Glenn Britt

Glenn Britt

Interview Date: May 12, 2007
Interviewer: Tom Umstead

Abstract

Glenn Britt discusses his start in cable with Time, Inc. He extensively describes the beginnings of HBO and its transformation of the cable industry. He recounts a brief history of the industry, the later competition with DBS, the response of Time Warner, and the development and use of broadband. He notes the necessity of increasing the number of products and services, and its effect on cable. He discusses the need for good customer service, innovation and marketing. He describes the important technology of video-on-demand and the Internet’s influence and usefulness for both cable and broadcasting. He concludes with anticipation of an expanded Time Warner, and reflects on his own legacy in the cable business.

Interview Transcript

UMSTEAD: Hello, I’m Tom Umstead from The Cable Center and we’re talking to Glenn Britt, President and CEO of Time Warner Cable. Mr. Britt.

BRITT: Hi, how are you today?

UMSTEAD: Alright, and yourself?

BRITT: Great.

UMSTEAD: Good, good. You’ve been at Time Warner since 1972 and at the time, I guess, Time Warner was more of a print business than it was cable. At the time, what were your career endeavors and visions when you started at Time Warner?

BRITT: Well, what happened is I graduated from business school and things were very different then than they are now coming out of business school. Most people were either focused on finance or focused on marketing, and the marketing people went typically to work for P&G or Colgate or one of those kinds of companies and the finance people usually went to work either for an accounting firm or for a commercial bank to be involved in lending. A few people went to consulting firms and a few people went to work for what I would call “real” companies, meaning not a service organization – I’m talking about the finance group now – not a service organization but an industrial kind of company. What happened is that companies used to come to campus and recruit and I was probably headed for the banking sector but one day this company called Time, Inc. came to campus and I interviewed with them and got interested in it. I think the real attraction was cable TV. You’re right – it was mostly a magazine company that was dabbling in cable; it had been in the broadcast business and was dabbling in cable and cable is really what attracted me to it.

UMSTEAD: What were some of the first things you did in cable while you were at Time Warner?

BRITT: My first job was in the corporate finance group, which dealt with all of the businesses. We had a forest products business, and publishing and this cable business. We were called the budget department; I worked on a lot of projects and it was at that point Time, Inc. had just closed Life Magazine which was very traumatic for the company at the time, and it had sold its broadcast stations to focus on cable. It also was experimenting with various forms of pay television, so there were two or three different ideas to get into the pay television business and I worked on several of those.

UMSTEAD: One of those was HBO. Did you consider back then what HBO would turn into and how influential HBO would become down the line as we grew into the 1990s and into today?

BRITT: Yes, and it was interesting at the time because as I said, I worked in the corporate finance department and my sense was the cable industry was going to be a big thing. Either that or it was going to be a complete disaster. It’s hard to get perspective – at that point, this was 1972-73, the only thing cable really sold was better reception. There were no cable networks, it was just better reception of broadcast and that meant it had largely been built in rural areas and there was an idea of building it in urban areas and a company called TelePrompTer, which was then the biggest company in the industry, had been touting interactive things and some of the things that still haven’t really happened, but that all wasn’t successful. Then there was a company in southern Manhattan called Sterling Manhattan Cable Television, which was started by Chuck Dolan and Time, Inc. was an investor in it; it was a public company. And it was selling, initially, reception service because reception here in Manhattan wasn’t very good with all the tall buildings. Inside that company was the idea for Home Box Office. So that was one of three things that Time, Inc. was looking at in the pay television arena, but remember, nobody had ever made pay television work. There’d been a number of tests in the country and it had never been successful so it was very risky.

UMSTEAD: What did you see in cable at the time…? You mentioned that you were hoping to get into the cable industry – what did you see in cable that was going to be successful and have those thoughts that you had back then come to fruition now?

BRITT: I thought there was a chance for a new infrastructure that would open up television programming and it could be much more than it had been beyond reception. Obviously that indeed has happened.

UMSTEAD: While you were at Time Warner I also understand that you spent some time in Iran. What was that about and what did you learn from there?

BRITT: Well, let me tell you how that happened. Can I just ramble on?

UMSTEAD: Yes, yes, that’s what this is all about. I want you to start talking.

BRITT: I’m used to doing interviews.

UMSTEAD: I know. I want to get as much information about you and your experiences prior to where you are now. So I want you to open up and talk about everything.

BRITT: Okay, well, let me go back to that early time we were talking about. So Time, Inc. had three different pay TV tests going. One was Home Box Office and one was a project with Hughes Aircraft and IBM. Satellite technology was still then very new. It had been a monopoly of the phone industry and people were just talking about opening that up. So Hughes Aircraft, which was then one of the leading satellite companies, had the idea of launching a satellite and having 12 channels of television on it. The role of Time, Inc. if this project had happened was going to be to program those twelve channels. So that was the second idea to HBO. That ended up looking very risky because satellites regularly failed when they were being launched during that era, plus Time, Inc. had very little television experience. This was very entrepreneurial, actually, at the time. So nobody could figure out how in the world you would program twelve new satellite channels, television channels, 24 hours a day. So, that all looked too risky. The third idea was pay television in hotels, and we had a company – I can’t remember the name of it now – doing movies in hotels that we later sold but it was one of the antecedents of the existing hotel movie companies. But coming back to Home Box Office – so it was one of the many things inside the Sterling Manhattan cable company and what happened is that Sterling Manhattan Cable was using large amounts of capital as it tried to build the southern Manhattan cable franchise and Time, Inc. kept putting more and more money in. Eventually it was taken private. So, inside that company were three interesting things – one was the cable franchise, which was the core of what today is our New York City cable system which has obviously gone far beyond southern Manhattan; the other thing was the idea for HBO; and the third thing were franchises for some towns out in Long Island which at the time nobody saw much value to. Remember, HBO hadn’t started yet; the only thing to sell was reception and those towns along Long Island got great over-the-air reception, so no one thought those were very valuable. Well, those became the core of Chuck Dolan’s Cable Vision today. He obviously, again, added on to it a lot but that was the origin of it. Time, Inc. got the southern Manhattan cable system which I’m going to come back to in a couple of minutes, and the beginnings of HBO. The idea of HBO was “Let’s come up with something else to sell other than reception. How about movies? Everybody likes movies.” And then the second part of the idea was, well, if we’re going to create a movie channel for southern Manhattan that has a certain amount of overhead to it, why don’t we try to sell that to other cable operators to help offset the cost of putting that together. So those simple ideas were what was behind HBO. As it turned out, it actually launched in Wilkes-Barre, Pennsylvania before it launched here in Manhattan but that was the beginnings of HBO, and at that time there were all these rules about what movies you could show, and I can’t remember them all anymore, but they couldn’t be really new and they couldn’t be really old – they had to be in a certain window, and there were all rules to protect existing business structures. So the early history of HBO is a lot about dealing with regulation that was put in place to protect broadcasters and the existing way movies were distributed. What happened to me was in 1974 I mentioned we had taken over this Manhattan cable system, Time, Inc. put a new management in there and I became the CFO, chief financial officer, of Manhattan Cable, and a fellow named Nick Nicholas became the CEO of it. We didn’t have those titles then, but those are today’s versions of the titles. I thought our mission was to make it look better and sell it. It was a very big cash drain on Time, Inc.; it was financially significant at the time and the company had been unable to do anything with it in terms of financial structuring. I should say, I left out that Time, Inc. had a bunch of other cable systems it had sold to a company in Denver called ATC, and in turn had gotten 10% ownership in ATC. But we still had the southern Manhattan thing. So I thought our job was to make it look better and then sell it or do something with it. It turned out after a couple of years that not only did we make it look better, it started making money. My guess is this company wouldn’t be in the business today if that hadn’t happened.

UMSTEAD: How much did sports play into the development of HBO as well? I think you were the first ones – “you” meaning HBO, were the first ones to actually televise a fight on pay-per-view. How important was that in terms of the future of HBO, and again, the future of pay-per-view and Time Warner?

BRITT: That was really later, so let me ramble some more and I’ll come to that.

UMSTEAD: Please do.

BRITT: So what happened to me personally was after a couple years at Manhattan Cable then I had an opportunity to go to work for Time Life Books, which was a part of Time, Inc. on a project in Tehran, Iran. That seemed interesting so I did that for a year and a half. Not germane to The Cable Center, we started a book publishing company – there was nothing there – and we actually did it for the Iranian government. They were trying to teach people how to read; there was a very high illiteracy rate in Iran at the time, I think 80% of the people couldn’t read and there was no publishing industry publishing things for them to read once they learned how to read, so they hired us to create a publishing company publishing books about popular subjects. So I did that for a year and a half. We were basically consultants. When I came back I went to work for Home Box Office running their engineering department, which was an interesting thing for an MBA finance guy to do. By that time, Home Box Office had gone on the satellite which the beginning of that is what you were just asking me about, the Thrilla from Manila. Early in HBO’s history, I mentioned it was selling a service to cable operators, it was transmitted in the northeast via microwave. In fact, the main company was one called Eastern Microwave that was owned by the Newhouse family. So if HBO wanted to sell to the next cable system, Eastern Microwave had to build another microwave hop and that kind of limited how fast HBO could expand. Remember, nobody had ever done pay television before successfully and it really took – I think HBO launched in Pennsylvania in late 1972 – it really took five years before it looked like it was a real business. Everybody’s forgotten about that now but it was frightening in a way because one month you would gain a lot of subscribers and the next month you would have massive disconnects. So it really was unclear whether it was a business. It was, I think, quite remarkable that the fellows who were running Time, Inc. at the time stuck with it because a lot of people wouldn’t have. And the programming kept changing. There were various sporting things, there were movies, and there was some original programming that was certainly a lot weaker than it is today, but of course this was a new start-up kind of enterprise. HBO, led by Jerry Levin at that time, studied satellite technology – and so there’s a tieback to the earlier project with Hughes in a way – studied satellite technology and said we ought to take a risk and put HBO on a satellite. That’ll give us access to the entire country rather than just using microwave and maybe that will make this thing profitable. So, they went to the Time, Inc. board and said we’d like to do that. It was very different than today so there were lots of FCC rules about satellite technology. To have a receiver – think about DirecTV today, and this is a big contrast – first of all, to have a receive-only earth station you needed an FCC license. In retrospect, why? Because you weren’t transmitting. But those were the rules. And the earth stations had to be 10 meters in size, so these things were huge and they cost a lot of money. In fact, they cost so much that it wasn’t practical for many cable systems. Cable systems were much smaller at that point in time. But a few operators decided to try this thing out and that led to the fight you’re talking about, the Thrilla from Manila which was Mohammed Ali, and that was really the first big HBO satellite event. A couple of pioneering cable operations carried that and it really set HBO and the whole industry on a new course. I forget what year that was, it was somewhere in the mid-70s, but you can check the date. (Editor’s note: September 30, 1975) Really from then HBO made a big effort to get cable operators all around the country to carry HBO and to put in satellite dishes. Back to my career, when I came back to HBO from my Iran experience, what I did in running the engineering department was largely about HBO’s expansion. So we did a very large deal with Scientific-Atlanta which was then a big manufacturer of earth stations. At some point we persuaded the FCC that smaller dishes were okay, so we ended up with 3 meter dishes, which is a lot smaller than 10 meters. We went out and the affiliate relations folks got more people signed up and then my group went and helped people to install earth stations and secure the signal and that sort of thing. All of this was a big deal for cable operators then. The cable business had been pretty simple; as I said, it was selling reception and either people needed it or they didn’t. Billing was very simple – a lot of people used sort of mortgage coupon book kind of bills. So this idea of having a pay television service which was optional complicated the whole billing setup and you actually had to sell it. That was a big change for the industry. And you had to secure the signal because you didn’t want people stealing it. So that was a whole new technology for the cable industry and I think started a transformation that has carried through to this day. Following that then there were ideas for more cable channels and you know the whole litany of channels we have today. But all of these really started because of the pioneering effort at HBO – going on the satellite and for the industry creating something different than reception to sell. For the first time we were selling more programming and that led to the explosion of channels in the late ’70s and really up through the ’80s that brought the video part of the business as we know it today. It also created an impetus to build the rest of the country so once we had something other than reception to sell – more programming – it became viable to build cable in the rest of the company. So during the ’70s and ’80s that became a big activity – franchising, constructing cable systems.

UMSTEAD: Exactly. Of your experiences in those early years, what did you take away that helped you prepare to lead Time Warner into the future?

BRITT: There were two things that were interesting to me about that time. One was it was very entrepreneurial but very practical. So it was an era where the industry was small, it was scrappy and people would try things, and if they didn’t work they would try something else. Think about my description of HBO – well, we need something other than reception to sell, how about movies? Then once we have a movie channel, let’s share the overhead by selling it to other cable operators. That isn’t some sort of dreamy vision of the world; it’s kind of a practical put one foot in front of the other and see what works, and that’s stuck with me because I think business is a lot about being practical, listening to consumers, being willing to do things and if they don’t work than we try something else. The other thing about that era was it was strategically very intense, particularly on the programming side. HBO in a way was a company nobody really wanted to have exist. In fact, the whole cable industry I would say, people surrounding the cable industry really didn’t want it – the broadcasters didn’t want it, the phone companies didn’t want it or they thought that they should be in the business, not the cable industry and there were anti-trust settlements that kept the phone companies out. So in all the surrounding industries nobody wanted this business to be created and so there were a whole series of regulatory fights in Washington essentially trying to push aside rules that impeded the industry being created. So there was a lot of strategizing about that. Then in the case of HBO, the entertainment business and the broadcast industry didn’t want HBO to be created and it certainly didn’t want it to be created by Time, Inc., this publishing company – “Who were these guys? What were they doing in the entertainment business?” So there was never ending… – and HBO was a middleman, so the big cable companies weren’t sure they wanted it and a lot of the big companies had their own pay TV services for a while. Hollywood didn’t want it; there were various groups of studios that got together trying to make sure HBO went away. It’s kind of remarkable in retrospect, it persevered and HBO is till here today.

UMSTEAD: Let’s fast forward to 2001. You’re heading up Time Warner Cable and the company undergoes a major restructuring effort. What, in terms of your dealings with your predecessors, what did you learn from them that allowed you to take the company forward, restructure it, and position it to be a force in this ever changing marketplace?

BRITT: I think I’ll give you a little more history of what was there in 2001. So we went through this period in the late ’70s and ’80s when the industry was growing very rapidly, we were constructing America, adding more channels, penetrations of people buying cable were low but steadily rising and although there was competition from other forms of entertainment, from broadcast and movie theaters and what have you, the only place to buy multi-channel television really was cable. As we got into the late ’80s, early ’90s, it appeared to people in the business like that business of selling more channels of television was pretty mature. The growth rate slowed, there was the ability to raise prices but it looked like the business had pretty much matured and there wasn’t that much growth ahead. In the early ’90s, ’92, the prices got regulated by Congress – you have other oral histories on the history of regulation, but the business has been regulated lots of different ways over the years – so rates were rolled back 17%, if I remember right in two bites. That caused the capital markets to sour on cable and cable companies all started looking at building cable outside this country so there was a whole international push. Round about that same time the direct satellite industry got going and that technology had been around for a long time. The idea of having powerful satellites that could transmit into smaller earth stations, and I actually did a presentation to the Time, Inc. board in 1979 on DBS and predicted that it would probably develop sometime in the ’80s. I was a little ahead of my time because it took longer. But there were a series of developments. DirecTV got going in the early ’90s, and I think the industry was very slow to react to that. I think there was a feeling that it wasn’t really going to be a viable thing, that it might take a few customers not very many, and I think the industry and our company was somewhat slow to respond to it and by the time you got to the year 2000, DirecTV and then EchoStar were in fact quite successful and they had brought the subscriber growth of the cable industry pretty much to a halt and I think some companies were losing subscribers. The reason that they were so successful was when they first launched they essentially took away what I think was the primary selling attribute of cable which was more channels of television. So those first satellites, they actually had more channels to offer than cable had and they were very economic. So they took away our primary selling attribute. Again, I think as things were okay in the industry, and we launched broadband in the mid ’90s, the industry and our company were slow to respond to the fact that we were in a much more competitive environment. So when I took over in 2001, I said, “We’ve got to become more competitive and we can’t behave the way we used to behave.” I think that was the fundamental challenge that I faced. The other thing I would say is when we got into the broadband business we really changed the face of the industry forever. We no longer were just a one-way distributor of television. We were now offering this high tech internet service and that changed what we were in the consumer’s mind, but it also changed how we had to operate the business.

UMSTEAD: I was going to ask you, you were obviously an architect of Road Runner, and obviously as you mentioned before, in a competitive situation the industry needed something else to offer the consumers. How important was the development of Road Runner and not only for Time Warner but also for the cable industry in terms of developing high speed internet access to offer to consumers?

BRITT: What happened in the ’90s – first of all we got re-regulated and the capital markets decided they didn’t like cable. At the same time, the people who were running the industry then realized, and I think led very much by Time Warner, realized that we had the possibility of creating a new architecture that could do a lot of good things for the television business. Namely, it could actually be two-way for the first time ever. Going way back to the late’ 60s, early ’70s with TelePrompTer, I mentioned before, people had talked about two-way communication over cable plant and there’d been lots of various efforts to do that including in Warner Cable something named Qube that attempted to create two-way cable. But with the advent of fiber optics it became possible to use fiber optics to isolate the cable plant into neighborhoods based on nodes as we call it today, and that meant you could do two-way things. The other thing that created was the ability to switch television and that meant that once we built this architecture we could avoid these upgrades that had characterized the industry. So the old model was there were always more networks to launch and however much capacity you built it would get filled up after awhile and then you would have to upgrade the plant. So our relationship with the investment community was very much built around those cycles and it was “When is the next upgrade coming?” because you’ve got to consume a lot of capital and in between there was lower capital spending so that was a good time. Cable plant was built like a big plumbing system so the signals would be sent from the headend throughout this so-called tree and branch system and as I mentioned a few minutes ago, electronics would be used to amplify the signals and the electronics determined how many TV channels you could carry. Remember, this was a country that originally had a broadcast system that maybe in a place like New York had the three networks and a few independents. Many towns in America had one or two, it was a big deal to have three TV stations. So the idea that at one point the people could have 12 channels of television, which were a lot of the cable systems when I got in the business, initially people said, “What would you do with 12 channels?” Well, they got filled up and then people started building more capacity. I think in Manhattan we built the 36 channel system – nobody could imagine what you would do with that many channels, but the creative community kept coming up with more networks. The cable industry actually supported those networks early on with equity investment and carriage fees. So we, as I mentioned, had these rebuild cycles every few years. So the idea of the mid ’90s was can we create two-way plant that also would end this rebuild cycle, and we had this notion of putting fiber optic into neighborhoods and that would isolate each neighborhood so it avoids the old problem that we had with two-way, and the old problem was that this tree and branch cable plant would serve as a giant antenna. So if you were trying to send a signal back from a house to the headend the cable plant itself would serve as an antenna and gather so much noise from the outside spectrum that it would drown out your signal and it wouldn’t work. The Qube technology that Warner tried actually had electronic gates that closed off each neighborhood and then it had a central computer that would pull open the gate and poll each box periodically. And that proved to be with the state of computer technology in the early and mid ’80s not practical, but the idea of isolating neighborhoods was still there and you could do it by putting in optical fiber because that uses optical energy and not radio frequency energy, so you didn’t have this interference problem. That use of fiber in building the hybrid fiber/coax plant was actually developed heavily by Time Warner and we have an Emmy award to show for it. But then came the problem of how to finance all this because the idea of rebuilding the cable infrastructure was quite expensive. Now, it was done pretty economically because the reconstruction was about 20% of the plant economically and the remaining 80%, the coaxial cable to the home was reused. So if you contrast it to what Verizon is doing today, for example, this was done very economically but it was still a big capital investment and the industry wasn’t, at the time, in the favor of Wall Street because our rates had just been regulated. So I think I would characterize the ’90s as a period of time in the cable industry where everybody was either trying to figure out how to finance this upgrade or some companies decided to sell out. So for example, Continental decided to sell out; they didn’t think their balance sheet could support that kind of capital spending. TCI actually, which was then the biggest company, didn’t rebuild and ultimately I believe sold out because they didn’t rebuild at that time and it would have been too expensive rather than selling to AT&T. Our company was the first big company to do this rebuild and we really did it for television. We thought our service quality would be better, we thought maybe we could do video on-demand which we thought could be a big thing, but that’s really as far as our thinking went – better service, better pictures, and the rebuild cycle, video on-demand. We had a R&D test called the Full Service Network in Florida that tested these things successfully, although it was a little ahead of its time and quite expensive, but we could see where things were going. Along came somebody from Silicon Valley one day, came to visit us and said, “Gee, with this plant you’re building you guys could offer high-speed access to the internet,” and we all looked at each other and said, “What’s the internet?” We forget, it wasn’t very long ago but in the early ’90s the internet was – this was before the World Wide Web was invented. So it was a thing of academics, it was invented by the Defense Department, it was certainly… high tech people knew about it, academics knew about it, but it really was not in the public consciousness. The word dialup online services, such as AOL and there were a couple of others that we don’t remember anymore, but those were proprietary dialup services. They weren’t the internet. So we really didn’t even know what this guy was talking about. We thought, “Well, maybe that would be interesting. Let’s go look into that high-speed access to the internet.” While we were looking at it, the mosaic browser was discovered, or not discovered, it was developed. That really created the World Wide Web and it made it easy for normal, non-academic, non techie people to start transmitting multimedia things around the internet. So that made it more interesting to more people and led to the explosion we have today in internet things. Meanwhile, we were kind of playing around with this what we now call broadband, and we’d had a bad experience with the Full Service Network. It got overly publicized and people thought it was going to happen then as opposed to later. It was really meant as an R&D test. But it created embarrassment for Time Warner, so we decided that we would do our broadband test somewhere that the press would never go to unless we invited them. So we picked Elmira, New York which is a small town up in the Catskills and I remember we had a big launch of it. We demonstrated what dialup versus broadband. It was very exciting and the first test was will this thing even work? And then the second was will consumers buy it? It wasn’t clear it would really work for awhile and it was an interesting mixture of people who understood digital and internet technology which was still pretty new, and people who understood about RF technology which was what cable was based on. We were working with, I think it was Hewlett Packard initially, and they had these modems and they wouldn’t work and nobody could figure out why. These very smart engineers from Silicon Valley didn’t know anything about RF. Well, it turned out over the years the engineers in Elmira to make up for various plant deficiencies had cranked the amplifiers way up so they were actually operating out of the spec these modems were designed for. It took one of the cable engineers with the screwdriver in his pocket to figure it out. So it was two disciplines that didn’t really understand each other and that was part of creating this. Anyway, we were successful in Elmira and then we had our first commercial launch in Akron, Ohio in 1996 which was not that long ago when you think about it, and the rest is history. I think broadband changed our business because first of all the two-way part of the plant had to work absolutely perfectly, our quality had to get a lot higher and that was good for the television business, too, because as I said before we weren’t used to competing. It used to be the way we found out there was an outage was three people in the same neighborhood would call and then we’d say, “Oh, there must be a problem there,” and send a truck out. I’m only slightly exaggerating, by the way. We’ve got to be much more preventative and predictive now to operate in a competitive world. So I think broadband made us better. It made us tighten up the plant and make it operate better, and obviously it created a whole new revenue stream, which also has caused us to become better at marketing and servicing our business because we had to learn how to handle multiple products, not just one product. You were asking what I found in 2001. So what I found was a company, and I think an industry, that was somewhat in denial that we had competition. We were probably overly reliant on rate increases for growth, which caused problems with regulators, and so I said, “Okay, the world around us has changed. We’ve got to be better at competing and we really have to grow the business not by raising prices in a period of very low inflation, but we have to grow the business by selling more things to more people.” So what I set out to do was focus us on three things that we’re still focused on today, six years later. The first was to be more innovative about products and services. It seemed to me that we had the ability with this cable plant, which the people who put together this architecture were geniuses because it was designed to evolve as the business evolved, and it was designed to evolve with technology. So we really don’t foresee having to do one of those big upgrades again, but we invest incrementally as we go along. It means we’re not trying to leapfrog technology, not trying to leapfrog consumer tastes. We’re trying to move with the consumer, move with technology. So it appeared to me and it still does today that just using things that already had been invented that we had almost a limitless number of new products and services that we could develop and we didn’t have to invent new basic technology – we just had to figure out how to use it in useful ways, which I think this company and this industry’s been very good at historically, going back to HBO which was done in a very practical way. So we’ve now organized around innovation and rather than launching one new product every four or five years, which had been the mode we were in, we now launch a lot of things every year. Not everything is as big as broadband; there’s lots of little things. The idea is to listen to consumers, try to understand how people use things, try to use technology to do those things better for people, then we should keep moving forward. So that was the first thing, more innovation. The second thing was marketing. I think given the history of the industry, where we were on marketing is not surprising but we weren’t very good at marketing to be perfectly straightforward about it. I don’t think we were good at it at Time Warner; I don’t think the industry was good at it. Again, when you go back through the history it makes sense. Initially we sold reception service. If you needed it, fine, if you didn’t need it that was fine too. So there wasn’t the need for a lot of marketing other than to say, “Here we are.” Then as we started selling more channels, then the marketing became really the marketing of those channels because cable was the only place to get it. So if you thought HBO was a really cool thing and you wanted to buy it then you’d buy cable. So the cable operators became a little bit lazy and said to the programmers, “Why don’t you market?” So if HBO’s out there with a big marketing campaign, or CNN or A&E, whatever, then people will think cable’s a good thing and they’ll buy it, and so most of the marketing was done by the programmers. We did some direct marketing. If you built a new cable system, you’d do initial door-to-door marketing and tell people you were there, try to get them to buy the service, but marketing budgets were small – actually still are relative to, say, a packaged good company – and you have to fast-forward now to 2000. We relied heavily, and still do, on direct marketing, so a lot of direct mail, still a lot of door-to-door. So, as we got into a business that was much more competitive we hadn’t really developed the kinds of marketing skills you see in other industries. We tended to be very straightforward because we’d been regulated, so if the regulators said you can charge $5.95 for basic, that’s what it would be. There was no notion of packaging or merchandising or any of that, the sort of things you see in other industries. The other thing is as our business got more competitive relying on other programmers became not as interesting because it was great if HBO advertised themselves but you could buy that from DirecTV or Dish, as well as from the cable company, and sometimes from an overbuilder. So it became necessary for the cable operator to develop marketing skills and we’ve been focusing on that so not just direct marketing, which we’ve gotten very good at, but things like building sophisticated databases, and we’ve done that now at Time Warner Cable, so when you call up and the CSR looks at the screen with your name, it’s not just what you’re billing status is but it’s a report on all your recent transactions with us – what do you buy, what was your last service call, what did you buy last time, and most important, predicatively what you likely to buy of our new services given your history and your demographics. Other industries do this; it’s not rocket science, but I don’t think it had been common in our business and other cable companies are now doing it, too. The other skill we’ve been working on is merchandising, and I talked about pricing before. We kind of had bills that just listed all the services at list price and that was it and sort of incomprehensible to most people. When you think about how most people market things in a competitive environment where you have sophisticated many products, you use price to set value and then you use packaging and discounting to persuade people, to sell, and that changes with the competition. That’s the kind of merchandising skill we’re now engaged in and packaging and what have you that we didn’t do before. I think the next step in marketing for us and for our industry is to start thinking more deeply about how we want people to see us. So when people hear Time Warner Cable, what does that mean to people, what do we want it to mean to people? I guess what I’m getting at is if you think about a company like Proctor and Gamble, everything they sell is a commodity – they sell, soap, they sell diapers, shampoo, there are lots of competitors but they’re perhaps the most sophisticated marketer in our society. Somehow they’ve gotten so good at it that they’ve been able to imbue their products with certain attributes which are psychological more than anything else.

UMSTEAD: They’ve established a brand name.

BRITT: They’ve established a brand and it has attributes. Why does somebody buy Crest instead of Colgate toothpaste or vice-versa? Who knows? There’s some reason but you do that and in many cases those products are sold at a premium to other products. Even though toothpaste cleans your teeth and soap washes your clothes, whether you put little blue crystals in it or whatever, somehow they’re able to do that. I think there’s nobody in our industry, really, or even our competitive space doing that kind of marketing. So I think that’s the next frontier. Rather than saying, gee, you can get the same… let’s say we’re ten years down the road and the phone companies have rebuilt their plant, they’re offering the triple play, why should you buy from Time Warner Cable instead of Verizon? It’s not because we have HBO, because they have HBO, too. It’s got to be something that means something to people. The third leg of this is customer service. People have talked about customer service for years in this business. Most people haven’t done that much about it. I would applaud Cox; I think Cox has done, starting in the mid-90s under Jim Robbins, maybe even earlier, they invested heavily in customer service and I think it paid off for them even though there were skeptics at the time. We operate in an industry space that does a bad job at customer service. We had a gentleman from JD Powers come and talk to our management group recently, and I forget how he defined this, as telecom, cable, satellite – we’re all in this category – and we were next to last in the JD Powers industry groups for customers service, I think followed only by insurance or dentists or something. It was not a good place to be in. So I guess the good news is all our competitors were in the same boat. The bad news is consumers don’t think very highly of any of us. Now, part of that is the nature of what we do. Our business has many, many transactions all the time. We have services that people use a lot. TVs are on 7 or 8 hours a day, people are using broadband more and more, we’re in the voice business, people use their phones a lot. So we’re in businesses that in our geographies have very high penetration. If you think about, if we have 50, 60, 70 per cent video penetration in some places that’s an extraordinary percentage of the population buying a service from one company compared to toothpaste which has a much lower percentage. So that characterizes this. These are services that people really would rather not fool around with; they just want it to work. And they like to pay bills that they understand. They want the service, they want it to be there, but it’s not what they think about everyday, even though I think about it everyday. So anytime they need to interact with us it’s already an inconvenience because they’d rather not have to do that. Then on top of that, as I said, there are a lot of transactions – people moving in, people moving out, people upgrading service, downgrading, and you have people calling us about any number of things. One of the more interesting things to do is to sit with a cable CSR for a couple of hours. If you do it, what you find out is that – the average phone call is about five minutes – in an hour not one of those phone calls is like another one. They’re all about different things. People will call up and say, “What’s on NBC tonight?” And you think well, why did they do that? I don’t know. Maybe they were too lazy to look at a program guide, maybe they were lonely and just wanted to talk to somebody, but people call up about things like that. One of my favorite stories is I was listening to phones in Lincoln, Nebraska a couple of years ago and the phone rang, the CSR said, “Hi, Time Warner Cable. How can I help you?” It was clearly somebody in a car, it was a woman in a car talking on a cell phone and she said, ‘Well, I’m at Maple and 2nd Avenue. How do I get to the gas company? I want to pay my bill.” So the CSR didn’t miss a beat and said, “Oh, you go up two traffic lights and turn right and you’ll be right there.” The person in the car said thank you, and the CSR said, “Thank you for calling Time Warner Cable,” and I asked her, I said, “Why did that person call you? Why didn’t she call the gas company?” And she said, “Well, she knew that she could get through and I’d answer the question.” So we hear stories about people not wanting to call the cable company because they wait on hold for 20 minutes, but that’s not always the case. But it means that we have all these transactions and there’s a difficulty in getting them all right. So if you get, and I think we get the vast majority of them right, and we take care of the problem on the phone or if we have to send a truck, the person shows up on time, they take care of the problem, they’re courteous – you know, all the things people want – but it’s those few transactions that we mess up that get people upset, and if it’s even just 1% – I don’t know what the percentage is, but if it’s even just 1% that’s a lot of transactions because there are so many transactions. Couple that with the fact that what we do is intrusive, we’re in people’s houses, we’re climbing around their attics and their basements. Nobody wants a stranger in their house doing those things or doing anything, I think all of that makes for a difficult customers service thing and that’s probably why all these companies are viewed at the bottom of the heap. Having said that, I think we can do much better than we’re doing and we’re investing a lot of money in training, we’re investing a lot of money in technology, but probably most important is this process… I think that our people who deal with customers, our CSRs and our techs in the trucks, 100% of the time they know what needs to be done to make that customer happy and if they don’t it’s most of the time because we have some procedure that gets in the way. You’ve got to have an organization and you’ve got to have a process and you can’t manage this without that, but I think our job as managers is to make sure that our process doesn’t get in the way of good customer service. We need to focus a lot on that, so that’s what we’re doing. So innovation, better marketing, much better customer service – those are the three things that I’m focused on.

UMSTEAD: Time Warner has also been on the forefront of the video-on-demand business, in particular the launch of Mystro TV and then obviously to Start Over. How important has that business been for Time Warner in terms of reaching out not only to the consumer, but also to the networks?

BRITT: It’s been very important, and I think we’re on the verge of something interesting using video on-demand technology. Let me talk a little bit about the relationship between cable and the networks. As I said a little while ago, most of the networks we know of as cable networks even though they’re carried on satellite and increasingly on the phone companies’ plant, most of them were developed by the cable industry and they were developed because as our plant got bigger and better we needed more programming and early on when this started – back in the days of HBO in the late ’70s and early to mid ’80s – it wasn’t clear that you could create a lot of economic value by starting a new network so Wall Street and capital markets weren’t as fluid as they are today. It was hard if you were an entrepreneur to raise money to start a new network. So most of the networks that were started during that time period were supported by cable operators, usually with equity investment and by paying carriage fees, and we really built the business together. So selling more television, consumers seemed to have an insatiable appetite for that and inventing new networks was a way to make money. So there was that kind of partnership. I think then that changed partly because of satellite competition, partly because a lot of the networks ended up being owned by what were essentially broadcasting companies, so over the last ten or fifteen years you’ve seen those two things happen. So number one, because of retransmission consent it became better to be a network attached to a big broadcaster than not. So you see really not that much cable programming anymore owned by independents. Time Warner owns HBO and the Turner Networks but it’s somewhat of a rarity. Most of the networks are owned by broadcasters. I think that affected the relationship because historically the broadcast industry and the cable industry have had a bad relation and there’s a whole bunch of historical reasons for that, but I think broadcasters felt early on that the cable guys were making their fortune based on their signals, they shouldn’t be able to do that, despite the fact that they were extending the reach of those signals. More lately, because of the proliferation of all the cable networks, the ratings of the traditional broadcasters have gone down so I think there’s been that hostility. So I think the ownership by broadcasters created a more distant relationship. The other thing is once satellite got to be a meaningful proposition there became an alternative distribution mechanism. So that created more distance between programmers and cable operators. The final thing that happened is that competition does many things – competition has reduced the ability of cable operators to raise prices, which is exactly the way competition is supposed to work and from a regulatory perspective is a good outcome. That meant at some point that had to get translated back to the programmers, so a world where a given programming network kept raising its prices every year and where it could launch lots of new networks on the assumption the cable operator could just build that all into his pricing, that changed. So I think we entered an era of much more difficult carriage negotiations between programmers and operators for all those reasons and I think the relationship has been pretty rocky over the last several years other than there’s still a lot of personal friendships between operators and programmers. Most recently, the situation’s been manifested by networks putting all sorts of programming on the internet but perhaps being somewhat reluctant to put it on video on-demand. I think that that will ultimately create a problem for the networks because… and everybody wants to be cool and hip and put their stuff on the internet, but the problem is that networks are really just aggregators. They get content from wherever they get it from. They try to build an audience around a brand, a linear network, and that’s the business. Very few networks actually make their own content. They may commission it from a producer, obviously news networks do, and there’s a bunch of networks that are heavily dependent on running syndicated programming that originally started on broadcast TV. You could envision a world on the internet where this programming just essentially is offered a la carte, not a la carte networks, but a la carte programming. At some point the producers will say, “Well, gee, why do I need to sell my programming to NBC, I’ll just put it on the internet.” So there’s a risk that the linear network business as we know it gets dis-intermediated if they’re not thoughtful about all of this, and I don’t think that’s as widely perceived as it should be. People think about the internet, oh, it’s going to dis-intermediate the cable guys, which it might, but I think there’s a bigger threat to these linear networks. There’s also a lot of regulatory noise about a la carte, which I think the operators and the programmers are together on it. We think an a la carte offering would result in most consumers paying more for what they watch. There’s a few that might pay less but predominantly, people would pay more for less. It also might drive some of the real niche networks out of business and they could be networks that appeal to different minority groups, so we think a la carte’s a bad thing. But if all the network companies put their networks on the internet in an a la carte fashion which they’ve been starting to do, it’s going to be very hard for people to say why shouldn’t cable be a la carte? So I think all of this needs more thinking. Meanwhile, in the video on-demand platform, we’re offering an interesting proposition to consumers and to networks. We’re offering an increasingly robust amount of programming that actually is on your TV, not on a PC. It’s still pretty difficult to get internet content onto your TV, your big screen. We’re offering it in ways that are attractive to consumers – I’ll come back to that in a minute – and we increasingly offer at Time Warner, we have a family of VOD based products where we disable the fast-forward so for the network we’re disabling fast-forward. It means people are going to watch those ads and we’re working with Nielsen and others about how that should be measured, obviously if somebody’s watching it. It also is a much more secure environment than the internet from a copy protection viewpoint, so networks ought to like this and I think that we’re starting to have more traction on that. We could see a new era of inventing new things together between operators and programmers where we have win/win as opposed to win/lose which is the world we’ve been in. Let me talk about a couple of our products, and it all grew out of this Mystro TV idea. One of them is called Start Over and the consumer proposition is that imagine you come home at 9:15 at night and said, “Oh, my program started at 9:00 and I forgot to record it and I really want to see it but I missed it.” If it’s Start Over enabled you can push select and it starts over like it was 9:00. Consumers absolutely love this service. We now have over 100 networks that have given us permission to put their programming on and we have more that are interested in it. Great for consumers, great for the network. We have similar ideas… we have something called Quick Clips and that will allow web enabled short clips to be put on our VOD server real time, so say CNN could have clips on our VOD server. We have another idea called Look Back which is like Start Over only it would be for a longer time period. Start Over is just during the time the programming originally aired. And then we have another idea we’re calling Catch Up – not like the catsup in a bottle – but the idea there is if you have a series of episodes 1-35 and you’re about to air episode 36 you can put a bunch of the previous episodes on our server so people could catch up. So we’re playing with all those things. The networks are excited about it because it preserves their advertising model and our program guide, we have a pull-down menu that you can get to these from the linear network and we let the network program that linear menu. So if you’re on CNN, you can pull down and go right to CNN Quick Clips, Look Back and so on. So we’re doing that to help the networks preserve their model because we think it’s a win/win for all of us. It’s interesting how consumers use these things. I heard something last week that was counterintuitive to me, but people who have DVRs and who have Start Over actually use Start Over more than people who don’t have DVRs.

UMSTEAD: Really?

BRITT: That didn’t make any sense to me because they’re similar functionality; it’s watching things on your schedule instead of somebody else’s. Well, it turns out when you think about it, it actually does make sense. So a lot of people now when they turn on TV, the first place they go is to their DVR and see what they’ve recorded and then they might watch something, and if they don’t like what they’ve recorded then they might go to live TV or to VOD. So let’s say you start a program. Well, the odds are when that program is over it’s not the top or bottom of the hour, it’s halfway through – 9:15 in my example. So if you go back to live TV then Start Over is terrific; you can go back to the beginning of that program. So that’s what people are doing. They’re watching on their DVR and they come in halfway through a program and go back and use Start Over. I never thought about that but it makes a lot of sense.

UMSTEAD: Five years from now – how will Time Warner change from what it is now?

BRITT: I think five years from now it won’t be hugely different than what you see today, only more of the same. So I think because we’re in the broadband business and the voice business, which we haven’t talked about much, in addition to the video business, I think you’ll see a bigger percentage of our revenues from the telecommunications business than today because those are growing rapidly. You’ll see a robust entry into the business market, the so-called commercial business. But I think you’ll see us still pushing the triple play, you may see the quadruple play. You’ll see potentially some very interesting things in the advertising space which is another thing we should be doing with networks, using our interactive capability to bring internet-like functionality to television which both advertisers and the networks should be interested in, and they are. So you’ll see more of that, but I think you can kind of see how things are going to look at this point. Ten years from now is another question.

UMSTEAD: What would you like your legacy to be in the cable industry?

BRITT: I would like to leave behind me a company that is a far more competitive, more innovative, on a shorter cycle than the one I found. I’d also like to leave behind a company that was a lot more committed to diversity, which we all talk about and nobody seems to do enough about. In a lot of ways we’ve come a long way in diversity since I was a young adult. If you think what the world was like in the 1960s and ’70s, so I can look back saying gee, we’ve come a long way, but we’ve not come as long a way as we would like to be, and I think we’ve got to finish that job. That means having a more diverse population in management; that’s the part we haven’t finished in business. Clearly young people have a very… I think young people are diverse, I think in their psychology they’re diverse. So some of this changes as generations change but we’re not there and I’d like to see us make more progress.

UMSTEAD: And in terms of Time Warner as a company beyond the diversity legacy that you’re talking about, what would you like to see Time Warner become in terms of its legacy within the telecommunications business?

BRITT: Boy, that’s a hard question. I think we have a reputation today as being perhaps the most innovative company in the business, certainly not taking away from others because they innovate too, but I think I’d like to continue that because that’s how you compete, that’s how you can thrive. So I’d like our company to be thought of as very innovative, sort of cutting edge, make mistakes occasionally, obviously. I’d like to think we’re going to be larger several years from now than we are now. We like this business a lot and as people sell out we’d like to be larger, so I think that’s it.

UMSTEAD: Just in terms of you personally, when it’s all said and done, when you’re through here, what do you enjoy doing beyond the cable industry in your personal life.

BRITT: That’s a problem, mostly I like working.

UMSTEAD: No hobbies or anything to that effect?

BRITT: I play golf badly like a lot of people, we like to travel… I think that whenever this part of my life comes to an end, I think I’ll find lots of other things to do.

UMSTEAD: Good, good. Is there anything I missed that you may want to add regarding Time Warner or yourself for this particular recording?

BRITT: The one thing I didn’t say that is very important, you asked me about what I’ve done with the company – I’d like us to be a company that people like to work for, that people feel good working here. We have this physical plant we focus on, we talked a lot about that, but we also have 45,000 employees. The vast majority of those employees deal with customers every day, they live in the communities where their neighbors are customers, and I think if we make this a good place to work, and I think it is that now, if we make it a place where people feel good about the company, that we care about them, that we care about the communities, I think we’re going to do really well as a business if we do that and that’s really important.

UMSTEAD: Thank you for your time, Mr. Britt. We appreciate it. Again, we’ve talked to president and CEO of Time Warner Cable, Glenn Britt. This is Tom Umstead for The Cable Center. Thank you and take care.

FELD: Given everything that you’ve done within the industry – your passion for customer service, your interest in technology and consumer electronics – without being modest, what do you think is your greatest strength and your biggest contribution to Time Warner and the industry?

BRITT: I’ve always been interested in doing new things although from a corporate kind of setting, big company setting, and I’d like to think that people would see me that way, that I’ve left behind an entrepreneurial atmosphere, an entrepreneurial history even though it hasn’t been in my case going out on my own and starting something, it’s been doing it on behalf of a company.

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