Interview Date: March 9, 2006
Interview Location: Denver, CO USA
Interviewer: Craig Kuhl
Collection: Hauser Collection
KUHL: We’re here today with Bob Clasen, the President and CEO of Starz Entertainment Group. Bob, welcome to the oral history program.
CLASEN: Thank you.
KUHL: First, why don’t you take us back a few years to some of the early years and give us some of your education information and where you were born and then we’ll kind of move on into some of your career path and beyond into the cable industry.
CLASEN: Well, I’m from a suburb of Cleveland, Ohio and grew up in Cleveland, and went away to school at Bowling Green State University. It was the ’60s so I stayed there for 12 years; thought that would be a nice place to just camp out, and did an undergraduate degree, went into graduate school, worked at the university, became dean of students at one of their colleges and was in a Ph.D. program. I was in counseling psychology, so I kind of haven’t had too many business courses yet but I’m going to get to that in a little while. But I was at the university and worked at the university for 12 years.
KUHL: Wow! So during that time you were studying psychology?
CLASEN: That’s right.
KUHL: Was your passion to be a psychologist or a counselor?
CLASEN: No, I was really headed toward, I thought, a career at the university. I liked being there; it was a very exciting time. I was there from ’62 to ’74 and we had a lot going on and I thought that I would finish with my degree and stay at the university and I might teach because I had been lecturing in some classes, and go into the administration of the university there or somewhere else.
KUHL: So you were there for 12 years at the university. At what point in time did you say, “I think I’m ready to move on.”? How did that transpire?
CLASEN: It’s a simple story – I had all but my residency and the dean of the college that I was the dean of students of was going to retire and he thought I should go in as the interim dean while they did a search and the faculty said, “No, we’re going to put in our own guy,” a Ph.D. in political science, and I’m sure I became frustrated and was kind of realizing I was perhaps a little more competitive. I was on the faculty flag football team and played centerfield on the baseball team for the faculty and felt maybe I should just take a year off and that’s really how it started. Through some college friends, Tom Willett, who at the time was vice-president of marketing for Continental, they had their marketing group in Findlay, Ohio, and Pam Euler Halling, who was his assistant – they kept saying, “You ought to come and talk to Chuck Younger and the folks at Continental,” and I did. I knew nothing about the business. They did some community programming and I thought that’s what it was really all about and naively went to work as general manager in Findlay, Ohio in 1974.
KUHL: Wow, so that was quite a move for you out of academia to the cable industry. Now is this at the point in time when you came into contact with Amos Hostetter and Jim Robbins?
CLASEN: I met Bud a little later. Jim and I started the same day. We met on a Monday morning with Pam Halling to have breakfast. I was right out of the university; I think I had a JC Penney double-knit suit and a bowtie and shoulder length hair, and Jim out of WBZ in Boston with his Harvard MBA looking great, and Pam said, “Bob, we’re going to do these photos of you two guys,” because he was going to run Huber Heights and I was going to run Findlay, “but we can’t use that bowtie.” So I borrowed Jim’s tie and one week in CATV Weekly there was Jim with his nice tie and then the next week there was me with his tie. So I met Jim that first day.
KUHL: Oh, that’s great.
CLASEN: In fact, I just saw him at the banquet this week in New York honoring him.
KUHL: And Amos was there at the time.
CLASEN: Yeah, he was living in Boston by then. He had been the manager in Findlay. Findlay had a great track record of managers coming out of there like Chuck Younger and Ray Joslin and Bud Hostetter, but he was back and came to visit us but it was reasonably clear what the style of management and leadership was and it was the first time I heard the words decentralization and they really lived it. Not everybody back then did, and certainly they were very tight frugally and were very close in terms of the budgets that you put together. When we had a challenge and an opportunity it was really for us to figure out how to do it. There was a moment when there were four regional folks there between Ohio and Michigan and within three or four years we all ran top ten MSOs. Tim Neher was running Michigan, and Jim Robbins, Barry Lemieux, who became president of American Cablesystems that was later merged into Continental, and then me. There we were, just kind of learning as we went and the beauty I always thought of Continental was that they had taken us all from so many different disciplines. Barry was a history major and had been at Bedford Stuyvesant, and Tim was a banker, Jim had been a broadcaster and had been overseas during the Vietnam War. Three, four completely different backgrounds, and there was something about that environment and the way we worked together that was very special back then.
KUHL: Continental’s had a great reputation, I know, through the years as having those attributes and really kind of bringing those people along. Was there someone special there that influenced you more than someone else, or was it just the environment at Continental that helped shape some of your future career path?
CLASEN: It’s interesting you would say that. Certainly I felt Chuck Younger took me under his wing. He was the regional guy for all of Ohio and I didn’t know anything. I remember my first week on the job they gave me all these books to read with FCC rules and I’m sitting in there reading them and the phone is ringing off the hook, and I yell out, “Doesn’t anybody answer that?” and Connie Hersimacky, who was the office manager, there were only four people on the office staff, said, “Well, if you’d come out here and help us answer the phone we’d be able to do it.” A truck had hit some pole and knocked it over. But I think Chuck did. The interesting thing from my perspective, having been at the university, there are two things that come to mind – one is that it became clear pretty quickly that our customers didn’t want to be numbers just the same way that students in the ’60s didn’t want to just be a number. They wanted to be treated specially, and I remember taking some time and writing a customer service – because I did learn that I should help out and answer the phone and those kinds of things – a customer service book. The other side was Tom Willett. Tom Willett and I had known each other in graduate school and he worked for Boston but had the corporate marketing group for all of Continental in Findlay. The detail of looking at everything we did – and he always used to say, “With every marketing piece you want to just sit down in a chair with your t-shirt on and read it like you’ve got an 8th grade education and really see if you understand that. I’ve thought about that every year as we consider what to do. The other trick he talked about was reading things aloud, that when you read things aloud you read them much more carefully and are better able to catch mistakes or things that don’t sound right. So I was kind of learning as I went there.
KUHL: That’s interesting. Journalists write for 8th grade readers. Sometimes we wonder if they understand even 8th grade.
CLASEN: Continental did an interesting thing, too. They brought in a fellow named Bill Clancy, who was a New York politician, had been a state senator in New York, because our whole life was getting rate increases from city councils, and he really came and gave one-on-one tutorials as we were getting ready to go and ask for our 50 cents or our dollar, or whatever it was, and did everything from kind of teach you how to pretend you’re having a glass of wine and yet not really drinking while the city councilmen you were hosting were, to really unbelievably tough questioning that when I got before city council I felt really comfortable. As over the next ten years cable franchising became important, that grounding really helped me quite a bit.
KUHL: So you’re at Continental and things are moving along, was there a time when you felt “I need to grow beyond this” or was there a time when you felt “You know, I’m attracted to the technology part of this now” because I know you have the technology background.
CLASEN: Reflecting on it, I was there three years and I had three different jobs. I was promoted to northern regional manager and southern regional manager and we were feeling like things were just going to explode, and as the satellite became an option, which initially we didn’t do, we did something else which was kind of interesting, as that happened and the major markets were about ready to be built – and I was frankly doing very well and they came to me and said, “Bob, we’ve decided we’re not going to move into the major markets. It’s going to be very competitive; that’s not our core, and by the way, we’ve given the next regional job if we do get another big franchise to Buzz Goodall.” He was a great guy, he was our corporate treasurer, and so I – because Continental was a hot company back then – was getting all kinds of phone calls, so I took a couple and decided that I would go on and do something else.
KUHL: So tell me what happened at that point. You’re just about ready to leave Continental now – what were some of the offers and what appealed to you at that point?
CLASEN: Let’s see, I know I talked to Viacom and Warner, but I was really intrigued with Canadian Cablesystems. Canadian Cablesystems Limited was a Toronto based company that was one of the three or four largest in Canada, and they had two things that they were known for. One was a tremendous community programming effort, which is what a lot of Continental did, that may have been part of why they were attracted; but secondly, they only had big systems. They operated in all the big cities, where in the U.S. at that time the average cable system size was 8,000 or 9,000. Their average cable system size was over 50,000, and they were filing a bid for Syracuse, New York and Syracuse was the first of the top 50 television markets that became available in the late ’70s when there had been a moratorium on building in major markets, and as that came off they won. They asked me to go there and build Syracuse. As I was accepting the job, Ted Rogers, who was smaller, did a reverse takeover, merged those two companies, and they became the largest cable operator in Canada. He had no American cousins, so he left me in place running the U.S. and I was the second or third employee that they had, and six years later we were a top ten MSO.
KUHL: Were you in Canada?
CLASEN: I lived in Syracuse and built that in about 2 ½-3 years. The first winter we had 154 inches of snow and that was an interesting experience. Then I went to Minneapolis. Again, they had tremendous credibility in the major markets and they won Minneapolis, and although that became a three year debacle and lawsuit when one of the city councilmen changed his vote between when they had selected Rogers and when they actually signed the contract – I mean, it was a pretty wild time – and Rogers, we had negotiated this contract over an eight or ten week period and we sat down for the meeting to have it executed and one of the city councilmen changed his vote, so it went from five to four to four to five, and they simply put Storer Broadcasting in and we always wondered how that happened. That city councilman a couple of years later was indicted on bribery in connection with liquor licenses, so I don’t know but it certainly didn’t smell right to us. But I moved to Minneapolis. We acquired franchises in California, we eventually built Minneapolis but I moved to Toronto right away. I was only in Minneapolis for a year, so I was living in Toronto but every week flying into the U.S. It was Portland, we did the deal with United Artists, UA Columbia, and were running San Antonio and Alamogordo and Little Rock, Arkansas and quite a number of other properties. So between all the new construction we were doing and the acquisition, we were one of the top operators there in the early ’80s.
KUHL: So, when did you develop, I guess maybe a sense of technology or a desire to get into… and I’m moving to ICTV now. Was there a point in time with Rogers that you thought… what sparked that interest? Again, you’ve had a diversified expansive career.
CLASEN: I wish I could tell you I had a great curiosity and an academic interest. It was simply, in that case – and I’ll talk about ICTV in a minute, the right place at the right time. You’re right about Rogers. Their core was engineering. The Jarmain family that had founded Canadian Cablesystems, Ted Rogers himself and his family were radio pioneers, and Ted was really a programmer and broadcaster at heart, but one of the reasons that helped Rogers win so many franchises were the number of innovations. They were the first to go to 41 channels instead of 36, and they were the first to experiment with two-way, time shared teledon, and it was very exciting. But I was always on the practical side. I remember that in those days you had to get permission from the FCC to build an earth station and it took months and months, and they did all the propagation studies for Syracuse and said, “Well, we need to put this outside of town about twelve miles and microwave the signals in because there’s so much congestion.” I said right away, “Why would that council, city council out there put up this tower. But I’ll go to the city council meeting and see what happens.” So I went to the city council meeting as they are having a gigantic debate over power lines and cancer, and I’m thinking this is the last thing I want to do. So I went to our engineers and I said, “Well, what if we just put an earth station on a flat bed and drove it around in our licensed area and found a place?” So we pulled it into the parking lot and put this earth station on it and turned it on and what do you know? In the parking lot of our offices we could get signal from the earth station. Of course now you can put them anywhere, but in those days. So, I guess my point is I learned pretty quickly technology is only important as it can be practically implemented. That’s an issue. And that’s the ICTV story, that here we were right but the company, although now it’s doing well because it was right over the long term, but this was the thick box versus the thin box, and you remember that debate. Let’s just have a thick box that has all of the software in it, and I’m thinking – and God bless Motorola and Scientific Atlanta – they have never built that kind of device, they are not software people, let’s do, and this is what the ICTV solution was, you have a thin box because that’s what people were putting out. They didn’t have much memory, you couldn’t do much with them, but it could talk to a central processing center in the headend and you could be in real time sending messages back and forth. The darn thing worked and it also, by the way, converted IP into MPEG in real time so you could also put stuff from the internet on, and this is 1999-2000. But nope, Motorola and SA were going to build the thick boxes and I think SA built a few of them. I don’t think Motorola ever built the 5000, and by that time the internet boom had crashed and we had been caught up in that internet piece. I’m glad to see ICTV coming back and doing so well.
KUHL: The impact of that on programming, of this kind of technology on programming, did you see that coming at ICTV? What were your thoughts at that point?
CLASEN: There was a website – this is 1999 – the feedroom.com. What the feedroom.com did was take a newscast from popular television stations in every city in the U.S. and you could go there and stream it. This was kind of new stuff in 1999 and with our technology you could stream it through the ICTV box in the headend and turn it into MPEG right to the television. So we thought there were a lot of cool things going on but there was this whole debate about lean forward and lean backward, which of course is now whatever you want to do. So it’s a place of being a little too early. If we had invented ICTV two years ago, it probably would have done a lot better and now I think it’s doing fine. It’s really redone itself as a software company. Gary Lauter, the VC that’s backed it for years is a champion for sticking with it and I think that they’re going to do fine because there’s so much need now to do centralized processing, especially with all the on-demand now. That’s how you do it.
KUHL: So ICTV, now where do you go from there? At what point did you feel that I need to move on from ICTV? Had you had enough of it there? Had you felt you had made an impact there and you were ready to move on or were there some other factors?
CLASEN: Let’s back up for a minute. I have moved all the time and that’s part of my nature. I think I have a short attention span, and I also think I wear people out. At Continental I had a great run. Why did I have this wanderlust? I had just been at college for 12 years; I hadn’t gone anywhere. But I did, and at Rogers it was a little different. We had built about as much as we could and as an insider I knew that Ted had committed to sell his U.S. companies to finance his cellular business, CanTel. So I knew that we would be out of the U.S. cable business in the next two years and then there’s the whole story of joining Comcast and having a great six years at Comcast. When I got there they were the 17th largest, they were smaller than Rogers, and six years later we were number three. It was Julian Brodsky, Brian was my head of operations, and we just had a great spurt from being in the mid-pack to going right to the top. Yet, I left that environment. Six years – I had some personal reasons that I wanted to get to California and the Comcast people were fabulous. They were worried I was ill. They couldn’t imagine that I’d just for personal reasons want to pick up and leave, and of course – I think I was in my early 40s then and at the top of the world running Comcast. It was, again, time for me to move on.
KUHL: And that’s when ICTV came into the picture?
CLASEN: No, ICTV was a lot later because I went to McCaw and worked in the cellular business, and then I was a year there. Craig and I were oil and water. I was the only…
KUHL: Craig McCaw, oil and water??
CLASEN: Yeah, we were oil and water. Well, I was an operating guy and they were a company of all deal people. Anyway… Then, I went back to Comcast. Actually I consulted for a year with Comcast and TCI and Time Warner overseas, and lived in California and did a lot of stuff in Asia. It looked like, at one point, those three companies were going to form a joint venture to go overseas and do cable stuff. So Brian said, “Come back to work for us and if we put this joint venture together then you can run that.” So that’s why I went back to Comcast although I still lived in California. But Comcast didn’t want to contribute cellular and Time Warner didn’t want HBO to touch it and TCI didn’t want… So it never worked out. In the meantime, I’m an operating guy; I’m out there filing applications in France and doing all these kinds of things which we spent a couple years unwinding because we won some of them. But I ended up staying at Comcast that second time for five years and we did some cellular franchising, we built cable in Venezuela, we were working on things in Europe. The big challenge was highly leveraged transactions that let the capital not flow quite so quickly to the cable industry that was so capital intensive back there in the early ’90s. So we had to be very careful about what we did. By that time, in a lot of the markets where there was really enough disposable income like Western Europe to support a video business, the satellite already had occurred and limited the opportunity to do it. But that’s in the UK. We were building telephone systems. We had the first non-British telecom switch installed in one of the Comcast systems there. We did the first integration with Mercury, the number two carrier. It was a lot of bumping up against new technologies, seeing what you could do with coaxial cable and fiber.
KUHL: And now Comcast and Sprint and all these others. How do you feel about these initiatives with Comcast? Looking back in those days and forward to envision partners like that or alliances like that probably seemed a little bit out of whack.
CLASEN: You know, in the late ’80s and early ’90s, our partners in Europe were US West, Southwestern Bell. The phone companies moved into Europe partnering with cable companies and built integrated networks and it was an interesting experience on both sides. We had great partnerships. The challenge was we were both operating companies and had such terribly unusual styles that not much happened, but it was the precursor of what ten, twelve years later is now going on in the U.S. There was a time when Bell Atlantic was going to buy TCI and then that didn’t happen in the ’90s, so it was a time when, I think, the Baby Bells at that time were looking to see what else they should be doing, when cellular was growing greatly. I remember Comcast was in the cellular business. I was there when they bought their first cellular company. So this whole idea of convergence, again we had that term about four years too early but got a lot of mileage out of it. So what’s happening today, I think, could have been seen a little while ago. If you have a robust enough infrastructure that you can deliver video and you can deliver telephone and high-speed, and if you can because of your size acquire spectrum to do wireless, you’re much better served because the consumer likes buying things in packages. The consumer likes to have some sense of what their obligation is. That’s why subscription always works so much better than pay-per-view because if you create the right price value relationship then I think you’re usually much better off than subscription, and then if you can take four subscription products, put them together, give them discounts, and then sell products a la carte, it’s a really winning situation.
KUHL: You know, Bob, I think that’s a great segue right now. We’re going to take a break and we’re going to come back and pick that up in just a second.
Well, Bob, we were just discussing content delivery and technology’s impact on that. Expand a little bit on that for me, will you?
CLASEN: Well, in 1974 in Findlay, Ohio, we had a 12 channel system and we were licensed for 16 channels because we could bring in Toledo, Columbus, Cleveland, and a little bit of something from down toward Dayton but we didn’t have channels so I got the bright idea to just program some of those Columbus channels myself. That was one of the manuals I hadn’t gotten to about FCC stuff. But we always used to run the Woody Hayes Show; going from 12 channels that were all broadcast and then going to more than 12 and satellite delivered was done in the wrong way, frankly. You would get this set top box and you had your 12 channels and then you added – let’s say it’s HBO – well, that was the next one and the next one and the next one, and all of the sudden you have this hodge-podge and the consumer, what is he or she going to do? I always remember the one impact we did make in California is a group of us got together and agreed that we would put MTV and ESPN and CNN, which were in 1981 – ’80 and ’81 – the only names anybody knew and intersperse them between broadcast channels so as people scrolled through they’d actually have to see a channel. I think those three companies should thank me to this day that we did that in the LA market.
KUHL: You should be getting some royalty checks!
CLASEN: I wish I was. So every technological improvement has problems that are associated with it. It’s like pay television – negative trap, positive trap, scrambling… I mean, did scrambling ever work? We were selling in Huntington Beach, California and we had like 17% penetration, just could not break through, and decided to turn off the scrambling for Playboy, and bam! 24%! Sorry. But we were trying anything. That was kind of the fun of the cable business in those days when you were able to experiment in your local markets. But those issues, I think, just to jump ahead, are part of cable’s challenge today because those hybrid networks are still in existence, you don’t rip everything out. So the cable industry sits today with a service that doesn’t require a set top, a service that does, digital platforms – Comcast has three digital tiers – and then there are the pay services and there’s on-demand, and there’s some on-demand you get at digital one and some you get at digital two and some at digital three, and as the phone companies come to the market with IP networks it’s a one integrated solution with probably more flexibility and I think that’s going to be a challenge going forward as we look at the next couple of years. I think the related issue, just again about technology, is the fact that there still are all those thin boxes out there that are very clugey with regard to user interface. The ability to menu is very arcane and I think that one of the challenges will again be the telcos will come in with IP set top boxes with very sophisticated menuing and user interfaces and that will be perceived as a leap forward. Going back to my ICTV days – we told you! We told you in ’99 and 2000 that if you didn’t plan for a 100 channel on-demand world, people would have trouble finding your content, and that’s the challenge today here in Denver. You can turn on the Comcast system, and I love ’em and they’re working hard with some of the recent acquisitions of software that they’ve made to improve it, but it’s still pretty clugey.
KUHL: Let’s kind of move on. You’ve been on the tech side in a lot of ways; you’ve been on the operations side…
CLASEN: After ICTV, living in southern California as we were talking before, there aren’t too many cable companies headquartered down there and I ended up just because there were plenty of opportunities working for seven or eight different technology companies. ComStream – I ran that and sold it off in a couple pieces. It was commercial satellite equipment. 80% of our business was overseas. We did some stuff with optical transport solutions. Certainly at Broadband Innovations we were looking at technologies that would allow you to mucks and demucks, and just on and on. There are all kinds of things going on. The challenge with those companies, though, is that as the cable industry consolidated you really didn’t have what was the European experience where you would have the large telecoms out and picking and choosing the pieces of equipment they were going to use. The cable companies turn to SA or to Motorola typically and say, “Give me an end-to-end solution and do it for less than you did last year.” Certainly my recollection was in the early part of this century, there was some lack of innovation because of that. There were opportunities to do things but they would have been at a cost to improve the fiber optical transport or the coaxial improvement and as that consolidation’s completed my hope is that the two big guys that are left – and Cox is private, but it’s really the two big guys – will deploy more resources to R&D. They tried to do it through these venture capital initiatives that they created and I think that that was somewhat successful but it wasn’t always pure to what the operating objectives were. “Oh, here’s a good technology. Let’s have Comcast Capital invest in that.” And they made some good returns but it wasn’t always integrated with their operating business. Having spent time on that side and recognizing the kind of hybrid networks that the cable guys have, there are some challenges for that infrastructure as the two big Bells start using fiber pretty far down the road and IP delivery.
KUHL: Interesting. A lot of convergence, a lot of blurred lines now among technologies and service providers, carriers, from your wireless to cable to etcetera. What technologies do you see, Bob, moving forward, being from a business perspective – like you mentioned earlier, from an operational perspective – to be the most important technologies moving forward that need to be advanced.
CLASEN: Well, I think there are three that the consumer is telling us needs to be developed. Certainly one of them is HD. There’s no question that we’re all going to have HD television sets; it will be the new standard. People will expect a high level of quality. It will be a challenge to those that are compressing it a little bit and not letting it be as robust as it might be off-the-air or unencumbered or unencrypted, so there are some issues there but I think the consumer is now going to move pretty rapidly, and as you hear about the new devices that are coming to the market and the new generation of DVDs, it’s going to be a lot about HD. I think the second thing is clearly DVRs. I know I watch DVRs. There are three or four shows a week that we would make a copy of, save them, watch them, and without a DVD I wouldn’t see them. I think that as those proliferate – there’s a whole other discussion we can have about the pressure that will put on linear channels, and whether that flows to the a la carte family friendly discussion is a whole other issue. There could be a lot to talk about, but I think the consumer said, “Look, I like DVRs.” So those would be something. Third is just the general area of portability, and while portability looks like it’s starting as a kind of generational issue I think that it’s much more than that. I think that we all like the convenience. Starz has the new Vongo product and I have movies downloaded to my laptop and you’re on a long airplane flight, there they are. What EchoStar is doing with Pocket Dish – let’s not debate the copyright issues, there may be some – but very clearly they are taking a position that Pocket Dish is an extension of their network and that’s a compelling consumer device. So HD, higher quality video, DVRs, and as it relates to on-demand – you’ve got to have menuing for on-demand so I don’t put it in my top three yet – and then third would be portability. I think people will want to take their content with them and they’ll want to have it available as often as they need it. Sling Box is another example of that. So I think those would be the three places that I would focus on the video side. Since we’re now integrated networks it’s very clearly wireless communications and whether that’s in the home or outside the home, the phone, moving pictures, we’ll be streaming to cellular phones this time next year. It’s a rapidly changing technological environment driven by digital, driven by IP, and driven by the consumers’ insatiable appetite for these kinds of conveniences. How many times have I said this? Content is kind but convenience drives adoption. That’s always the law.
KUHL: Moving on to… I want to continue this in respect to Starz and the delivery there and the content and the devices and how that’s going to effect your company moving forward from a content delivery standpoint, but let’s kind of transition now to Starz. Tell me the dynamics in that process of getting to Starz. How did that occur, at what point in time – was there another moment in time or person that influenced you greatly to go to Starz, other than probably John Sie? Tell us about that.
CLASEN: As I said earlier, I left Comcast driven by some personal issues and the timing of some things. It was actually the same with going to Starz. I was living in California with my family; there were some reasons why we felt we might have another window to just go do something else. Within just that week that my wife and I were talking about it, John Sie called and said, “I kind of forgot about succession planning” or words to that effect – I don’t think that’s exactly what he said, but yeah, I had not been on the content side. That is the one thing John and I have in common. He’s been an operator, he’s been on the technology side, he’s been a programmer at Showtime and at Starz, and it was all about movies but it was all about the movement of video to IP and the rights that Starz had quietly acquired over the last few years for internet in the window that was the same as their video window. So, I saw it as an opportunity to take the couple things that I had been doing and put them together with what I hadn’t been doing and that was the programming side. It’s been phenomenally great for me, and it’s been fun, and I think we’ve reinvented Starz. We re-branded everything, we really looked across all of our channels and identified the right target demographic. We challenge our people scheduling those channels. There are three movies usually in primetime every day that prove its edge, that prove its comedy, that prove its action, and we’ve taken the interstitial and not made it just homogeneous – you know, “Tonight at 6:00, Tomorrow at 5:00”, to really do entertaining, fun, and sometimes hard-hitting pieces in between the movies to give somebody something actually to pay attention to. We’ve invented movies done in 30 seconds by bunnies. We’ve done movies in two minutes. In fact, we originally did The Hulk in three minutes and it was still too long but when we cut it to two minutes it turned out to be a really quick, crisp, entertaining interlude and of course we find out it just doesn’t work on interstitial – very popular on-demand and works wonderfully for our IP platform and it will be content that we use then on the wireless platform. So it was that opportunity to kind of take that different thinking… I’ve thought about myself two things as I’ve moved so many times – one is that I am a chameleon. I was never the smartest student but I always got great grades because I knew after the first few weeks what the instructor wanted and it’s kind of the same thing when you see what the ownership’s plan is and what they’re trying to accomplish and you focus on that, or what the shareholders are looking for if it’s a public company, then you’re in a position, I think, to try to execute on that. So I think that being a chameleon, and then secondly, focusing more… I’ve often said about myself I’m much more a process person than a content person, and that means I don’t need to make every decision. I have to rely on building a staff and we’ve done a great job at Starz blending some of the folks that had been there with John with some new people that bring in video streaming experience, some other content experience and I think we’re off to the races. I mean our plug is our Nielsens for our Starz Superpack are up five out of five years; Encore is up five out of five years – nobody can say that. One of the premiums is down five out of five, the other is down three out of five. Even ESPN has been flat for six years. We’re doing something right and the consumers are identifying with it. We’re helped by the fact that it’s the only full premium movie service left, so if you want a movie you know you can go to Starz or Encore and according to the genre find something. It’s been driven by personal decisions a lot of times. When I moved from Minneapolis to Toronto – I was talking to Bill Bresnan and I enjoyed and appreciated Bill all those years. It was in the TelePrompTer days and he was looking for someone to come in and sit between him and his three divisional people, and I just decided I was having a lot of fun with the Rogers folks, we were hot, we were growing like crazy – they were the largest but I stayed with the Rogers guys and actually two weeks later Westinghouse bought TelePrompTer. He must have known it was coming. He had just hired Burt Stanier, too. So there’s happenstance. Would you rather be right or lucky?
KUHL: So tell me a little bit about your vision for Starz at this point, you know, content windows, movie windows, all of those issues, and competition, like we were talking about earlier, with the explosion of devices out there that people are going to be able to watch movies on. How are all these things swirling around going to affect Starz and how were you planning to address those?
CLASEN: Well, we want to be at the curve. I don’t know that anybody can be ahead of the curve but we do want to be, and we know we are, at the curve. We’re the only subscription premium product out there – in fact, I’m not sure who else is streaming on the internet besides us. That’s a whole other issue about why people aren’t streaming. But our vision started with recapturing our core, and that is the linear channels that in the case of Encore, 26 million homes have Encore, almost 15 million have Starz, we really needed to be sure that those were headed to the right demographics and that they were broad enough but targeted channel to channel. So we started with the core and at the same time put out our first internet product, and that internet product was Starz ticket. But to supplement the core we embraced on-demand. The basic networks have a problem with on-demand because people skip through the commercials; we have no commercials. So we reinvented on-demand. We premier our movies on-demand before they’re even on linear. We buy some movies only for on-demand as bonuses and features because on-demand, they’re movies that on primetime at 8:00 – we like to see our ratings, too – had never run. But there can be niche programs that we can run that can be very effective on-demand and we actually create a faux interactive experience. When you order a movie somebody at Starz Central comes on and says, “Great choice, Craig! You’re really going to like Pulp Fiction, and if you like Pulp Fiction, let me just show you a little bit about Kill Bill 2. That’s on next month.” Jerry Maglio, who’s been Chief Marketing Officer for three major MSOs, is doing our creative thinking. He’s very bright. Our on-demand looks and feels different from everybody else’s. We’re always trying. Even Comcast lists everything alphabetically… we threw them a curve because every week now we list our new releases alphabetically first, and then the rest – just throwing them a curve ball once in a while. But it’s really, frankly, a flat category. You got 108 million television households, 90 million multichannel households, you’ve got the cable and satellite guys swapping bad debt, you have a market that only grows about 1 ½ percentage points a year – we’re growing dramatically on the satellite platform, we’re growing a little bit on the cable platform as they get more digital because remember, we’re only available in digital, and if the telcos ever get going, we’ll have a much higher penetration on that platform because we start with a level playing field as opposed to being 30 years behind Showtime and HBO developing their brands and being a part of the public’s consciousness, so when we’re on a level playing field as we will be on the telco platforms we’ll do very well. But our growth opportunity is really in the internet space and in that regard we’d love our affiliates to embrace what we’re doing. They’re all worried about us, “Are you going to bypass us?”, and I say, “Well, it’s only a bypass if you don’t use the product. It’s the internet – anybody can go to Vongo and subscribe to Vongo, but you’re my biggest customer, I’ll give it to you wholesale and you can retail it, and you’re big enough you’ll always have a better deal than I will myself because I’m at my core not a retailer.” If two years ago the cable industry would have shared with us what their plans were, we would have probably developed Vongo differently, but we developed Vongo to work on multiple platforms, to have a variety of content, to do download to own, burn to own, pay-per-view, and subscription and add television content, and it already has concerts. It could be the place to go for long form concerts. People love to watch concerts, and it’s an easy way and it’s always available. So, we are trying to reinvent ourselves and I think we’ve done a good job at the television, now it’s to do it with our affiliates and to figure out some way that they can… I think the bigger challenge is what are they going to do with IP? Are they going to go over the top? I guess they will. I would if I was them. I wouldn’t stay in my market. I’ve got Echo and Direct over the top. I’m sure that the telcos are going to have products that will go over the top, and so I want to be at that curve and we are. Nobody’s doing what we’re doing. We’ve started to talk to some of the other cable programmers about adding content and it’s clear to us that nobody’s there. Also, there’s this disintermediation that’s occurring – Google, Yahoo, the portals. They’re desperately trying to acquire content and their early forays into it all have to do with “for $3.95 you can own this”. That works as a kind of marketing tool, but if you’re a 17 year old desperate to have a copy of The O.C., by the time you’re 26 you won’t have thought that was a very good acquisition. So again, it’s the subscription model that we think will help quite a bit, and so part of our mantra is if you really want a place to go to get content you could have all the programmers come to Vongo. I don’t think they will, but that’s an interesting idea. We’re open to innovation; we’re open to doing things differently. I think the basic guys are more concerned about getting beaten up by the cable folks by streaming because, at least in our case, the cable companies make a lot of money off of retailing us because they sell us for real dollars, we’re not just a cost. That creates a little bit of a different view of us, I think, than some of the others.
KUHL: Bob, in your mind, and give me your vision on this, one major development that needs to happen or will happen looking down the road that can almost fundamentally or at least significantly change at least something at Starz or in your discipline, but overall in the cable industry does there need to be a major development happen to allow cable to compete with the telcos and satellite, etc. moving forward? What is your vision on that, or is it a combination of things that cable needs to do so that ten years from now when people look back on this they can say, “Bob had quite the vision then.”?
CLASEN: Well, of course one of the challenges is that there is no cable. There are still hundreds of cable companies and even among Comcast and Time Warner rates are different, sometimes packages are different, channel lineups are different. One of the things that would be wonderful is if you could wave that magic wand and be able to very efficiently – the way that Direct and Echo does, and soon the way the RBOCs do – will be to have a consistent way to present your content and your product and price it. Some places on-demand costs money, some places it doesn’t. I think the consumer wants simplicity, especially in this day of tri-plex and four-plex. I think that’s a challenge for the cable industry. I think that they need to recognize, as I said earlier, high def is important, they have some bandwidth constraints. What’s going to happen with carriage of all the analog signals that they’re carrying now? Portability and proliferation of DVRs – they’ve got to move on those pretty quickly. So I think they’re in a cleanup mode, frankly, and consolidation helps and lets them move in that direction, but if you look at the LA market and the New York market, you probably still have four or five big operators in New York and three or four in LA, and that kind of sets a tone. When AT&T finally builds in LA with their new plant it’ll be one product across the whole marketplace. You’ve got to be more efficient doing that. Look at your marketing costs – you’ve got Comcast taking out ads and Time Warner taking out ads and Charter taking out ads. Again, I’m a practical guy, that’s a practical issue and I think the way it comes back is how do you price yourself to stay competitive? And there will be pressure on prices. I’m sure that there will be. My hope would be that they make some of those technological leaps to get to where they have to be in order to do that. I don’t think, in answer to the first part of your question, that there’s any gigantic revolution coming. It’s as it always is. All of the sudden something happens and usually it’s the consumer that starts to see it before those of us in the ivory towers do. Look at the I-Pod. Who would have thought the growth of that product would be so great? We were helped by the I-Pod in consumer electronics even though Vongo isn’t yet available on the I-Pod just because portability was so hot and we had a portability solution for all the Microsoft enabled portable devices. There have been so many changes in the last few years, but once you get to IP, there’s not too many other places you can take the transport or the use of that IP product. In fact, you can slice it and dice it and… Video search! I think video search is going to be a hot product. You’re not going to do that in MPEG and you’re certainly never going to talk about it in analog. If you have IP TV you can do it. Go into the audio track, put little flags in for here are the fight scenes, here are the love scenes. That’s all coming.
KUHL: We’re going to continue this in a couple of minutes. Bob, I want to get into the wind down of this and talk about your signature on the industry and where you’re headed from here in just a second.
Well, Bob, you’ve had quite an expansive career in cable and with technology companies – quite a career path. Where do you go from here? Are there any passions left for you? I’m sure that there are moving forward beyond Starz. Anything that appeals to you beyond that, and what is your passion beyond that?
CLASEN: Retirement. I retired once, failed. My wife suggests I actually failed retirement twice but the next time it’s for good. Going to Starz was not a career move for me. This was a chance to do something new and different and I’m very excited about what we are doing for Starz. I think when we get Starz to the right point and I decide to leave, that’s probably the last thing I’m going to be doing officially.
KUHL: And then what?
CLASEN: Well, I’d love to do some more running and golf. I have four grandkids I’d love to spend some more time with. All of them still live back in California. Colorado’s great but I know we’ll always have some reason to be in California quite often to see the grown kids and the grandkids. Our 17 year old, almost 18 – he picked up on something when I was doing a lot of work internationally for Comcast we were in Romania, Transylvania, and I was actually visiting and looking at some castles and he has this idea that we should go there and look for a castle and have a castle in Transylvania, so Michael and I might pick up some week and go there. Not that that’s going to happen in the next couple years, but certainly those are kind of the fun things that we talk about doing.
KUHL: That’s an interesting career path right there! Castles in Transylvania! What about your footprint, your signature on the industry? When people watch this video what do you want to be known for? What would be the biggest kudos for you in this industry and your signature? What signature would you like to leave?
CLASEN: Well, I think most of what I’d be known for was building an awful lot of the cable networks that exist today. Again, at Comcast and at Rogers and at Continental – it was a tremendous period of growth there from the mid-70s right one through and a lot of that gave me the opportunity to work for some very interesting and exciting people. Bud Hostetter, Ralph Roberts, Dan Aaron, Julian Brodsky, now John Sie and then John Malone, Ted Rogers – I’ve learned a lot from those folks, and perhaps my legacy was also that I could put up with them all. But see, maybe that’s also why I only lasted four or five years at a place, I’m not sure. But I think in general people would say this guy was kind of right there at that moment when the cable industry moved into the major markets and was one of the fellows that really helped manage those businesses and grow and build those businesses.
KUHL: And your vision of the industry in the future? What do you see it looking like ten years from now?
CLASEN: Well, I would think that the distinction between the phone company and the cable company will become blurred. Ten years from now you won’t really care which is which. Those distinctions will be gone. The phone companies will look more entrepreneurial, the cable companies will look more bureaucratic and they will have kind of become one and there may only be three or four of them left. How’s that?
KUHL: That’s a great way to end it! We won’t hold you to that in case that doesn’t happen ten years from now, but it sounds like you’re right on the money.
CLASEN: Thanks Craig.
KUHL: Well, Bob Clasen for The Cable Center’s Video and Oral History Program. Bob, thank you so much. We really appreciate it.
CLASEN: It was fun. Thanks!