Interview Date: February 4, 2005
Interview Location: Unknown USA
Interviewer: Steve Nelson
NELSON: Susan, let's just start back, go way back and talk about your childhood, growing up, where you grew up and particularly what TV meant to you when you were a kid.
PACKARD: Well, I grew up in Detroit, so I'm from the Midwest and we had Canadian import channels as well as the broadcast nets because we were so close to the border. What did TV mean as I was growing up? It was a companion. We used it when we came back from school and we would do our homework to TV, we'd have dinner and the TV was on all the time. It was just part of our lives. My memories of some of my favorite TV shows were some of the sitcoms that were a lot of fun, Ed Sullivan, those kinds of shows growing up.
NELSON: And was something like Ed Sullivan kind of family get together and watch TV?
PACKARD: Yes, Sunday night family time, that and Bonanza. Those were...
NELSON: Put the show on and leave it on, no remote control.
PACKARD: Oh, no. Not even color. I guess I just dated myself.
NELSON: Well, maybe you just got color late, that's all. We'll just assume that.
PACKARD: That's right, that's right.
NELSON: So you grew up with TV in the background all the time, but did you have any expectation that this was something you would get involved in because we all grew up with TV in the background and most of us never thought we'd get involved in it.
PACKARD: No, not at all. No expectation. And even through school, even though my advanced degree was in telecommunications I wasn't sure what part of it because I was always more attracted to business than to pretty pictures.
NELSON: So what did you study when you went away to college?
PACKARD: My undergraduate was in advertising and then I stayed on and had an emphasis in telecommunications at Michigan State, but it was a lot of research and business and media classes, but more theory. So, I thought I might get into a research company or I might get into an ad agency, something like that, with that background, and actually I did end up getting into a research company. That was my first job.
NELSON: And what was that?
PACKARD: At Burke Marketing Research in Cincinnati and I wrote questionnaires and did field studies and did mall intercepts and went into people's homes and did all kinds of research work, which was pretty interesting.
NELSON: What did you learn from that because now you're getting an inside view of who these consumers are, what they want, what their tastes are?
PACKARD: It was absolutely the foundation for the work I've done here at Scripps Networks for the last ten years on the development of new businesses – starting with the consumer and what the consumer wants. Research is research. You believe research but then again you have to have your own intuitive feel and gut about what research tells you, but it is directional so that helped, that discipline of talking to the consumer and understanding what their wants and needs and passions were. It was very helpful and kind of laid the groundwork for the work I did in cable.
NELSON: I'm skipping ahead here for a moment, but today are you still using that... is there a heavy research component of what you're doing here? Are you really drawing on that?
PACKARD: Yes, in the last many years as we've developed new networks and new businesses we have. For example, Hispanic, which we're still evolving here, we've spent three years in the field talking to consumers about what they'd want from a Hispanic network. Certainly that was the case with DIY – all of them! Food we bought, so it was already up and running in 28 million homes.
NELSON: But everything else was really thought out in terms of what you were learning from the marketplace – not, hey, I've got this great idea, let's do it.
PACKARD: And some of it wasn't theoretical research. Some of it was, for example with DIY, when we started HGTV we started with a call center so we had people calling us, writing us, emailing us questions, things they liked and things they didn't like and that evolved and we saw that as we were evolving HGTV to be a broad lifestyle network we saw that we were leaving behind, if you will, the hardcore how-to user and viewer, and so we recognized that we had to have an opportunity to reach out to them and to offer them some kind of a dedicated television service.
NELSON: Okay, we'll get back to that, but I want to go back to now you're still in Cincinnati, you're still doing market research, how did you then move on from there and why?
PACKARD: Well, I'd love to say that this was a great master plan, but what ended up happening...
NELSON: We know that's not true!
PACKARD: It's not true! This girlfriend of mine was at HBO, and this was 1980, and HBO was just starting to staff up and she called me – I was in Cincinnati, she was in Chicago – and she said, "Look, I'm having the time of my life. This is a lot of fun. It's called subscription television. We need people. I know you could get a job here. Do you have an interest?" And I thought, hmm, write questionnaires or have fun in Chicago? It wasn't a hard decision, so I moved and started at HBO and that's how I started in cable television.
NELSON: But you went to Chicago. Was that at an affiliate relations office there?
PACKARD: Yes, yes.
NELSON: And you had really no background in cable? At that point were you a cable customer?
PACKARD: Oh, yes, I was a cable customer, and the other background I had was when I was at Burke in marketing research I wrote a paper on the Qube service that was up and running then. So it was all sort of theoretical background.
NELSON: Well, since that whole interactivity kind of comes into play later with the web and all that stuff, what was it you learned about Qube, which is a very famous episode in cable's history although ultimately unsuccessful and probably way ahead of its time, but what did you learn about that? Anything interesting?
PACKARD: Well, again, it was somewhat theory based, but there was an interest on the part of people and being able to interact with their televisions and having choice and control over their televisions. It was a little bit overwhelming for the majority of people because they didn't know really how to use it and they weren't trained to use it. So there were some good learnings back then about it, but frankly it all was put on hold, as you know, for quite a long period of time before the industry picked it back up.
NELSON: Okay, so we'll let you move to Chicago now. Tell us some of your early experiences. You suddenly show up, you're now in the cable TV business, and actually at a pretty interesting place, obviously, HBO. But affiliate relations – how did you pick that up? You didn't come there knowing a lot of cable operators at that point, obviously.
PACKARD: No, no. Well, the experience at HBO for everyone in that era was very team-based. You rarely would go on sales calls alone. There was a lot of training. HBO was great with training and so you were trained to sell, you were trained to negotiate, you were trained to close. There was a great foundation at HBO to go into sales and marketing. You had to have a marketing sensibility because not only were you selling distribution, you were selling the programs, the marketing programs, and that was a very important part of what you were doing so that it's obviously very different from basic, but you not only had to get distribution, but you obviously had to get penetration in a system, so you wanted to maximize the number of people that were actually going to subscribe to the service in a system. That was the marketing program we provided to the operators at HBO. I had a lot of marketing background, I had the research background, and selling is not... frankly everybody to a certain extent does some sort of selling whether they call themselves that or not. So that was the beginning of my career.
NELSON: When you got to HBO was there anything there that really struck you in your early days there like, wow, this is really interesting, this is a great business, I made the right choice, or what am I doing here?
PACKARD: No, from the very beginning I had a great feeling about the power of the business, the subscription business, and the offering. I thought the offering – movies, sports, specials – really covered the gamut, and the original movies and... It was led by a very smart team of people. To this day look at the success of HBO, so I was delighted, excited, enthused, and just had a great feeling that it was going to take off and it did. In the early '80s we had that blip with the VCRs.
NELSON: Right, right, which added a lot of value, obviously, to your subscription.
PACKARD: Yes, but there was a worry about VCRs. Oh my God, what did that really mean, and then you had the Blockbuster videos started coming. So there were these little blips along the way that we all took a pause and said, "What's that going to mean for the business," but they ended up, if anything it all enhanced the subscription business.
NELSON: Did you do a lot of traveling, going out to see cable operators?
PACKARD: Yes, yes.
NELSON: I know I've talked to other HBO people... as you said, you tend to go out there in teams as opposed to all by yourself. What was your sense at that point in time of the cable business and the people you were dealing with?
PACKARD: It tended to be... again, my territory was Midwest, so at that point in time I was moved quite a bit with HBO but in the beginning it was Midwest, so when I would go to visit these cable guys they would love to take me to pole climb and show me the headends. It was the beginning, and I actually was pretty interested in the technology, so we would do that and I would take them to lunch at the Shoneys and we'd talk about business and their families, but it was fine. I had territory responsibility as one of my jobs but then they moved me into something called area marketing management, targeted area marketing management, which was still a field job. What we tried to do was get DMAs cooperating because at that point in time, of course, there wasn't the clustering, so Detroit, Chicago, some of these territories I had you could have a dozen operators and so we tried to get them together to do united marketing programs and that was a real political challenge. HBO would come in with some financial support, marketing materials and bring them together. So I had that job, which really just tended to be a marketing job as well as the field responsibility for a period of time.
NELSON: HBO was always good about putting money in behind the operators and behind the programming, and in a way unique in that regard.
PACKARD: To grow subscriptions. It was all self-serving.
NELSON: But you left, you left HBO.
PACKARD: Well, I ultimately left, but I was there for eight years, and I was moved... I started in... I went from Cincinnati to Chicago, Chicago to Dallas, Dallas back to Chicago, Chicago to LA, all with HBO in eight years.
NELSON: And these were jobs in these places, not just traveling?
PACKARD: Yes, all HBO jobs, different territories, and then in '88 I left.
NELSON: And you went to a start-up network, essentially, with CNBC. Now was that at the very beginning of CNBC?
PACKARD: Yes, yes.
NELSON: Now why did you do that? By '88 HBO had become a real powerhouse and how you're looking at a start-up in an area where – in the late '80s there had been a lot of financial finagling going on out there in the marketplace. It was kind of a questionable proposition. FNN was going down the tubes, which was kind of ironic, a financial network going bankrupt. What made you make that move?
PACKARD: By the way, FNN going down the tubes wasn't the case when I joined.
NELSON: That was still going on?
PACKARD: Yes, it was still the competitor and there wasn't a sense that there were issues with FNN.
NELSON: So then why would you go to somebody coming in as number two in the market if you have an established competitor in that program area?
PACKARD: That's a good question. It's the flip of why I left HBO. I left HBO because at that point in time it was a powerhouse. I was a director for the Los Angeles market. What I did was go out and try to get operators to use marketing programs that were canned programs that I didn't create. It got to be a boring job, whereas the challenge of creating a new business, albeit that there was a competitor out there, with the resources of NBC I didn't think that this was going to be that... obviously I knew there would be risks, but I thought with those resources that... and I liked the team that I'd met and was just excited to start something new.
NELSON: So tell us about your first day on the job or your early days there. Impressions, people you worked with... now you moved, obviously.
PACKARD: I started in Los Angeles with them. I started in Burbank so I wasn't moved at that point.
NELSON: Oh, were you in LA at that point?
PACKARD: Yes, yes.
NELSON: Okay, it was one of your HBO stops. So you hopped out onto Burbank in LA.
PACKARD: Yes, went up to Burbank, but then eventually I did move to start up their Midwest area out of Detroit, which is home, so there was an attraction for me to do that. The early days were exciting and alive and we were all together choosing booth designs, just like a start-up. We did a little bit of everything – marketing, PR, obviously all the distribution work in the very beginning.
NELSON: Did that give you a chance to kind of expand your professional abilities at that point?
PACKARD: Yes, the good thing about... if I had a takeaway from CNBC other than another start-up and you have to be multi-faceted with start-ups, the other takeaway was my boss, her boss and his boss and his boss, they were all lawyers. It was very much populated with lawyers.
NELSON: In affiliate relations and marketing?
NELSON: Hmm, that's interesting.
PACKARD: So while I wasn't trained to be a lawyer, I learned how to be a lawyer, if you will – on the job training.
NELSON: Talk lawyer-ese?
PACKARD: And do deals, and you know, it was pretty sophisticated stuff. Retransmission consent was part of what we did. Those were complicated deals, so that was a good takeaway for me when I left CNBC.
NELSON: So you had a lot of... because that was that '92 Cable Act, so you had a lot of involvement with retrans at that point?
PACKARD: I absolutely was one of the key team that did those deals, yes.
NELSON: Now, anything else about your days at CNBC before we move on and get to where we are?
PACKARD: I don't think so.
NELSON: Okay, then why did you leave? How did that come about because I know you joined, again, another start-up right from the get go?
PACKARD: It's the definition of insanity, by the way.
NELSON: I think you were number 2 employee, is that correct? Were you the second employee here after Ken?
PACKARD: Yes, if he counts!
NELSON: If he counts. So you've got this guy starting a network and he wants to bring you in. By this point, of course, CNBC has really got a lot of wind in its sails and is really moving. Now, once again, you're going to leave something that's really established for the challenge, and here you've got one guy saying I'm going to start this network and you jump on board. Why was that?
PACKARD: Are you basically suggesting that I'm out of my mind?
NELSON: No, I think you obviously were very much in your mind given where this has come! Maybe you're very omniscient. Got any bets that I can make?
PACKARD: It was a similar situation. CNBC was established. It felt like my job was done and I can't explain it any better than that, whereas here was a new opportunity. The reason I even knew about this opportunity as much as I did was because I was calling on, for CNBC, the Scripps Cable Group. So I knew Scripps from that standpoint, I knew their culture, I knew they were starting this home and garden television network. I actually thought it was a great idea. I was surprised that something like that hadn't existed yet. So I was excited about the idea and I met Ken Lowe and Frank Gardner at a cable show; they walked me through their presentation and their thought process behind why they thought it was a good idea. I totally agreed with them, and it just felt like the timing was right for me to start something new with them – great guys, great first impressions of them – and they also were going to allow me to stay in Detroit, which was home for me, and we owned WXYZ at the time, still do, Scripps does. So I set up shop at our television station and hired people and people started moving... well, most of the people I hired were from Detroit and they just worked with me at WXYZ, and those were the very early days, and then I realized as we were setting up here in Knoxville that it was actually harder on my family because I was here all the time, never in Detroit, that I might as well just move them to Knoxville and that's what we did.
NELSON: Talk a little bit about those Scripps cable systems because you had some different exposure to them than being part of the company. You were calling on them. What was your impression of those cable systems, how Scripps ran them, as opposed to, say, other cable systems that you had because you had dealings with a lot of cable systems in, of course, that territory, a lot of operators?
PACKARD: But again, my territory... well, of course I had had LA at that point. You're right. I was thinking Midwest. They were a classic Midwest operator. They were no different from any other Midwest operator. If you went to some of the more sophisticated territories, in LA, for example, you found that there was a difference in terms of the management.
NELSON: What was that?
PACKARD: Probably more marketing savvy, the need to be more marketing savvy. More than anything else I would say it was that. The technologies... they invested in the same way other operators invested and in that point in time... let's see, where are we now? It's 1995 – they were investing in upgrading plant the same way other operators were.
NELSON: Although some of the big investments that operators faced were really in the future, and that will lead us to, how in fact, they exited the business. But talk about marketing – essentially it's a company that has a lot of broadcasting properties, newspaper properties, was there more of a broadcast culture, would you say, that even permeated cable or did the cable companies because cable was for a lot of people very decentralized and they just had a system manager and he or she was just another person that was like any other system manager anywhere else?
PACKARD: Are you asking did the cable division have more of a broadcast culture?
NELSON: Well, I'm looking for how did the broadcast/newspaper culture spill over, if at all, into the way they ran their cable systems versus a lot of these guys that you talked about going up poles and taking them to lunch at Shoneys – guys that sort of came up in the cable business, that's all they knew.
PACKARD: No, I would say that that division was very cable-centric. It was not at all allied with... the divisions were pretty separate. The influence of broadcast was more in the creation of our division and even then there really wasn't much because while Ken had been a part of the broadcast division, when you think about broadcast all of the images of it being a mature business and those kinds of things, he was very entrepreneurial, so he broke stride with what the normal image of broadcast was in managing and leading us here in terms of the creation of HGTV.
NELSON: And of course one thing that's always driven broadcasting very strongly is programming, number one; and marketing, number two. Because broadcasters have always used their assets, their on-air assets, as marketing tools.
PACKARD: Yep, it's true, but on the other hand – you can look at the good or the not so good, there wasn't an understanding or a belief that cable was going to break out.
NELSON: It was still an inferior medium.
PACKARD: Yes, exactly, and they were mass media and they reached everyone and here was little cable coming along. They just didn't have the vision of what cable could do or be.
NELSON: But they did give Ken the money to start this network.
PACKARD: Well, "they" meaning E.W. Scripps. I'm just talking generally about the broadcast group. You probably should talk to him about that.
NELSON: Oh, I will! But I want to see from your perspective as somebody... Ken has the vision, he gets the backing from the company. I don't know how you two connected, but you did, and he said, "Well, come work for us. I've got nobody working for me but we're going to start this network," and you're saying, "Okay."
PACKARD: Yes, sure, no problem. Well, the reason I connected with him was through – he'll again explain this – the cable people gave Ken a list of who they worked with, the representatives that they worked with. I was part of that list and we were in good-standing and had a good relationship, and so he called me. He explained that this is how he had heard of me. He didn't go through headhunters or anything like that.
NELSON: This is through the affiliate relations with the Scripps cable systems?
PACKARD: Yes, exactly. So that's how it started and then we met at a cable show and he and Frank showed me the presentation and I really was blown away by it.
NELSON: Well, why? What was it in their presentation? Because you felt that, hey, why didn't somebody do this already, like one of those light bulbs goes off, and wow! Of course! Of course there's a niche for this!
PACKARD: Right, right. Well, again, comparing it to the other start-ups I'd been involved with – and I was also involved with some start-ups at HBO. I was involved with Cinemax and Festival, which didn't make it, and then of course CNBC and America's Talking. There was just so much more fleshed out thinking and consumer focus and analogies to print, analogies to... one of the things that Ken talked about is if you look at a newspaper and you look at the sections of the newspaper, why is it you have every other segment represented by cable networks...
NELSON: Sports, business, news, etc.
PACKARD: Exactly, exactly, just all of these things that came together and how big the idea was. When I first heard it I said, "I like it and it makes sense and I think it's going to have consumer reception, but I don't know big it is." And then you start thinking about every room of a house being a show and then you start thinking about what other categories could fall under this and you realize how broad the idea was. So it was all of those things that got me excited about it.
NELSON: But at that time, if you really look at even the more niche oriented cable networks, they were all really based around some entertainment premise – movies, music videos, or whatever it was. Other than news, the CNN type thing...
PACKARD: Or Discovery.
NELSON: Yes, or documentary, you didn't really have something that was quite as informational, not to be confused with DIY but sort of hands-on, here's something you can do. What gave you the sense that this was the stuff of TV shows?
PACKARD: Well, it was Ken's vision, not mine, and what he would explain to you is that he had built a number of homes. I had not built any homes at this point.
NELSON: It sounds like you were traveling too much!
PACKARD: Yes, I was lucky I even had a home. He had built, I think, three or four homes at that point and he had realized in his love of doing that and the exploration of that that there wasn't this dedicated resource that he was looking for. He could watch a show here or there on PBS, but to have a dedicated cable network, it didn't exist. Putting all of this under one roof was something where the time was right for it.
NELSON: So you bought into the idea.
PACKARD: Yes, it made sense.
NELSON: Who else came onboard as part of the start-up team that you were working with at the time?
PACKARD: Well, there were people that I brought in to the Detroit office – Doug Hurst, for example, who's now SVP of affiliate sales and marketing, he does the affiliate marketing part of our job; Annette Lindstrom, who I brought aboard and she's now HGTV's VP of marketing; Pam Tracy, who was with ESPN and she's now our SVP of National Accounts. There are a number of people that I brought aboard to work for me and then there were my colleagues, who you're going to talk to some of them today – Ed Spray, who came aboard to do the programming; Burton Jablin, who worked with him on the programming. And then here we had Jim Clayton, who was here. We had bought Cinetel, which was the production house here, and he was their financial person and he's still with us and he's our CFO. Who else was around in those early days? Mark Hale came aboard from E! He was with them and then he was one of the first people and he's now our EVP of all facilities ops. He runs all of that.
NELSON: It's interesting because you're ticking off lots of names of people who were there pretty much from the get go and that are still around. What is it that not only attracted people here but kept them here because it's a business where there are lots of opportunities and there's been lots of growth and there have been lots of new networks and all sorts of news technologies, and yet there's something about... of course, there's been a lot of growth here, too, but what is it that you see about this place that's kept people so involved and interested? Since you told us already that in your other jobs you got to a point where you got bored and it was time to do something else.
PACKARD: That's never been the case here, 10 ½ years later.
NELSON: When you joined HGTV, what was your position? What was your title? More or less.
NELSON: EVP, but were you the person in charge of affiliate relations?
PACKARD: Yes, again, in the very beginning we did a little bit of everything, but the primary responsibility I had was distribution.
NELSON: Okay. So you had to go out, you had to talk to cable operators – hey, we've got this great new network, HGTV. What did they say? What kind of reactions were you getting? This was before you went on the air, I assume that you're getting ready and you're talking to people and saying, "Hey, how about carrying us. Here's the deal..." What were the reactions out there?
PACKARD: Well, it was a mixed bag. There were a number of short meetings.
NELSON: Why? Did people just dismiss the idea?
PACKARD: I think partly it was the fact that E.W. Scripps had never done cable networks below so there was some question.
NELSON: A little skepticism?
PACKARD: Yes, some skepticism. There was an inability... it was 99% male that I was calling on, and they couldn't relate. It's not like selling a sports network or something like that. Probably those are the two main reasons why. And then, of course, a third reason is they never want to carry anything new because there's a cost that's associated with it. So you always start from a position of having to work uphill to get to some position of balance and getting them to be convinced.
NELSON: And there were a lot of new networks trying to get carriage at that point.
PACKARD: Well, the going forward rules were in effect and there had been a paralysis of... there were a lot of networks trying to get launched, but until those rules actually came out, the operators didn't launch anything because they didn't know what the financial underpinning of what it would look like. So when those rules finally came out, there were a number of networks that were launched but that had not gotten any distribution for 24 months. So we were up against them and we were up against... our group was History, Golf Channel, Speed Vision, Outdoor Life, HGTV...
NELSON: You mean in terms of your timing? Your sort of class of?
PACKARD: Right, we all launched at the same time.
NELSON: And interestingly, most of those that you've named have done pretty darn well.
PACKARD: Not in the beginning. History and HGTV were the only two breakouts. With the others, either their models didn't work – Golf started as a premium service, that didn't work – and these were all owned by the industry and they still didn't work.
NELSON: Talk about that. You were not owned by the industry. One of the things that was characteristic of channel launches then is the operators would take some equity in the channel. You didn't go that route.
PACKARD: Not that they didn't ask, repeatedly.
NELSON: I'm sure they did. But you didn't want to do that.
PACKARD: No, I insisted that we didn't do it.
NELSON: Why? Because that seemed like the easy path to get carriage.
PACKARD: Because I was so confident in Ken's vision, but Ken's vision required us to be independent of... we had to be able to move quickly, we had to not have a huge cast of characters that we had to report in to. We thought very differently about the business than most cable networks. His vision was much broader than a traditional cable network. We were the only ones with a call center. We still have a call center. We wanted to relate directly to the viewer.
NELSON: So what was the deal? You'd go in there and say, well, we can't give you a piece of the network, but here's what we have – because you obviously got some carriage. I think you went on-air with what? Six, six and a half million homes, something like that?
NELSON: So what was the deal? What were you offering people, or did some people just buy into the concept initially?
PACKARD: Yes, there were a few programmers who bought into the concept, but overall it was a combination of Ken, who has got a great sales ability; I was out there, I had established relationships with operators and I think a lot of trust. We had a great presentation. Even though they were skeptical they couldn't deny when you looked at how big the idea was. We had a little bit of retransmission consent we threw in, but not a lot, especially not a lot relative to the CNBCs and the ESPN2s and those guys. We offered a year free. There are just little things we did and the combination of all those things got us into about six million homes.
NELSON: Talk a little bit about – you mentioned retrans consent, which was a big factor in a lot of places those days. What was it, how did that play into your gaining carriage? You had the Scripps TV stations in certain markets but that didn't cover much of the country.
PACKARD: No, it didn't, and that's a funny story too because when I joined Ken said, "We've done the analysis and we're going to be able to get 12 million homes out of retransmission consent at launch," and I said, "Boy, that's a big number!" I remembered my days at CNBC, I said, "Can I look at this analysis?"
NELSON: Were you already working here?
PACKARD: Yes! I should have looked at it before I joined! But there was a different group who had done this analysis and it turned out that they had counted every sub out of contour, hyphenated markets, dual carriage markets, they just didn't know, really, how to do the analysis to get the one-for-one which for the most part when you went out there for retrans you got a sub for every broadcast sub. So that twelve million ended up being four million and I had to keep sharing this bad news with Frank and Ken. Week after week I said, "You know, it's not really twelve, it's ten." "It's not really ten, it's eight." "It's not really eight, it's four." They were about ready to say ugh!
NELSON: Was this creating any sense of... maybe panic is too strong a word, but dismay?
PACKARD: Well, yes, but it was start-up.
NELSON: Because you had that expectation, but they were happy to get the four.
PACKARD: Well, we were happy to get the four, sure.
NELSON: And pretty much you got the four as part of the six start-up?
NELSON: Now you also had some kind of arrangement where you used retrans consent from other TV stations in non-Scripps owned markets.
NELSON: Can you explain what that was all about? How that worked?
PACKARD: Well, just that there were a number of other groups who had been unsuccessful in negotiating with cable operators. They didn't know how to approach them, they didn't have any relationships with them, anything they did have with them was negative. So we had a lot of relationships – this is at the broadcast level with E.W. – with other groups. So Ken and Frank and others facilitated us working with them. We created this larger group, but the four I'm talking about included that group.
NELSON: They already included that.
NELSON: But you used their retrans consent rights and what did you give them back in return?
PACKARD: We gave them back a share of our ad sales so we had a formula, kind of a complicated formula, in our deals, which said that they could get a certain percentage of our ad sales but if we didn't make that number we gave them a floor and that floor was at that time 25 cents a sub.
NELSON: And did you feel comfortable about putting that floor out there in that deal?
PACKARD: Yes. The one good thing from the very beginning about this category was how robust the advertising sales were going to be. Again, you had furniture companies who had never really even been on television, they'd just been print based and were looking to television. You had the Lowe's, the Home Depots, you had so many endemics, gardening companies...
NELSON: That had no TV outlet, essentially, or being in an environment which didn't really relate to the product.
NELSON: You mentioned Lowe's. I know they were very significant to getting started. Talk about that relationship.
PACKARD: Lowe's was very significant. Lowe's came to us and got it before we even went on the air and if they could have had their way they would have owned our air. There were days we felt they owned our air, but they were a wonderful advertising partner. They bought spots on cable systems to promote HGTV and to promote Lowe's. They were also very smart. They were creating new stores at this point in time, and this was in the mid-90s, so both Home Depot and Lowe's were really on a rampage to open new stores, and they did research that showed if HGTV was in a market prior to their opening a store there, when they opened a store there that store did better. So they had enough to suggest that they wanted to be a huge partner with us and they were in the very beginning. They still are! They've been a great friend and partner.
NELSON: And they also, as I understand it, brought in other advertisers. They took some kind of block of your ad time and brought in other people, so they didn't use it all themselves. So they almost became your agent, in a way, bringing other people into the deal.
PACKARD: Their vendors, so what it is those companies that were selling to Lowe's, yes, they would direct to us. It was beautiful when we launched. We had all kinds of great advertising on it, and again, back to the category, these people, the viewers, are really looking for this information and they don't see a commercial as a commercial. They see it as information. So there was so much satisfaction in the viewing experience, that started spreading like wildfire. The word of mouth just started spreading.
NELSON: Among the advertising community?
PACKARD: No, among the viewers!
NELSON: Among the viewers – "Have you seen this? Have you checked this out?"
PACKARD: Yes. "Does your cable company carry it?" So that was very helpful.
NELSON: Now you must have done research on this, as well. Obviously, I know from your research background. Did you actually find that people were much less likely, for example, to zap away from commercials because they viewed the commercials as sort of part of the informational content of the show? That you had that kind of loyalty?
PACKARD: Well, it wasn't that sophisticated way back then to know. The systems weren't interactive. We couldn't really know if they were... we knew anecdotally because our call center would tell us that they loved our commercials. Our advertisers would tell us because they would call them. Lowe's – it was funny because Lowe's does all kinds of research and their customers thought they owned... some of them thought they owned HGTV and some thought HGTV owned Lowe's, but the marriage was so tight, and it was really good.
NELSON: Well, that's unusual in terms of a cable network start-up because one of the rules of thumb is that to really get any kind of advertising you've got to get 25, 30, 35 million homes. That number has sort of crept up over the years. The target gets more and more elusive, but you really started in an unusual position by having this really strong advertising partnership, and I guess that was a reflection really of the market segment you were serving, which was unserved as a television market place.
PACKARD: And not just Lowe's. I mean, Lowe's was the largest, but Michaels was a big partner of ours. Gardenway, back then, was a big partner of ours. Troybuilt. There were a number of companies that got it and they were dying to have a cable television outlet because buying broadcast television just wasn't going to be efficient for them.
NELSON: How did that help you, because I know your growth in terms of cable carriage ramped up very rapidly, it wasn't one of these sort of hockey stick kind of things where you stumble along for a few years and finally you become successful, but did that help? The fact that you had that kind of advertising support? The operators could see that number one, the viewers loved it; number two, the advertisers loved it. That must have been a nice story to go in and tell somebody when you're trying to get carriage. Did that help you?
PACKARD: We would never tell the advertising story because the advertising story, the more you told that story, the more that would suggest you didn't need fees. So you don't tell that story, and we really didn't have to tell the consumer story although we did because they heard it because their phones rang.
NELSON: "I want my HGTV."
PACKARD: Absolutely. It was a huge, powerful tool for us, just that grassroots word of mouth.
NELSON: The market pull. You're definitely in the minority of networks that had that kind of impact. So is that what you really attribute that rapid growth to? It's really just the consumer saying we love this?
PACKARD: Yes, I think it's a combination. I think the number one reason is that the consumers loved it and it had a powerful pull. I think once they knew that, once the MSO knew it they're still reluctant to launch things because they're going to be costly but we had proved ourselves as a programmer, they liked working with us. We weren't one of the biggest guys so we were very agile as a mid-sized player. They trusted us. We threw a few good parties – you know how it goes.
NELSON: Well, that goes without saying! You've got to throw a few good parties, but it doesn't necessarily get you anything except people having fun at your party. I've been to a few parties of networks that don't even exist anymore. They were good parties, but... Because of this tremendous market pull, did you ever see yourself as sort of the Maytag repairman of affiliate relations? I don't need to do anything, I'll just sit back here. I'm sure it wasn't that easy.
PACKARD: No, it wasn't. And at that time, too, you had probably 20+, 25 important distributors, as opposed to seven or eight today. So you really had to get 25 deals done and then you had to work under those deals to get the distribution.
NELSON: Because they were umbrella deals, essentially, right?
PACKARD: Yes, so no, we did a lot of work.
NELSON: You worked hard, and I didn't imply you didn't but I wanted you to get that out. So talk about how the network evolves as this carriage starts exploding in your early first three or four years.
PACKARD: Well, we started more as a how-to network and as we had more distribution and we could talk to more people about what they liked and what they wanted to see from us, it was clear that we wanted to take a broader, more lifestyle programming point of view. And so we did. We started programming it in a broader way, and in '97 – we launched in '95 and in '97 the Food Network became available. So we ended up purchasing that and we had had a little bit of food on HGTV, so we sort of pulled back from that and dedicated our food programming to Food Network. There were tweaks and broadening of HGTV as we went.
NELSON: Now you had talked earlier about the fact that most of the operators were men. They would probably take ESPN6 and 7 before HGTV, and yet that changed. Was it really just the consumer acceptance that got them to say, hey, you know, we need this?
PACKARD: It was a combination of a number of things. I would say the consumer acceptance was the most important and the fact that they were hearing about the satisfaction from their viewers and they were also hearing, where it wasn't distributed, "I want you to carry HGTV". So those were all important, but again, I also think that being a mid-sized player we had proven that we could program it; we had proven that we were good for what our promises were on the delivery of this business. We lived up to that and they were comfortable with that and they were comfortable with the relationship we had with them.
NELSON: But how about... I'm looking now at just pre-Food, you're still an independent single network with a broadcast industry parent, so you're not really in the mold of a lot of the cable networks where they're putting out their second, third, fourth programming service and there's that relationship where you're coming back, hey, we've got a new network. How did that affect your ability to work with the operators to gain carriage?
PACKARD: We had a lot of work to do in those early days – '95, '96 to '97 – because we grew about ten million a year but that still meant that there were 60 or 70 million, so we were all over the country doing our missionary work, calling on cable systems to get distribution. It was a combination of salesmanship, the marketing we did, we did a lot of trade advertising. One of the interesting trade campaigns that I created put the faces of the operators – Rob Stengel, Lynne Bunning – who endorsed the business, endorsed the network and, as you know, it's a small group and they are very respectful of one another's opinions, for the most part. So that was helpful. So there were a lot of different things.
NELSON: The classic third-party testimonial, only with their peers as opposed to a consumer and that had a big affect.
PACKARD: Exactly, exactly.
NELSON: There was a period there where there was the pay for play going through the industry. I think Rupert Murdoch sort of triggered that with his ten bucks a sub. Did you get involved with that kind of activity?
PACKARD: We had a number of different deals out there. We had a free carriage deal, or you could convert that into... we'd pay you a stipend, or whatever, but none of those deals were all that dramatic. They were just ways to continue to negotiate and get new distribution. You had to do all of it. You had to do the marketing, you had to throw the parties, you had to have a great product, obviously, you had to constantly listen, and there was a point in time where the operator needed cash, there was a point in time where the operator needed free carriage and as long as you made sure that your deals were all uniform and that you didn't violate any... that everything was equal in terms of how you treated your operators then they all wanted to work with you.
NELSON: Because it was a small world and it has gotten smaller. Did you envision, when you got started with this, the kind of essentially universal carriage that you have? Did you say this would be a niche and there's 25 million people out there that we'll get in front of?
PACKARD: I thought 30. I remember, because Ken, every time we'd get another ten he'd say, so when's the next ten and I'd say maybe another two or three, and he thought I was the biggest sandbagger alive, but in my heart I really didn't believe it would ever get to even 60, 70, 80. When we reached 30 – and I guess we weren't making money but we were really close to making money at that point in time, we could see it on the horizon, us breaking even – I said, "Ken, anything else we get is gravy. This is huge for us to have hit 30 million subs," and here we are, almost 90.
NELSON: And as I said, it's pretty much universal distribution. One of the things that happened over time as your distribution grew, your visibility in the industry grew, the recognition of you had tapped into this incredible vein of consumer interest – other programmers kind of got on the bandwagon a little bit with home lifestyle oriented shows or reality shows, talking about Trading Spaces and things like that. Did that affect you negatively, positively, did it worry you when people started doing that? Hey, they're kind of eating into our audience?
PACKARD: Well, I think you would hear all of the senior team say that we operated with a healthy sense of paranoia at all times, and when one replicates what you're doing that's acknowledgement of success, so it's a compliment. We were very watchful, but nobody had a dedicated brand, so they could do those things but there was not a home and garden dedicated 24/7 network. We felt at times that it did help us because the confusion of where those shows were coming from we got attribution for. On the other hand, we've always been very watchful and we still are with what's going on in the home and food, mostly home, related shows.
NELSON: Obviously, one of the things that helps is people could tune in without knowing what was on the air and they would be in that space, in that environment, as opposed to tuning into Discovery and maybe they'd be looking at dinosaurs as opposed to that.
NELSON: That's one of the powers of niche networks, obviously, is that they really define an environment and people know they can be in that environment when they tune into it, and obviously you've been able to utilize that in terms of your carriage growth, your acceptance in the consumer market place, your viewership, your advertising, etc., etc.
PACKARD: Exactly. All of the above.
NELSON: And did that also, I assume, play into the other networks that you acquired and started which were other slices of that kind of thing?
PACKARD: Lifestyle networks, yes. So that convinced us that Food would be a good acquisition and it was. That convinced us that launching DIY made sense, launching Fine Living made sense, so yes. Our formula, if you will, was passionate core audiences, information and entertainment and really tapping unmet needs, and all of our networks do that.
NELSON: How about in terms of internationally? We've talked a lot about your domestic growth. What's happened on the international front? Take us back to when you first started looking, hey, maybe there's something beyond the U.S. borders that we should be exploiting here.
PACKARD: We have three fully dedicated networks up in Canada. We have HGTV Canada, Food Canada and Fine Living Canada. We're in 90 countries. Our formula for international has been to have a scrappy small team of people and to either create full brands where it makes sense, but for the most part to either have branded blocks, essentially branded blocks in the rest of the world. In English speaking countries one can make money. It's easier, it's an easier proposition internationally, so that's why we are so flush up in Canada with three brands. We're in Australia, not with full brands, but DIY has a huge presence in Australia. Not all of our brands are all over the world. Our two big brands are in most places.
NELSON: And is there a difference, say, let's say Canada as an example because that's the most fleshed out market, is there a difference at all in programming the network there versus what you would see here and what would that be?
PACKARD: In Canada, for example, you are allowed, as a U.S. partner, to own up to 1/3 of the network and they have a requirement that you have to have at least 50% Canadian content. So we are an owner and we are a program supplier, but we are also in partnership with Alliance Atlantis, which is our partner up there. They create content. It's very similar. It's called Home and Garden Canada – it's those categories. It's very similar to what we do. But in other parts of the world we're on a block on lifestyle networks or things like that and they will create their own local content and really that's the only way you can be successful overseas.
NELSON: And do you see that as a continued growth area? Obviously there's not much more you can get for carriage in the U.S.
PACKARD: Yes, absolutely. So we're excited about that, and part of the reason for Hispanic is recognizing that we can also appeal to different ethnic groups in a meaningful way and that's an impetus for us to do that.
NELSON: But that could also be within the U.S.
PACKARD: Within the U.S. or Latin America, as well, Spain.
NELSON: That brings up something because you mentioned before in terms of Food where you sort of off-loaded the food programming that hemmed in on HG over to Food because that was sort of dedicated. As you bring out these other related networks do you see that as in any way impinging on the coverage of what goes on on HGTV air, or is it, for example, with DIY that you sort of moved away from the real more hardcore do-it-yourself stuff so you found an outlet for it? I'm trying to get a sense of how these networks work together and how you adjust the audiences you're targeting for HGTV knowing that you have these other audiences you're trying to serve at the same time?
PACKARD: Can I ask you to ask that of Ed and Burton because I'm not programming the networks?
NELSON: Well, not from a programming sense, but from more of a general sense? Well, let's take it from an affiliate relations sense. You go out there, say I'm an operator and you go out there and you're trying to sell me DIY or Fine Living and I say, "Well, what do I need another one for. I've already got HGTV. Doesn't that cover it all?"
PACKARD: Our categories, while they're under the umbrella of lifestyle, are very discrete categories and there isn't much overlap. The overlap, if you will, is that the audience is an information seeker. They like information and entertainment but they're an information seeker first and foremost. So it's the psychographic of the audience, but the categories are pretty distinct.
NELSON: Now you've had responsibility here for bringing this kind of programming into new media areas. Talk about how you got involved with that.
PACKARD: Several years ago when Ken was made CEO of E.W. Scripps we reorganized here and I moved over to run an area called New Ventures. New Ventures was the start-up of new cable networks, so for example Fine Living and some of these other things that I did, as well as the start-up of interactive media, although we had websites up and running and things already operating.
NELSON: Very early.
PACKARD: Yes, but one of the things we tackled – myself along with Channing Dawson, who runs our emerging media area – is VOD. So we started with VOD and we created the platform from the standpoint of how we would program it, how we would choose the content, edit the content, deliver the content, work with operators in terms of what their needs were for the content. So we started with VOD and spent a couple of years – we're still in that business – and since then, of course, we've launched broadband, which was something we launched last year, 2004, and we have deals with MSN and Comcast for broadband and more deals to come in that regard. We're looking at everything now – cell phones – we're looking at every platform that is user friendly for our content. We own the content. One of the smart things Ken did from the beginning was he said, "I don't care if we have to pay a little bit more for the rights to own the content, we need to own it." So that allowed us to go overseas and to do all this interactive without having to worry about rights, clearances, those kinds of things.
NELSON: So when you went to do VOD, you had an enormous library of product that you already owned. You didn't need to do other deals with people, you didn't need to acquire it, so that was a real asset to be able to use. But talk about that VOD business because that is still very early and people are still trying to find what the appropriate model of it is – the free, the subscription, the purview, etc., etc. How are you seeing that evolving here?
PACKARD: Well, we still believe in free, but free means it has to have ad support. You can't operate this at a loss forever.
NELSON: It can't be free free.
PACKARD: Yes, it can't be free free. Ad support requires that our operators work with us and give us the appropriate data on take rates because that's what the advertisers are looking for and the degree to which we get that cooperation will lead to the success of free VOD for a programmer. There's going to be a point in time where a programmer's going to have to say, unless you give me this in this format, with this kind of granular information, it's not useful to our advertisers and therefore we don't have a revenue stream and we can't make the business work. So we're still in those discussions. It's a tension.
NELSON: And that bursts forth occasionally with anonymous quotes of people denouncing operators from some network somewhere. You're sort of leading the way in that regard because getting advertising onto a free VOD service – I really can't think of too many people that have been that successful at it, and again, it goes to that whole relationship between your programming and your audience and people seeing that as informational.
PACKARD: Yes, and our advertisers and the fact that we've done a good job of relationship building with our advertisers and they want to support these new platforms. Their point of view on DVRs and TiVo and everything else is of grave concern to them, so they're trying to find new ways to reach their audiences, but we have to be able to all work together on this and we're not quite there yet.
NELSON: All right, we'll leave it at that. Just one other question in that regard, though. The nature of the way an advertiser sponsors a VOD segment versus running a spot in a 30 or 60 minute show – my sense is that they have more involvement in those segments in that they're almost branded with an advertiser. Are you running spots or is it kind of a "this is brought to you by..."?
PACKARD: It's a mix. Where the advertisers have something that's fuller than a 30-second spot, if they have a five-minute or a six-minute segment that they're producing, we're happy to run those on the front or back end of our shows. So it's a real mix, but we also have traditional 30-second advertising that goes around our shows.
NELSON: And you found that works in the VOD environment?
PACKARD: We don't know!
NELSON: You don't know. The jury's out.
PACKARD: Yes, we think it does but again, we have to be able to know what the viewer is doing and how they're interacting, not only with our content but with the advertising, and the only way you can know that is to get the information through the operator.
NELSON: Now why did you take the free route versus other forms of paid VOD where somebody might say I'll pay – and I'm not saying they would – but I'll pay two bucks to look at this segment on putting up a fence, whatever it might be.
PACKARD: It's a good question. My experience at HBO was the cost of marketing to get a subscriber was so dramatic and the cost of getting and maintaining subscribers and the churn that comes along with it to have a subscription model was very tough. We couldn't rationalize a subscription model because we knew we'd have to put so much marketing into it. So really we didn't see a meaningful way to have a subscription model, which doesn't mean we're not testing them. Here or there we do test SVOD, but for the most part to be meaningful and to really get the number of subscribers you need, you're going to have to spend a whole lot of money on marketing.
NELSON: Of course what you have is you do have a lot of networks that you can do that on but then you're using up air that you can't sell to anybody else.
PACKARD: Not only that, but you can't use that airtime because that's 80 or 90 million homes when the universe is so small that you're wasting most of your message.
NELSON: Would that change as that VOD universe grows, which it is growing?
PACKARD: Maybe. It's just hard to rationalize the marketing costs.
NELSON: Do you see the free VOD as ultimately profitable or is it something that helps just to build viewer loyalty and promote the network?
PACKARD: No, oh no!
NELSON: You're in it for the money.
PACKARD: It needs to be profitable.
NELSON: And of course it's much too early to tell, but that's the road that you're going down. Just to kind of wrap up a little bit, kind of looking back at this whole experience, what do you think that you personally have brought to it and I hate to use this word, but I will anyway, what is the legacy that you've left here? I know you're still here and intend to be, but at this point in time, and maybe you've never even thought about this – do I have a legacy? – but what do you think you've brought to the party that's impacted this place, that helped make it what it is?
PACKARD: I'm very entrepreneurial by nature and what I've brought to the place and what a number of people here have brought to the place is that spirit. I'm also very competitive, and again, a number of people here are that too, so it's just a drive to create and to achieve and to be successful. I would say that if I brought anything it would be those things.
NELSON: One of the other things you've brought is a number of people that you talked about that you hired way back in the early days in Detroit when you first came onboard who are still here. You started ticking off names and there were quite a few. Why is that? What is the loyalty? Ten years at one place, that's unusual, particularly in a fast moving business. People have lots of opportunities. Why have people stuck around?
PACKARD: All of us that have stuck around have this passionate loyal feeling about what we've created here. We created HGTV starting in '95 and then we had to recreate Food in '97 and create DIY in '99. Every couple three years we're inventing something new and it's pretty exhilarating. The people that are still here are the people that feel a real passion, and that's most people, feel a real passion about what we're creating here. There are a number of programmer groups who have forced channels down, top down. They insist operators are going to now carry this slice of something that already exists for retrans, or for this or for that. Everything we build here bubbles up from the bottom. It's like a laboratory. It's exciting. So I think that that's the culture of the place and that's why people like to come to work here.
NELSON: Also, if you look back, obviously it's been very successful and ramped up quickly, but was there a point – because anytime you're starting a new venture there's always the question of is this going to fly – was there some point or some milestone or anecdote you recall when you suddenly concluded or felt strongly for the first time, hey, this is really going to work? Is there a moment that you recall having that feeling?
PACKARD: Well, my moment, but again, that's my distribution hat, was when we reached 30 million homes. I believed at that point in time that we had pushed the boulder uphill and it was now falling downhill, and that we'd done the hardest work and now it was a question of staying smart, not doing anything stupid.
NELSON: And executing.
PACKARD: Yes, because it had enough at that point, it had enough sea legs and it had enough tentacles into the country that we just had to execute properly. So there was that moment, and then there's another sort of funny moment which is I talked about parties earlier – well, we threw a party with Crosby, Stills and Nash in Los Angeles – were you there?
NELSON: No. I was probably in an edit suite somewhere. During these shows, I have to admit I have missed many great parties. Not all of them, but many great parties.
PACKARD: That's too bad. Well, we rented this mansion in the Hollywood Hills. It was a perfect night in Los Angeles.
NELSON: I've heard about the party.
PACKARD: The sun was setting, the band was actually in harmony, we had a great number of the best operators. It was just one of those moments where we all felt that there was something magical about what we were creating and that it would have a long, long life to it.
NELSON: And what would you say has been HGTV's contribution to the cable business? Is it just another network or if there is something that you've done that has changed the business, had an impact on the business, what would that be?
PACKARD: Well, it starts with, what Ken's vision for the business was, he did not have a typical business plan. He had a very broad point of view of what this business was. It wasn't just a cable network. It was a call center, it was a magazine, it was a radio network, it was a website, it was all these things. It had, in his view, all these flanker brands, if you will, around it to grow it and to broaden it. So it starts with that. Secondly, we've always been dedicated to original programming, create programming from scratch and most networks buy programming, buy syndicated programming, that's how they juice their ratings. We have never done that. We might have a Martha Stewart or we might have This Old House or whatever – but for the most part it's an original programming network and we're very proud of that in all of our networks. We can say that even about our digital networks. So we're very proud of that and it has huge consumer positive reception. So, the vision, the original programming, and the fact that it's family friendly, it's a great environment that everybody can watch. I think all of those things are wonderful and are what all of our networks are about.
NELSON: You've been very active in a number of industry organizations. Why? It's not that you're not busy enough. Is that something, you think, that really helps your job or do you just enjoy it?
PACKARD: It's both. I enjoy it. I enjoy helping to put organization to chaos and the business over the last 20+ years has been somewhat chaotic, so some of those organizations help with that. I was part of the start-ups of the CTAM local chapters, the WICT local chapters, it helped people come together, share stories, share learnings, so that's been helpful. And then currently I'm on The Cable Center board, I'm on the WICT Foundation board, and I'm involved in a number of other organizations, and it's shared learnings more than anything. What can I, from my perspective, bring? What do others bring that help me learn and grow? So I actually think they're good laboratories for learning.
NELSON: You know, sometimes managements frown on people doing too much extracurricular activity. Has there been a lot of support for your involvement in these organizations?
PACKARD: Yes, very much so. And I'm a supporter of my people being involved. Beyond organizations the company's very supportive of us being involved in community work, so I'm on a number of local boards that are community boards as well, and that's great as well.
NELSON: What kind of organizations?
PACKARD: The YMCA, I'm on the board of the YMCA here, which is a very active organization; I'm on the board of Columbus Home, which is a children's center, a children's group home; I'm involved in Child Help, which is child abuse. I'm involved in a number of things in the community and it's good for us because we give back as a company to the community, and it's good individually because it makes you feel that what you've been blessed with you can give back to others.