Interview Date: July 2006
Interviewer: Steve Nelson
Panelists: Charlie Townsend and David Van Valkenburg
Abstract
Charlie Townsend and David Van Valkenburg describe changes in the cable industry by the 1980’s, such as the expansion to urban markets, and how that affected CTAM’s focus. They define and discuss the issue of churn in pay services, CTAM’s research, and the shift to buying programs. They comment on Char Beale’s segmentation study, the outreach to operating executives, and how the Family Viewing Study helped target programs to different audiences. They explain the creation of the Mark Awards for the best marketing campaigns, providing new opportunities for people involved in advertising sales. They conclude by reflecting on how their work helped to integrate marketing into the whole of the industry.
Interview Transcript
STEVE NELSON: Charlie, let’s start talking about when you first got involved with CTAM. What were you doing at the time?
CHARLIE TOWNSEND: Well, it is ironic that I’m sitting here with David Van Valkenburg because I was happily employed at the Pepsi-Cola Company in charge of new product marketing, and I got this invitation to come out and interview with United Cable with David, and I was intrigued by the cable television business and by what United was doing.
NELSON: Did you follow the business at all at that point?
TOWNSEND: A little bit. I knew Matt Blank. He and I had spent a lot of time together. He was, at that point, head of marketing for HBO. So I came out, I interviewed with David and also with Gene Schneider who was out of another world from my standpoint. I have since grown to really, really like him, but at the time… It was like 8:00 in the morning, he had a shoestring tie on, smoking a big stogie cigar, and he had on cowboy boots.
NELSON: And so people know, you’re a graduate of Harvard Business School, kind of an eastern kind of a guy, right?
TOWNSEND: Yes. So here David and I are both alumni and we had on our three-piece suits, and Gene had on his stuff. So I decided it was an intriguing opportunity and joined the company in the fall of 1981.
NELSON: But you had a pretty good marketing background. Pepsi is a very marketing driven company, unlike cable TV in 1981.
TOWNSEND: I think that was part of the reason David hired me, although you’ll have to ask him, but I had actually worked for H.J. Heinz before that and Phillip Morris, so I had a pretty good consumer packaged goods background and had actually talked to Bert Stanier, who was the first guy that I knew who had come into the industry as a true packaged goods marketer. He was, I think, product manager for Colgate-Palmolive. So I got in and I sat there and said to myself, I could see it was just beginning to turn into a true consumer product because we’d been selling reception up ’til then and then suddenly you had some of the basic channels. I think MTV launch…
DAVID VAN VALKENBURG: In ’81.
TOWNSEND: The day that I was interviewing. I went…
VAN VALKENBURG: Went to the party.
TOWNSEND: I went to the party, and I’m like, this could be fun.
NELSON: That got you interested, I’m sure.
TOWNSEND: It got me interested.
NELSON: I can imagine the MTV launch party.
TOWNSEND: It was pretty exciting. And then I could see things were potentially going to change, and I really think that CTAM to a large extent reflected those changes as they occurred over the next five or six years. That it went from an industry that had focused on really selling reception improvement to true consumer package goods companies where they had originally pay, then multi-pay, then packaging, all of which were the driving forces in the early ’80s. Then, I think what was kind of a transforming event was in 1983 there was a planning session which Gary Weik hosted down in Florida, I think at Sanibel Island, and his concern was that a lot of the old people who had originally started CTAM were going off the board the next year. So all the heritage, the knowledge, the perspective was gone, and you had a lot of new board members like myself, Gary, Ed Bennett – I’m trying to remember some of the other ones – that were on there that certainly had good marketing experience but didn’t have the right perspective. So he had a strategic planning session in Sanibel Island that really formed the basis of many of the changes in CTAM over the next five years. I think the significant one was that up ’til then, CTAM had had a very central focus, which was the annual show and I think the feeling was that it needed to have more of a national focus and it needed to be more mainstream in the industry. So the result of that session was that they decided to take it from Atlanta which was where it was headquartered at that point, bring it to Washington and also focus more on year-round programs and also a more local orientation. Up ’til then, the only people who came to CTAM events were people that could afford to travel to the annual show which was in San Francisco, Boston or Chicago, which meant you had to be at a fairly senior level in your organization. The thought was we really need to bring this knowledge down to the local level. So, I much greater focus was on local marketing, which developed the local chapters several years later; it was a direct outgrowth of that. It also, I think, as Gary told me, shifted from tactical sales and marketing to more strategic marketing, which the shift there would have been from the bundling and multi-pay in 1981-82. He also said that the franchising wars were an important part of the focus then, so it was more franchising than marketing. And the pay packaging really started in ’83-’84 which was one of the key products in selling into the new metropolitan areas that up ’til then had not embraced cable. So pay television was really the product that brought cable TV to the major metropolitan areas.
NELSON: And it was actually, as we saw in an earlier panel, the product that actually brought CTAM into being as the first meeting was on pay TV. But I want to ask you, David…
VAN VALKENBURG: Go ahead, because I wanted to comment right here because pay TV… this was the time where the industry was getting into urban markets. You had the basic programming services that were off the satellite, like TBS, was all purchased programming. You had the start of MTV, but it was all purchased programming… WGN, another off-air that we imported elsewhere. But when it came to cable exclusive product, the only thing we had at that point in time, as Charlie said, were HBO and Showtime. That was real, incremental, first time that people could see that product in the home, and that’s why you had the single pay and then multi-pay, and bundling those together, even though in some cases they were duplicate movies, but you could get the variety of when you saw it and they had some differentiation. This was before the days they got into more exclusivity and original product. But Charlie’s right, that was the driving product that got us into the large urban markets like here in Boston.
NELSON: Now turning back to CTAM and your involvement in it coming out of this meeting in Florida – where did you go from there?
TOWNSEND: Well, Gary Weik actually went from there. He was later to become president of CTAM.
NELSON: He was your immediate predecessor?
TOWNSEND: Yes.
NELSON: I’m just try to keep this chronology.
TOWNSEND: So, I followed in Gary’s footsteps. His focus was really quite good. The other things that came out of the strategic planning were much more focus on quantitative measures – acquisition costs per sub, the subscriber lives, also there was the CTAM database, which was really interesting because we had several people who had come out of consumer packaged goods, the idea of having a Nielsen rating for the cable television business in terms of share of markets, the different products, because up ’til then there’d been no way of measuring really how Showtime was doing against The Movie Channel against HBO. You knew the total number of units but you didn’t know who was taking what. So the database actually would then provide us with information with churn, with acquisition numbers, and most importantly with what pay packages were doing well.
VAN VALKENBURG: Charlie just used a word that just rolled off his tongue, but one that – I don’t know whether you created it, Charlie – but it was not a word that was in existence in the mid-80s and that’s churn. Churn became a factor as we get towards the end of Charlie’s time on the CTAM board and mine coming in, and that was the churn of pay services and the slump that went into premium services, and that’s where the word churn really became a household word for those of us within CTAM. The research that Charlie did, and the research committee at that time – this would be ’85, ’86 – was what’s the cause of the churn? What has to change in the product within premium services to reduce that churn?
NELSON: Can you just define how bad that churn was? Give us a sense of what was going on. Was this really dropping off the cliff?
VAN VALKENBURG: Well, it was. I mean it was a factor at least that cost me my job, so I know it well.
NELSON: Oh, you churned!
VAN VALKENBURG: Yeah. Because we came to the end of the roll-out of multi-pay and what was underlying that was the churn that was going on of customers coming on and then going off, but we were rolling out multi-pay to more and more markets so we were growing. But we got well into ’85 and the bottom didn’t fall out, just growth stopped and we had declines, and the first quarter of ’85, as you may recall, the industry declined – many of the companies did – in pay units. So we were having churn, correct me if I’m wrong, we were like 10, 12, 14% per month. This was very high turnover of pay units and so what was going on, why? And back to the research committee and some of the things that came out of that, and obviously one of the things as we go later into the ’80s is exclusivity, which especially, well, both Showtime and HBO went towards, and original programming. So when you get that now into the late ’80s, this increasing amount of original programming, you start to stabilize the HBO and the Showtime base and have a chance to grow it again. When you take a look at a Showtime today and how many quarters that Matt has grown it today here in 2006, looking back 20 years ago that’s very hard to believe except he’s got exclusive programming, he’s got cutting edge programming, and very original kind of programming that he can acquire and retain customers, which we didn’t have in the era that Charlie’s talking about.
NELSON: Now this research, was this really one of the first big research projects that CTAM got involved in because obviously there was a real economic incentive to do that. Had there been much research going on before that?
TOWNSEND: There were really two key research studies that done in close proximity to each other, and the CTAM database was not a single shot study. It was an ongoing study, so we actually had results every month in terms of pay units, one, two, three, four pay households, churn, acquisition…
NELSON: And the data? Where did the data come from?
TOWNSEND: Well, the pay suppliers gave it to like Price Waterhouse, who carefully guarded the data and then gave it back to everybody later. The second study which was a real beauty was done by Char Beales when she was at the NCTA, and this was a segmentation study which was identifying who was buying cable, who might buy cable in the future, and who was unlikely to buy for a long time. That study came out and had several key acronyms that came from it. One was the “truck chasers”, who were the people – as David remembers and other people may have indicated – who used to knock on the doors of our service vehicles to get them service ahead of everybody else, and what that started to identify was how does the industry go from 35% basic penetration in 1985 in the new builds, go above that? Because you’ve already got all your fixed investment in your plant, so every one of those new customers is like 80-90% profit margin. So the segmentation identified many of those people, and it turned out that after the first 35%, the next level of subscribers were not interested in pay TV or else they would have bought cable. What they were interested in were the basic services. So what that change did in the mid ’80s was it started focusing on basic programming, and the pay suppliers actually came to us, I think in about 1984, and that was at a point where we either got free carriage or they paid us at United Cable. I remember this – two guys came to me – Roger Werner from ESPN said, Charlie, if you don’t pay us we’re going to go bankrupt”, and I said, “Okay, Roger, how much do you want?” And he goes, “We need 25 cents a customer.”
NELSON: You fell on the floor?
TOWNSEND: Well, I went back and I talked to David and to Gene Schneider, and then the next… and I’m not going to tell you what we did quite yet… but the next call I got was from Doug Holliday at The Weather Channel. He came in and he said, “If you don’t pay us, we’re going to go bankrupt. As a matter of fact, here are our books.” He has this financial presentation, he shows us, we showed it to David who understood all these things, and we both agreed, they were going to go out of business in the next six months. So we came back, I’m not sure we gave Roger 25 cents, probably 15, and I think we gave The Weather Channel a nickel.
VAN VALKENBURG: Exactly right.
TOWNSEND: And we were the first company to agree to pay the basic suppliers and it was because of the segmentation studies. We knew we had to have better basic programming if we were going to attract the next level of basic subscribers.
NELSON: So this wasn’t merely an expense, it was really an investment in your growth.
TOWNSEND: The quid quo pro here was we’d say, okay, we’re going to give you this money, what are you going to do with it? It can’t go into Roger Werner’s salary. So they agreed to buy certain types of programming which ultimately ended up two or three years later with the NFL, which I think was a real turning point in terms of the viewing of how serious cable had really gotten when we could knock off some of the big network programming.
NELSON: ’87, as I recall, was a real watershed year, and the NFL deal and also reaching the 50% mark.
TOWNSEND: That’s right.
NELSON: So that was a big leap forward from where… you said you were what? At 35% only five years before, something like that. So obviously the strategy of pushing basic at that point, the shift away from pay, paid.
TOWNSEND: It did, it did. The other piece that came out of the research that the CTAM database showed is what it really showed was, which was the underlying cause of churn, was that you had certain households that were going to buy pay television, and then the question was how many pay TV services were they going to buy? Not knowing any better, the industry basically crammed five services down their throats as the new belts came through. So they’d give people these packages of five pay services and a special offer to keep them for a month or so, and then lo and behold, three of them went poof after a couple of months and everyone was scratching their heads – I wonder why that happened? Well, what the research showed was that people didn’t want it. So the answer was that you had to one, segment your customer, so certain customers wanted Disney Channel, certain customers wanted Showtime and HBO, and then there were the true tonnage users and those people wanted everything. That was about 5-10% of homes passed were your true tonnage users and you could sell them anything, but the rest of the people were relatively discriminating.
NELSON: So this whole experience must have really reinforced CTAM’s role in the industry because this research really led to a huge surge forward that you might not have achieved without understanding what the customer was really thinking, what the customer really wanted.
TOWNSEND: I think one of the concerns about CTAM that I noticed in the early days was that it wasn’t focused on making money. That the operators were all very financially oriented and that the marketing people were more interested in esoteric things. I think starting right after the strategic planning session we were focused on how do you maximize profitability. Fortunately it tended to coincide with good marketing practices and so one of the other conclusions was we had to change the location of the headquarters from Atlanta where Dean Wait and Judith Williams had done a very diligent job coming out of their experience there, into Washington D.C. with Vic Parra. At that point it went from a fairly small budget to a fairly large budget in terms of how much money the industry spent on CTAM activities.
NELSON: During your period there, CTAM went through big change. It had been in Atlanta, it moved to Washington; it went from sort of part-time management to full-time. Can you just give us a little bit of that chronology of the changes that occurred then?
TOWNSEND: Sure. Well, originally Lucille Larkin was doing this on a part-time basis, helping to put the Association shows together on an annual basis. Then Lucille handed the administration piece over to Dean Wait and Judith Williams in Atlanta, I would say in the early ’80s, and they did a great job of keeping things running then. But after the strategic planning session in 1982 or ’83, it was concluded that we needed a full-time professional staff in Washington because that’s where a lot more of the central activity was occurring of the industry. So the Association’s headquarters were moved from Atlanta to Washington D.C. and Vic Parra was hired as the head of the Association.
NELSON: And what was his background?
TOWNSEND: He had been running an association. I can’t remember if it was the American Manufacturer’s Association or the supermarkets’ group, but it was on some packaged group’s level. What he had a great deal of knowledge about was how do you get many disparate groups to work together for a common cause in an association format.
NELSON: So he was an association professional as opposed to cable guys filling in to keep this organization going.
TOWNSEND: Exactly.
NELSON: Now of course with the move, with bringing on a full-time guy to run it, increasing the staff – I’m smelling the need for more money to keep this thing going. Where’d that come from?
TOWNSEND: Well, fortunately it came from greater attendance at the annual show, and the interest in marketing was just booming at that point, and it was booming from several areas. Number one, the programmers were very interested in learning as much about what the operators needed and also trying to influence in terms of what they needed, and the operators were becoming more interested in bringing more of the operational people to the CTAM show. So one of the other things that came out of the strategic planning session in ’83 was a more operational-focused CTAM. Instead of just being pure marketing I think what we realized we had to do was to incorporate the general managers and the operating personnel of the major MSOs into CTAM, which was the reason that David eventually became involved, as did a number of other operating people. Rod Thole was one that came in then. So we specifically reached out to operating general managers – Wayne Knighton was another one – who had a marketing focus and were operationally oriented because what they could do was they could take a lot of the CTAM ideas and incorporate them into their business plans so that they really worked.
NELSON: Do you recall something that maybe you did that you in fact incorporated?
VAN VALKENBURG: That’s a good question. I’ll have to think about that one. But let me though do respond to the change in direction in terms of bringing operating executives on the board. That it became a lot more than just focused on marketing. This was at a time when we now start to get into human resources, we got into – in fact in some of those days right in there is where we got involved in advertising, but later we spun out that advertising committee that formed CAB. Later the development of reaching out to human resource people and that got spun off eventually to CTHRA. And so you had all of those various other disciplines as well as operating executives brought on so you can really permeate the entire organization. The other thing we did, and this maybe was in your era, that we started to have CEO mini-conference, confidential conference, bringing the CEOs to CTAM and having very specific closed-door sessions in talking about topics that are more broad-based topics but are critical for an entire company and that would be of interest to the CEOs. I think you had one that had 50-some executives there in ’85 or ’86 timeframe.
TOWNSEND: Yes. I am so glad you brought that up. One of the problems that the members of the board and other people who were involved in the leadership of CTAM found was is that when they came in for their annual budgets the CEOs of the companies were scratching their heads frequently on why they needed to spend more marketing dollars and it was difficult to frequently justify those programs. Part of it wasn’t that they didn’t get it, it’s just they really didn’t understand the benefits of the marketing itself. So what we realized is we had a mission that we needed to perform, which was to expose the CEOs to why they need to spend marketing dollars and to focus on marketing and we thought who better than other CEOs to help bring this out. So we had these CEO conferences and then we would use the CEOs who were more marketing oriented to make presentations, to talk, to answer questions so that the CEOs would then embrace the marketing budgets, the marketing orientation of the people in CTAM when they came up for their annual reviews.
VAN VALKENBURG: And then ’86 was Charlie’s, and that is one of the major topics was the slump in premium television, was in use of the research study, presenting that to the chief executives. Another one was preparing for rate de-regulation that happened now in ’87 and that was another topic. Another was restructuring of the channel lineups, which became called tier meltdowns, but that was another topic. And what’s interesting was – and this is back to Charlie and his background in Pepsi – and that was where’s our competition today for the viewer, for the entertainment dollar, and specifically talked about the home video business that was occurring at that time. So those were the four major topics that Charlie presented to the CEOs there in ’86, which were very, very relevant for the CEOs to think about what are the big issues that are happening with the consumer in marketing at the time.
NELSON: So I imagine this not only would change attitudes toward the marketing budgets but towards CTAM itself because of the kind of value that they derived from these sessions.
TOWNSEND: I’m not sure they necessarily said CTAM is doing this. I think they said I had a good experience at CTAM, I learned a lot of good things, it’s helping me do my job; therefore if my people want to participate in CTAM it’s a positive thing.
NELSON: Well, that was a good accomplishment, I would say.
VAN VALKENBURG: You asked a question earlier about what I took away – and the one that Charlie was involved in – and that was the Family Viewing Study, and who watches what TV, where do they watch it, who’s the buyer, who’s the influential buyer, and so forth, and that in-home segmentation in terms of focusing on a particular program and aiming it at different people even within the home. That was a very valuable research study that came towards the end of Charlie’s time of being active in the CTAM board.
NELSON: And at that time, were people still thinking of TV viewing as the home as a family gathers around the set?
VAN VALKENBURG: Exactly. Yes, it was mass marketing, mass media, everybody collected around the one TV set. Well, by the mid ’80s, TV sets were in a lot of kids’ rooms and elsewhere in the home. I think that was one of the very first, if not the first, study about the family and its viewing habits.
TOWNSEND: And coming out of that were several key findings. One was, you want to get additional outlets into the home.
VAN VALKENBURG: Absolutely!
TOWNSEND: It was like glue in that the more people watched it, the more they liked it. So putting those additional outlets in didn’t really cost us very much and it significantly increased the viewing of our product. The second thing that came out of that study was in terms of the decision-making process to bring cable TV into the home and then the decision-making process to rip it out. How did that happen? Well, it turned out that the guys brought it in and the gals got it out.
VAN VALKENBURG: In terms of final decision.
TOWNSEND: And here’s how it would work. The man would sit there and watch the sports and movies and they would say, “Gotta have it.” So they’d get it into the home, the wife would sit there and watch, now her husband is watching more television than ever, her kids are watching shows that she doesn’t want them to watch, she can’t spend as much time as her husband and her children as she wants, and she says, “Why are we spending $20 a month to do this?” So she gets on her husband’s case, out it goes. So one of the conclusions were women’s programming was really important. So Lifetime, which at that point was kind of floundering around, we were like, yes! And we also needed to highlight more women’s programming in terms of our promotion of different shows. The other thing that came out of that was of the homes that don’t buy cable TV, why don’t they buy it? And the answer was an interesting one. There was a fear, frequently, that they would watch too much television. It was almost viewed like narcotics, that you bring it into your house and it’s going to destroy your home. So we had to highlight what shows could come into the home that would not be harmful to the home setting. So we pushed CNN, Arts & Entertainment, all of the more information programming and less of the entertainment. The focus there was you don’t have to watch a lot of television to buy cable TV, and it slowly started working away at that perception that you don’t have to be a TV junkie to buy cable. Today if you were to ask people, that’s all gone!
NELSON: That’s for sure.
TOWNSEND: It’s hard to believe that 20 years ago people didn’t want cable in their house because they were afraid they were going to watch too much.
NELSON: But that is an odd thing to sell your product by convincing people they’re not going to use too much of it.
VAN VALKENBURG: Well, it got it in the home, and with the family viewing now you can have quality programming – Nickelodeon, I forget when that was launched…
TOWNSEND: Right in there.
VAN VALKENBURG: Right in that same timeframe, quality programming for kids. You got the wife, you’ve got various kinds of programming so you don’t have to watch a lot yourself to have value for the entire family.
NELSON: That sounds like the Family Viewing Study and then Lifetime, Nickelodeon were really at the real turning point here in terms of really starting to have more and more segmented programming, more and more focused programming and all the special kinds of networks that followed from that.
VAN VALKENBURG: Let me cover something else on research that I think is important on why CTAM was able to do and achieve this at that point in time. This was at a time when at that point in time it would be less than 25% of the customers of our cable industry would be in, say, the top five. You had a proliferation of operators within the industry; none could on their own afford the kind of research that Charlie is talking about, but together could get enough of a broad sample to get relevant information for an individual market. And so that was a real value for CTAM that CTAM brought to each company and to each chief executive as well as each marketing person. Charlie had a research person but it was narrowly focused kind of research, and so with CTAM you could get some industry value that was company applicable and market applicable.
TOWNSEND: And actually, United Cable developed an advertising campaign that came right out of us. It was called The Less You Watch Television, The More You Need Cable.
LAUGHTER
NELSON: We won’t take that to its logical conclusion.
TOWNSEND: You would think that would be counterintuitive. We researched the hell out of this thing and we found that it played with the non-subscribers. They knew exactly what we were talking about. It also helped that we had a little known actor at that point, Jason Alexander, who was in our commercial. This was one of the first commercials he ever shot; I’ve still got a copy of it. He went on to become legendary in Seinfeld as George, but he was very good because it included humor and also all of the more informational programming.
NELSON: Now where did this commercial come from?
TOWNSEND: We had an advertising agency in New York develop it for us.
NELSON: Now is that the first time that CTAM went out with a video campaign?
TOWNSEND: This was actually United Cable.
NELSON: Oh, United did that. Okay.
VAN VALKENBURG: But the question is appropriate because it has to be about the first time that, because of Charlie, we had a New York ad agency at United in Denver.
TOWNSEND: Right.
VAN VALKENBURG: And that’s a major, major step forward for that company as well as others in the industry at the time. A New York ad agency would not be something that maybe any others had at that point in time.
NELSON: But CTAM wasn’t yet doing any of these kinds of campaigns that they subsequently did?
TOWNSEND: No, this started with individual companies. I think CTAM embraced a lot of the advertising as individual companies started to bring it along and would share it with other companies. I’m thinking here…
VAN VALKENBURG: Let’s key off that because this is at the very early beginnings of what are now the Mark Awards and I don’t know whether those started under your…
TOWNSEND: I think they were right after me.
VAN VALKENBURG: Right after you. But that’s what started it. By the time that it got to my time in the late ’80s as president or chairman of CTAM, they started to have real awards but the genesis of that was Charlie hiring an ad agency, producing a professional spot and producing those kinds of commercials for us that led to the Mark Awards, which is today a very, very professional event for us and the ads are very professional today. This has got to be one of the very first TV spots.
TOWNSEND: I think that David’s point is very well taken there. That wasn’t just kind of haphazard. People realized we needed to showcase the best marketing campaigns. How do we do it? So first you’ve all got to decide, which are the best campaigns, hence the kind of award making process, and then how do you publicize those? The beauty of the cable industry is since they don’t compete with each other you can do a lot of sharing and everybody can benefit. One of the other things – I remember it now – that about the television campaign that was important, and it was a major breakthrough, is that we were advertising on broadcast television and we didn’t know if the broadcasters were going to let us on because we were basically going right after their customers, but fortunately those greedy little guys didn’t care, or at least they didn’t think we could do anything. So we were putting these commercials right on the broadcaster’s stations, aimed right at our customers – well, the beauty of it was their customers, the off-air viewers, were exactly who we wanted!
NELSON: You couldn’t target better than that, right?
TOWNSEND: It was so good.
NELSON: That’s fantastic. Well, you were talking about the broadcasters – what else was going on during that time period outside of cable that you were competing with in terms of you had the broadcasters, this was a period where the VCR really took off, but that really turned out to be a real plus for cable.
TOWNSEND: David was right. The fear there was that the VCRs were going to basically undermine pay TV because the window for VCRs was before pay television so people would watch it on their VCR and they’d dump HBO.
NELSON: And was that fear realized?
VAN VALKENBURG: Well, that certainly was a significant factor and I think that’s where the push to get more original programming and exclusive programming on HBO and Showtime, that’s where that drove it. Obviously the other thing that drove it would be sporting events, especially HBO with boxing, that was a major exclusive with HBO, but it was the additional exclusive programming, original programming that then was the competitive response to the advent of the VCR in the home of being able to watch the movie way before they could watch it on HBO or Showtime or Movie Channel or Cinemax.
NELSON: Charlie, talk a little bit about during your time period, the event itself – because here we are at the summit taping this – how did the annual meeting or whatever it was called at the time, how did that evolve over the period when you were active in CTAM?
TOWNSEND: Well, when I got into the industry in ’81 it was evolving. I think I had missed the Gail Sermersheim days when it was like 30 people in the Holiday Inn, but it had increased to, oh, I don’t know – the first one, I think was in Boston here where Ted Turner announced that he was going to come out with CNN 2 to respond to… somebody else was launching another news network, SNK or something like that. So that probably, I’d say, was in the 400-500 category in terms of attendance, ’81, although we have the exact number, and it really skyrocketed in the next couple of years to 1,400-1,500. So there was a lot of interest and a lot of money coming into the Association. I think what we felt we needed to do, which again was part of this strategic planning, was we had to make this worthwhile where people weren’t going to come and they weren’t going to spend – I think it was $300 or $400 to come in those days – so we really had to make sure that our product was good, and we had to give them good information. They had to go away having two or three ideas that they thought they could bring home and use immediately in their cable systems.
NELSON: And were there things in the way the conference was structured that started changing, because if you go from 100 people to 500 people, you’ve got to deal with them in a different way. You can’t just keep putting them in one big room.
TOWNSEND: I think we can thank Jerry Maglio for that. They started to have tracks where you’d have a central session followed by all sorts of different smaller sessions that you could pick from so that individual interests… we’re almost segmenting our own customers so that everybody could go after what they wanted. We’d have lot so things – we’d have an operational focus, an advertising focus, a direct sales focus, and you could basically reach out to many pieces of the marketing community that way.
NELSON: The advertising folks you just mentioned, because it just brings me back to something you talked about before which I guess not having been there I’m curious about, and that is the fact that CTAM started becoming so many things to so many people – the administrative, the operations, the advertising, the HR. How was the decision made – I can see why you’d do it – but how was the decision made to move into those areas which were getting pretty far afield from marketing per se?
TOWNSEND: Well, one of the things we did is we ran a survey of our own membership in 1982 and we said who’s attending the conference? Of course everyone thought telemarketing people. We had about 40% were marketing, 20% were programmers, 20% were administration, 20% were operations and 20% were other things. So we already had a base of customers who were coming to the shows – and HR is another one – who were this broader base. So we said, hey! We’ve already got ’em, we might as well target ’em better. So we expanded the base of our own clientele.
NELSON: Did you finally discover why those people, of all people, were going to a marketing conference?
TOWNSEND: Well, CTAM as you probably remember had “Administration” wedged in there at one point, and fortunately…
NELSON: So was that the hook that got them?
TOWNSEND: Well, a lot of them really were administration in the early days, when it really started, and then it kind of shifted over to marketing in the early ’80s and then I think it shifted back to administration in the mid ’80s.
NELSON: And then those things were spun out – CTHRA and CAB.
VAN VALKENBURG: But see, they didn’t exist. The people that were involved in ad sales within the cable systems, they had no place else to go so this was a way for them to learn more about the industry. Charlie developed sessions for those that were involved in the creative, the ad sales, and so this was sort of the germination… and you’ve got people like Jerry Maglio that comes out of Literary Guild, or Trygve Myhren from Psychology Today or Charlie from Pepsi that were used to the ad sales side as well, and so it was very natural for them to have a segment on advertising and ad sales. Now it obviously grew to the size that it really needed its own organization but this was the place where those that were comfortable with it, it was the only place that they could go, was to CTAM.
NELSON: So CTAM really was an incubator for a number of other organizations that came later, which probably a lot of people don’t realize that that’s where they came from.
VAN VALKENBURG: Right, right.
NELSON: You know, in the early days the industry was very much of a technology driven and, as a friend of mine used to say, the operators would come into a room and they’d have to take the pliers out of their back pockets to sit down. How did you start to see that shift taking place where… I mean you talked about the CEOs starting to accept the marketing budgets, but I think it’s more… and I think you’re nodding because it’s really more than just that. It’s really that just the buy-in to marketing and the importance of marketing and really the centrality of marketing in people’s operations and to their bottom line, particularly.
TOWNSEND: Well, it certainly is an area that I thought a great deal about 20 years ago, and Gene Schneider, bless his heart, is the perfect epitome of this because he had the pliers. He was an engineer, a very good engineer I might add, and he had the pocket protector.
NELSON: He had it all!
TOWNSEND: He had it all. And I figured if I could get Gene Schneider to buy-in on this stuff, he was the epitome of the typical old cable operator who was usually technically based, very good technically because they were mostly engineers. The key to success in the cable business in the ’70s was engineering, it was not marketing. So you have these companies that are built by people who are operationally engineering focused who are running the companies. Suddenly you get this shift taking place in the late ’70s, early ’80s where you start to get this marketing focus and it’s a lot of this razzle-dazzle stuff that the engineers did not understand, and I’m not sure wanted to understand, but the one thing they did understand was if it could make them more money, they were willing to listen. The profitability of a lot of these multi-pay, pay services and even basic marketing programs were clearly profitable, so I think we brought them along slowly, but we had to prove that we could earn our way to do it.
VAN VALKENBURG: But you take a look at the markets that Charlie was now involved in versus the markets that Gene and Richard Schneider, his brother, had built. There’s a big, big difference between Casper, Wyoming and Hacienda Heights, California. Huge, huge, huge difference. In Hacienda Heights, part of Los Angeles, it’s got a dozen, fifteen or more off-air. They don’t need cable for entertainment. It’s got a significant minority population. It is a very, very different market, and totally foreign to someone that came from Casper, Wyoming. So you had to market, and you had to figure out the various segments of a Hacienda Heights or an East Valley there in LA and so forth, and later a Baltimore. Very, very, very different and different communities within each, and that’s where someone with Charlie’s background and Ajit Dalvi and others that came into the industry from the consumer products industry really added real value to the industry in terms of you had to really market. You didn’t just put it out there and they come.
NELSON: Would you say that transition – kind of looking back on your term at CTAM – that that was your biggest accomplishment? Or what was your biggest accomplishment? When all is said and done and you step down from the president’s chair, what did you think you had gotten done?
TOWNSEND: I think the thing that I really felt was critical was to bring CTAM base back to the mainstream of operations. I thought to be profitable in this industry you really have to integrate marketing right there into the heart and soul of the companies, and so we brought the operating people in, we really focused on how do you make money and how do you make this thing work. I think that was very effective. We had some just sharp people who were on the board who did that. I used to learn a lot myself from them. I was very good in marketing, but I wasn’t that knowledgeable about operations. So I could tell them, here’s the idea, and they’d say, okay, Charlie, here’s how to make it work.
VAN VALKENBURG: But let’s just take that, and that is in terms of permeating operations, and that is making the installer a salesperson, making the CSR a salesperson, and that again comes from integrating marketing, product knowledge, and sales skills to everyone in the organization and only a person that comes from that product marketing background and understands the consumer can really bring that into the entire organization. So I would agree with Charlie. That’s a major contribution to the industry and we had a number of those kinds of sessions during the CTAM years that Charlie was on the board where we talked about the incentives for the installer or a CSR, and training them and so forth. That’s also why we got HR people in, because they’re part of marketing.
TOWNSEND: And then if you look at who succeeded me as presidents of CTAM, many, many of them – David, Barry Lemeiux – they were all a COO, CEO of their company so these were operationally oriented people who I think forced that marketing to stay on target.
VAN VALKENBURG: The transition from Charlie’s time to mine… you were ‘8…?
TOWNSEND: ’86.
VAN VALKENBURG: ’86. I was ’89, so basically a five-year period, but the major difference of thrust between Charlie’s time and mine was the full implementation, or the over implementation of Gary’s strategic plan. By the time it got to my time it had grown in so many different ways it was almost unmanageable and why the next transition was one of bringing more focus because it just was trying to do too much. But we were the ones in the late ’80s implementing some of the ideas that came out of Gary’s and Charlie’s strategic plan that said marketing needs to permeate the entire organization. We did it, but it went too far as we learned from previous discussions.
