Interview Date: April 16, 2024
Interviewer: Stewart Schley
Abstract
Nimrod Kovacs, currently a self-described “retired international business guy,” is best known for his marketing work with United Cable Television in the United States and later international cable initiatives in Eastern Europe for United International Holdings and Liberty Global. Kovacs describes his escape from communist Hungary and arrival in the U.S. and his first years working as a waiter and going to college. He describes his early advertising career with Doyle Dane Bernbach, Grey Advertising and Wells Rich Greene. Kovacs then details his start at United Cable Television in the 1980s working for Gene Schneider, marketing challenges of the time, and his role in the early development and business model of the Discovery Channel. He describes the consortium that saved Discovery and instituted license fees. Also discussed is E! Entertainment and the merger that created United Artists Cable.
Kovacs then outlines his work with United International Holdings, UnitedGlobalCom, and Liberty Global in the late 1980s through 2009. As Chairman of the joint venture Kabelkom he brought HBO to Hungary and describes the relationship-based business environment there. He describes the introduction of broadband internet service into the Liberty-owned properties via Chello Broadband. Kovacs states that what made the cable industry great was its entrepreneurial spirit. Kovacs then talks about his transition to the wine business, its challenges, and his winery in Hungary. People mentioned include John Malone, Mike Fries, Bob Miron, John Hendricks, and John Sie.
Interview Transcript
STEWART SCHLEY: Hello there, and welcome to a new episode of the Hauser Oral History Series, maintained and presented by Syndeo Institute at the Cable Center. To my right, an individual I regard as one of the Renaissance men of the cable business who has put an imprint on marketing, on programming investment, on international development. Nimrod Kovacs, it is a pleasure to have you with us today.
NIMROD KOVACS: Thank you very much, Stewart. I appreciate it.
SCHLEY: It’s been too long, for one thing. But thank you for dropping by the studios here. There’s a lot to talk about. You spent, I think, 27 years in and around the cable business.
KOVACS: Cable TV, that’s correct.
SCHLEY: But I want to start somewhere else. And I know you’ve told this story 762 times. I would like to ask you to tell it for the 763rd time. But take me to June of 1971. Who are you, and what are you about to do?
KOVACS: Well, I’m 21 years old. I live in Budapest with my parents in a small apartment. And my world has been kind of a black and white, and I was looking for some —
SCHLEY: Color.
KOVACS: Color and excitement. And the way I can describe my world in those days is that later on when I was involved at HBO, we shot a movie with Robert Duvall about Stalin’s life. And Vilmos Zsigmond, the famous Hungarian cinematographer actually did the camera work. And then, it started out in 1917, when Stalin and Russian Revolution — then colors and excitement and happiness. And as the movie was going on, became a black and white product. So, it showed the grayness and the hopelessness of the Communist world, which obviously applied to Russia, but it was also applicable to Hungary too. So, I want to get out of there. And asked for a passport to go to the west, which they denied. And I was able to finish school. I didn’t get accepted in law school, which I wanted to do — my father was a lawyer — and due to my politically so-called unreliable background. And ended up going to a waiter school, and I worked as a waiter in a restaurant, and I was able to get a so-called internal passport, which was among the Communist bloc countries. And without telling my parents — I said, “I’m going to go for a week of vacation to Slovakia.” In reality, I went to the former Yugoslavia, which is obviously south of Hungary. And took a train and ended up getting out to the Slovenian coast of the Adriatic Sea and rented a little tent and waited until night came, drank a couple of glasses of wine and got in the water and swam over to Italy. So, that’s how I ended up… I’m a wetback actually. And getting to Italy, an Italian coast guard very nicely captured me, gave me some hot chocolate and clothing and put me in jail for a few days. So, that’s how I started.
SCHLEY: You say it in such a glib fashion, “got in the water and swam to the coast of Italy.” That is a big risk. That is a major life endeavor. But you were down to do it.
KOVACS: Well, I was because, you know, when you’re lying on the ground, you cannot fall further down. So, I was really determined to get out. And a couple of friends of mine escaped by climbing through a forest, which they were almost caught. So, I figured that swimming, unless there were some cameras underwater, which there were not — thank God those days. I swam breaststrokes, just went over to the side. And fortunately, I wasn’t captured. So, that’s how it happened.
SCHLEY: Were you penniless? You didn’t have money did you?
KOVACS: No, I had like $10 with me in a plastic bag and my Hungarian ID card and a passport. That was it. Yes.
SCHLEY: We are here with the cable industry organization. So, we will talk about cable communications in a second. But what was the progression from there? You arrived ultimately to the United States. You began —
KOVACS: The process — the refugee process in those days in ’72 was somewhat different. You know, when you escape from eastern Europe, which I was, had to go through a reviewing process, you know, in a camp nearby Trieste. And they wanted to be sure that people who come in were not sent by the KGB because that was obviously one good way of sending some spies there.
SCHLEY: Sure, sure. Right.
KOVACS: To give you one example of some of the reviews, I talked to Interpol, talked to a number of organizations, including CIA. And I will never forget an interview with a young CIA guy who spoke flawless Hungarian. And he just wanted to talk to me. And I said, “Where did you come from? Budapest?” “Well, gee, which area?” And I said, “Rákóczi Street where I lived.” And he pulled out a map and, “Show me the building that you were from.” And I point to the building. He said, “I’ve been to Budapest several times, and I remember on the street there — street corner number six, what was going on.” And in reality, it was not.
SCHLEY: This was a trap.
KOVACS: I said, “No, no, no.” It was a trap. So, basically that’s how they tried to kind of prevent from — you know, KGB sending guys, which I’m sure they did. But actually, it wasn’t me. And then, he said, “Okay, that’s fine. You will receive political asylum,” which I did. And, “If you want to stay in Europe, you can go to two countries, either Sweden or Switzerland.”
SCHLEY: Okay.
KOVACS: I didn’t want to stay in Europe. I was a big rock and roll fan and a movie fan. So, I want to go to the United States. Okay, then you have to send out an application, which I did. And six month kind of a waiting process followed, and they sent us to a different refugee camp and waited until my so-called approval came from the U.S. And collected us in January of ’72 and arrived in New York City in January. That was an amazing experience.
SCHLEY: Did you have a sponsor or family connection?
KOVACS: No, I didn’t come with a sponsor. But I found a sponsor in New York, a friend of my mom, and ended up going from New York to Tulsa, Oklahoma. So, my very first place in America, aside from New York, was Tulsa.
SCHLEY: That — it is amazing. Are you in school in Tulsa at this point, or what’s happening?
KOVACS: No, no. I had to get a job. So, I got a job as a dishwasher at a local Holiday Inn hotel. And as you may remember, there is the lower level dishwasher, the pots and pans —
SCHLEY: Oh yes.
KOVACS: And glasses and plates were the higher level. So, I was starting at a lower level. And I worked there. I spoke some Italian, so I was able to talk to the Mexican guys in the kitchen, but that was kind of it. Didn’t go to school. I had to learn English first.
SCHLEY: You published and wrote a memoir called I Was a Good Waiter, which I thought was a really interesting title and reflects on what became a career path in the restaurant business. Right?
KOVACS: I did. Yes.
SCHLEY: In Tulsa and —
KOVACS: Well, then this family — the Megyesy family is good friends of mine. The old guy died, sadly. But the young many still lives in Denver and is a friend of mine. And I had moved up with him to Denver in ’72 in about May. And he and I rented an apartment together, and he was my young sponsor. And he had a girlfriend, an American girlfriend. So, I was looked after by some of the locals. It was a great experience of learning English and getting to know some of the town.
SCHLEY: I know that ultimately you did go to business graduate school, correct?
KOVACS: Yes, I did.
SCHLEY: In Arizona?
KOVACS: In Arizona, in Thunderbird, in Phoenix.
SCHLEY: Right.
KOVACS: But I went to CU [University of Colorado – Boulder].
SCHLEY: Okay.
KOVACS: In fact, Gene went to DU [University of Denver] right here for his law school, my friend. And he was the guy I — you know, was my big brother so to speak.
SCHLEY: Sort of making these connections between this fantastical journey and where you ultimately came to be is quite a story. It’s quite a thread. And behind it all — I’ve got to believe — we’ll talk about the corporate career in a second. You believed in yourself, right?
KOVACS: Yes, I believed in the power of positive thinking. And this is one of the things I learned from Uncle Gene, this guy’s father who basically – It was a book written right after the ’29 major stock market crash. A lot of people were very desperate. And he was saying that basically whatever happens to you cannot control, but your reaction to it you can.
SCHLEY: This is Norman Vincent Peale?
KOVACS: Norman Vincent Peale, exactly. That was the gentleman. And that was the power of positive thinking. And this guy translated this book into Hungarian. I was able to read it in Hungarian, and I learned about it. And then, it sort of became a guiding force in my life of positive thinking. Now, no failures, only lessons. You’ve just got carry on step by step, yes.
SCHLEY: Ultimately, I think New York came calling for you then. Is that correct?
KOVACS: Yes, after graduate school, after finishing my BA at CU at Boulder, got my master’s degree in Thunderbird in Phoenix.
SCHLEY: Right.
KOVACS: I fell in love with advertising at Thunderbird, and I was hired by DDB, Doyle Dane Bernbach Agency out of New York.
SCHLEY: Just — and in — what — in mid ‘70s?
KOVACS: Seventy-seven.
SCHLEY: Seventy-seven, beyond the Mad Men phase of the advertising.
KOVACS: Beyond, but the Man Men part was still there.
SCHLEY: Yeah. And then, did you like that business?
KOVACS: I loved that business. I love creativity. I love arts. And that was essentially a combination of arts and business, and how you can figure out how you can sell a product to an individual. And I learned a bunch of interesting lessons. One was that there is no objective reality. Everything is subjective. And we are all brands, individual brands. And how do you sell something to someone? Now you have to find the innermost core of feelings of that individual and try to apply to that, appeal to that and try to repeat it enough for them to sink in.
SCHLEY: To internalize it. Can you give us an example of one brand or client or campaign you worked on?
KOVACS: Well, my first client was American Airlines and that was a part of the decentralization process, and it was about on-time performance, that was a very major benefit, and quality of service. That was an interesting one. Then we did Hershey’s syrup later on and various candy bars with Messy Marvin who was basically a character who made a lot of messes introducing the —
SCHLEY: I don’t remember Messy Marvin.
KOVACS: Anyhow, that was an introduction of a certain type of bottle, which is nice to do. And later on, at my third agency — I worked for DDB first and then Grey Advertising second, which was more of a marketing shop. I needed a little bit of training around. And my third agency was Wells Rich Greene. And they had the I Love New York, Made in New York campaign. And that was an interesting project, if you will, because in New York City those days, and New York state, was not a very desirable place. Talking about the ‘70s.
SCHLEY: It’s rough.
KOVACS: High crime, expensive taxes and all of this stuff. And how do you make a state or city appealing? With emotionality. And that’s how the company hired Marvin Hamlisch to produce “I Love New York” music. And that’s how Broadway and excitement became the hallmark of New York City. And in fact, a Hungarian guy, Milton Glaser designed the “I Love New York” logo.
SCHLEY: Iconic logo.
KOVACS: Iconic. So, that was — I had a chance to talk to — he was born in Brooklyn, but he is from Hungarian parents. So, I was able to talk to him.
SCHLEY: Small world.
KOVACS: Very small world. So, that was an exciting thing how you can create excitement behind a product which was not so good. And actually, the project changed to fulfill expectations.
SCHLEY: That’s — and it worked, the campaign.
KOVACS: Sure did.
SCHLEY: But I think around 1982, I think you decided a change was in order.
KOVACS: Yes.
SCHLEY: Tell us about that.
KOVACS: Well, I mean, I was married. I had one child in New York. And life in New York, if you don’t have a lot of money, is not easy.
SCHLEY: For sure.
KOVACS: We lived in a small apartment on Roosevelt Island. And interestingly enough, I was called by some of these fledgling cable networks to say, you know, what about advertising? There is an interesting world out there. And my ex-wife and I met each other in Denver. And I said, “Wouldn’t it be fun to maybe try to go back to Denver?”
SCHLEY: Oh, yeah?
KOVACS: Yeah. And basically, befriended a headhunter who was a good friend of Charlie Townsend who was the head of marketing at United Cable in those days. And he wanted to introduce me. I said, “No, I’m an ad man. These flaky guys — I want a good marketing guy.” And he said, “Why don’t talk to this guy? He’s okay.” So, anyway, we talked to each other. And thank God he liked me, and then, he hired me. And so, I started to work for United Cable in September of 1982.
SCHLEY: And Nimrod, explain. For those without long memories, Denver was the place for cable.
KOVACS: Absolutely. One of the birthplaces of cable TV. Pennsylvania was another area, and Colorado was another one. And in those days, there were seven out of the top 10 cable companies located in Denver.
SCHLEY: The cable capital.
KOVACS: The cable capital, absolutely. It was a wonderful entrepreneurial place, yes.
SCHLEY: I think a year and a half, two years ago — maybe before — a man named Ted Turner launched a program network called Cable News Network.
KOVACS: Yes.
SCHLEY: And you had a service called MTV, very popular.
KOVACS: Right, right.
SCHLEY: Some things were happening. But I think at ’82, the number of — the percentage of households in the U.S. that had cable was maybe 30 percent. Right?
KOVACS: Yes. That was the beginning. That’s where the so-called — the red neck phase was over, and the marketing phase started.
SCHLEY: So, my point is this was not a ubiquitously deployed product yet. What excited you about — why did you think cable might actually be a thing?
KOVACS: Well, I mean, there are few things that people have to be shown once and they fall in love with it. Car is one of them. Television was one of them. And cellular phone. These are the things I can think of.
SCHLEY: Okay.
KOVACS: And TV people loved.
SCHLEY: Sure.
KOVACS: And I figured with was an area where people — for someone likes a category wants more of it.
SCHLEY: Sure.
KOVACS: And it looked like a very attractive dynamic industry. And I have to say to you, I really liked the people. They were good, down to Earth, no bullshit kind of characters. So, the culture of cable to me compared with the snotty New York — it didn’t really — it was very nice.
SCHLEY: And then, what did you do on day — week one of your new job? What kind of stuff?
KOVACS: Well, I totally thought he was going to send me to a conference, an NCTA conference. I got to basically just learn about it, learn about what it takes and what moves the business from a marketing point of view. I was a marketing director at that time. Charlie was the head of marketing. And it’s just trying to learn about the components. And I think it took about six months. And I got a pretty good hang of it.
SCHLEY: What was appealing about the business besides the people and you’re on a growth path a little bit? But the challenge for a marketer, as you just explained, was to express the benefits of this product at a scale level, at a large scale.
KOVACS: Yes, but you need to identify the target audiences for various components of the business. So, it’s very important to figure out, you know, how you communicate with the given audience that you want to accomplish. I mean, the unique thing about cable TV, as you know very well, since we were colleagues for many, many years, is that roughly 25 percent of the population was part of the so-called truck chasers. Remember that? I mean, you go into a town, and people want it. I mean, one story that I can tell you — going back to the old days. Gene Schneider, my great hero and boss, told me when they started cable TV up in Casper, Wyoming with Bill Daniels and his brother Richard, and basically brought two signals from Denver up to Casper through microwave. And there was no cable — no TV at all. And so, first of all, they put in a big TV set in a shop window and people were in groups of people watching that. So, they had to sell them a cable — sell them a TV set. And those days TV sets — $300, $400, $500, very expensive sets. And they hooked these people up and charged for the installation fee. And roughly, 20, 25 percent of the people wanted it. So, the business already broke even.
SCHLEY: Okay. (laughs)
KOVACS: It already broke even. So, it was like a rocket ship. So, I said, “Yeah, if you get some good clever marketing and get a 20, 25 percent up to 50, 60, 70 percent, it’s really a winner.” And that was very exciting, those days, to me.
SCHLEY: Was your focus premium television? HBO and then Showtime drove a lot of the economics of that business. Was that a focal point for you?
KOVACS: Well, yes, it was and Movie Channel and some of those channels in those days. But at the same time, we discovered different tiering processes. So, a basic tier in many cases was regulated. So, in order for us to make some money and make some rate increases, we had to introduce extended basic and you pay more for that. And the so-called premium channels were in addition to that. So, we had to figure out how we can package in a given market the various products based on the requirements of the audience. Yes.
SCHLEY: Nimrod, if you would, tell me a bit about United Cable Television and a man you reference called Gene Schneider.
KOVACS: Yes, yes, yes. Well, Gene Schneider was bigger than life and a wonderful man, kind of a rough and tumble guy from Enid, Oklahoma. Grew up in Texas. But he was a sweet man and a very quality oriented guy. He was a pioneer truly. He was an engineer by training. But he was among the first to embrace new technologies, new approaches. He was open to those “flaky” marketing ideas (laughter) at first. But, you know, he was just a great guy to work for. I really appreciated getting to know him as well.
SCHLEY: I remember when I think of the late Gene Schneider, I think of cigar because he was a cigar-chomping guy, kind of a no nonsense character, I think.
KOVACS: Yes, and he was great with numbers. I mean, those days were not, you know, computers as much. And he looked at a spreadsheet, and if there was a mistake, he immediately picked it up. So, he was a magnificent math mind.
SCHLEY: I did not know that. And I don’t want our audience to think it was easy marketing cable. You had truck chasers and strong demand. But what was hard about it? What sort of maybe kept you up a little bit at night, or did it?
KOVACS: Well, it was sort of like a decentralized structure. And we had to — the corporate guys had to convince the system managers to embrace certain things since this was coming out of their budget, to some extent. We had to be, you know — we had to really come up with stuff that they bought into first and then implement it together. It was a major kind of a player coach approach that we had to use.
SCHLEY: Okay. Decentralized quality was interesting. It really was a propellant for this business.
KOVACS: Yes, yes.
SCHLEY: Right.
KOVACS: I always believe that if you put the right people on the ground and take their guidance about what the consumers want because he is the one or she is the one who is talking to consumers, yes.
SCHLEY: If you started out today, you’d be peppering social media with messaging. But what were your mediums of communication?
KOVACS: Well, direct mail was the most prominent in those days. And then, we started getting to traditional media, newspapers and local papers, and then getting to some television, limited television, and use our own channel space —
SCHLEY: You had your own connectivity to — right.
KOVACS: To do. I mean, in some cases, use radio and posters and stuff like that. But a variety of things, really.
SCHLEY: You had mentioned your introduction at an NCTA conference. But there was a separate organization called CTAM focused on the marketing side of this.
KOVACS: Yes, yes, yes.
SCHLEY: What was important about CTAM from your standpoint?
KOVACS: CTAM was a great lab for people to come together and compare notes. The good thing about the industry was that it was not a cutthroat competition like in many industries. So, there’s a great deal of trust developed between individuals, and not only trust but friendships. I mean, many of my colleagues were good friends and we went out – playing hard, you know, to drinking hard and working hard and all of those things.
SCHLEY: But collegial. You were able to share observations.
KOVACS: Absolutely and work in teams, which was very nice.
SCHLEY: Okay. And just to reeducate, this is partly because local cable companies tended to not compete with one another in the same territory.
KOVACS: Right, absolutely. The individual franchises won. The initial franchising process was competitive. But when the franchising phase was over, then the operating folks came in, and it was more collegial and more learning from each other. And I think it was just wonderful to see what worked in different cable systems at Cox, Continental, or any other cable system, and to see what worked and borrow the best ideas. And they were open to exchange these ideas. It wasn’t really holding back the information, which was very nice.
SCHLEY: I had mentioned CNN and MTV had launched, but we were about to undergo a new wave of programming network launches. And they weren’t always businesses that were going to be obviously successful from the start. And I’m bringing you into a theme about a service called the Discovery Channel. Open the forum. What happened?
KOVACS: Well, it’s interesting. I mean, cable TV obviously grew predominantly on movies, sports, and to some extent, adult entertainment. And they were not as many so-called family programming on cable TV. And we received some criticisms from it from various municipalities about that. And lo and behold, it was a gentleman, John Hendricks, who came from a university background. And he came up with a wonderful idea of taking documentary programming of various genres, whether it’s nature, science, or adventure, all those, and packaged them together into a television channel and basically making it available to the industry. And it is a really brilliant idea.
SCHLEY: Sure.
KOVACS: First of all, the product costs was virtually nothing because these were documentaries produced by major companies—
SCHEY: Sitting on the shelf–
KOVACS: BBC, PBS, all of those. And you could buy them fundamentally for a tape cost. And a 20 year old lion still looks new, ok. And news obviously — yesterday’s news is no news. But these things were evergreen kind of products. So, they came up with channel with some young university crew and launched it. And it was a very big success around the country. And we loved it. We got very good feedback from our various operators.
SCHLEY: On the United System.
KOVACS: United System, right. TCI had it and most of us did it. And his business model assumed only advertising revenues. And that was the problem because in those days the cable advertising was very nominal. And he was not able to really sustain the business. He had an Allen and Company as an investor, venture capital, and also, Westinghouse who provided satellite capability. And about a year or less, unfortunately, he started to run out of money. And John Sie and I been working very closely together, TCI and I and us. John Malone was an investor of United Cable in those days. So, John Sie and I worked very closely together, TCI and United. And I said, “This is a great channel. It’d be a shame to see it go.” So, we sat down and talked to our respective guys, Malone and Schneider and said, “Let’s try to find folks in the industry who would be willing to support it.” So, we went to Jim Robbins at Cox and Ajit Dalvi and Bob Miron at Newhouse. And we established a consortium of four cable operators, and we basically invested in — saved the channel so to speak, invested in the channel and changed the business model.
SCHLEY: Changed it to include licensing fees.
KOVACS: License fees. Definitely John Sie — genius. John Sie is my hero. Really a genius guy. He came up with a rebate scheme. So, if an operator paid a license fee and then upon the success of Discovery Channel, there will be a rebate based on their carriage of the channel.
SCHLEY: They really became partners in the business.
KOVACS: Truly partners. And all four of us went out and sold it of course. And it got a very massive extensive distribution, good revenues and became a global success, huge success.
SCHLEY: Nimrod, had you not done that, assembled this consortium of cable partners, was there any money to be invested in Discovery? It was pretty bleak.
KOVACS: No, not with the business model that had. People were not willing to pay them for license fees unless there is a different deal. And that’s what we had to change, a different deal to the industry. Sees the merit of it. And it did. I have to give you — I have to give credit to the industry. Most major operators decided to carry it in massive distribution, yes.
SCHLEY: When you invest in any business — you’re a people person, so I can ask you this — you’re not just investing in the idea. You said John’s idea was a great idea. But the brains, the management, the humanity behind it — what about Hendricks made you believe?
KOVACS: Hendricks was a great guy. He was truly an entrepreneur, and he was also a very nice guy. And he just made a mistake. I mean, not being in the industry, not really knowing the business model, he made a mistake, which is why we kept him. If he would have been a bad guy, we probably would have found a different person. But basically, he lost most of his equity in it, fortunately — not fortunately for him. But we gave a very extensive option package to him after the deal was done and he made a lot of money. So, God bless him. He’s a very wealthy man.
SCHLEY: What is that — the story you tell about, I think, very quickly this consortium comes together. Some phone calls, some faxes, and here you go. What does that tell you about the structure and the entrepreneurial quality of the cable industry that you were able to do that?
KOVACS: I think it’s wonderful. That’s what made the business very successful, the people side. I mean, entrepreneurs and the willingness to take risk and moving forward. So, I think that is the number one strength, if I can think of one, of the business.
SCHLEY: Yep. And then, the essential economic model that you brought to bear for Discovery was then, I think, replicated throughout the industry.
KOVACS: Yes, absolutely.
SCHLEY: So now, programming networks, television networks for the first time had two sources of income.
KOVACS: Yes.
SCHLEY: So, what else was spawned in that era of creativity?
KOVACS: Well, what networks?
SCHLEY: Yeah.
KOVACS: Oh, well, many of them. I mean, basically as the TCI United became very big and a lot of people came on, you know, with distribution, we, in many cases, received equity in the networks. And that was good for them because they basically got huge distribution and some revenues, and we got some equity. And this is the basis for Liberty [Media]. It was established because TCI and United received equity and trust in a variety of content businesses which were not, you know, monetizable as part of a standard cable operation. And then, Peter Barton and John Malone spun out Liberty as a company, standalone business.
SCHLEY: Some of the networks I think of that adhered to that model who were partnered with their distributors would be the Home Shopping — QCV shopping network. Although, I don’t think it had advertising grouped in. But it was more of merchandising.
KOVACS: Merchandising, yes.
SCHLEY: And then, E! Entertainment.
KOVACS: Yes, yes. E! Entertainment was one of the projects I was very much involved in in addition to Discovery. It was starting out as Movie Time, and that was the name of the channel. And it was basically behind the scenes gossips and L.A. based — Larry Namer was the guy who started the business. And he ran into similar situations and not enough revenues. And then, the same group of guys that invited Time Warner as well did a deal of essentially investing in the channel and renaming it. In fact, I was the chairman of the channel in L.A. for a few months. I had to commute between Denver and L.A. to do it until we remained it E! and hired Lee Masters to run it. And he turned it into a much bigger business.
SCHLEY: And what was personally rewarding? You’re sort of in programming business. Nimrod is now in the programming business as well as in the cable marketing and operations business. But you liked the programming side.
KOVACS: I do. I mean, I believe that both of them are very important. I mean, take a look at the major success of Apple. There are in a content business and the hardware business too. So, you can control the business much better if you are in both of the businesses. And I think I had an opportunity to work in both, which was a great experience for me.
SCHLEY: There now is no United Cable Television. It doesn’t —
KOVACS: Well, it is still — I mean, it was United Cable until 1989 when, as you probably remember, a deal was cut between Bob Magness and Gene Schneider and Bill Daniels that established the United Artists Entertainment Company into which was — United Artists Cable was a consolidation of United and Daniels.
SCHLEY: And the way with consolidation has continued ever since. But what was the rationale in getting bigger?
KOVACS: Well, it’s scale. It’s scale is — you know, you can buy content cheaper. You can buy hardware cheaper. I mean, when you take a look at, globally, the telecommunications businesses now, there is not a huge amount of extra growth because the world is wired. Everybody has a cell phone. Most everybody has some kind of multichannel television.
SCHLEY: Broadband Internet connection.
KOVACS: Yes, yes. So, the way to make money is to consolidate. It’s basically put two, three companies together and whack the excess overhead, and basically the business is much bigger and more valuable.
SCHLEY: Okay. Was it dispiriting to you? Was it energizing to see, you know, this company you helped build sort of meld into something new?
KOVACS: Well, I accepted that. It’s an entrepreneurial world. You know, deals come and go. And you just kind of see what makes sense. And, you know, the deal was very attractive. I got a very nice payday out of the merger.
SCHLEY: Right.
KOVACS: So, you know, everybody felt good about it. And it’s — you know, the old saying, the gig never changes, just morphs. And new opportunity with this company — a new company. It had a number of assets, which were not the main focus of the business.
SCHLEY: I remember, yeah.
KOVACS: Stewart Blair was the CEO and Gene Schneider was chairman of this new company, which were spun out into a company called UIH. I became a partner of that with Schneider and Bill Elsner and some of these guys, Mark [Schneider]. And we started with international activities.
SCHLEY: UIH was an acronym that stood for?
KOVACS: United International Holdings. That was the name of the company.
SCHLEY: So, I don’t want to be glib or put words in your mouth. But you’re almost setting out to recreate the cable model in the places where there hasn’t been cable. Talking about people having to buy television sets in Casper, Wyoming.
KOVACS: Absolutely. Yes.
SCHLEY: In some of the eastern European markets that you pursued, was that similarly the case?
KOVACS: Yes. Well, television sets most people had. But multichannel television they didn’t have.
SCHLEY: Okay.
KOVACS: But I also worked in other parts of the world. I worked in Scandinavia. I worked in Malta, Israel, you know, Australia, New Zealand, places like that. But eastern Europe became my primary focus. Eastern Europe was even a more complicated challenge —
SCHLEY: Yeah.
KOVACS: Because fundamentally they did the dark ages of communism. And then, all of the sudden — I mean, the Berlin Wall came down in 1989. You know, it was just a new world. And for instance, many movies were not seen in eastern Europe which were made in Hollywood the last 30, 40 years. So, there’s a huge demand for more television and all this stuff. And then we had an opportunity to skip a couple of generations from a technological point of view.
SCHLEY: Very good point, right.
KOVACS: It’s going from basically stone age to, if not digital, but close to it. Bang, bang, bang, which really gave a huge opportunity for offering more and more services, and it was just really an exciting time in those days.
SCHLEY: I never understood how the territorialization worked in some of the European markets. Was there the equivalent of a franchising process?
KOVACS: No. It was relationships. Political relationships. Whether you — the national government was involved in certain areas or local municipalities. And they either owned things themselves or they gave it to a private entrepreneur to run it. For instance, with a Hungarian business that — I saw your great interview with Mike Fries. He was talking about this very thing. I mean, when we started to work in Hungary together — Fries and I were partners in 1990 — we identified nine municipalities were the cable systems were owned by some local entities.
SCHLEY: But there was a rudimentary cable system.
KOVACS: Very basic, very basic, you know, antenna systems with a very simple headend and a couple of satellites but very few — and just very simple antenna operations. So, we had to convince these individual municipalities to do business with us and do a joint venture with us. They contributed to the joint venture their assets for a 50 percent equity. We brought in money to the same value of 50 percent plus the management expertise.
SCHLEY: Rewarding for those entrepreneurs who originally started these systems — right — because they had incumbency.
KOVACS: Absolutely. It had — it was six time multiple. Mike Fries, a young genius, came up with that number, a great number. So, basically got that for nothing. But we had to really great value out of it. And thank God, the audience was very receptive to new and new channels. We launched HBO very first outside United States in Hungary. In fact, you know, we had to build a studio there to produce the channel. And we brought in a bunch of people from HBO New York, actually physically sent them — sent the studio. And we produced tapes. We were bicycling tapes to the various headends because there was no satellite available.
SCHLEY: Right.
KOVACS: So, we — you know, a motorcycle or car — people drove to a different town, gave the tape to the operator. And if the guy had six o’clock, it was six o’clock. If it was 6:10, 6:10. And that’s how HBO started. So, it was really truly crazy days. And most of the product, which was on, was never seen in eastern Europe.
SCHLEY: Yeah.
KOVACS: In fact, one of the problems we had — the people watched it too much, and they started to complain when repeats occur. And we tried to educate them. “Man, the idea is not for you sit in front of TV every” —
SCHLEY: Yeah.
KOVACS: “Just try to occasionally tune in and watch what — when you like to watch what you like to watch.”
SCHLEY: What did people pay for that service typically in a month?
KOVACS: Oh my God. It’s — depending — exchange rate like 50 cents to a dollar.
SCHLEY: Is that right?
KOVACS: Yes, very, very low money. But as we introduced more channels, expanding channel capacity, we took some hefty rate increases. So, went up to, you know, some pretty good numbers at the end.
SCHLEY: It had to strike you that among — any person who could build this business, who had the pedigree — I mean, you’re a kid who swam across the Adriatic Sea. You speak multiple languages.
KOVACS: Yes, I do. But Hungarian I do speak for sure.
SCHLEY: So, it’s almost — destiny is probably too strong of a word. But did it feel like —
KOVACS: Yes, I agree. I fully agree. I think it was destiny. And it gave us a major foothold in eastern Europe, and we were able to conquer eastern Europe.
SCHLEY: Amazing.
KOVACS: Later on, when the company became UPC with the joint venture with Philips, United Philips Communication, UPC, we took the company public on the Amsterdam exchange. UPC, as a subsidiary company of UIH. UIH remained to be a public company in America. And we took, you know, huge monies in from the stock sales. And we had huge leverage that we were able to buy essentially most everything that moved in eastern Europe.
SCHLEY: I don’t want to give anybody the impression this was easy. The capital demands of building out these systems were immense.
KOVACS: Very difficult, very difficult. I mean, that’s the reason why — you know, UIH was a small partnership and cable TV is an expensive business. And we were able to, on a deal by deal basis, finance things. But when we started to become bigger in Europe, we needed to find a partner, which is how we interviewed various players, European players. And Philips came out as a potential partner because they’re a very major manufacturer of equipment and also very, very healthy balance sheet. And they were really not a cable operator. They owned a system in Vienna and Brussels and in Hamburg in Germany. But they were not really truly — they just were in the business to sell equipment. That was the primary reason. And they thought it was interesting to hook up with a real operator, which was us, and did a 50/50 deal. And that’s how, with the combination of their brand name and expertise and the banking relationships and our collective businesses, we were able to raise a lot of money.
SCHLEY: I wanted to have you riff a little bit about a couple of technology dimensions of building out eastern Europe. One, you mentioned there was no satellite connectivity early on —
KOVACS: Right, right, yes.
SCHLEY: To get programs from one centralized place to a headend. But the actually satellite television, the DBS business came to be around that same time. Is that right?
KOVACS: Yes. A little bit later. Yeah. It was — really the high power satellite, when they started to emerge with — the lower power satellite required a huge dish.
SCHLEY: Yes.
KOVACS: And the huge dishes were not — in city dwelling, were not appropriate.
SCHLEY: No.
KOVACS: But when — like a great — when Charlie Ergen started, you know, his company, America is very big and a lot of space. And the big dish — C-band dishes were —
SCHLEY: Those big backyard dishes.
KOVACS: Yeah. And the small dishes weren’t really started. And in fact, we had our own DBS business.
SCHLEY: That’s what I was kind of getting at.
KOVACS: Yes.
SCHLEY: Yeah. And it operated where?
KOVACS: Yes, in all of our countries in eastern Europe.
SCHLEY: Okay. And what was the rationale there? Why not just stick with cable as an —
KOVACS: Well, in some areas it may be too expensive to run cable and cover rural areas and some — we tried to save money. And the good news was we controlled both. So, either, the cable option or you took a DBS option — both of them — cable was obviously always a better option because of bigger capacity.
SCHLEY: Sure.
KOVACS: But for some people, you know, 30 channel, 40 channel is perfectly sufficient.
SCHLEY: And then, were you doing work when we transitioned into the Internet area?
KOVACS: Yes, absolutely.
SCHLEY: It was Chello Broadband was the name.
KOVACS: Yes, that’s correct.
SCHLEY: When was that and how was —
KOVACS: Well, it was right around the time we took UPC public. We had this Chello broadband business. And we were, in fact, traded by Wall Street guys.
SCHLEY: Chello itself?
KOVACS: Well, the company using the Chello as an Internet component. We were traded as almost a dot-com business, which was amazingly — and Gene Schneider is looking at his stock saying, “What are we doing that every week $6, $7 rate increases?” He said, “You guys have to be careful.” He was right about it. But, you know, the dot-com bubble came at the end, and we went from — I don’t remember because I was on the Amsterdam exchange when we launched it there. And it came out $31 — 31 euros — I’m sorry — a share, and it went to 120 euros when the dot-com burst, and it went down to seven euros. Those were really difficult times, I have to say.
SCHLEY: As a marketer though and a development guy, what was it like to sell this very different product? You were a television centric business for a long time, and now you’re not.
KOVACS: The DBS product or in general?
SCHLEY: The broadband Internet connectivity.
KOVACS: Well, it was a different audience. You know, I think — stories always come down to who do you want to sell it to. Identify the audience and try to pinpoint them and directly communicate with them.
SCHLEY: Same thing you used to do with cable programming.
KOVACS: Basically, yes. It’s segmenting the audience to identify the most attractive component and start with that. Yes.
SCHLEY: Okay. When did you know it was time, maybe, to exit corporate?
KOVACS: To get out of business? Well, it was later. I mean, just to finish the UPC story, John Malone, who was an investor in the parent company, basically took over the entire business, both UIH and UPC and rolled it up in Liberty Global.
SCHLEY: Under the mantle of Liberty Global.
KOVACS: Under the Liberty Global. And Mike Fries became the first CEO. And it was a less entrepreneurial business, especially at the end. And I started to reach the age 60, and I said, “You know, it’s — you know, the alignment of the stars seems to suggest that I love wine.” (laughter)
SCHLEY: And wine loved you—
KOVACS: Yes, yes. It made me do something. And it turned out that, at age 60, you know, I got out of the corporate life and became a wine guy.
SCHLEY: You still have many acquaintances and friends in the cable business.
KOVACS: I do.
SCHLEY: And you mentioned — do you think that pivot from entrepreneurial, sort of roll the dice, bootstraps mentality to more of a contained corporate environment still exists?
KOVACS: Yes, yes. But I believe that what made the cable industry great is the entrepreneurial spirit and people’s ability to try to go around, you know, the envelope, so to speak. And more corporate, the more frequent is gets, less likely to be able to compete.
SCHLEY: Sure, sure.
KOVACS: And it’s becoming such a complicated business that, depending on the individual side, I think maintaining entrepreneurial spirit is a major benefit for the business.
SCHLEY: What do you miss about being in the business?
KOVACS: Well, I miss intelligent and fun people.
SCHLEY: Yes.
KOVACS: If you’re a wine guy, you deal with — it’s a different world. Not as much intellectual stimulus in it. But, you know, we have a bunch of friends. We have our fun drinking wine and enjoying theaters and discussions.
SCHLEY: We were talking before the camera was turned on that wine is itself a very difficult business.
KOVACS: Yes.
SCHLEY: What makes it hard?
KOVACS: It’s the most difficult business I’ve ever been in. I mean, first of all, I’m a city kid, and it’s agriculture. (laughter) All right? So, you look at things and — Jesus — I don’t know what it is. So, I had to basically sit down and ask a lot of questions about what makes — you know, what is the varietal that you choose for a given terroir? What climate conditions — I’m just learning about the agricultural aspects.
SCHLEY: Wow.
KOVACS: Then, I was very bad in chemistry. This is the next piece of it. How do you produce from grape juice wine and the ways to do that? But I learned enough about it to be able to know. Then the next one is the so-called marketing. You know, product, price, promotion, place, the four Ps of the business. It’s very difficult. And wine is one of the very subjective products like fashion, you know, arts, and cosmetics. So, you have to create a story around the given product to somehow touch the heart of the individual audience, which is also true for wines. The label design — it’s an art.
SCHLEY: Absolutely.
KOVACS: You know, who do you hire to make something that people will see on the shelf and take it home?
SCHLEY: A lot of wines on the shelf.
KOVACS: A lot of wines. So, it’s really a very complicated business. But I have to say I really enjoy it. And you know, we are going for the high end, so the high quality stuff. And it’s always a pleasure to drink some wine with some sophisticated people. Yeah, that’s pretty good. Yeah.
SCHLEY: You have such a lovely expression in the book that you wrote, and it equates a wine to a person, to a human being.
KOVACS: Yes.
SCHLEY: I think what you’re saying is it’s not the same 20 years down the road as it was when it was born.
KOVACS: Absolutely.
SCHLEY: And it really maintains though a sense of place. And I would love you to expand on that.
KOVACS: Yes, of course. I mean, you know, when you have a wine and you basically bottle it, it’s like a puppy, a very young person. (laughter) And it takes a little time sort of to age in a bottle. And then, it shows different characteristics of the wine. So, when I buy some wine from some known winery, I usually buy either a three pack or a six pack. And I drink it immediately after buying it to see what the wine tastes like when it’s young. Then take another bottle a year from then, and then, take the rest of the bottles and put it in a cellar and pick it up later.
SCHLEY: Cadence them out.
KOVACS: Yes, yes. And they change beautifully over time. If it’s a wine well made from a good winery and well stored, which is also important, then, you know, 20, 30 year old wine is just as enjoyable as a young wine.
SCHLEY: Okay. Well, let’s continue the wine-human analogy. You’re talked about Gene Schneider. You’ve mentioned Mike Fries as an influential person in your career.
KOVACS: Yes, very much so.
SCHLEY: Malone? Where did he fit?
KOVACS: Yes. I mean, John Malone has been around, or I’ve been around long enough. And when — you know, I was sitting in various board meetings. I like to sit next to John Malone and chat with him. He’s a truly Renaissance man. I mean, he is able to talk about technology, philosophy, weather, programming, finance. So, it just — you know, I really admire his —
SCHLEY: You’re going to learn something almost every time.
KOVACS: Absolutely. And he was a modest — he is a modest — he’s a very good, modest man. So, I really enjoyed Malone. I also befriended Bob Miron from Newhouse, you know, when we were together on Discovery board together. And he became a dear friend. And any time there was an issue, in my professional life, I called Bob, and he was always very nice and gracious to give me advice. So, yes.
SCHLEY: Individuals who really ran a gamut — I remember being a journalist, and Bob was not the most accessible of all the cable people.
KOVACS: Yes, he wasn’t.
SCHLEY: He did his thing, you know, kind of privately and effectively.
KOVACS: Yes.
SCHLEY: And Gene, a little bit the same. I do remember when I worked for a publication called Multichannel News early on —
KOVACS: Great publication. It’s true.
SCHLEY: Thank you very much. (laughter)
KOVACS: The Bible. We read it all the time.
SCHLEY: It was aways a treat to get a call from you because we thought you were plugged into the heartbeat of the marketing side of the business.
KOVACS: Yes.
SCHLEY: And you were, and we didn’t even touch on some of the technology. Pay-per-view, for instance, was a big part of the world.
KOVACS: Yes.
SCHLEY: What are you most proud of in your cable industry career that you’ve accomplished?
KOVACS: You know, I think Discovery was a major thing that I’m very proud of it. And, building out international businesses. So, we just became an American innovation. And, you know, I really have a lot of good friends I developed over the years in the business that I still cherish. Yes.
SCHLEY: And then, what do we think is going to happen going forward? If there’s a young version of Nimrod that’s just beginning her or his career in this business, what are they going to see? What are they going to work on?
KOVACS: Well, you know, I go to universities occasionally to talk to students about careers. And I know some people who come. And, you know, the fundamental advice is that — find the compass of your heart, which is kind of a trite thing. But better yet or more important, find out what businesses are going up.
SCHLEY: Okay.
KOVACS: And don’t get into a business, which is on its way down, obviously. It’s a very important — and thirdly, which I think is also important is what you are good at. So, you can love something and being good at — that’s a perfect combination. And I think certain parts of the cable industry are really high growth areas even today.
SCHLEY: Okay. Such as?
KOVACS: And finding them — well, the — I mean, the whole streaming business, if you call it cable anymore —
SCHLEY: Sure.
KOVACS: And, you know, the overbuilding world is doing well. And even the traditional cable operating companies are doing well. So, there’s still… You know, as long as there’s opportunity to bundle and unbundle And play around with the offerings, cable will stick around.
SCHLEY: You make a good point. It’s so different because there is fierce competition even at the local level now from multiple providers.
KOVACS: Yes, right, right.
SCHLEY: Forget just the satellite TV guys. You have wire line operators. That would have changed the game, you know, from what you did.
KOVACS: Yes, but I think smart people will figure it out. You know, I mean, I know some people who are recently joining the industry. I think they will be fine.
SCHLEY: In my notes, Nimrod, I have three words: Knight of Hungary.
KOVACS: Yes. (laughter)
SCHLEY: Help me with that.
KOVACS: Well, a number of years ago, I was given the honor of a knighthood in Hungary for my contributions to the telecommunications cable industry in Hungary. So, I technically could call myself “Sir Nimrod.” But I don’t do that. But it’s just an honor, and I’m proud of it. And I’m grateful for it.
SCHLEY: I asked your compatriot Mike Fries this question. He’s a traveler of the world as you are. Divided world in many ways right now. But you sense among human beings no matter of location more commonality of interest than division? And I ask you this because you’re our eyes kind of on the world at large.
KOVACS: It is a very good question. Yes, but the politicians don’t like that because they’re in the business of divide and conquer. And if people talk to each other, then they are not going to be able to rile up against each other. And sadly, the world is moving toward a populist tendency and politicians take advantage of the benefits of social media to divide and conquer individuals. So, somehow people have to take control again and control away from the bad politicians anywhere in the world actually. It’s not necessarily just here or Europe. I mean, it’s happening in most places and people are too complacent. And they need to take a more active role in determining their own life. And believe me, after that happens, they will be able to work together. So, cooperation is significantly more important than division. But again, that’s not in the interest of the politics, sadly.
SCHLEY: A lot of us — and I don’t know if you were in this camp — had this fairly utopian and maybe naïve idea around internet connectivity, thinking it would open up lines of communication and literally democratize. And now, I think we’ve seen the opposite happen with social media.
KOVACS: Absolutely. It — both — it happens both.
SCHLEY: Both. It’s a big world.
KOVACS: It just — fundamentally — I mean, take a look at China. I mean, the face recognition hardware is so advanced that you take a street camera photo and it identifies each and every person goes with a number. And you can pull it up and have all the information about them. And the police and the governments use it against the individual which is really sad. But at the same time, again, I think that people — democracies have to prevail. They have to be more active and more, you know, forceful about the views of what they want. They want prosperity and have fun. I mean, that’s kind of what it is. What else is out there? (laughs)
SCHLEY: So, what is next for you? Where are you living, and what’s life going to be like five years?
KOVACS: I live in Budapest most of the time. I have a place, an apartment here in Cherry Creek, Cherry Creek North. And I like to travel.
SCHLEY: Sure.
KOVACS: You know, I have some investments, sit on a number of boards, got involved in a number of charities and be a wine guy, you know, producing my stuff. Yeah.
SCHLEY: People hate this question. But I’m going to ask it anyway. Legacy. How would this business of cable communications maybe be ever so slightly different if you hadn’t touched it or been involved in it? Put you on the spot.
KOVACS: Well, I believe that I made a difference in my environment, and I can do more. But I think I try to make the world a better place and hopefully added some to it. Yes.
SCHLEY: Excellent parting thought, Nimrod. Thank you so much. This has been kind of wide ranging conversation, both informationally and geographically. But thank you for going along for the ride with us. For Syndeo Institute at the Cable Center, with Nimrod Kovacs, I’m Stewart Schley. Thanks for tuning in.
