Interview Date: Wednesday December 4, 2002
Interview Location: Indianapolis, IN USA
Interviewer: Jim Keller
Collection: Hauser Collection
* Jim Ackerman, age 88, of Carmel, Indiana passed away Saturday, March 2, 2013 with his loving wife of 65 years, Lois, and their children at his side.
KELLER: This is the oral history of James F. “Jim” Ackerman, currently president of Cardinal Ventures in Indianapolis, Indiana, but for our purposes he was executive vice-president of Indianapolis Morris Plan and Economy Financing in the early days of cable television and in fact would be one of the prime movers in the early days of financing cable operators. The date is December 4, 2000. Your interviewer is Jim Keller. Jim, give us a little bit about your background before you finally made the first cable loan.
ACKERMAN: Well, I started out going to Purdue University in 1941, got called into the Army and was in the artillery. I got out of the Army in 1946, started to work at Indianapolis Morris Plan in 1946 as a collector in consumer loan operation and I was there, except for getting called back for the Korean War during 1950-1952, and in 1958 we made our first loan to the cable television industry.
KELLER: Would I be correct in calling the Morris Plan and Economy Financing a relatively small consumer banking organization?
ACKERMAN: It was small compared to big banks but it was certainly the largest Morris Plan in the country. Economy Finance started out as a small loan company and eventually became bigger whereby we had some 40 offices and they in turn bought Morris Plan – they were all owned by one family – and Morris Plan became a subsidiary of Economy Finance. Economy Finance was a finance company that financed consumer loans, small loans, industrial loans, made loans that went through to cable television systems around the country, also had…
KELLER: Don’t go beyond this. You were one of the first to finance cable television operations, is that correct?
ACKERMAN: I think that’s probably correct. At that time, cable systems were financed usually by the manufacturers or maybe their loans by the manufacturer were discounted at banks but no one made the loans individually to cable operators until we started to in 1958.
KELLER: What was interesting is that you started without taking on equity or warrants whereas the Jerrold Corporation, which at that time was the largest manufacturer and provider of equipment, was taking an interest in the systems that they financed.
ACKERMAN: That is correct.
KELLER: Did you have a difficult time convincing your people, your board, your bosses at that time, that cable television was a good deal, and how did you convince them?
ACKERMAN: I don’t think I had to convince them. As I said, it was a family owned operation and Bill Daniels, who we all thought of as father of the industry, came in and sold us on getting into the cable television industry as a lender. This is 1958 and we made our first loan, then, to Bruce Merrill out in Arizona. As I recall, the loan was either $300,000 or $350,000, which was a lot of money in those days for cable systems because cable systems were then valued at somewhere between $200 – $300 a subscriber. We figured out a way to make the loans at that time when no banks were making loans directly to the industry unless they were completely collateralized with something else besides cable.
KELLER: Well, oftentimes a small-town operator knew the local banker and he was able to get at least an initial loan from the local banker. Did you ever take one of those banks out?
ACKERMAN: I don’t recall the banks doing that, really. There weren’t that many.
KELLER: Jack Crosby had one; Dean DeBull had one in Barstow. A couple of other people had one.
ACKERMAN: There were very few, though.
KELLER: Yeah, very few and they had substantial assets backing them up also. They had been collateralized.
ACKERMAN: That’s right. When we got into the business, we figured out that by taking, not equity, but taking an assignment of the city franchise, assignment of the pole attachment agreements, and assignment of the stock of the company we could then control… if the company went sour we would be able to take over the company without any problems because all we’d have to do is go back to the city council or whoever awarded the franchise and get their permission.
KELLER: Did this ever happen?
ACKERMAN: In our experience, no.
KELLER: Did you ever have a bad loan?
ACKERMAN: Not really. We had some weak ones, but we never had any bad loans. Not in cable television.
KELLER: That’s been the history, though, of the business?
ACKERMAN: That’s been the history of the business for all these years, up until recently.
KELLER: Up until very recently. When you made your first loan to Bruce Merrill, did you make it to Ameco as the cable operator?
ACKERMAN: No, just strictly to Bruce Merrill’s cable company. Ameco was the manufacturing company, but we did not make any loans to the manufacturing company.
KELLER: Do you recall what the terms were then?
ACKERMAN: As I recall, we lent the money on what we called a 6% discount rate over a period of 5-7 years. The 6% discount rate was equal to somewhere between 13 and 14 percent simple. Later on, probably after we’d been in the business a couple of years, we then started loaning money at 6% simple or maybe prime rate plus 3. So our rates were, depending on the prime rate, somewhere between 10 and 14 percent.
KELLER: In the early days?
ACKERMAN: In those days.
KELLER: You financed many companies, including – we’ll go into detail on some of them – TCI, Bob Magness and John Malone; TCA, Bob Rodgers down in Texas; Jim Palmer of CCOR operations. How big of loans did you make to these companies? Let’s take them one at a time. How about TCI?
ACKERMAN: Well, at that time we didn’t make any direct loans to TCI. We were making direct loans to Bob Magness before TCI was really started. As I recall, those loans were somewhere in the neighborhood of $200,000 to $400,000. We loaned money to someone like Carl Williams. In those days, in the early ’70s, mid-70s, probably no one of us made more than $400,000 or $500,000. Later on the industry got bigger and when pay TV came in the amount of what a subscriber was worth went from $300 to $1,200 to $1,500 and so forth, so that of course caused the loans to become much higher.
KELLER: And your loans were generally, in the early days, for seven years?
ACKERMAN: Usually five to seven years. One of the biggest loans we made was as a co-partner with the bank here in Indianapolis to Telesis. As I recall at that time we had $500,000 in that loan. That was one of the biggest loans we had.
KELLER: Dick Shively, who was a television operator.
ACKERMAN: Dick Shively was the chief operating officer of Telesis and the fellow that built the Kentucky superhighway was the biggest owner of Telesis at that time. He was out of Evansville, Indiana.
KELLER: How long did you stay in the Telesis loan?
ACKERMAN: We partnered in the Telesis loan for two or three years until such time as they wanted more and more money and we thought it was relatively weak. The Teamsters union came in and took over the loans of both the bank and ourself.
KELLER: So they took you out?
ACKERMAN: They took us out and eventually Equitable Life Insurance Company took over that loan.
KELLER: So then the Teamsters got out entirely?
KELLER: I didn’t realize it had gone through that many… You had an early deal also with… well, let’s go on to TCI with Bob Magness. You loaned money to the systems in Wyoming and Montana, is that correct?
ACKERMAN: Yes, it was individual loans. In other words, this was before TCI became a reality and before John Malone joined the company. Later on, after I left Morris Plan and Economy Finance, I started a company and merged with E.G. Becker Investment Banking House in Chicago and we formed Becker Communications and we also had a corporate finance area in Becker whereby we arranged a 70 million dollar loan for TCI, which was one of the first insurance company loans to the industry.
KELLER: And you brokered that deal, is that correct?
ACKERMAN: Yes, we got a commission for handling it.
KELLER: What year was that?
ACKERMAN: As I recall that was probably around 1976. It was probably the year after John Malone joined the company.
KELLER: So it is post-Malone then.
KELLER: You never loaned any money to TCI prior to Malone coming there?
ACKERMAN: No, we never loaned any money to TCI at all. We loaned it to Magness before it became TCI and we arranged long term financing to TCI. ’71 was one of the first of many loans that we arranged for them.
KELLER: And that was, again, after John Malone came in.
ACKERMAN: That was after John Malone joined them.
KELLER: And that gave you a little more confidence in the company and of course the other lenders also.
ACKERMAN: Well, I don’t feel we had confidence necessarily in the company. We had confidence in the industry and that’s what we looked at always.
KELLER: And you did that really from the first day.
ACKERMAN: That’s right.
KELLER: You had confidence in an industry that was just getting started when no one else did.
ACKERMAN: We were lucky! We were in the right place at the right time.
KELLER: You were probably one of the best early developers of cable television. You weren’t an early operator, but you sure financed a lot of early operators. You subsequently came in as an operator, didn’t you?
ACKERMAN: Individually I started our first franchise here in Indiana in 1973 and built that company up to where we had 21 franchises here in Indiana and had seven offices. So there would be no conflict of interest we had an arrangement with Becker that I could operate in Indiana and no place else, so it was a separate business that I had on the side.
KELLER: So you stayed as a direct officer or direct lender in… as Becker at that time, is that correct?
ACKERMAN: That was Becker after 1971.
KELLER: What happened to Economy?
ACKERMAN: Economy later on became First Smart Financial and was sold to a company in Buffalo, New York, and this was after I left the company, six months after I left the company.
KELLER: And the Morris Plan the same way?
ACKERMAN: Same way.
KELLER: They went together?
ACKERMAN: That’s right.
KELLER: You also had deals with TCA.
ACKERMAN: We started out with Bob Rodgers and at that time I was with Becker and we arranged financing through Fidelity Bank in Philadelphia. Becker actually had a small loan to TCA, and then later on we took TCA public as a public company and I served on the board of directors on that company from once we took them public up until three years ago when they sold out to Cox.
KELLER: So you stayed on the board then all that time?
ACKERMAN: I stayed on the board all that time.
KELLER: It was a good experience, I would assume.
ACKERMAN: A wonderful experience.
KELLER: Those are great guys down there. How about Jim Palmer and CCOR?
ACKERMAN: Jim Palmer and I became friends over the years and eventually he wanted to go public so we took that company public, CCOR public, and later on we did a secondary issue of stock form and this was when I was first with Becker and later on with Merrill Lynch because Becker sold out to Merrill Lynch.
KELLER: Oh, Becker sold to Merrill Lynch and you stayed with Merrill Lynch then?
ACKERMAN: I was with Merrill Lynch for a couple of years.
KELLER: Did they do any cable deals?
ACKERMAN: Only to arrange corporate finance, and then took companies public and arranged loans and so forth.
KELLER: Did you take any other cable companies public at that time?
ACKERMAN: All told we took five companies public.
KELLER: Can you remember who they were?
ACKERMAN: They were Shopper’s Charge Service for one, out of Tampa, Florida…
KELLER: Did that become Home Shopping Network?
ACKERMAN: Yeah, that was Home Shopping Network. And then we took TCA public; we took Palmer public; off-hand I can’t think of the other two. There were five of them that we took public.
KELLER: You didn’t turn down too many deals over the years; in fact you made a whole lot more deals than ever before. Are you making any cable deals today?
ACKERMAN: The venture cable company we have is invested in a small cable system in Germany; we’re invested in a distributing company out of New York City. Those are the two deals we have in venture capital at this point.
KELLER: You said at one time you had loaned money to Gene Schneider and United. Have you done anything with him since he’s been in Europe?
ACKERMAN: No, we have not. Going back with Gene Schneider, when he was connected with cable systems in Illinois we financed them. We also financed at the same time Jack Crosby and Ben Conroy and Fred Leiberman.
KELLER: They all came together at one time.
ACKERMAN: I could say that probably up through the mid-80s we had either financed or loaned money to or arranged money for or took public one out of every three cable systems in the country.
KELLER: One out of every three?
ACKERMAN: One out of every three.
KELLER: 33%, that’s amazing. And you may have had investments in some of the others then, too?
ACKERMAN: Probably, I can’t recall offhand.
KELLER: When did you start taking warrants in cable systems?
ACKERMAN: Morris Plan and Economy never did. They were strictly lenders. When we started Becker Communications at that point we started taking warrants whereby we had anywhere from 10 to 20 per cent interest in the company if we exercised the warrants.
KELLER: Over about a seven year period?
ACKERMAN: Over a seven year period we had what we called a “put in call” where we could put the warrants back to them at a specified price or they could call on us after seven years at a specified price.
KELLER: So you always did set a price upfront?
ACKERMAN: Yeah, the prices were upfront. They knew what it was. It was in relation to cash-flow, is the way it was priced.
KELLER: Now, when you say in relationship to cash-flow there were times when systems were selling for anywhere from five up to 20 times cash-flow. Do you recall the time period that those…?
ACKERMAN: Usually as I recall a private company would sell from anywhere from seven to ten times cash-flow, a public company would sell around five times cash flow. The private companies sold for more than the public companies would.
KELLER: That’s because there was more interest in buying them, right?
ACKERMAN: There was more interest in buying them, you’re right. I can’t say that always happened that way because there were other times that extenuating circumstances came about that led to a change in those formulas.
KELLER: In the early ’90s, I know, they were going sometimes as high as 20 times cash-flow.
ACKERMAN: Very possible. When I sold our company, Cardinal Communications, in ’93 we sold out at around $2,300 a subscriber which at that point in time was the highest price paid for a cable system. We had 87,000 subscribers here in Indiana, and I can also remember though back previously many years before that, way before we joined Becker, we had a cable system in Florida and that was sold for about $400 a subscriber, so how much it increased. Then, of course, in recent years some of the big deals that we’ve read in the papers, cable systems have sold for $4,000 or $5,000 a subscriber. Just recently, as I recall, a merger with AT&T and Comcast you can actually figure out that based upon what’s happened they sold out for about $2,400 a subscriber.
KELLER: But again, in those early days when you were selling for $500 a subscriber, still you were getting a cash-flow of maybe $30 a year. $5 a month is what it was and you say 50% cash-flow, so you were getting about $30 a year per subscriber, so 10 times that would have been $300. The multiples, I don’t think of cash-flow today, which if they’re getting an average of $60 a subscriber per month, not per year, and the cash-flow is anywhere from 35% to 40% now.
ACKERMAN: In some companies maybe, but that’s pretty high, though.
KELLER: I think it is pretty high, but depending on what their programming costs are and that’s the big thing.
ACKERMAN: That’s the biggest problem today is the programming costs.
KELLER: Exactly right. Did you sustain a relationship with Bill Daniels over the years?
ACKERMAN: Oh, I always was friendly with Bill Daniels. In fact, there’s a funny story that Bill called me and he wanted to come to the 500 mile race.
KELLER: Is that when he had a car in?
ACKERMAN: This was before he had a car in, and he came to the race and it was impossible to get hotel reservations in those days here, and so he stayed at our house and he brought with him a fellow by the name of… oh boy, I can’t think of him off-hand, but he was the astronaut that landed on the moon.
KELLER: P. Conrad.
ACKERMAN: Yes, P. Conrad. So P. Conrad and his wife, Bill Daniels and his girlfriend stayed at our house for the race. The following year Bill wanted to get a car in the race and we loaned him money to help put the car in the race. That was not a cable loan; that was a personal loan. So, we’ve had relations with Bill all the way up until he passed away.
KELLER: Did you ever lend any money to any of his ventures?
ACKERMAN: Off-hand, no, I can’t say that we did other than the race.
KELLER: But none of his joint ventures or limited partnerships. Other than Bill, what other long-term sustaining financial relationships have you had within the industry?
ACKERMAN: We’ve had long-term relationships with Bob Hughes…
ACKERMAN: We’ve worked with him when they bought Buffalo. We’ve had long-term relationships with a number of the different, at that time, private entrepreneurs who eventually went public. We did business with Malone until 1978 at Indianapolis Cablevision.
KELLER: Tell me about that Indianapolis Cablevision deal. That was a rather complicated and long-term situation, wasn’t it?
ACKERMAN: Well, Telesis originally had the franchises for the outside city of Indianapolis.
KELLER: Did the city council divide the city up in areas?
ACKERMAN: Well, it wasn’t city council then. That was the days before you had Ginagov here in Indianapolis.
KELLER: City and county?
ACKERMAN: A city and a county. We were able to form a company, limited partnership, with five general partners and 20-30 limited partners and we bought the franchise for something like $25,000 because before that big cities had come up bringing distant signals so franchises weren’t worth much. Then when the franchises started being able to bring in distant signals either through microwave or satellites then we could start to build the big cities and Indianapolis Cablevision was able to build the outside city.
KELLER: Generally the county, then? Outside the city limits.
ACKERMAN: Yeah, and Warner got the franchise for the inside city. In other words, we had the donut and they had the hole.
KELLER: Was that Ross who was head of Warner at that time?
ACKERMAN: I can’t remember.
KELLER: Before the merger with Time, Inc.?
ACKERMAN: It was… what’s his name? Who had Columbus, Ohio?
KELLER: Did they promise the two-way system?
ACKERMAN: They were talking about that. They never put it in, but they talked about it.
KELLER: I remember what a pain that was. It never worked, anyhow.
ACKERMAN: Anyway, we built that franchise, started in 1978.
KELLER: You had satellite signals at that time.
ACKERMAN: Not quite. Later on, about a year later we did.
KELLER: Okay, because HBO was up.
ACKERMAN: We knew it was coming. Channel 19 or 17 out of Atlanta, Georgia was one of the distant signals – Ted Turner.
ACKERMAN: We brought in, what was that, Channel 9 out of Chicago? Then there were the three local television stations plus Bloomington, Indiana made four. We started out maybe 12 signals here and eventually built it up more. We sold the company in 1983-84 to Comcast. Comcast owns it today. The inside city is still owned by Time Warner, plus Time Warner also had some small franchises in some of the small towns around Indianapolis.
KELLER: I’m surprised with the existing relationship between Time Warner and Comcast that there wouldn’t have been some kind of a deal made to consolidate those.
ACKERMAN: Well, they tried to do that and it didn’t work out. A year and a half ago they said they were going to do it and then something blew up and it didn’t happen so they’re still separate. Right here in Indianapolis in my office we’re on Comcast, my home’s in Carmel and we’re on Time Warner.
KELLER: Who was the most interesting character that you’ve dealt with over the years?
ACKERMAN: Probably the most interesting character is probably Peter Gilbert. Peter Gilbert came to us, I can’t remember the exact year, but came to Becker Communications and we loaned money to his company called Petra at that time, which is out on Long Island. What was so interesting about him was that he always had a backup. If something went wrong, he always had a backup plan that he could handle it. He built that company up on Long Island to quite sizable and then sold out and bought the franchise for Buffalo. Actually he bought out two companies in Buffalo. One was on the outskirts of Buffalo and one was Buffalo city itself. He bought those two that had been built and were not operating successfully and put them together. It was one company and later on that was sold to Bob Hughes’s company and then later on that was sold to Adelphia. As I said, for anything he always had a backup way to do something. He was one of the first ones to take HBO by microwave a long, long distance. He took it from New York City out to Buffalo, going out at night with flashlights and going on top of the hills to see where the microwave station should be from all the way from New York. No one else had quite done things that way. Unfortunately, Peter passed away a number of years after that from cancer.
KELLER: Didn’t they sell the systems then to Cablevision?
ACKERMAN: Well, Buffalo was sold to Hughes first.
KELLER: Yes, I know. I’m talking about the Long Island systems.
ACKERMAN: I can’t remember. I know we had a 10 or 15 per cent interest in both those Long Island systems and the Buffalo system.
KELLER: Did you ever have any real or major concerns about the validity of some of the loans that you’ve made over the years? Any scares? Let’s put it that way.
ACKERMAN: Well, we had a couple that were borderline that we asked the owners to sell out. One we got pretty close to the courthouse steps but never went to the courthouse. In fact, talked the individual into selling out and we continued the financing of the operation and came out okay.
KELLER: Was it because they were not legitimate operators, they weren’t good operators?
ACKERMAN: Probably a case of a few friends who were going to work whereby they start out with a small company and start building it, maybe build it too fast and got beyond their abilities to handle it. It was not a question of the industry or a question of the franchise, more a question of just management.
KELLER: How many of those deals did you have?
ACKERMAN: Not more than a couple. Very few.
KELLER: At one time you had, I think, probably a questionable situation with TCI, didn’t you?
ACKERMAN: TCI? No.
KELLER: Prior to Malone? You said you did have some money or did not have some money in it?
ACKERMAN: Well, we had a case with Carl Williams where Carl had systems in Colorado that the distant signals started coming in whereby he couldn’t compete. He was questioning whether he’d be able to continue to make his payments and when we talked to him he said, “Well, if I had microwave where I could bring in the distant signals I could solve the problem.” So we said, “How much money do you need?” He told us and so we gave him extra money and he made that into a real good system.
KELLER: That was about ’64-’65?
ACKERMAN: Right in that neighborhood.
KELLER: I remember that. We’re talking about Salida. Competition was with a translator that they had there, and not over the air signals or anything else like that. It was a translator that was causing the problem.
ACKERMAN: One of the interesting things in the cable television industry is that there were very few cases where there was duplication franchises in one area. I remember a cable system in Huntsville, Alabama where a second franchise was awarded, so both systems had problems making it. We were lending to one of them and we finally talked the two parties into merging and that solved the problem.
KELLER: But they weren’t overbuilt. They served a different section of the city, didn’t they?
ACKERMAN: That’s right. They were in different parts of the city.
KELLER: Did you ever have a situation in which you were dealing with a system that was overbuilt?
ACKERMAN: There was an overbuild situation in Pennsylvania. I think it was in Scranton. I can’t remember exactly, but there was an overbuild there and neither one of them were making it and they finally put it together and merged.
KELLER: That’s usually the history with that.
ACKERMAN: That was one of the beauties of the business. You could lend money, let’s say to a real estate operation where they put up a hotel and somebody else put up a hotel across the street, or you’d lend money to a department store and somebody else put up a department store across the street, but in cable television it didn’t work that way and that was one of the beauties of the business.
KELLER: What do you think about the competition from satellite delivered signals today?
ACKERMAN: I think there’s a good worry there. A major cable operator today has to find other ways to bring in more income rather than just through the selling of cable signals. That’s why you’re seeing companies like Comcast and so forth trying to do more in the telephony and internet and so forth.
KELLER: AOL Time Warner, the same way. The bigger companies.
ACKERMAN: As I say, when you’ve got competition it’s entirely different. When you’ve got Direct TV over the air, now they’re able to bring in the city signals where before they couldn’t, it makes a different competitor than we had before.
KELLER: Would you have any compunction against financing a satellite operator?
ACKERMAN: That actually came after we got out of the business.
KELLER: I know, but if you had the opportunity do you think you would?
ACKERMAN: I would think it would depend upon the operator who had the franchise for the city as to how good they were to be able to compete against the…
KELLER: They don’t require franchises.
ACKERMAN: Satellite doesn’t require them, but if you have the city franchise and you say, “Okay, do you want to finance that?” how good of operators are they? Would they be able to compete long-term wise with the satellite system?
KELLER: Jim, at one time you were a cable operator also in Indiana. How did you get involved in that?
ACKERMAN: We started out beginning with the period from the time I left Morris Plan Economy, we were actually able to form Becker Communications. At that time I was able to get a franchise along with Harold Ewen and Gail Oldfather in the city of Conesto, Indiana. So we started out with that cable system.
KELLER: How large a community is that?
ACKERMAN: Well, Collinsville is a town around 25,000 people. We got that franchise and then we were able to get a franchise for Seymour, Indiana.
KELLER: You built those?
ACKERMAN: We built those and later on we built New Albany, Indiana and built Monticello. We ended up with 21 franchises with seven offices. Columbus, Indiana… Many of us operators who were near those towns allowed us to expand the operation.
KELLER: Who acquired the franchise? Who played the political game?
ACKERMAN: Myron Patterson, who was our chief operating officer and I was chief executive officer, between the two of us we bought the other franchises and Myron operated the systems and he always used to say that I didn’t know how to screw in a light bulb, but he couldn’t read a financial statement. So, the two of us made a pretty good team. Myron did a wonderful job. When we sold out in 1993…
KELLER: What year did you get in?
ACKERMAN: We started in ’71 or ’72. ’71, I guess, is when we got the first franchise.
KELLER: But you started out in classic markets.
ACKERMAN: Right, they were all classic markets until we got to New Albany, New Albany being a bigger city. In fact, we bought Corydon, which is a suburb of New Albany which at that time was owned by our present governor of Indiana. So we bought that cable system from him. Interestingly enough, that cable system didn’t have poles. They put the lines up through trees.
KELLER: Oh, they didn’t build their own system?
ACKERMAN: They actually ran the lines from one tree to another tree, so we had to rebuild the system after we bought it, but that was quite a successful operation that we had. When we sold out we had 87,000 subscribers. So, that was one facet of my operation in cable. Another facet was that when we started Becker Communications, actually, before that, when I was with Morris Plan Economy, Gail Oldfather… the first was Harold Ewen ran the cable television department and then that later was succeeded by Gail Oldfather.
KELLER: I knew Gail when he was here.
ACKERMAN: Both of them did a wonderful job. Gail later went to work for Carl Williams and Harold went to work for a banking company in New York City doing the same thing Becker Communication was and it was primarily owned by Malarkey and Taylor, and didn’t work out so Harold came to work for us at Becker Communication in Chicago. He moved to Chicago. Later on, Harold went to work for Rick Michaels.
KELLER: I want to go into that. You then joined CEA…
ACKERMAN: After Becker sold out to Drexel Burnham and Merrill Lynch, Harold got Rick to bring me on board…
KELLER: Rick Michaels, by the way, of Community Equity Associates.
ACKERMAN: Right, and I was vice chairman of the board of that company for a couple of years. At the same time…
KELLER: Did you ever see Rick?
ACKERMAN: Oh, I saw Rick quite often.
KELLER: I thought he was usually in his airplane going over to somewhere else.
ACKERMAN: Vice chairman of the board means once a month down in Tampa. At the same time, I was with Merrill Lynch in the corporate finance department around cable television. I was more or less the cable guru. Anything that came through Merrill Lynch I was involved in, such as arranging loans with insurance companies and taking the companies I mentioned public, with a fellow by the name of David Wicks. David Wicks now is with Cablevision in the arc city. All these men are brilliant guys – Gail and Harold and David. So I had a wonderful experience working with them.
KELLER: You always hired people smarter than you so you didn’t have to do the work.
ACKERMAN: Now I didn’t say I didn’t do the work; I just had people smarter working for me whereby they could do the grunt work and I could just sort of oversee. They did the detail work… well, I did all the detail work, too, initially, but they did the heavy work. Because at the same time I was involved in other things besides just cable television – minor compared to cable television. But these people – Myron Patterson and Harold and Gail and David all were wonderful people to work with and we got a lot done that way.
KELLER: Gail was here at the time; he lived in Indianapolis.
ACKERMAN: Gail was here. He started, as did Harold, at Morris Plan and they worked their way up whereby they were vice-presidents and ran their different divisions. Harold ran cable television one year and went over and ran commercial financing and accounts receivable financing division.
KELLER: Gail is an accountant, isn’t he?
ACKERMAN: Yes and no. Gail worked his way up from Oregon, took over from Harold and then took over the cable television operation itself under me so that there was continuity there. Harold, Gail and I usually went to all the cable television conventions. I think I missed two cable conventions from the time we started in ’58 until ’93. Otherwise I was at every national cable television convention. I served on the board of the National Cable Television Association for three or four years and so did Harold after me.
KELLER: You served on the board from when?
ACKERMAN: I can’t remember what years it was, but I remember Malone was on the board and so was Hostetter. Hostetter is another one we financed.
KELLER: In Ohio?
ACKERMAN: In Michigan.
KELLER: Michigan? Monroe and that area up there?
ACKERMAN: Jackson, Michigan and some other town. This was when he was still in partnership with his teacher at Harvard Business School. I can’t remember his name. So that was another one we financed. We also arranged long-term financing for him when we were with Becker. A very shrewd businessman.
KELLER: If you were asked, and I’m going to ask you, what the total sum of the loans that you made over the years to cable television, would you have any general idea of how much it would be?
ACKERMAN: I have no idea.
KELLER: One hundred million, two hundred million, five hundred million…?
ACKERMAN: I have no idea. I’ve never added it up because it started out with $300,000-$350,000 loan and then we arranged financing for large sums, corporate financing. I don’t how you’d put them all together.
KELLER: Well, they’re two separate things. One was direct loans and the others you brokered. How much would you say in your direct loans that you made as Economy and Morris Plan?
ACKERMAN: I’d have to guess 40 or 50 million maybe, because in those days they were small loans. We had small individual companies until we went to Becker and started doing corporate finance.
KELLER: You shouldn’t downplay that because that was the lifeblood of the industry and I think you pumped an awful lot of blood into the industry.
ACKERMAN: They were private entrepreneurs. I mean it wasn’t the big corporations like they are today. For example, Bob Rodgers was financed early before he became a public company. We arranged a loan for him, as I recall, with Fidelity Bank in Philadelphia. We actually did a direct loan with him to buy out a company down in Louisiana. Both in that company and then when we took them public I served on the board. They in turn sold out to Cox about three years ago. So, those were big money at that time, became big money.
KELLER: Have you ever done any business with offshore banks or with the Canadian banks?
ACKERMAN: No. We tried to do some business in Canada.
KELLER: With Toronto Dominion?
ACKERMAN: No, with Ted Rogers. I can’t recall if we actually… I think we probably made a loan when I was with Merrill Lynch with him, but I’m not sure. I can’t remember, but outside of that we did nothing offshore or anything like that. When we had Cardinal Communications, our own company, we had loans with the bank in Baltimore because of my relationship with a fellow that used to be with Citibank in New York where we had a loan, Morris Plan had a loan, but then when he went into the cable television business he had moved to the bank in Baltimore and they in turn had a bank in Ireland, and so Cardinal was borrowing money from the bank in Baltimore and Ireland and here in Indianapolis.
KELLER: How did you keep track of this?
ACKERMAN: We dealt with the banks on a partnership basis. In other words, you had one bank that you did all the business with and they in turn refer everything to the other two banks, for example.
KELLER: They never got you interested in any of those offshore properties?
KELLER: You said today you had an investment in something, do you not?
ACKERMAN: Yes, in Cardinal Ventures we have an investment in Europe and an investment in New York City.
KELLER: In cable?
ACKERMAN: In cable.
KELLER: Who is your investor that you’re invested with in New York City?
ACKERMAN: A fellow by the name of Acker is the president of the company. It’s a distributing company.
KELLER: Oh, a distributing company.
ACKERMAN: Of cable products. The second largest in the country.
KELLER: Not George Acker, is it?
ACKERMAN: No, no, he’s out in California. I know George real well because anytime we had a movie I always sat next to him because of names.
KELLER: You never loaned to any other distributing companies or manufacturing companies?
ACKERMAN: Well, as I say, we took CCOR public, which was Jim Palmer’s company, but as far as lending Jim money we didn’t actually lend money to him. I think Jim referred business to us once in a while when they had a client come in to buy their product and wanted financing. Jim would refer them to us to handle it.
KELLER: How many of those deals did you make?
ACKERMAN: I have no idea.
KELLER: That was straight equipment financing, though, wasn’t it?
ACKERMAN: A customer would come to Jim wanting him to build a system using CCOR products and didn’t have the money arranged yet, so we would get into it at that point and make the loan.
KELLER: Well, you’ve had your fingers and your hands and your toes and your whole body in all aspects of the business since 1958.
ACKERMAN: That’s right.
KELLER: And are continuing to do it.
ACKERMAN: As I say, it’s a fun business. I’m not sure it’s that much fun today. What’s happened in the banking field, or rather in the stock market field whereby they said, well, here are these companies that have always run on a cash flow basis, maybe they should run under a net income basis which makes a different thing out of it entirely. That’s why cable stocks are taking a beating, just because of that.
KELLER: John Malone has always said, “I would rather pay interest than taxes.” I don’t know how many times he’s said that.
ACKERMAN: That’s right, and the thing is that on capital expenditures for example, companies handle them different ways and the animus, if you work for the big brokerage houses, are trying to get a uniform way and it’s sort of difficult.
KELLER: Yes, it is. Some will capitalize their drop material, some won’t; some will claim a portion of it, some won’t. They handle multiple buildings differently in the capital investment.
ACKERMAN: That’s right. I know here at Cardinal Communications we only use capital expenditures on new product, new ideas. The expense of hooking up a customer, that was an operating expense as far as we were concerned.
KELLER: Yeah, generally that was considered unless you needed it to put some more capital expense when you bought a company.
ACKERMAN: I don’t think that was quite the way to do it.
KELLER: How about franchising? How did you amortize franchises?
ACKERMAN: In those days a franchise didn’t cost you that much, not unless you were buying a company because then you’d have the goodwill factor.
KELLER: It wasn’t a goodwill or did you put as much as you could on the franchises or the customer service gifts or whatever. We all did it. If we paid x number of dollars for it and we could only justify x minus something, nothing would go below because you couldn’t get any better without a goodwill.
ACKERMAN: They changed that practice now. Some of these companies are writing off goodwill now completely and hitting the bottom line in the stock market, but the analysts are saying, “Okay, it’s a onetime shot and it shouldn’t affect it in the future.”
KELLER: What else do we want to talk about? Some other people in the business that you’d like to…?
ACKERMAN: Well, as I say, we did business with so many different people in the industry. There were few we didn’t do business with – people who had their own muscle with family financing or very profitable at doing what they did, a good example is Comcast. We called on Ralph Roberts and Julian Brodsky and Dan Aaron many, many times but never could get their business and they did a good job of financing their own operation. That was one of the few big companies we didn’t do business with.
KELLER: Julian is a genius when it comes to financing.
ACKERMAN: Julian and I were really good friends. It wasn’t a case of not knowing each other or anything like that. We appeared on panels together, for example, but they knew exactly what they wanted and they were able to get what they wanted in the way of financing. Once a company got big and got their own internal financing area, then it was hard for us to crack that because it was basically operators in the individual systems that we did arrange quite a bit of long-term financing, but it’s still the banks…
KELLER: You gave the basis of the financing.
ACKERMAN: But what happened was the big brokerage firms such as Solomon Brothers and J.P. Morgan and so forth, they got into the business of arranging the long-term financing so it changes the industry because of all the consolidation that went on.
KELLER: Did you ever get involved in that tangled situation with Storer Broadcasting?
ACKERMAN: With what?
KELLER: Storer Broadcasting?
ACKERMAN: No, I don’t think we ever did anything with Storer.
KELLER: That was a mess for a long time.
ACKERMAN: As I say, there were quite a few big ones we didn’t get with, but smaller operators…
KELLER: Well, you were the lifeblood, as we said before, of these small operators. Pull out your crystal ball – where is the industry going to go?
ACKERMAN: Well, I think the industry is going to… it’s interesting what’s happening right now. For example, high-definition television. The sets aren’t selling that much and they’re selling at tremendous prices because not enough of the TV stations have gone to high-definition, though now they’re saying they have to. The FCC is saying they should. As a consequence, prices today on television sets are coming down. I just had to put in a television set for my wife – she has this macular degeneration – she couldn’t see a screen such as I have there on my desk and so we bought a plasma, which is a four inch to eight inch screen and big – 52 inches across, not diagonal, 52 inches across – where now she can sit in a chair ten feet away and see it where before she had to sit right on top. Those sets start around as much as $15,000 and they’re coming down now so that they’re going to be cheaper and cheaper and cheaper as more and more people start buying them. Also, it’s going to be real interesting to see what happens with your broadband communications as to whether we’re going to use our television sets for internet as opposed to a separate computer. I know a number of my friends go on the internet through their television set. Is that going to increase? Who knows exactly? The big companies are having to find other ways to sell product other than just the programming, especially if you bought a cable system for $4,000 a subscriber, how are you going to get enough revenue to justify that cost? So that means they have to get into other areas. When I was with TCA we just started to go into telephoning. In College Station, Texas, for example, a university town, they sold a package for $75 a month whereby they could have their long distance on cable, in other words their telephone, cable products, pay products all in a package, and the students were buying it like mad.
KELLER: Did they go into one central instrument though? Sooner or later we’re going to have to come up with that one separate instrument.
ACKERMAN: Right, that’s what we did. They had a box maybe on top of the television set. You’d take students that had a small set in their room and they’d have a cable box to use for the other things. I think the big cable systems like Time Warner, which is AOL now, and Comcast, which are the two biggest, are going to have to do more and more to find ways to increase their monthly payment. I thought up until the recent merger of Comcast with AT&T that probably Cox was the most diversified in other products of any of the major cable systems. They had originally gone into big cities and bought, in Las Vegas for example, they had other cities like Omaha and New Orleans and so forth, and they were selling telephone and so forth. I think that’s going to be more and more in order to compete with Direct TV, over-the-air TV, in other words. It’s going to be real interesting to see who really comes out on top.
KELLER: I see the day when the so-called cable operator is going to give away the television signals and make their revenue on these other services.
ACKERMAN: It’s very possible although I hadn’t thought about it that way because I think a lot has to do with the younger people. Us older people are not as aware of how we can use broadband more. My daughter, she uses internet all the time. She’s chatting with people in New Zealand, Australia and so forth around the world. I wouldn’t even know how to begin to do it.
KELLER: The high-speed internet connection from cable systems is working out quite well. I know we have it in our home. Tell me, where did you think that Michael Armstrong of AT&T made his mistake, if he did?
ACKERMAN: I can’t say.
KELLER: Okay, I thought maybe you would speculate on that.
ACKERMAN: First of all, I think John Malone did a masterful job of selling TCI to them.
KELLER: I think that’s pretty well accepted.
ACKERMAN: I don’t think that AT&T really knew exactly what they were getting.
KELLER: I think that’s true, too.
ACKERMAN: So as a consequence we know that the condition of those cable systems couldn’t compare to let’s say the condition of Comcast or Cox and so forth. The same way with Charter; Charter’s been buying older systems and haven’t brought them up to date like Comcast has done and so forth.
KELLER: Well, Carl Vogel’s a good operator. He’ll do all right with Charter.
ACKERMAN: But it’s a case of what do you pay for and what do you get and how much are you going to put into them, and are you going to be able to take enough of these new things to make it worthwhile for the customer and spend a hundred dollars a month or more.
KELLER: Before we wrap this up, anything else you want to bring up, Jim?
ACKERMAN: No, I think we’ve covered the field pretty well. As I say, I think it’s an industry that we were lucky to get into at the right time and were able to do pretty well in it. The industry today is entirely different. We entered it in 1958 and now it’s a big corporation business and it’s not a private entrepreneur business. I don’t know how many private entrepreneurs there are left in the industry. Very few. And yet I can remember fellows like Alan Gerry who ran an operation really big and sold out. You take all of these different fellows that were private entrepreneurs and started out with one little cable system and built it up to a large size and then have sold out or merged. There’s not many left of the private entrepreneur so you’re looking at a different industry as far as analyzing it, as far as financing of it and so forth.
KELLER: Well, Jim, you have been really the lifeblood of the industry in the very early days and without Economy Financing and the Morris Plan and Jim Ackerman, the industry would have had a greater struggle than it did at the time.
ACKERMAN: Well, somebody else would have come along probably and done the same thing.
KELLER: But you were the one that did it and you were the first to come in with the underlying financing for cable television systems, and I know the industry greatly appreciates it. This has been the oral history of James F. “Jim” Ackerman, former executive vice-president of Indianapolis based Economy Financing and the Indianapolis Morris Plan. The date again is December 4, 2002. We are in the offices of Cardinal Ventures in Indianapolis, Indiana. Your interviewer is Jim Keller. Thanks, Jim, I really appreciate it. It’s been fun.
ACKERMAN: Thank you, Jim.