houses ... I'm sure he kept a number of families alive.

He remarried later in life and moved to Florida. He married a southern woman in Vero Beach, Florida, as a matter of fact. She's a wonderful southern lady who owns a major orange grove there, but who treated Blacks as most southerners treated Blacks. My father treated Blacks as equals. In that environment, it is always fascinating because he would call Blacks "sir." In rural Florida, a Black was a nigger, and that was exactly what he was. They weren't mistreated, but they were inferior people and they were treated that way. My father used to aggravate the hell out of my step-mother and everybody else by treating Blacks as equals. Somehow or other, that got into me. Often as you get older, I think, you sometimes spend a little time in reflection. I never spent much time on reflection. But, I sometimes wonder what put this in me, because I have a lot of that in me. It must be in my genes--obviously comes from my father. But, I can't pinpoint a specific time when I became concerned about Blacks. My whole life I have been concerned with the underdog. There is the less than privileged, and I grew up not privileged. Even though the Munro side of my family had a lot of wealth in it at one period of time, that never got to my generation and I worked my way through college. I worked as a kid, and my mother worked to support us. We were people of modest means. It is a fascinating question. I will never know the answer to it. I have given you the best I have, but I will always care for the people who don't have much which is why I am a liberal.

SMITH: Must have been some feat for a liberal to get to the top of the Time organization.

MUNRO: Well, we were a Republican company, and God knows, Mr. Luce was about as Republican as you can get, and about as conservative as you can get. Even a lot of my colleagues here are mostly conservative. Not all of them, however. We have a few here who share my feelings.

SMITH: I would assume just from your general remarks that Time-Life has been at least in the last ten years if not before.

(Break in tape)

SMITH: ... college fund. Did they come to you and ask you to support them?

MUNRO: I really don't remember. It could have been that way. Most things happened that way. I think the word gets out, "Oh my God, there's a Democrat over there at the Time-Life Building. Let's go see him." I think that's probably how it happened. Probably Chris Eddly at one time--a decade ago--came to Paul and me and wanted to know if I could become involved, and I jumped at it, I suspect. I don't recall that specifically, Strat, at all.

SMITH: I think your story of delivering these commencement exercises at these colleges is exciting. I just wondered how you might have gotten started. Why they started to invite you to do it.

MUNRO: Well, I think most of my category of people who are on the United College Fund Board, and there are several businessmen that are on it--Joe Williams, now of Warner-Lambert, is the chairman--I think most of us get invited to do this occasionally, not all the time, but occasionally we get invited to do it. I wish I could do it every year. I did it every year for a number of years, but the last couple I haven't.

(Break in tape)

MUNRO: Yes!

SMITH: That's all right.

End of Tape 2, Side A

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Everett Mundy

Everett Mundy

Interview Date: November 26, 1991
Interview Location: Pleasant Gap, PA USA
Interviewer: Marlowe Froke
Collection: Penn State Collection
Note: Audio Only

FROKE: This is the oral history of Everett Mundy who is the president of Tele-Media Corporation with headquarters in State College, Pennsylvania. Their corporate office is in a small community outside of State College called Pleasant Gap. We are in the offices of Mr. Mundy. It is the 26th of November. Everett, we will be asking about your family, career, work in the cable television industry and also get your views about the future of both the company and the cable industry.

Mr. Mundy is an engineer by trade. He has been in partnership with Robert Tudek in the development of Tele-Media Corporation. It is a unique partnership. They have been together now for more than twenty-five years in terms of their corporate activity but that professional relationship goes back even earlier than that.

Tele-Media Corporation has approximately 325,000 subscribers in the United States as of this date, but it really is the second generation of Tele-Media Corporation. The first generation company, which was somewhat larger, was sold in 1984 to TCI, one of the other large multiple-system owners in cable television.

Ev, thanks very much for taking time for this interview. I know you've got many other things to do.

MUNDY: Well, I enjoy it. Actually I get kind of excited anytime I have an opportunity to talk about the cable industry.

FROKE: You're not only proud of the cable industry, you're proud of Tele-Media Corporation.

MUNDY: No question about it.

FROKE: And you should be.

MUNDY: We have a lot of fine people and I've enjoyed a partnership over the years that's a rarity, really, when it comes to partnerships.

FROKE: He plays golf and you do the boating. Is that right?

MUNDY: That's about right--boating and flying. Of course, I quit flying about three years ago. Bob and I flew together for approximately twenty years. That was the way he and I traveled. In the early days we didn't have good air transportation out of State College so we either leased or owned our own aircraft. We traveled constantly together in that fashion.

FROKE: That shows a great deal of trust on his part.

MUNDY: Well, I came to him as a commercial pilot. I started teaching flying during World War II. So I did have a bit of qualification that gave him some confidence, and we went on from there.

FROKE: In reading the history of your corporation, I noticed that you were born in Lewistown, Pennsylvania.

MUNDY: Correct.

FROKE: What were your parent's occupations?

MUNDY: Well, my father was a printer. He met my mother in Philadelphia. She was nursing in Philadelphia and he was with a publishing company. They ultimately migrated to Lewistown because mother's home was just about twelve miles north of Lewistown up in a little community called Horningsford, Pennsylvania. My grandfather had a truck farm, and he was a railroader on the Altoona division. Horningsford was one of the stops for passengers.

FROKE: So your grandmother and grandfather also lived in Pennsylvania?

MUNDY: Oh, yes.

FROKE: Were they born in Pennsylvania?

MUNDY: Yes, both of them.

FROKE: So you have to go back four generations before you trace your ancestry to another country.

MUNDY: That's right. I have never followed it one hundred percent, but my father always told me that the original Mundy's came over very early--real early--to the new state of New York. Ultimately, my grandparents migrated to Dover, Delaware, and Grandpap on Dad's side was a chef for Campbell Soups Company in Dover. Of course, Dad and Mother wound up in Lewistown. He went with the Sentinel Company and was what they called a stone hand. In the printing business a stone hand is a fellow that sets up the pages as the print comes off the linotype. He'd make up the ads and so forth. Eventually he got lead poisoning as a result. Of course, in the old days they didn't know much about those things.

FROKE: This was probably the turn of the century--1910 or 1920, somewhere in there.

MUNDY: Well, Dad was in World War I and ... yes, it was around the '20s I would say. I was born in '24.

FROKE: The Lewistown Sentinel is the same Lewistown Sentinel that exists today.

MUNDY: Most certainly. As a kid I spent a lot of time in that place.

FROKE: Did you ever think of becoming a journalist or a printer yourself?

MUNDY: I suppose you go through that, but my interests weren't really in that line, nor Dad's. He started as a hobby to build custom radios before you could go down the street and buy radios. He built radios--and sold them as custom units. In fact, half of the second floor of our bungalow was his workshop where he did this. Of course, I had my corner over in the workshop and that's really where I got my early exposure.

FROKE: You're familiar with the early history of radio and the interference from one radio station to another.

MUNDY: Oh, yes.

FROKE: Finally the Federal government stepped in to get things cleared up a little bit.

MUNDY: Right. My radio days started when I was in high school. I worked for WMRF in Lewistown as a transmitter engineer. That was as the war was cranking up and in those days we took a preliminary examination, not necessarily highly technical, and the chief engineer would sign for us.

FROKE: This was a third class license as they say.

MUNDY: Yes, but we were still authorized to operate the transmitter and there wasn't such a thing as remote stations in those days. There was a transmitter engineer on duty twenty-four hours a day.

FROKE: You got a very solid background in the media as a youngster. You had the newspaper side, you had the advertising side, you had the radio broadcasting.

MUNDY: And I loved the radio. I can remember one of my jobs at that time was always seeing that the remote broadcast for Saturday night was taken care of and then the equipment was moved to whichever church was going to have the Sunday morning services. Those were happy days for me.

FROKE: Going back to the very early days--and you might not be able to recall this because of your youth-- Penn State operated a radio station back in the 1920s and continued it until probably about 1932 or '33 when they turned in whatever authorization they had.

MUNDY: I wasn't familiar with that, unfortunately.

FROKE: Apparently the University wanted to avoid the regulation of the Federal government. So rather than go through the application process, they closed down the radio station. It was one of these big power stations that was common at the time--a 100,000 watts, a 150,000 watts--and they were getting listeners down in Cuba and out in California and Canada, all over.

MUNDY: Well, Penn State's always been active in that line, as I recall. In fact, I have one of the transmitters that was built in the EE Department and still have it on the air. It was built, probably ... Well, I'm told the story that it was built when Byrd went to the South Pole. It used to be over in the old ORL Building and it was one of the communicating points that kept in touch with him.

FROKE: This is shortwave?

MUNDY: Yes. It was left there after Professor Crosley retired and went to HRB-Singer and when the old-timers left HRB-Singer, nobody was using it--there was only one or two around that knew how to tune it--so I finally got it, restored it, and I've had it on the air as recently as night before last.

FROKE: My land. I'll tell you what, in the Cable Center and Museum and from the same source, we have one of the old carbon microphones that was given to us by a man over at the Applied Research Laboratory.

MUNDY: Okay. It's the one with the suspension.

FROKE: That's right. The one that holds it in place and then a couple of old RCA dynamic microphones that are a little bit younger than that, I guess you would say.

MUNDY: Well, this transmitter eventually, after I'm not around anymore, I'm going to offer it to the Antique Wireless Association, or at least that was my thought, for their museum up in Canandaigua, New York. I've been trying to find somebody to write a history on it. I think Bud Yonkers might be able to help.

FROKE: Bud is still around?

MUNDY: Yes. Somebody said he moved back to State College.

FROKE: I don't think so, no. He was in town to help celebrate the twenty-fifth anniversary of the public TV station and I saw him casually then. He turned over to us some personal records about the TV station at that time. But I do have his address and I can get it to you.

MUNDY: I talked to his wife. He had an ad in our AWA bulletin that comes out for some of the stuff he has. It was the first that I managed to find out where he was. A call to New Jersey located Bud. He happened to be in the Navy hospital at the time very briefly, so I missed him and I haven't talked to him in years. But I was at WMRF in Lewistown when Bud arrived on his motorcycle to be an engineer at the station. He was coming from the RCA school in New York. He had just completed his work and hadn't got his license.

FROKE: So Bud worked with you before he came with the University.

MUNDY: Yes. He was from Philipsburg.

FROKE: Eric Walker brought him into the University to help out on electronics.

MUNDY: Yep. And then I worked in the lab, ultimately, after I came back from the service, from the Korean deal.

FROKE: As a research associate.

MUNDY: With Bud in the old engineering building back in the lab next to the president's house. So I've known Bud for many years.

FROKE: We'll pick up some more detail on that later but let's go back again, if you would.

MUNDY: I'm sorry. I get ...

FROKE: No, no, no. This is very, very good because it provides us with an outline to move ahead here at a later time. How many brothers and sisters did you have?

MUNDY: I don't have any brothers or sisters.

FROKE: You're an only child.

MUNDY: Right. My mother taught school.

FROKE: Your mother's name is?

MUNDY: Ella. She taught school in a one-room country schoolhouse for some thirteen years.

FROKE: Were you a student of hers?

MUNDY: No, no. She married rather late in life. So there was only one child. She taught over in the general area up where I said ...

FROKE: Horningsford?

MUNDY: Yes, up in that area. There was a schoolhouse that sat right close there that she taught in for years.

FROKE: As a school teacher she also guided your homework, I would imagine.

MUNDY: Oh, my, oh my, yes. She sure did. I'm afraid I was disappointing to her at times. She had the idea that I should be either a preacher or ... I had an uncle who was a surgeon in Brooklyn, New York. He was a naturalized citizen--a Spaniard--who came over here during World War I. He offered to put me through medical school if I was qualified when I got to that age, providing I'd come to Brooklyn and practice with him so he could get out of there. He wanted to get out of the city in the worst kind of way. That never materialized. I purposely flunked a Latin course so that it would get out of everybody's mind that I was ever going to go to be a doctor. Of course, that was one of the disappointing moments for my mother. I'll never forget that.

FROKE: She was all wrapped up in those professions, so to speak.

MUNDY: Yep. I either wanted to get into electronics or fly airplanes.

FROKE: You had that interest very, very early?

MUNDY: Oh, yes.

FROKE: Flying airplanes, specifically, I'm referring to.

MUNDY: Oh, yes. In fact, I got my driver's permit when I was 16. I soloed an airplane at the same time because I'd work on the weekends at the airport-- the Lewistown Airport--with Jack Kratzer, an old- timer over there. Well known, in this area, by the way. His old homestead is the brick home, going to Lewistown, as you pass the Milroy exit on the left-hand side right catty-corner across from the manufacturing plant that makes hi-fi equipment. That's his old homestead. He's an old barnstormer and he appears in my life later on, too, by the way.

FROKE: I see. Terms that come up in different things that have been written about you are trustworthy, steady, reliable.

MUNDY: I was raised in a religious home.

FROKE: Church every Sunday?

MUNDY: Oh, yes. We used to go to the Brethren Church over on Shaw Avenue in Lewistown. My mother was active with the church. Of course, I was there every Sunday. And then the people that I've been fortunate enough to meet as I went along. When I was in high school, I had a teacher in the electrical department who was a great inspiration. I was in the academic program in high school and I decided in my junior year that I was going to step out of that. At that time they had the vocational school in Lewistown. I went over there to see if I could transfer and they said the only way I could transfer was if I could pass the examination the students took the year before to go to the next grade. So I took the examination and passed. So they let me into the vocational school and I spent some time in the drafting department and then I transferred to the electrical department. Mr. Bensel was the instructor there. He was very influential in my life, so to speak--morally and every other way. He was just a fine gentleman.

FROKE: He gave you guidance toward a career?

MUNDY: Oh, yes. Primarily, of course, at that time though, it was in power.

FROKE: Public utility-type things.

MUNDY: Right. But at the same time--junior year and part of the senior year before I went with the broadcast company--I worked out at an apprenticeship with a radio service place that was right close to the vo-tech school. A fellow by the name of Martin Ort was the owner. He was also very influential in my life. He had some basic moral standards and he worked hard with me. Of course, I had a fair background when I got there. His nephew, by the name of Fisher, was leaving because he was graduating from high school, so I got to go into the shop. Fisher went with AT&T and I went into the radio shop. It wasn't too long after I got there, that Martin went to Washington to the Navy but he left me with the shop until it was convenient to close it. I ran the shop after he left town. When I got the job with WMRF, we closed the shop. And then I got into heavy industry and I had some very excellent people that helped me. So there's been a lot of people involved.

FROKE: Was it the high school vocational teacher who guided you to these various opportunities.

MUNDY: Pretty much so, yes.

FROKE: Did he refer you to the radio station and refer you to the electronics shop ... introduce you to the people?

MUNDY: Basically, yes. Now the radio station, as I recall, came about from an old ham that I knew in Lewistown by the name of Vernon Knepp. I'll never forget him. That's when we used to have the transmitters built in the wooden racks--with the open chassis. He was a great twenty meter man. He had his equipment in a room upstairs in his house and I used to go over there. I always loved to see the gas tubes glowing, you know, when you modulate it. But I can remember those days. I spent many, many evenings with him. But he was the one who recommended me to the radio station.

FROKE: It's too bad that those kinds of situations are not more prevalent today as young people grow up.

MUNDY: That's right. I don't know if it's the fact that we don't take the time or we don't care. I haven't decided that yet.

FROKE: But the relationships between young people and older mentors does not seem to be nearly as prevalent as it was when we grew up.

MUNDY: No, and I think it's an extremely important part of a young person's life.

FROKE: People need role models, they really do.

MUNDY: That's right. All the way along the line I've been fortunate in that. It seems that every phase that I went into there was always some elder person there that would work with me and help me.

FROKE: Took a personal interest in you.

MUNDY: That's right. Even in heavy industry and power.

FROKE: What year did you graduate from high school?

MUNDY: Forty-two.

FROKE: And did you go directly into the military then?

MUNDY: No. I went to Middletown as an electronics technician. Wound up in the radio division. At that time Middletown was a facility that either equipped military aircraft for special missions or reworked them as they were being recycled for major maintenance. For instance, we prepared Doolittle's B-25s in Middletown. Specialty work went through there.

From there I got bored because I wasn't going to the service so I enlisted in the Navy. Jack Kratzer was with the airport in Bellefonte which was contracted to the University for the screening of the Army and Navy cadets at that time. He and my mother were rather close. Dad was in Washington at the Government Printing Office and Jack always checked up to see where I was and so forth. So, he got a hold of me. They were giving an entrance exam for Army Air Corps (not the Air Force) flight instructors at Westminster College at New Wilmington. Mother convinced me to go take the exam. She didn't want me to go to the Navy. I was home waiting for the physical and to be sworn in. So I went and took the exam. Jack took me out there. He was teaching at Gramham Aviation in Butler at that time. I took the exam and passed. So I went down to the old post office building in Pittsburgh and signed up and started off from there as far as the flying end was concerned.

FROKE: So you became one of the people who is responsible for the training of pilots who were in the Army Air Corps.

MUNDY: Right. At that time they didn't have any uniform training program. Most important was the fact that without the training program organized, they had no way of evaluating the students uniformly. So they put us, as prospective instructors, through that whole program. When we came out the other end, we were the people that had the program in hand and were going to administer it.

FROKE: And you were 18 or 19 years of age at the time.

MUNDY: Let's see, when I actually went into the program I was 18. I got my commercial ticket when I was 21. So, I went through quite quickly.

FROKE: All of that early work over in Lewistown, really prepared you for this activity.

MUNDY: Yes. And I love to fly. Still do. But I don't at the moment because the urgency has been reduced. I was on the airport authority over here when we developed this airport.

FROKE: Brought it down from Black Moshannon.

MUNDY: Oh, boy, what a battle that was. I'll never forget that one. I don't know if you happened to go to the court hearings on that situation when those fellows over there sued us.

FROKE: Yes.

MUNDY: Anyway, it was all very interesting and I arrived in this area ... I was finishing out a course at Marshall College in Huntington, West Virginia, pursuing the instructor's career. Mother told Jack when I was coming home. He left the paperwork there for me to go pick up an airplane the government had bought, and bring it here to Bellefonte, to the University. I did and that's how I arrived here. That's how I got in this area. So for that summer I made a number of other trips and brought airplanes in for them and then I went back to the next school. But that was how I arrived in Happy Valley.

FROKE: Again, just to make sure that I followed it correctly, you came out of Lewistown and you took the examinations then as a flight instructor and were assigned in Delaware for some training ...

MUNDY: Not in Delaware. Actually I was assigned the first time at Westminster College and flew out of New Castle Airport. But our academic portion of the program was given at Westminster. And at each case as we went along we went to one of the colleges or universities for the academic portion and then we flew at one of the contiguous airports to that facility.

FROKE: And Marshall College down in West Virginia was a part of that.

MUNDY: Right. And from Marshall College it was to Tri-Cities Aviation School up at Endicott, New York, and then from there to ... No wait. First it was Concord, New Hampshire, St. Paul's School. Boy, I remember those women--they really cooked great meals. Oh, it was great. But we took our academics there and flew with Wiggins Airways for our training and then from there we did instrument work at Tri-Cities Aviation and then the final part of the program was at the University of Minnesota where they gave us the psychology of teaching and all that stuff.

I was on the farm campus. It was ten Army fellows and ten Navy fellows that flew out of White Bear Lake in the wintertime--open biplanes. But it was great.

FROKE: What were the planes that you used in training?

MUNDY: I started off with Navy N3Ns and the Steermans, which were primary trainers, and then into the BT series--BT-13 series, (I never trained in the AT-6s) and some multi-engine work in the Cessna family of airplanes. I was discharged as officer surplus when they closed the cadet program down, and then I was flying for Piper in the experimental department.

FROKE: This would have been about 1945 or '46.

MUNDY: I was discharged around '44, I think, as surplus. I went back in about '45. They had to reassign me in the Air Corps. So, I wound up with the Free French on B-26s as an instructor/engineer, an enlisted man. I did some teaching there because there were a lot of High Point officers coming back, and ready for discharge. They were applying for airline positions but they had never had the civilian version of the instrument flight requirements. So they put me in as a co-pilot/engineer on 26s in the flight test division. I'd fly these fellows and put them under the hood and get them oriented to the civilian version of the instrument test. That was a good deal for me. That's how I spent the rest of my time.

FROKE: Where were you based at that time?

MUNDY: Selfridge Field, Michigan. Barksdale, Louisiana, and Selfridge Field were the two installations where they assembled the Free French and B-26s--the air crews--and then they also gave the gunnery work and so forth to the fellows who were flying the P-47s. In fact, I stood review for General DeGaulle at Selfridge Field when he came over to the United States for a visit during the war. When you stood in review you always knew where he was because he was very tall and had that big hat and you could see the hat going up and down the rows of the troops. You knew exactly where he was.

FROKE: He was about six foot six or six foot seven. A very tall man and imposing.

MUNDY: Yes. That was a good experience.

FROKE: From Selfridge you were discharged again?

MUNDY: Yes.

FROKE: And that took you to Piper.

MUNDY: Right.

FROKE: At Lock Haven.

MUNDY: Yes. And I was in the experimental department. I flew for experimental and sales as well as worked in the experimental department, primarily on the electrical systems. They had some production airplanes for the government at that time but we were working more on the post-war family of aircraft, which was interesting. Most of those fellows were eventually moved down to Florida when they opened their division in Florida.

FROKE: Did you meet your wife at that time?

MUNDY: I met my wife when I first came to Bellefonte and stayed that summer. She was working in a restaurant. I met her there, and kept coming back, and ultimately we were married and that's it.

FROKE: In Bellefonte and your family home.

MUNDY: Yes. I had been away some, traveled quite a bit, and so on. But always the family has been based in Bellefonte.

FROKE: Is your wife a native of Bellefonte?

MUNDY: No, Houtzdale. An Irish girl. McDermott was her maiden name. She still has a brother living in Houtzdale. She came over to Bellefonte when her sisters moved over here. So, that's how we got together.

FROKE: And you have how many children?

MUNDY: I have three. I have a daughter, Connie, who's with Tele-Media down in Richmond, Virginia. I have two sons. Tom is the oldest boy. He was with corporate development. He's a graduate of Penn State and an accountant. He is in Richmond. I have a younger son who's a Penn Stater. He didn't graduate. He got impatient in his senior year and wanted to open computer stores. He opened two of them. He and his wife, who is a Penn State graduate, are now based in Greenville, South Carolina, operating a security company that we've had down there now for about a year and a half and are building up. So that's the children.

FROKE: And the security company is part of the process of diversifying Tele-Media.

MUNDY: Yes, but it's actually domestic and commercial security systems.

FROKE: Not necessarily tied to cable electronics.

MUNDY: Nothing, that's right. In Florida we're transporting the data on cable systems involved in security installations. Jim was in charge of data processing back here when he was located in Bellefonte with the company, but he wanted to get into security and we had an opportunity down there so the pair of them moved down. Linda, his wife, had been with Tele-Media from the time she was in high school. My secretary, Mrs. Howell, was at the University for awhile and with HRB and with Jim Palmer, clear back when I first came with the cable industry. Linda has been with us a long time, during which she served in a wide range of responsibilities. They're all doing a great job. I'm very fortunate along those lines.

FROKE: Your children were born during the time period, say 1946 to 1956.

MUNDY: Yes, that's about right.

FROKE: You left Piper and came with the University.

MUNDY: No, there were a couple stops ... one stop in between there. I had a brother-in-law who was a foreman at then Titan Metal Manufacturing Company and they were having some problems in the electrical department. It was an opportunity, he thought, for me to come up here. Of course, with Piper it was always a very turbulent environment. Not the most reliable situation. So I came up and took an interview with Carl Gettig, from Pleasant Gap, foreman of the electrical crew, and Grey Tressler, who was in charge of the plant down here. As a result of the interviews, I was hired.

So I went to work there and, again, I met some gentlemen that were extremely helpful. They put me on automated equipment. They were having some problems with the extrusion presses. Particularly the new one at Plant 4. There weren't too many, I guess, that understood how the thing worked. They thought it was operated on pressure-type instruments but it was ... Well, that's a long story.

I was there for some time and wound up taking care of substations and also the Ingatron Rectifier equipment, and so forth, in Plant 4, for the mill. Again, people were very helpful, including Grey Tressler, who was extremely helpful. You know, he was an electrical engineer by education but mathematics was his forte. He'd get a phone call and on the phone, while he was talking to the customer his secretary would get the prints, he'd calculate what it would take to make a change. He was quite a guy. He also, later in life, was on the airport authority over here with me. That was a rewarding experience.

From Titan I went back on active duty during the Korean War; and when I came back from that I only stayed a short time and then I went with Standard Lime. Martin-Marietta came after me to come out and automate the plant. They had all the equipment setting there in the racks and the cabinets, but it was never put on line. It was designed that from the time the stone came out of the crushers and was separated to be fully automatic until it wound up as crushed limestone out at the other end. So I took a contract with them and put all that equipment in place--electrically not mechanically. Then I left there and came to the University as a research associate.

FROKE: When you went into the Korean War, did you also train pilots?

MUNDY: No. I went into the maintenance aspect. I did train pilots but not for the government. Off-duty hours I trained on the G.I. Bill in Clarksville, Tennessee. When I went back on active duty I was a civilian that maintained the aviation section for the 200th Field Artillery Battalion locally. Of course, we got called to active duty and I left with them. But I did teach flying down there, off post. Ultimately, I was in charge of the maintenance at Fort Campbell, Kentucky, for Army Aviation as a master sergeant.

FROKE: In addition to Fort Campbell, where else were you stationed during that time period?

MUNDY: During the Korean War my entire tour was at Fort Campbell. They started to break our outfit up. I came up for overseas shipment--turned out to be a supernumerary on the shipment. I went back and the 11th Airborne Division left which put the command of the post back to the post cadre and they asked to have me transferred up to post headquarters to operate the aviation section--the maintenance side of it. Which I did and taught flying out at the civilian airport. Once again, they finally decided to throw me out of the service and send me home.

FROKE: With Martin-Marietta you then went on to take a position at the University. How did that come about?

MUNDY: Ah, how did that come about. I think it came about through my association with Bud Yonkers. He needed help and had told me of this several times. I had my work pretty well finished. I had automated the plant, changed over the power distribution in the mine and converted the substation to 44,000 when they built the new line in. So I went up to Bud and again I was interviewed up there. Those guys all interviewed me, anyway, and they hired me there. When I left, I operated a television repair business here in the county full-time for a brief period of time. The University called me back when they had the projects over in the temporary graduate student housing area. There were several buildings there that were labs. Engineering mechanics had a lab over there. I stayed there through the period of time when the plans were being cast for the new engineering buildings. In the meantime I went out on a lot of projects. We set up the first airborne stress analysis for Piper that they had. Before that it was all static stress analysis. Engineering mechanics attached the strain gauges and everything and I set up the instrumentation and monitored the stuff. I stayed at the Engineering Electronics Group until I was transferred over to work with Bud Yonkers. When he left, I took that lab over and I worked with the General State Authority letting the contracts for all instrumentation in the new engineering buildings. That's the last project I did there.

I got to the cable business when Palmer came over and wanted help at the then Community Engineering Corporation. He had transferred from HRB-Singer over to run CEC after Dr. Brown died. He wanted an R&D department set up and a production test department because there was beginning to be a conflict of interest between Community Engineering and HRB-Singer. There was ownership from HRB- Singer--Dr. Haller and Fred Thompson. There were others. At that time a lot of the UHF equipment that was developed at Community Engineering was being sent over to HRB for final tests. So, anyway, I set up CECs R&D department along with production tests. Finally they came to me--Floyd Fisher and Palmer--and offered me stock options if I'd come over with Community Engineering. And that's how I got into the cable business.

FROKE: I'm going to interrupt you for just a minute to flip the tape here and then we'll pick up the conversation on side 2 of this tape. All right?

MUNDY: All right. Fair enough.

End of Tape 1, Side A

FROKE: This was the time period when Eric Walker had come to the University. First out of the Applied Research Laboratory and then going to the Department of Electrical Engineering and moving on from there to become the dean of the college and then the president of the University.

MUNDY: He followed Eisenhower, didn't he?

FROKE: Yes, he did.

MUNDY: I have a very humorous story about that if you want to hear it.

FROKE: Yes, go ahead.

MUNDY: The antenna site for the State College cable system used to be in the water tower at the University.

FROKE: The one by the Nittany Lion Inn?

MUNDY: That's right. It supplied all of State College. The cable wasn't all through campus at that time but the president's home was on the cable. We had just moved our antenna to another site although we had our lab and offices on College Avenue. An emergency came up where I needed some equipment. We still hadn't removed the equipment from the water tower and I thought, "Boy, I have over there just what I need to cure this emergency." So I came over and stripped probably three or four channels out of there, automatic gain controls, and pre-amps. And suddenly our emergency was cured. Palmer found out that everything was okay but he couldn't figure out how we resolved the situation so quickly. So he came into the lab to me and he said, "How'd you get this thing going so quick." I said, "I went over to the water tower and I just stripped some equipment." "Oh my God," he said. I said, "What's wrong?" He said, "The agreement is that that stays there until we get the cable on campus for the president's house." As I recall, Eisenhower was president at the time. But that created quite a fuss. Needless to say, I worked late that evening getting the system back on the air on campus.

FROKE: Community Engineering Corporation evolved into C-COR, correct?

MUNDY: Well, it went from Community Engineering to C-CO to C-COR. Now the C-CO name was dropped because there were several other C-COs in the country. One of them was a trucking company; one of them was a company that built very sophisticated camera mounts, tripods. In fact, I used to work the IEEE show every year for C-CO. I was always the one that went down ahead of time to set up our booth at the coliseum. I arrived at my booth location and there was C-CO equipment but it wasn't my equipment.

FROKE: Immediately you knew you had a problem.

MUNDY: We had a big problem. So we then became C-COR.

FROKE: Was there a financial settlement on it or just an understanding ...

MUNDY: Not that I recall, no.

FROKE: They just suggested that you change your name.

MUNDY: That's right. We had no choice and that's what we very promptly did. Mimi Barash redid, of course, all our sales brochures and so forth. She took care of our ...

FROKE: Barash Advertising was the advertising agency for you.

MUNDY: Yes, for years.

FROKE: Trying to pick up a little bit of the history that led to the establishment of C-COR. The people in Haller, Raymond & Brown, HRB, were very much involved in Community Engineering, a corporation that you already alluded to.

MUNDY: Right ... Dr. Brown, Dr. Haller, Fred Thompson.

FROKE: They also had very, very close ties to the University.

MUNDY: Right.

FROKE: They were academic leaders within the University, so to speak. So while the work that they did had a tendency to stimulate industry, at a time the company had grown to the point where there began to be conflicts between their responsibilities academically as well as their work with the corporation.

MUNDY: That's correct and that's where the parting of the ways came. Of course, Fred Thompson and I worked together very closely. At one time they wanted me to come to HRB but I didn't go.

FROKE: Was Community Engineering Services founded by Haller and Dr. Brown?

MUNDY: Dr. Brown was the principal. I don't know exactly when Haller came into it. Dr. Brown was the real founder. From his old notes, I noted he actually developed some of the techniques that we use in the cable business today. He was the father of them. For instance, cable power. That's strictly Dr. Brown.

FROKE: Was he focusing at that time with Community Engineering Services on cable television or were there other aspects of Community Engineering Services?

MUNDY: Basically cable television and while he was attempting to develop a line of equipment to make them become independent, in the meantime they took on a distributorship from Jerrold Electronics. At one time they actually were a distributor in this area for Jerrold while they were developing their own equipment to become independent.

FROKE: Milton Shapp's records indicate that Jerrold was founded in 1948. Did Community Engineering Services come at about the same time or later. Do you have any recollection?

MUNDY: I don't know exactly but I'm going to make a guess it must have been about the same time. They had some equipment. Their real goal was to become independent with their own line of manufacturing--OEM Manufacturing--that was their real goal in the whole situation.

FROKE: What was it that held them up from becoming more prominent at that early time? I would imagine it was capitalization.

MUNDY: Well, that's true. In those days ...

FROKE: Not very many people believed in cable.

MUNDY: That's the point, and particularly the financial community. It was mostly ma and pa operations. That was our biggest problem in those days. Monies were not being spent for R&D work or for the capital investments to build plants. We used to build plants with connection fees. We'd get $250 a connection, pre-sell the system, and that's where we got our money to build the system.

FROKE: The consumers themselves gave you the money.

MUNDY: That's correct. That's the way it was done. That's the way Shapp built every one he ever built. So we did the same thing. The bankers were still not educated in cable. They were not educated in cash flow businesses. They had to have hard, cold assets. That's all they knew when they started to finance something. Centre Video was spun off from C-COR. This was done to let both companies develop. That's when I met my partner, Bob Tudek. He came in as vice president and general manager of Centre Video. But the bankers still didn't know. We actually used to try to sponsor the presence of a different bank each year at the national convention so they could go to the seminars and they could see the product and meet other bankers and so forth. So it was a long, long time getting banks educated to what was going on and then they were only few and far between. That was the hold up in our business. Plus the fact that there was the in-fighting going on back in the research and development between the vacuum tube and between solid state equipment and that was a very vicious battle. But they still couldn't let go of the vacuum tubes because they didn't have the transistor equipment to do the job. And that's a long story.

FROKE: This relates in part to the ongoing difficulty of introducing new technology when you still have not depreciated existing technology.

MUNDY: That's happened to us for years. Our plants would last a lot longer ... we have to replace them or upgrade them to new technology.

FROKE: Did Community Engineering Services pre-date Centre Video as a distribution ...

MUNDY: Yes.

FROKE: Let's say that Community Engineering Services was research and development and a touch of manufacturing.

MUNDY: And they had engineering services for other people. And then ultimately they put together some local financing--investors--and they built first the Bellefonte system with the original investors from down in that area. And then after that came the State College system. But they were independent. Two independent groups of investors in those companies--they weren't one.

FROKE: But the same leadership.

MUNDY: That's correct.

FROKE: Did Jim Palmer and Barbara Palmer get involved in the very early days or had ...

MUNDY: They got involved shortly after Dr. Brown's death.

FROKE: So Community Engineering Services had been established before Jim Palmer joined ...

MUNDY: Oh my, yes. He was at HRB-Singer, as a matter of fact, as an engineer. They came to him ... Haller came to him and asked him to come over and take this company over and see if he could get it rolling. Basically, Jim's background is power. He was an engineer, at that time. Before he came to HRB, primarily his work was in automatic high voltage switch gear.

FROKE: And when you say take it over to get in rolling, you mean the Community Engineering Services or you mean Centre Video.

MUNDY: Centre Video didn't exist. It was Community Engineering.

FROKE: All right, very good.

MUNDY: And the Bellefonte system ... I forget what it was called ... Bellefonte Cable System or something, and the State College Cable Company. They weren't part of Community Engineering.

FROKE: When did you join Community Engineering?

MUNDY: Ah, Community Engineering, when did I join that ... it was in the '50s--'57 or '58. At that time they were just finishing the State College system and the Bellefonte system had been built and the antenna site was up at Point McCroy. State College was initially on somebody's ... I believe it was on Dr. Brown's house in State College and then it was moved over to the water tower on campus.

FROKE: This is just in passing but would you know where some of the early records of Community Engineering might be?

MUNDY: I had some of them in my files and Jim Palmer may still have some. He would be a good contact but we ... between Jim and me we had several of Dr. Brown's original workbooks. I reviewed those workbooks and that's where it came up and found out that he originated cable powering. We had cable powering before anybody else in the industry. We powered whole antenna sites with the coax going up the mountain. This was all pioneered by Dr. Brown. Now in Bellefonte he was lucky because they put the site up where the old beacon light was. He had power there. Then he had trouble with ice forming on the feedline. By passing power on the feedline it was able to cope with icing most of the time.

FROKE: At some point if you would like to donate some of these papers to the National Cable Television Center and Museum we would be very appreciative.

MUNDY: There's no problem there. Personally, I may have some old workbooks but Dr. Brown's workbooks, as far as I know, would be with Jim because they were still ... I never took any of those when I left there. He would be the gentleman that had that.

FROKE: The work with Centre Video and with Community Engineering Services that evolved into C-COR began on an official basis ... full-time employment, so to speak ... about 1957.

MUNDY: Latter '57, early '58.

FROKE: Prior to that you were doing incidental-type work with Community Engineering Services and you got to know them ...

MUNDY: That's right.

FROKE: So if there was a particular task that needed to be done, they would contact you because of your background.

MUNDY: That was a service of the University because as a land grant university we did that, as you well know. Still do that for industry throughout the state.

FROKE: So the University was supportive of the development of the cable industry even at that time.

MUNDY: That's correct. Ultimately, I worked with them when they developed their first CATV training program, you may recall.

FROKE: Yes. The one that started about 1968 I think it was.

MUNDY: I forget the gentleman's name that spent a whole summer with me in the field getting familiar with the cable business.

FROKE: This would have been Harry Weaverling.

MUNDY: I think you're right. He was with me when we were rebuilding the Kane, Pennsylvania site and he might have been in on some of the Clarion site when we put the closed-circuit TV in the Clarion University.

FROKE: Coincidentally, the organization at that time--1968--was called the National Cable Television Education and Training Center.

MUNDY: That's right. I remember some of the seminars I attended over there. Dr. ... was it Dr. Amerman?

FROKE: Yes.

MUNDY: I'll never forget the seminar that he gave on reliability and the mathematics he went through on determining the reliability of a piece of electronic equipment according to the number and type of components in it. I mean I was completely lost. I'll never forget that. I attended those early seminars.

FROKE: That training center lasted for only two to three years and then the cable industry had that terrible financial problem in the early 1970s and the National Cable Television Association had to withdraw its financial support. It's too bad that it could not have survived at that time because I think it would have been very, very useful.

MUNDY: Oh, yes. Locally, here, we have fellows that we sent through. At that time the classes were primarily held at the Altoona campus, as I remember. We sent a number of people through that course. Early on some of them unsuccessfully because they were put into courses where they didn't have the background but then that was modified to give them the background and some other work and then eventually get them into it.

FROKE: In your role with Centre Video and Community Engineering Services when you went with them on a full-time basis in 1957, were you primarily the design engineer for the systems?

MUNDY: I'd call it more a project engineer. The design work was still coming from guys like Fred Thompson. They would bring it into the lab to me and from there I'd try to come up with a product. That was my job plus I had the responsibility for their systems in the field. They had a lot of problems in those days. They were developing UHF converters, some of which were being used in translators out in the west. The first family of converters they developed went into Towanda, Pennsylvania. I'll never forget. I went up there in the wintertime to make them work--they weren't working. Another funny story. I was there about three days and had come to the conclusion that I ... on the multiplier chains in the local oscillator ... that I had to reduce the queue because it wasn't stable. So, the fellow that was the manager of the system, I called him in and I said, "I want you to go downtown, go around to the dry cleaners and I want you to get me some coat hangers that are soft--iron coat hangers." He looked at me like I was nuts. I said, "Don't ask why--get me the coat hangers." In the multiplier chain, I removed the tank coils that were in there, made them out of coat hangers to give the multiplier chain stability, put the converters in service and I guess they were there until they rebuilt the antenna site.

FROKE: On the C-COR side you carried things to the product stage.

MUNDY: Yes.

FROKE: And on the distribution--the Centre Video side--you would supervise the installation of systems and also go out and identify major problems that were beginning to show up with the systems.

MUNDY: That's right. When I went there, shortly afterwards--like three years or so afterwards--over 50 percent of our work was R&D work for the government. So it was a combination of the two. We competed very heavily in the early days with octave bandwidth amplifiers--UHF type, IF amplifiers for spectrum analyzers and things of that nature. Eventually, that tapered off and we could support the R&D work in the cable equipment. Then I wound up in that. But it was a mixture. For instance, we put the first amplifiers and distribution system in Point Arguello, California, in the missile pads. That was an interesting project. Those were very sophisticated amplifiers and they were nothing more than an amplifier off our production line modified to suit those purposes. So there was all sorts of that type of work--very interesting.

FROKE: So Community Engineering Services was actually beginning to evolve in a manner comparable to, I guess what you would call, the parent organization, HRB-Singer. In other words, working heavily with government contracts ...

MUNDY: And that's where the conflict of interest began. That was where the original confrontation of conflict of interest came about. And that's what generated it.

FROKE: The question whether it would go on and become a generic electronics research and development firm or whether it would concentrate on the cable television industry needs.

MUNDY: It was a big question. Of course, they went through the same sort of situation all over again when the fellows from HRB sprung off and formed ... oh, Thompson's company ...

FROKE: The Locus.

MUNDY: LOCUS. Remember that? That was the same type of scenario. The only difference there was HRB had cut back on a lot of their work that they were doing in those fields. This group of fellows who were primarily the receiver group spun off and formed LOCUS and that was a big problem. The unfortunate thing was they weren't able to side step the litigation and so on whereas Community Engineering knocked it off quick enough that they weren't exposed to that and avoided it.

FROKE: Mr. Palmer became president of C-COR and Centre Video about that time period, am I right?

MUNDY: Well, as the company names changed and evolved into the ultimate, he was always really president. Fisher was in there ... what was the gentleman from Kane, Pennsylvania, that was your controller at the University?

FROKE: McKay Dobkin. John Christopher.

MUNDY: Christopher. Christopher was there, Fisher was there, and Palmer was there. Those were the three principal guys. All of whom are investors.

FROKE: On both the C-COR and the Centre Video side.

MUNDY: Oh, yes. They followed that through. They came from the original situation. All they did is evolve with it as it went through the chain. And they were good people to work with. Now there was another investor and he was a retired professor at the University. I forget his name now. I'll never forget, I took a ride with him to Hershey one time in his car. Boy, what a wild man. He was a big shareholder in C-COR. We went to a state convention at Hershey. What the heck was his name. I'll have to ... I apologize for that ... a heck of a nice gentleman. But when he got behind the wheel of a car, boy it was seventy miles an hour. I'll never forget. We went over Seven Mountains on the way to Hershey and it was a foggy morning.

FROKE: I was going to say Ray Carpenter but I don't think ... He was on the program side of the University to a greater extent.

MUNDY: And the fellow that started Chemcut was an investor with us and quite active. Maybe I'll think of this chap's name. He was just a great guy.

FROKE: At what point did Centre Video decide to become expansive and move beyond Bellefonte and State College?

MUNDY: Well, at the same time ... that decision was made when the then board of directors decided to spin off Centre Video which at that time was owned by C-COR. It was spun off for the purpose of developing. That's when Bob Tudek was brought in.

FROKE: So just as there was a conflict on the C-COR side, the manufacturing and research development side, as to what direction they were going to go.

MUNDY: That conflict was behind us.

FROKE: Now you were at the point where distribution was beginning to cause problems with the C-COR side.

MUNDY: Well, the problem there was they weren't all common. The investors hadn't necessarily come in through the same door. Even though the entities were owned by C-COR, some of them were basically orientated as cable investors, some of them were orientated as manufacturing investors. And there became a conflict there in that the old attitude was that the cable systems were subsidizing the manufacturing. So it was decided to break that up. Plus, it was felt by the board that both companies would develop much better independently. And that's what, in fact, happened. That's when we went out on the franchise trail. At the time that they spun things off the Towanda system was in existence. They had a franchise ... I believe Kane was in existence. They had the Clarion franchise, but that was it ... possibly Follansbee, West Virginia ... I don't remember. You know Tudek was here when we built that ... Follansbee-Mingo Junction. But anyway, that's what brought it about. I wound up when they spun if off being a shareholder in both companies. As a result and sticking around and helping develop the whole thing is where I finally came up with the wherewithal and cash to originally form with Bob ...

FROKE: The Tele-Media Corporation.

MUNDY: That's right.

FROKE: When the two were split--C-COR and Centre Video--did you choose to go with Centre Video?

MUNDY: Most certainly. I requested it.

FROKE: You wanted to go on that side.

MUNDY: By that time, at my suggestion, they had hired George Dixon who had come on board and took over the engineering responsibility for C-COR and I requested to come to Centre Video. Well, they weren't going to do it but they finally granted that permission but they split my time fifty/fifty between C-COR and Centre Video because I still had the antenna site work that C-COR was involved with. Eventually they took that all over when Tom Kenly came from HRB-Singer to C-COR. He took over the antenna site effort and also the sales effort. Then I devoted full time to Centre Video Corporation.

FROKE: What year was it that Bob Tudek came with Centre Video?

MUNDY: It had to be ... we left there in '70. Bob came there in '64 or '65 because he and I worked together for about six years developing the franchises around the Pittsburgh area. I time it in that he says he flew with me for six years before we formed Tele-Media.

FROKE: That was a very, very rapid period of expansion for Centre Video.

MUNDY: Oh, yes.

FROKE: I believe the figure that I read some place was forty-nine separate franchises were granted to Centre Video.

MUNDY: Actually there was more than that. Is it forty-nine out of fifty-one that we were successful in getting? I believe that's the case with Centre Video but then those numbers are further carried in our history which includes the franchise efforts we went through in Tele-Media to rate our success in getting franchises.

FROKE: What would be the typical pattern of activity when you identify a community? I'm talking now about the time period when you were with Centre Video and you were expanding with Centre Video. What would be the particular pattern of activities once a community had been identified as being a market that you would like to move into?

MUNDY: Of course, the first thing we have to do after contacting the powers to be--mayor, council, whomever--if the community was thinking about cable or hadn't, perhaps, and we wanted to convince them, then we would go into a training program. First of all get to know them but then we'd go into literally a training program.

FROKE: To familiarize them with ...

MUNDY: As cable. The way we would do that in many cases, particularly in football season--now comes Penn State again--we would bring the council and whomever they wanted to bring with them up here for a weekend. We'd usually get them in here on a Friday night. That would be an orientation program and dinner Friday evening. Saturday morning we'd start out early. We'd take them to the offices of Centre Video and C-COR here at Dale Summit. There would be people in from C-COR to give them a tour of the manufacturing facility and explain that. Then we would take them into Centre Video's offices and we would show them how we operate a cable company, how we keep our records--the whole setup. Then on Saturday afternoon they'd go to the football game. Those that wanted to go to the football game would go to the football game. The other ones who wanted to shop or whatever, we'd split up and take care of the whole group. Get them from the football game. There'd be another dinner, and then a brief period again of orientation Saturday evening. Sunday morning everybody would get up and we'd get the people to church that wanted to go to church and then they'd leave for home. Many of the groups came up by bus. Some of them travelled individually but most of them came up by bus from there to here. Some of them I flew in in smaller groups. That was the procedure we used and it was very successful. Of course, they'd always get the tour of Penn State. Many times there were tours arranged with your radio facilities and so on over there. So it was all intermingled.

FROKE: Then you would go out and do a site survey to determine what the costs would be for putting in a trunkline and ...

MUNDY: A search of the demographics first as to whether the market was a good market and then we'd go into the technical side and survey the area for the system, for the antenna sites, and the whole bit and put it all together.

FROKE: You'd look at the demand for cable in a particular community?

MUNDY: Early on, yes. That had to do with the quality of the reception in the area. Believe it or not, everybody thought areas like Pittsburgh were poor cable areas. That wasn't so. There was a high percentage of the people around those areas whose pictures were all ghosty from reflections. Cable was a great blessing to Allegheny County, no question.

FROKE: The assumption was that the Pittsburgh metropolitan area had a substantial number of broadcast channels and consequently they were getting enough television.

MUNDY: That's correct.

FROKE: But it was the reception problem that really made this a market for cable.

MUNDY: It was the reception problem that changed them. That's right. You had your basic networks there and I think you had ... Early on you didn't even have an educational channel ...

FROKE: No. WQED, I think, came on about 1956. Would you like to take a break, Ev, for five or ten minutes.

MUNDY: Well, that might be good.

FROKE: Get a little bit of rest here. I could use a rest.

MUNDY: All right. Fine with me.

SHORT BREAK

FROKE: We were talking about some of the things that you would look for in choosing a community to pursue a franchise and then go on and build. You touched on whether the market for cable was there. In addition to that was the climate of the government apparatus, the council or the city manager. From a technical point of view, an engineering point of view, did terrain and cost of building a system in a particular community play a part?

MUNDY: It certainly did but I want to add one other criteria that Bob Tudek and I personally always had. As we were looking at these areas, one of the early-on things that we considered, and particularly after we were in our business, would we live in the community. And if we would live in the community, our interest went way up.

Now to get back to the technical side. There are many things that affect the cost of building a system.

FROKE: I'd like to go back to what you just got through saying. What were some of the things that made you say, "Yes, I would like to live in this community," or "No, I would not like to live in this community."

MUNDY: Is it a clean community? Do the people seem friendly? Do they have a good school system in the community? Is it just the kind of a place that you would be willing to move into and live--make a living.

FROKE: If you had a gut reaction that, yes, this is a pretty good town, that would carry over into a business-type relationship.

MUNDY: That's right.

FROKE: You would anticipate that you would not have problems that really were not problems inherent in the business itself but were problems coming in because something was wrong with the town itself.

MUNDY: That's right. That was a very important part of the selection--at least by Bob and me. But then on the technical side, there are many things that vary from community to community that have an impact on the cost of building a system. I guess the first and probably most important is the general condition of the utilities plant where you are going to put your cables. And if, for instance, you have a predominant amount of underground construction, it puts the price way up. Now early on that wasn't too significant. The alleys behind the main streets were where the utilities were and we you could still get on the poles. In those days the utilities weren't too friendly either. They still aren't. They loved to see us come to town if they thought we had enough money to upgrade their plant if they had been wanting to do that.

FROKE: There's a whole legal literature in pole attachments, right?

MUNDY: That's right. Pennsylvania, again, kind of led the industry in that whole battle. Barco from Meadville ... he and his daughter, as attorneys through our state association fought this whole pole contract concept and our position on those poles. So again that was a first for Pennsylvania. He was quite a gentleman, by the way. So that was always a big consideration. We went on from there as to the availability of signals ... The type of distribution equipment more or less was a common situation but the antenna sites was where the unique things came in as to how we would get the signals to make up a package we felt would be marketable.

FROKE: You wanted to make sure that you'd be able to get reception that would dramatically improve the quality of the picture.

MUNDY: That's correct. It had to be good. You didn't dare have great contrast across the channels in quality. That was one of the big problems that Canada had early on when they developed Topo scatter techniques. There was the local station, and there was usually at least one local station in the area, and then they put in Topo scatter equipment for reception. Then they couldn't sell the product because signals received using Topo scatter techniques were generally substandard in picture quality to the local station. So we had to watch here and in our development in the United States that we didn't put ourselves in the same type of problem.

FROKE: What were the circumstances that lead you and Bob Tudek to decide that you were going to go off on your own? There was the personal relationship that bonded you very, very quickly. In reading some of the things that I have about your work together, you immediately seemed to strike it off together on a friendship basis.

MUNDY: Yes. I thought a great deal of Bob. We were fishermen. He was a golfer, of course. In those days he and his family ... his wife, she'd catch fish when we couldn't touch them. But that's another story. I told Bob when we were coming pretty much to the conclusion on the development of the franchises we had around the Pittsburgh area, that I had some major projects that I had worked on such as non-duplication for the whole area, and some microwave projects. I went to him about a year before I figured these projects would all be finished and I said, "I'm going to leave. I don't have any plans. I don't know where I'm going. But when I get these projects completed that's going to be it. I'm warning you that you better start looking at selecting somebody to take this job over. We have to start grooming him one of these days."

So that was approximately a year. Oh, it was only a few months after that he asked me, "What are your plans?" I said, "I don't have any yet." I said, "There's all kinds of opportunity out there. Hell, I don't know what I'm going to do." So one day he came to me and he said, "Would you like to have a partner?" I thought a little bit and before I could even respond he said, "I'd consider going with you." At that time he was probably in the frame of mind to leave, also. This was leading up to the merger with TCI. In Centre Video we had come to the point where we had franchises that had to be developed. There were bonds on the development of those franchises and it was difficult for Centre Video to come up with the financing to do all these. That's what triggered either the sale or the merger of Centre Video with some larger organization. Our first big opportunity was with CBS, I believe, out on the west coast. They were in here and were ready to go. They were ready to do it. In fact, I had the fellows from CBS with me in the airplane over Pittsburgh with the low frequency radio turned on listening to the radio because that day the FCC was to make the decision on whether or not newspapers and radio people had to divest of their cable connections that were common to their other operation. Sure enough it came over the radio. I was showing them the area around Pittsburgh from the air. It came over the radio that, in fact, they would have to do that. That killed that deal. So I very calmly took them back to the airport and they went back to the west coast. But Bob was in the airplane with me and there was two or three fellows from CBS in the airplane. That's when we continued to try to put together this financial package, whatever it was, to accomplish these commitments. That's when TCI came along and ultimately it wound up with a tax-free exchange of stock to buy the company. Little did we know it but at the time that took place we were stronger than TCI. We didn't know that. But that's a fact. It's been shown that that was a fact since then as we look back into the history.

FROKE: The perceptions of the financial people, however, probably were different.

MUNDY: That's absolutely right.

FROKE: They perceived TCI as ...

MUNDY: I tell them to this day when I happen to be with John Malone, I tell them, "Look, baby, Tudek and MUNDY: made you." And he just has a little laugh. In fact, he wasn't with TCI at that time. He was still president of General Instrument Corporation. So, when we got that put together then we tended our resignation and formed Tele-Media Corporation. That's how it came about.

FROKE: Did you feel some kind of a personal obligation toward Centre Video to delay your departure.

MUNDY: Certainly. Even though I'd worked awfully hard, we have to face it. Centre Video and C-COR were the steppingstone for me to do whatever I wanted to do. Palmer and his board gave me the original opportunity to get the financial wherewithal to do what I wanted to do.

End of Tape 1, Side B

FROKE: Those characteristics that we've read about you played a part in your decision to stay on for one year with Centre Video. At the same time you had a financial obligation also that you wanted to carry through with.

MUNDY: Oh, yes. I figured that Bob ... Well, I owed it to Bob, I owed it to Palmer and to the board to make sure that they didn't get messed up in that situation. Continuity was a very important thing. A year prior to that I took on Bill Glass' son as an assistant and I had him bringing all the engineering files up to date and getting that filing system complete and I had all these things to do before I left. So, we worked it that way.

FROKE: Did you and Bob have a general idea of how you were going to put together your new company when you left?

MUNDY: None whatsoever. We just wanted to go do our own thing. We had no hangovers from Centre Video or any intent to take over any of the things that we had developed for them that were yet to be ... I should say franchises that we had gotten that were yet to be built.

FROKE: You left all of that behind you.

MUNDY: Yes. We didn't even go see those people.

FROKE: At what point did you say to yourself you wanted to stay in the cable business?

MUNDY: Well, Bob was torn between the cable business and the security business. He had some contacts in Philadelphia that were very good in the security business who wanted him to come with them. I was aware of that but he, on his own, made up his mind that he wanted to stay in the cable business. Of course, I wanted to stay basically in the cable business or I would have gone back to heavy industry. I always liked heavy industry. But I figured that I could get a job in the cable industry with a phone call so why shouldn't I stay in the cable industry. That was my decision. But I would have changed had I not been fortunate in the cable business. It wouldn't have bothered me.

FROKE: How did you decide that you would continue to live in the State College/Bellefonte area? That was about the time that different metropolitan areas were beginning to assert themselves for certain roles within the cable industry.

MUNDY: But the metropolitan areas were not within our means to develop.

FROKE: Okay.

MUNDY: And, in any event, with the concept we had of the smaller or medium size systems ...

FROKE: Those were the markets you were going to be going after.

MUNDY: We targeted those markets. Basically classic markets. But we'd have to travel regardless of where we lived so why uproot our family from this area and take them somewhere else only to leave them sit there while we were out developing a company. So it was no question--this was the place to be.

FROKE: And your early franchise work with Pennsylvania, Ohio, West Virginia ...

MUNDY: No, that's all right. She'll get it. In the early days we didn't know too much about areas other than Pennsylvania because with having been with Centre Video ...

FROKE: You knew the state inside and out.

MUNDY: But we didn't realize how many opportunities were out there. We got in the airplane. We met over at the University Park Airport. We had leased an airplane from Stocker--a twin Comanche. I believe Stocker and Claster owned it. I'm leaning on the wing with it outside the hanger when Bob arrived the first morning and that's the first time we discussed where we were going. This is true. He said, "You know, I believe we ought to go talk to some of the fellows that we've known for years. We had set up Tele-Media Corporation so we could operate at least a year without income. That was the agreement with our investors and that's where the money was set aside for doing. So we started off by flying around to see the people we knew. We went up into New York State and saw Jim Coffey and we went around to other places. We went down to the West Virginia convention and so on. We just went around to see people.

FROKE: Was Jim related to Lyle Coffey?

MUNDY: Jim Coffey had been out of Lewistown with George Gardner for years.

FROKE: No, different family.

MUNDY: And he had worked with George Gardner for years. In fact, I met Jim Coffey when he was with Vikoa.. He and another gentleman out of Lewistown ...

FROKE: The Baum group ... Dr. Arthur Baum.

MUNDY: Yes. There was a gentleman, an older gentleman from Lewistown, that worked with him on the franchise trail for Vikoa at that time. I met him when he was with Gardner and then he left and went with Vikoa and I met him many times in the field in his efforts with Vikoa.

FROKE: He suggested nothing in New York right now?

MUNDY: No. As a matter of fact ... I'm trying to think of the name of the community--the home of the big antenna company. There's a town in Ohio by the same name and I'll have to recall that somehow. But anyhow, he took us over, introduced us to the mayor, we had our talk, and they would like a proposal for a franchise. So we called back here and sent them a telegram saying that we would be interested in submitting a proposal to them. Dick Webster was in charge of the Western Union office in Bellefonte and he made a mistake and sent the telegram to the town in Ohio. Ultimately we got that straightened out but we got offers for proposals for both of them. I can't think of the name of the town now. That's terrible. The home of Channel Master is the town up in New York and once we break that down we'll know where it was.

FROKE: Your first franchise was an Ohio community wasn't it?

MUNDY: That's correct. Our first system we bought was a leaseback in Columbiana, Ohio. That was the second leaseback sold in the country. Columbiana is about twenty miles across into Ohio. When we hit the franchise trail in Ohio, we got East Palestine which is contiguous--right next door--and Leetonia and then we went up along Lake Erie and got Geneva, Geneva-on-the-Lake, Geneva Township, and so forth. In the meantime we were pushing to buy Ashtabula and Conneaut, Ohio. Ashtabula was a leaseback plan and Conneaut was owned by the Aiello brothers out of Ridgeway. So then we began to build the franchises after we got them as well as we ultimately were able to buy Ashtabula and Conneaut. But those were the early efforts. In the meantime before we completed that, we went down to the southern part of Ohio and we ... I'll have to think of that name in a minute, too. Anyway, we bought systems down there which were really the second systems we bought. We can look at that history there--it would give it to you. There were two systems down there.

FROKE: This would be about 1973? East Palestine ... New Waterford ... Geneva ... Madison ... Ashtabula ... Geneva ... Celina?

MUNDY: No, that's later. It was before.

FROKE: I'd better give it to you and then you can find it.

MUNDY: Okay. But, anyway, we were fortunate in that endeavor and we got ... I bet they might have even overlooked that in this history from the looks of things here. We won't waste much time on it ... Oh, Jackson, Wellston, and Coalton which is right down close to the tri-state border there next to ... where Marshall College is down there. But we bought those systems and expanded them.

FROKE: What Ev is looking at is a segment from what he and Bob Tudek refer to as their blue books. They have prepared a remarkable history of Tele-Media and we'd already asked Ev if we could include this in the oral history itself and in this way we can eliminate the need to go into some of the detail about some of these acquisitions that we're now touching.

One of the factors that is emphasized in the history is the substantial growth in the number of subscribers that took place in the early months of your purchase or your operation of a particular franchise. Is that something that you also looked at when you went into a community. The penetration of ...

MUNDY: Oh, yes. You must have the capability to leverage the system so to speak--expand it. This is the only way that you can finance the thing and ... The real story is you can't afford to pay taxes and financing at the same time. If you don't have the expansion, you immediately wind up into a tax problem. Because of your income you're not reinvesting it. You don't have an avenue to reinvest. So we have to be able to expand.

FROKE: So you're looking for a penetration maybe of 30 or 40 percent and the possibility that you can go in and very, very quickly move it up ten or fifteen points.

MUNDY: That's right. Now in the early on, Columbiana, Ohio, had just slightly ... just around 200 subscribers on the leaseback plan. We took it up to 1,200 in about three months. That's the sort of thing that we were able to accomplish.

FROKE: What explains your ability to do that kind of thing and other people are less successful?

MUNDY: Tudek has a background in promotional-type work. He was with Blue Cross-Blue Shield ... he was with Muscular Dystrophy. He brings that basic expertise to this partnership and then he got ... Bob Shepard ultimately came on board with us. Between the two of them they developed the sales program we still use which is primarily a door-to-door effort. We also have a telemarketing arm. But we didn't have that for years. It was door-to-door and Bob and Bob Shepard developed this. Tudek brings that expertise. It was up to me to supply the physical plant to keep pace ...

FROKE: To be sure you've got a product.

MUNDY: That's right. To keep pace with their projections as to their sales and what they wanted to do. That's where I came in. They never told me what or how, they just said have the plant there when we need it. That's how it went. And still it's pretty much that although I'm not in that side of it anymore particularly. That was the way the team worked. In fact, Bob Shepard was the first one that came with us from the TCI group. We had had him in State College and he lived in State College and then he moved to Pittsburgh and was in the sales effort for TCI. He's the first one that came with us and we put him up in Ashtabula, Ohio, as VP and general manager but his real job was to develop that whole plant along there from the sales point of view. He never missed a quota. If he couldn't make his quota in what we built he'd over bill the mileage and wouldn't say anything. We'd finally find out about it and then we'd have to figure out how to pay for it. But that's the kind of a guy he is. He helped make us successful in a major way.

FROKE: We are tape recording this oral history in Ev's office and on one wall is a bookcase that includes lots of legal-looking publications. I would imagine each of those is a franchise.

MUNDY: Each of these is either a franchise that we developed or a purchase and the ultimate company we developed. Each one represents a financial transaction either from scratch or a refinancing or a reorganization or what have you. It's a chronological file basically for my estate but we also use it everyday in things that come up.

FROKE: So it's a total record of the evolution and the growth and development of Tele-Media.

MUNDY: That's right. Sales basically are not in there ... where we sold systems ... because it doesn't require keeping track of all that legal work. These are all purchases or financings that we went through.

FROKE: The 1970s, when you left Centre Video, were initially very, very difficult I would imagine because the stock market on cable was way down. TCI was selling for about one, if I remember correctly.

MUNDY: I got as much as over thirty bucks for their stock after the merger took place. That's when we quit leasing an airplane and I bought the first airplane personally and then leased it back to the company. I'll never forget one occasion. My son-in-law Frank Vicente was with me and he was still going to Penn State and we were over at University Park in a hanger. Toftrees had decided to get a new airplane. They had a nice twin in the hanger the same one I was in and they came in and wanted to sell me that airplane. Well, I kind of liked to have had it and I had the stock to just go ahead and buy the airplane. Well, that was just a short time before the market went zip ...

FROKE: So you and Bob got out while it was still up.

MUNDY: We never got out. We kept a lot of their stock but we cashed in enough of the stock to form Tele-Media Corporation. To make our obligation in the initial group of investors which were all Pittsburghers. We called them the "Sewickley Five." They were all from Sewickley, Pennsylvania ... multi-millionaires.

FROKE: How would you identify them in terms of interest in cable?

MUNDY: They were brought to us primarily by Rose, Schmidt and Dixon. Evans Rose, who was active up in this area with Penn State and with one of the governors. He was campaign manager and that sort of stuff. But politically they were our law firm at that time and they brought these fellows to us.

FROKE: And you sold them on the potential in cable?

MUNDY: That's correct. And they were all clients of Evans Rose.

FROKE: What were their backgrounds?

MUNDY: Oh, they were from the metals industry; they were from the coal mining industry; they were from real estate. Grant McCargo was one of the biggest real estate people in the Pittsburgh area. John Oliver of the Oliver family in Pittsburgh that owns the buildings--he was the biggest single shareholder in Kodak at the time. This was the type of people we had.

FROKE: Now, Tele-Media is privately owned. You and Bob then have the financial interest in Tele-Media. Did you have some kind of a bond arrangement with the "Sewickley Five" or ...

MUNDY: We didn't have any terminating point.

FROKE: You had a loan from them for a certain period of time?

MUNDY: They had equity in Tele-Media Corporation proportionate to their investment. It was not a lot.

FROKE: So over a period of time you bought ...

MUNDY: We bought them back. The biggest part that we bought back was when we reorganized the Lake Erie company. We did the financing to buy them out at that time. It was not a loan--they had equity in Tele-Media.

FROKE: Now then, 1970-1971 were not good times financially for the cable industry but these were the times when you were going out there. Because you had this financing and because you were operating at a relatively ... I guess I would call it inexpensive capital investment approach to building, going into the smaller communities and so on ... you were able to thrive, really.

MUNDY: We financed the first system we bought 100 percent. One hundred percent ... not a buck down--Columbiana, Ohio--Equibank in Pittsburgh.

FROKE: So you were not moaning and groaning, so to speak, about what was going on in the cable industry. You were simply building a step at a time for the future.

MUNDY: Actually when times were tough we did better because we had some connections to get financing that allowed us to go in and take advantage of some real bargains. So we always did better when times were tough. We were a size where we weren't over burdened with debt. We knew how to come by these properties and so it was good ...it wasn't bad times for us. We didn't have any problems. We used to make up the cash flows and stuff between the two of us. It was many a night we spent in a hotel in Pittsburgh or in the William Penn doing cash flows, he doing one part and I doing another part and going to the bank the next morning to get a loan to do something. That wasn't uncommon. Those were the greatest days of this whole situation for me. If that cash flow didn't fly, we'd go back and make up another one the next day and back in the next. And that's the way we did it.

FROKE: You moved from one state to another during that 1970s time period. What was the receptivity of government to your various ventures. Did you encounter any hurdles during the 1970s that were unusual?

MUNDY: Well, we encountered some political people that were rather cantankerous, so to speak.

FROKE: These were personalities?

MUNDY: That's personality problems. But as far as the communities and our ultimate subscribers, for the most part they were kind to us. They wanted the service. We gave it our best shot to give them what they wanted and they appreciated that. They were very faithful but their elected officials weren't necessarily in that light. Unfortunately it seems in politics, and I shouldn't say this, but it seems in politics that you have somebody involved in the council or some other facet of corporate government of a community and they'd never had any notoriety in all their life and suddenly they're elected to this office and now they're looking for notoriety. They seem to have a passion for pursuing that. But we could always cope with them. Sometimes it wasn't too pleasant but in the end ...

One thing, we were always honest. We told it like it was. If we made a promise, we tried to fulfill it. We never did any deals under the table. Now there was a lot of that crap going on. We ran up against a lot of it but in being honest we prevailed in the end when those things were actually taking place in the franchise battles.

FROKE: The 1970s were also the years in which some of the promise of cable television were being written about. The Wired Nation which lead, I think, to probably some of the big mistakes of the cable industry ...

MUNDY: Blue skies.

FROKE: Blue skies type of stuff. Did you and Bob deliberately make a decision to shy away from that kind of a thing? You didn't seem to get caught up in it.

MUNDY: We didn't purport to do something that we weren't sure we could do. We would allude to the possibility at some time--these other things being available--but we didn't tell them that we were going to bring them to them because they weren't available at that time. We told them point blank what we were capable of doing, what we would do. We even had their format laid out for the system--the whole bit--in our presentation and that was it. We mentioned the fact that as technology progressed and the market was there for these things, that it would be a natural evolution, that if we were still there we would provide them if they were available but they weren't available now and we didn't say they were available.

FROKE: That contributed to the sense of integrity of your operation as well.

MUNDY: Right, and with the financial people gradually ... it enhanced our position with them because they knew we weren't going out and presenting a program that couldn't fly.

FROKE: Three years ago I had the privilege of being invited to your celebration at the Atherton Hilton Hotel and you had many financial interests from all over the country.

MUNDY: That was when I was so emotional that night I couldn't even talk when I looked over that room.

FROKE: The testimonials that were coming from these major metropolitan bankers from all over the country.

MUNDY: Many of the bankers that were in that room that night actually attained their position in the bank as a result of loans that they helped put together and financings they helped put together with Tele-Media.

FROKE: It looked good for them.

MUNDY: And they were literally promoted. Some of them had been promoted when they were present at our closing; a phone call would come in that you are now so and so. That happened at different times.

FROKE: What would explain going from one financial company to another--simply the availability of dollars?

MUNDY: The availability of the dollars ...

FROKE: Because there were so many of them that ...

MUNDY: Well, the point is that it doesn't take you long in a major effort to hit the lending limit of a bank. So that's one problem. The other thing is that bankers kind of hold hands and personnel change and many times you followed the personnel because a bank would decide that they're going to get into cable and they take ... personnel would leave this bank and go over there. Now they have a whole new situation and we would follow them there.

FROKE: And undoubtedly there's a sense of competition also that once they know that you're out looking for a purchase in an area why they would be coming to you.

MUNDY: But we developed a relationship with some of the people in the financial world that we were faithful to them. They helped us. Now they're in a situation where they're the new boy on the block and they have an opportunity to do something. They come to us and say what are you fellows going to be doing and is there some place for us and so forth. If we had a place for them, they had it. And that's the way it works.

FROKE: The 1970s were also the time period when cable began to put much, much greater emphasis on original programming. Prior to, say 1970, most people perceived cable television as delivering broadcast signals in a viewable manner.

MUNDY: We had the old weather scan and things like that.

FROKE: That's right. But come the middle of 1975 and the satellites and so on, all of a sudden cable programming began to change. What were the challenges of that time period for you and Bob?

MUNDY: Well, of course, satellites weren't quite in yet. But cable programming started to come along and the biggest challenge to our whole industry was to utilize the program sources to the extent that they could exist because their revenues were solely from cable. This was the problem and that's where a lot of the failures came early on. It wasn't the fact that they wouldn't ultimately have been good program sources, they just didn't have the financing. We, as cable operators, could only finance so much. We had to stay within the framework that the market would bear. That was the battle. One of the guys that helped most idea-wise and investment-wise and so forth in this whole scenario was Dr. Malone. I can remember having lunch with him at different times and he was always saying we have to get programming into this industry if we're to be successful. He was one of the guys that pushed that from day one.

FROKE: HBO, I believe, came on with their satellite service, pay service, in 1975 and they were ...

MUNDY: I don't remember when they had satellite. The pay service, at first, came in with terrestrial microwave. New York Penn in this area. Remember we had to feed in New York stations. Ultimately they brought us Home Box Office. So, terrestrial microwave and then from there into the satellite program. The satellite program made our industry.

FROKE: Now then, you had to rebuild sometime during the '70s in order to accommodate the larger number of channels. Did that pose a financial problem for you.

MUNDY: Well, it was bound to but ...

FROKE: How did you handle the demand for it?

MUNDY: If we really stop and think about it, there weren't that many available. HBO was about it. There were different things tried. The financial network and stuff like that but ... they did that teletype initially.

FROKE: GridTronics was trying to fool around with what eventually developed into The Movie Channel.

MUNDY: That's right. But these people weren't on line. HBO was the first one we had to accommodate so we literally dropped some duplication we had on network television, opened the channel up, and put them on.

FROKE: So you were up to twelve channels at that time and you were ...

MUNDY: That's right and we were at twelve channels for a long time because we didn't even have ... early on we didn't have the equipment to go beyond that that was really proven. Even the first two-way equipment was twelve channel equipment and that was developed in Canada. The cross-over filters, as I recall, were developed by Cascade. They made the first cross-over filters but it was still twelve channel equipment and we actually used that in the early stages just to send information of origination type from the office to the antenna site and put it on the cable system.

FROKE: The 1980s were the time period where you ...

MUNDY: That was the blooming, when things started to ...

FROKE: And that's when you had to really face the cost of rebuild.

MUNDY: But we were in business from '70 so in our plants for the most part we had anywhere from five to eight years already in them. Many of the plants were financed with an amortization of ten years with a balloon at eight so we actually paid the system off at the end of eight years.

FROKE: And you were ready to borrow again.

MUNDY: That's correct.

FROKE: Timing plays a great deal of difference here, doesn't it?

MUNDY: And this was Tudek's expertise. The same way when he anticipated that the interest rates were going to go wild, he said we've got to do something about this. He finally came up with a plan to cap the interest when we went in to borrow the money to begin with. Well the bankers weren't thinking interest was going to go wild and they capped it for us with the idea that surplus went to the end and the loan was paid off at that time. Well that saved our butt. That whole Lake Erie complex was capped at 15 percent when interest was running 19 and 20 percent. That's what kept us out of bankruptcy because we could never, never have existed paying 20 percent interest. That's right off the top. So those are some of the things that were interesting. And that's where Tudek's expertise in this partnership came out. These were his ideas.

FROKE: It was in the 1980's that you and Bob decided to say take Tele-Media One and start all over again. What were some of the factors that lead to that decision?

MUNDY: Well, we were still reasonably--what do you say--middle-aged. We weren't ready to do any retiring and we had a lot of good people with us. We felt an obligation to those people, too. So we decided to go on and after we were at that turn around period for about a year we came out with what we called the five-year plan. And that plan was ... and we presented this to the people that were still with us ... at the end of five years we'll see where we are and then we'll make a decision what the next step is. If it's the right thing to get out of business, we'll sell. If we want to reorganize and go into a long-term situation that's what we'll do. And that's where the fifty-year plan came out--to perpetuate the company at the end of that five years. So here we are.

FROKE: In 1984 you sold out to TCI.

MUNDY: I think that was the date, yes. We didn't sell completely. We kept about 50,000 subscribers as I remember. It's a matter of record in that history. That gave us a bed income that helped support the group of people that we kept on board in the interim and reassigned.

FROKE: But there must have been some overriding reason why you wanted to say get out, so to speak, in 1984 and start all over again.

MUNDY: They were all sound business reasons.

FROKE: They were business reasons.

MUNDY: That's right. Period. In any company there comes a time ... we'll call this a reorganization. This had to do with debt. It had to do with the condition of the marketplace at the time. All of those factors came in and it was the right thing to do. Now we went to TCI and we never intended selling all the subscribers we had. We only wanted to sell them 50,000 subscribers. That was a debt-deduction effort. After we started negotiating with them, they came up with the idea why don't you sell it all to us because the systems in many cases were contiguous to plants they already had and it was an ideal situation for them. Stuart Blair, who was formerly a vice president in Chase Manhattan, at that time had gone to TCI and he's the guy that kind of brought this together. He was deeply involved in this.

FROKE: Tele-Media could have continued but ...

MUNDY: We could have continued but it ...

FROKE: From a business point of view ... from a financial point of view?

MUNDY: A business point of view at that time and what the near future looked like, we came to the conclusion that we had better reduce some of this debt so we can press on with no problem. We never wanted to be strained or up against ... having our people scrambling to meet debts, so to speak. So that was how that all came about.

FROKE: In the hindsight you feel that was the right decision?

MUNDY: I have no doubt, I have no doubt. It all worked out fine and here we are. I guess that's all I can say.

FROKE: And in 1984 you and Bob and all of the people that you held together began to rebuild from ...

MUNDY: That's right. Now you must understand one unique thing about Tele-Media. Our key people all have equity in this company and there were a number of them at that closing with TCI that ... we made several of them millionaires because of the equity they had. Part of which they earned while they were with us. Some of them had put in equity coming in. So they played a big part in the decision to do this after we presented it to them. We had sold them on the idea. We weren't obligated to but we did. And to this day when we go into major changes our management team has considerable equity in Tele-Media Corporation.

FROKE: In addition to that you kept on all of the people from your old Tele-Media, so to speak.

MUNDY: We've only ever lost one key person. The rest of them have been there in that management group with us since they came on. Now in the last five years or so we've taken on some new young blood. We've enhanced our accounting department and we've enhanced the legal department. We now have in-house legal. Allegretti was the first attorney that came with us from Buchanan, Ingersoll but he's primarily now engaged in the financial side. Allan Jacobson from State College is on board and has just been promoted to corporate attorney and he's in the process of hiring an assistant attorney to work with him. These things have all been done to make our internal working closer and more expeditious and to reduce outside overhead.

FROKE: With the accumulation of equity of staff on the first sale, and the fact that you kept everybody on in order to go into the second generation of Tele-Media, and some of the corporate decisions that you have made related to assuring the future the company by giving amenities to many of your staff, Tele-Media, then, in the industry has established itself as having a very, very ... well the word I'll use is not appropriate but it gets to the heart of it ... paternalistic attitude towards its employees. Is that something that you and Bob deliberately set out to do to make your company so receptive to caring?

MUNDY: We'll go back to TMC--our logo--Tudek, MUNDY: and Coworkers. That's been from day one. We've carried that concept through from day one because both of us, Tudek and MUNDY:, felt that in past times in our life we had been treated unfairly with organizations that we had been with for one reason or another and in our company we didn't want that to occur. We recognized how important these people were if they stayed with us. We couldn't make the company by ourselves. These people will help us make the company if we give them the opportunity. So that's been from day one.

FROKE: So Tele-Media Corporation really has another name--Tudek, MUNDY: and Coworkers.

MUNDY: That's right. And "C" is for coworkers. Always has been from day one.

FROKE: That's a very, very nice management plan.

MUNDY: Well, it's paid off for us. Some people look at us and some of the things we do, the promotional programs or incentive programs we've put on, the number of couples we've sent to Hawaii on trips they've won, and all this kind of stuff ... some of the bankers kind of look at us and wonder about that. But every buck we've spent in our people has been returned to us many fold.

FROKE: On that good note I'm going to pause for this first taping session and I'll come and see you tomorrow morning at nine o'clock.

MUNDY: Okay, fine. I'm not going to ask what I'm even supposed to talk about.

End of Tape 2, Side A

Tape 2, Side B was not used

FROKE: We are continuing with the oral history of Ev Mundy being taken in his offices at Pleasant Gap, Pennsylvania, just outside of State College. The date is the 27th of November and we're picking up the second of the sessions that we are having with Ev, trying to keep each one of them around two and a half to three hours so one doesn't get too tired.

Ev, thank you again for giving me some of your time to work on the oral history.

MUNDY: Most certainly.

FROKE: We have been talking for the most part in a chronological way although we keep moving back and forth on some topics from time to time. So let's continue that same process. Although we've not adequately explored everything prior to 1984, I'm going to ask some questions this morning that would continue a little bit of the chronology from that date.

Nineteen eighty-four was the date that you sold your first Tele-Media organization so to speak to TCI.

MUNDY: That's true. That was the major sale. We had made, of course, the Florida Keys sale to TCI prior to that but that was basically Tele-Media's major sale and it was to TCI.

FROKE: What prompted TCI to get into the cable business down in Key West, Florida? Did your fishing interests draw you there and through that circumstance you became aware of the availability of the Key West system or are you a Hemingway fan?

MUNDY: Well, I respectfully doubt that either case prevailed. As far as TCI's involvement in the Florida Keys, it was a classic system and it was just plain a good business deal. John Malone came down there and did a considerable amount of study personally and he liked some of the engineering achievements that had been accomplished in the Florida Keys in the line of microwave as well as the earth receiving situation. The system had a lot of appeal to Dr. Malone and that's what did it plus the fact that it was an excellent business proposition for them because of the microwave. I think they envisioned the microwave to become a part of their common carrier division that already existed. So it was ideal for them.

FROKE: So they saw it fit into their total business plan.

MUNDY: That's correct.

FROKE: When did you buy the Key West system? Do you recall?

MUNDY: Oh, boy. I think we had it for about five or six years. So we'll move backwards from that and we'll come up with the date.

FROKE: So that would probably be about 1977 or '76, somewhere in there?

MUNDY: That sounds about right.

FROKE: How did it come about that you bought the Key West system or was that an original construction on your part?

MUNDY: No. The Key West system was probably one of the first cable systems in the United States. Actually it didn't operate as a conventional cable system.

FROKE: Because of the distance from television signals.

MUNDY: They had no signals except Cuba and they put in a broadcast-quality studio and operated it really as a closed-circuit television station providing the programming from the studio. It was all broadcast quality. You could have set a transmitter in there and put up your antennas and gone on the air and met the basic requirements for a television station.

FROKE: And they would acquire programs from CBS, NBC, and ABC and play them back on their system.

MUNDY: They did a lot of that and they also originated an awful lot of programs there. Because of the bilingual nature of the Florida Keys, they tailored the programming to that group. And they also carried Cuba on there. When we bought the system, some of their own original antennas for Cuba were still in place down there.

FROKE: What prompted you to buy it or how did you learn about its availability?

MUNDY: I'm quite sure that was brought to us by a broker and then after going down there and meeting the people involved--the Spotswood family primarily--the whole situation appealed to us. It was quite a challenge. It didn't turn out quite as we had originally planned. The two plants in existence at the time were Key West and Marathon. Both of which were in very poor technical condition. We envisioned basically doing a certain amount of repair and upgrading in those plants and then going into the construction phase to increase the subscriber base but it didn't work quite that way early on. After we were there a few months it became obvious that we had to rebuild those two plants and then go into construction for expanding the systems. But it worked out very fine.

FROKE: I want to come back to that from a technical point of view at a later time. Here from Pleasant Gap, Pennsylvania, so few people in State College would know that your company was actually operating on a national basis and engaged in business down in Key West, Florida.

MUNDY: That's true.

FROKE: How have you and Bob Tudek--and this doesn't have anything to do with anything we're talking about-- how have you and Bob Tudek been able to do this in such a quiet way? Here you are one of the largest multiple system owner cable systems in the country and there are very, very few people in State College that really know the scale and scope of what you have accomplished.

MUNDY: Well, Bob and I, number one, have always been low-key type individuals. We never looked particularly for any notoriety. So with the contacts we had within the communications industry, people took us to these opportunities and we discovered some of them on our own. Early on most of our administrative functions were based outside of this area. For instance, our accounting department was based in Ashtabula, Ohio, early on. And he and I commuted there. So really back here about all we had was the engineering function and administratively my office and Bob's office with our secretaries and that was it. Then we moved the whole accounting department back to Happy Valley down in the Bellefonte area. We bought a building and put them in there and that's the way it's been. We've just been low-key. We didn't want vendors ringing and beating on our doors. And so we've been able to operate very well.

FROKE: It's an amazing story. It is actually one of the finest cable television organizations in the entire country but yet it's tucked away here in State College where very few people know about it. Obviously you're widely known in the cable industry for a wide variety of reasons.

MUNDY: Well, thank you. That's about the size of it. I think recently several times when we got into the broadcast business Zimmerman brought out the point that people in the area didn't realize who Tele-Media was and the extent of their business activities and the fact that they had almost 100 people employed locally in Centre County operating here from this complex. I guess we didn't really realize that we had that many until we went through a phase of looking into the future and what our physical plant requirements would be for this organization locally.

FROKE: When you began rebuilding for your new Tele-Media, you had been the twenty-first largest cable system in the country--multiple system operations--and you were operating somewhere around 400,000 or 500,000 subscribers. What lessons did you learn from that that resulted in changes as you began thinking about what you were going to do in acquiring new systems and building your new organization? What were some of the new things that you drew upon for experience? Or did you say things worked well based on the guidelines we'd used before--the principles we'd used before, the business plan--and were simply going to be successful in the same way that we were before.

MUNDY: Well, that's a pretty difficult question. I don't think that we had any real basic changes in our philosophy as far as the business and how we envisioned the company as to its structure. Certainly when we started on the second cycle we were more knowledgeable than we were and experienced than when we went through the first bit. We used the same basic criteria, if you will. One of the big advantages we had, and this is an advantage and not a change, we had a management group put together who were used to working with one another and that really probably was the thing that enabled us to go as rapidly as we did. Early on we were very disappointed in the plants that were for sale. The problem was the plants were run down, needed rebuild, and the owners weren't willing to recognize the fact that these would have to be rebuilt when they looked at the price they wanted for their properties. But, no basic difference in our concept. We had the same philosophy. The biggest single advantage was that ... well there were several. One, we were known in the financial community. Two, we had a trained management group that was used to working with one another and that's what's made the second cycle as successful as it's been.

FROKE: So you were looki