Interview Date: Wednesday April 25, 2001
Interview Location: Dallas, TX
Interviewer: Jim Keller
Collection: Hauser Collection
Note: The Cable Center Website is made possible by a gift from Paul G. Allen, Jeffrey A. Marcus and Marcus Cable.
KELLER: This is the oral history of Jeffrey A. Marcus, former chairman, CEO, and president of Marcus Cable, who just a few years ago sold out to Microsoft co-founder Mr. Paul Allen. This oral history is part of the Oral History Program of The Cable Center and made possible by a grant from The Gustave Hauser Foundation. Jeff, give us a little bit of your background prior to the time you got into cable television, which I know was way back when.
MARCUS: Well, I was a junior at the University of California, Berkeley, and was working my way through school. Prior to getting into the cable business I was actually collecting garbage, driving a garbage truck during the summer of 1967.
KELLER: In Berkeley?
MARCUS: At Berkeley. I had a great job and I used to get up at 4 in the morning, I’d be at the yard by 5 and work until 2. It was exhausting and I couldn’t go out at night. I had a roommate, his name was Gary Cornelius, and Gary was selling cable television door-to-door for Scott Bergeren at Televue and Gary would go to work at 5 in the afternoon and he’d be home by 9-9:30.
KELLER: Where was Televue operating at that time?
MARCUS: Well, they were out of Seattle. I think that’s where Homer Bergeren was headquartered and I don’t know where all their systems were, but they had systems in Antioch and Pittsburg, California, in the East Bay.
KELLER: And eventually they got San Francisco then too, with CBS.
MARCUS: Right, right.
KELLER: You were involved in that before…
MARCUS: Before CBS bought them out. That’s right. But Gary would come home and he would brag about all the money he made and he’d be able to stay out late and have a social life, and it took me awhile, but I figured out he had a better job.
KELLER: So what were you selling? At that time we were very limited about the number of signals and what programs we could bring, especially in that East Bay area with the conflict between Sacramento and San Francisco signals. But what were you selling?
MARCUS: Well, we were selling antenna service because Pittsburg and Antioch were way out east and they were about as far from the transmitters of the San Francisco stations as you could get and still be in the San Francisco ADI. They were out towards Sacramento. So we were actually just selling an antenna service.
KELLER: You could deliver Sacramento too, couldn’t you? Or what were you delivering?
MARCUS: Well, no, I think Sacramento at the time was considered a distant signal and I don’t really remember, but I believe that we at one point were bringing in Sacramento and then in 1968, under the Rosell Hyde FCC, they put a ban on distant signals and that made it even tougher to sell.
KELLER: And then there was a conflict between the two top 100 markets of Sacramento and San Francisco.
MARCUS: Right, right.
KELLER: What’s always interested me, right at the height of the hippie era of the ’60s, the late ’60s, how someone could become interested in business in general and cable television specifically with everything else going on over there in Berkeley.
MARCUS: Economic imperative. I had to eat.
KELLER: So what did you do after you were working with Televue? Did you also then work with Viacom or sell for Viacom in that area?
MARCUS: No, I actually graduated from college in ’68 and while we were at – when I say “we” there was a bunch of us out of Berkeley that were selling cable for Scott. In fact, John Goddard was a system manager then at the time for one of the systems. I think he was in Pleasanton. So there were a bunch of us selling and the guy that was sort of the senior sales manager was a fellow by the name of Mark Van Loucks.
KELLER: Tell me about Mark Van Loucks.
MARCUS: There was nothing Mark couldn’t do and couldn’t convince somebody to do. A great salesman and a great gift of gab and he had the idea that he would form a company that would go out and make contracts with cable companies to sell subscriptions on a contract basis and he called his company CATV Marketing. His wife, Melody (wife at the time) was one of the sales managers for Televue and so she, I think she came along, and they formed this CATV Marketing and I joined the company and this girl I was dating at the time, by the name of Lisa Best…
KELLER: I remember Lisa, too.
MARCUS: Yeah, Lisa joined, and Sherry Rapp…
KELLER: I remember Sherry too.
MARCUS: …who was Miss California, and a few of us out of Televue joined and that was the birth of CATV Marketing, and Mark set out to fly around and get contracts. Boy, he made good use of Lisa and Sherry; they were his marketing team.
KELLER: Yeah, he sure did. And did you stay in the Bay Area, then, or did you move around all over the country?
MARCUS: I sold in Walnut Creek for awhile. We got a contract with General Electric; they owned the system there. And so I was a salesman in Walnut Creek, and then after I graduated – I graduated in June of ’68 – and I think it was probably October-November of ’68 Mark took me up to Seattle, and he had gotten a contract, I believe with NBC and NBC owned the system in Bellevue and Wenatchee, Washington. I think it was NBC. And so I was the sales manager for Mark and I used to go back and forth between Wenatchee and Bellevue and over the Snoqualmie Pass, and this was my first real job out of college and living up there on my own, not knowing anybody, and it was a lot of fun. Lisa, my girlfriend at the time, she was still down in the Bay Area and that was the beginning of my cable career and the end of my relationship with Lisa.
KELLER: I haven’t seen Mark in so many years, I wouldn’t even know him, I don’t think. When you left CATV Marketing, where did you go from there?
MARCUS: Well, while I was doing that, I met a guy by the name of Burt Kittay, who was selling the news services, I think for UPI or AP or one of these news services that were on the cable channel and Burt, he was a little bit older. I guess at the time I was about 21-22, and he probably was 30, had a wife and two kids, and lived in New York, in Scarsdale, and he had the idea to go out and form a marketing company on our own. He had the idea and I had the experience, and so we…
KELLER: How did you meet Burt?
MARCUS: I think I was introduced to him at a convention and he had a business relationship with Bob Clark, who was then the president of CableCom General, owned by RKO General, or General Tire, I guess.
KELLER: Yes, it was General Tire.
MARCUS: So we went out to see Bob, and Bob was a great guy. They were in, gosh, Oklahoma, or somewhere up in…
KELLER: They were out of Oklahoma.
MARCUS: Was it Oklahoma? Okay. We went to see Bob and at the time Bob Lewis was working there, my old friend Bob Lewis, and they had some systems in California and we pitched them on the idea of backing us and I have a picture that my parents took of the check, the equity check, that CableCom General sent to start Burt and me in business. It was for ten thousand dollars and with their check and I think Burt used all that money to move his family out from New York to Los Angeles and we set up our office down in the Los Angeles area, and we were in business. We called our company Markit Communications, and that was a great experience for – what? – 1970, a 24-year old young man. The first year in business we did a million dollars in sales and then we decided to buy an installation company because we thought that it would be very effective if we could offer both the ability to sell the customer and then to install the customer, that the cable operators would like that, and indeed they did. We had a lot of business from CableCom and others. My job was principally to run the sales groups and Burt was going out trying to get contracts with various cable operators around the country, although I participated in that at some point. But we expanded fast and after a couple of years we were continuing to ramp up our revenues, but our expenses ramped up too fast and this was probably the downside of not going to business school, and after a couple of years in business it became unsustainable and we decided to shut it down. There was a company that was interested in buying us, for whatever reason I don’t know, and they actually owned a small cable system near, I think it was Modesto, where CableCom General had a system, and so by this time we owed CableCom General some money and CableCom General swapped that note for that cable system that these folks owned and so now these guys owned half our company. It became clear that they weren’t really interested in our business as a business. They had some other purchases in mind and so Burt and I left.
KELLER: What purpose did they have in mind? You were a sales and installation company.
MARCUS: Well, I don’t know. All of the sudden when they owned control of the company, and we would see checks being cashed in various places and the bank account being drained and it didn’t seem to make a hell of a lot of sense to us. We didn’t really have any power to change it or stop it at that time.
KELLER: You still had an interest in the company?
MARCUS: I had an interest in the company, but not control. So Burt and I both resigned and I think ultimately the company went out of business.
KELLER: Did you get a piece of the cable system up around Modesto at that time?
MARCUS: No, no.
KELLER: You did not, so it wasn’t a two-way deal, then.
MARCUS: No, I didn’t get a taste of cable ownership for several years to come.
KELLER: Did Marc Nathanson join you at that time, or when did you become associated with Marc?
MARCUS: Well, actually I knew Marc just from the business and after Markit Communications demised, here I was at 26 years old, washed up, and didn’t have a job, didn’t have any money. You know, when you’re living in Los Angeles, the thing to do at that point is go out to Hawaii and contemplate your fate, and that’s what I did. I was sitting on the beach one day and I had called home and there was a message from Bill Karnes, you remember Bill?
KELLER: Oh, yeah.
MARCUS: The president of Sammons Communications, and he said that they were looking for a person to become vice-president of marketing and wondered if I’d be interested in coming to Dallas and interviewing for the job. So I called Bill and it sounded interesting. I didn’t have a job, so the job sounded interesting and I had to eat. So, I flew to Los Angeles and got a haircut and got some clothes and went on to Dallas and I met with Bill for awhile and then he introduced me to Charles Sammons.
KELLER: A great man.
MARCUS: Oh boy, Charles Sammons was something! He had created a fortune, a large fortune, in debit insurance…
KELLER: And in the hotel business, too.
MARCUS: The hotel business, right, and he had a lot of businesses. Sammons Enterprises is still a very large company, privately held always, and Mr. Sammons spent about six hours with me, and was just very interested in my view on cable marketing, and he’s an old salesman so he wants to talk sales. So at the end of the interview, he says, “Jeff,” something to the effect of, “I really think you’re terrific and I like you very much and I think you’d fit in really well here and you’d do a good job. But one thing’s been bothering me: Bill Karnes tells me you used to come on down here to Dallas and you had this company that would sell cable subscriptions on a contract basis and do installations on a contract basis, and that you would make the pitch that if you contracted for these services that you’d be much more efficient and you’re just paying on a unit basis and you’d get a better job and a better overall result.” And he said, “Now, we’ve spent six hours and you’ve really convinced me as to why we ought to be doing this in-house. How do you balance that incongruity?” And I looked at him, and he had the brightest blue eyes, and I looked right in those blue eyes of his and I said, “Well, Mr. Sammons, for the last two years I’ve been lying to you.” And he loved that; he laughed and he made me a job offer right then and there, and I took it.
KELLER: If outsourcing that work, you’d still be in business.
(LAUGHTER)
MARCUS: That’s exactly right. But I had a very good experience here in Dallas for those couple years and we had about 250,000 customers, and this was in 1971 when I came, and the company was supposed to go public and the markets turned against us and we couldn’t go public.
KELLER: Turned against everybody. I remember that.
MARCUS: Right. And so the company remained private, and I enjoyed the work here very much, I enjoyed my colleagues very much. It’s where I met Nate Levine and Nate and I remain good friends to this day and I haven’t seen Bill Karnes for a while, but I know he’s still around here, and Bill Strange.
KELLER: Is Bill still in town here?
MARCUS: Yeah, I think so. I haven’t been in contact with him, but I probably talked to him a couple of years ago, just to say hello.
KELLER: So you kept very close ties, then, to the Sammons people and the Sammons group, which you eventually bought out?
MARCUS: Well, that was the irony. It was really wonderful.
KELLER: That’s getting ahead of our story right now.
MARCUS: Right. Jim Whitson, of course, was the president then, so I got to know him and work with him, and Ernie Blank was the guy who was actually involved in the mix for awhile as well. But anyway, after a couple of years living in Dallas, it was a wonderful job and a great company, but all of my colleagues were married and I was traveling all the time. I was out in the systems all the time and I’d come home on the weekends, but I really didn’t know anybody here and I didn’t have any relationships, and I guess I was – what? – 26 years old at the time, and I wanted some sort of social life, and so at the time, I guess it was the ’73 timeframe, that’s when Jack Kent Cooke engaged in that proxy fight for TelePrompTer with Irving Kahn and Irving had ultimately gone to jail and Jack took over the company, and Jack was bringing in the team of people to rescue the company because TelePrompTer was in deep trouble. The late Jerry Greene was hired as the CFO, and I guess Bill had already been there, Bill Bresnan was already there.
KELLER: Yeah.
MARCUS: They brought in Marc to be the vice-president of marketing, and I guess a few other people.
KELLER: That was Marc Nathanson?
MARCUS: Yes, right.
KELLER: And what had been Marc’s experience before that?
MARCUS: Well, Marc, I think, had worked with Bill Harris at Harriscope, and then I think when they formed, was it Cypress Communications, Marc had also worked at Cypress.
KELLER: Cypress bought out the old HBO, didn’t they, right around that time?
MARCUS: H&B American.
KELLER: H&B American! I’m sorry, you’re right. HBO was wrong, H&B American.
MARCUS: Right, right, exactly.
KELLER: That was when Jerrold was required to divest, as I remember.
MARCUS: I think so, yeah.
KELLER: So that’s when you first became associated with Marc?
MARCUS: Right, so Marc actually called me one day and said that they were looking for somebody to ramp up the big door-to-door sales program and I had become pretty well known in the industry at that point. I’d won a NCTA marketing award for our direct sales program at Sammons, and this is sort of what I’d been doing for a number of years and I knew a lot about it and could do it, and this is what they needed. So, I flew to New York and I interviewed with Jack Kent Cooke and with Bill Bresnan and Marc, and they offered me a job. So, I came back here in the beginning of October of ’73 to let the Sammons people know I’d be leaving, and I think I went out for a drink that night and as I was getting ready to leave, I saw this girl that I’d dated a couple of times and she was with another girl, who absolutely captivated me, and I just was trying to figure out how could I get this girl I’d dated to introduce me to this other girl, and as luck would have it, as I was walking out this other girl walked up to me and started talking to me, and we exchanged phone numbers and I was in Dallas for three weeks from that point on, and we had 21 dates in 21 days, and that was the woman that I would marry the following June. I guess we’ll celebrate our 27th wedding anniversary. So my stint here at Sammons…
KELLER: Did she move back to New York with you, then?
MARCUS: No, she was still finishing up her college here at SMU and she graduated in January of ’74, and then she enrolled in graduate school at Vassar in Poughkeepsie. So starting in January she went to Vassar so we would see each other on weekends. But I went up to New York and I lived in a hotel for three months, in the Gotham Hotel, and boy, that was a very, very fun and pressured experience. It was like a fire drill every day, because I guess Jack Kent Cooke had committed that we’d have a million customers by a certain date or the banks could have the keys, and we had 750,000 customers when I joined them, so we had a big mountain to climb.
KELLER: And you did.
MARCUS: Yeah, we did.
KELLER: And how long did you stay, then, with TelePrompTer? Bill was the president at that time, Bill Bresnan was the president?
MARCUS: Bill was the president, right, right. I left TelePrompTer in – I guess I joined October of ’73 and I left in February ’75, and it was interesting because I’m not sure when we achieved our million customer mark, but I remember we had a little celebration in the board room. I had a beard at the time, and Jack Kent Cooke was going to shave off my beard in celebration of the millionth customer, and so we took a picture of that and that was on the cover of Cable Day, and it was big news that TelePrompTer had reached a million customers. It was big news for me; I shaved off my beard. But I left in February ’75, and didn’t really know what I was going to do, but the whole tone had changed at TelePrompTer. Jack went back to California, they hired a guy by the name of Russ Karp to be president and the whole atmosphere changed, and the, I guess, authority that had been invested in me during the time of the big crisis had all evaporated and it was one of these things that you really couldn’t put the egg back in the shell, and so I moved on and ended up after going to California where my folks were for awhile, and visiting with my parents, and then going to visit my wife’s parents in Dallas, we went up to Minneapolis to spend a little time with Rick and Inge Michaels, who we had… I’d known Rick, I guess, since I first got in the cable business when he was at Times Mirror.
KELLER: Was Del Henry involved in that group at that time?
MARCUS: Yeah. Well, Del Henry was at Berkeley, and so he was part of the door-to-door crew.
KELLER: I was wondering about that, whether you were there at the same time.
MARCUS: Right. And Del went down to work at Times Mirror as well, and I remember, I think Rick and Del, their big claim to fame was that they would put on these concerts.
KELLER: Yes, that’s right.
MARCUS: They were music impresarios, as well as being cable guys. But anyway, Rick and I became friends and when he got married to Inge, Nancy and Inge and Rick and I would spend a lot of time together in New York because Rick was living in Gutenberg, New Jersey, trying to get his company, which was called Communications Equity Corporation, trying to get that off the ground. And he moved to Minneapolis to help some people try to get a franchise out there, and so we…
KELLER: Do you remember who that was?
MARCUS: I think the name of the principal was Paul Thatcher, or something like that.
KELLER: Continental finally got it, didn’t they?
MARCUS: Well, they got St. Paul, and this is sort of getting ahead of the story, and let’s go back to that. But anyway, we came to visit Rick and Inge and we were going to stay for four or five days and we ended up living with them for three months, and Rick and I decided to go into business together. In order to pay the bills, I took a job with General Television as assistant to the president. The president was the former Lieutenant Governor of Minnesota, Jim Goetz, and his company was principally controlled by the Phillips family, Phillips beverages out of Minneapolis, and probably did that for about a year and really didn’t do anything with Rick for that first year, but then in October of ’76 I decided just to take the plunge, and again, not having a lot of capital, I had to make the decision if I wanted to spend the $400 a month to lease the office in the executive suite next to Rick and all that.
KELLER: That was in Minneapolis?
MARCUS: Yeah, that was in Minneapolis, and I did, and I told my wife Nancy that she had to go to work in order to put food on the table while I got ramped up in this business, and as luck would have it, from October to December in ’76, I was able to close two deals, one with John Booth, Ralph Booth’s father, Booth American was the name of the company.
KELLER: That was out of Detroit, wasn’t it?
MARCUS: Yes, and then I sold another company up in Crookston, Minnesota, and made more money in those three months than I’d ever made in a whole year of my life, so we were off and running, and Communications Equity Associates, as our partnership, was born. Although Rick had had it as a sole proprietorship prior to that, and we moved… we were really successful from the beginning and…
KELLER: You were about the second company in the cable brokerage business, next to Daniels.
MARCUS: Yes, right. And actually over the next few years, we would give Daniels a run for their money because we were able to really ramp up our volume and we did it by concentrating on two companies that were really trying to expand in cable. One was Storer Communications, and the other was TCI. And we moved to Tampa in April of ’77. Rick wanted to move back to Florida where he was from and we were beginning to make some money and we were being taxed on all the money we made all over the country, and because we lived in Minnesota, Minnesota is a very high tax state. I love Minneapolis, living there, and I would have been happy to have stayed, but Rick wanted to move and we didn’t have children then, and we felt that would be fine. But we met up with Arnold Muller, at Storer, and they were on the hunt for franchises and for buying systems, and so that’s how we got in the franchise business, and we hired old Tom Alexander, that probably is a name you remember.
KELLER: Very well. He was with me at ATC.
MARCUS: Yeah, he used to work with Joe Collins, and Tom came to work for us and he headed up our franchise department, and so we got involved in trying to get the franchises in the Tampa Bay area, such as St. Pete, and Clearwater, Tampa, and we worked for Storer up in Minneapolis. Altamont Springs was another one. We were quite successful in that. Tom, I think, did a good job, and we ended up after a huge battle with Ted Rogers’ group, we ended up getting Minneapolis, Storer did, and I’m not sure if we had an interest in that. I think we did that for a fee, but we did have an interest in…
KELLER: Didn’t they divide the city up into more than one franchise?
MARCUS: Ultimately, after all the lawsuits. And then we did have an interest in the Clearwater system and the Altamont Springs system, and so we had some equity ownership in that, and things went along very well with CEA, and Rick and I remain good friends and we were good partners, yet in 1979, we bought our first cable system up in Richland Center, Wisconsin, and I went to get the listing on that, and ended up thinking it was such a great little system that I convinced Rick we ought to buy it and we brought in some partners and we bought it.
KELLER: That was your first venture into the operation end?
MARCUS: Yes, exactly, and I’ll never forget, Malone and I we were over in…
KELLER: Malone?
MARCUS: John Malone. In Acton, Massachusetts, we were trying to get Sam Phillips to sell the Acton systems to TCI, and we were staying in the Acton corporate apartment and we’d had a big dinner, and we didn’t get anywhere with those guys. Sam Phillips had a big idea of what those systems were worth, but John and I sat around drinking late into the night and he said to me, he said, “Jeff, what are you doing with the cable system that you just bought?” And I said, “Well, we’re going to operate it.” And he said, “You don’t know anything about operating cable systems. You ought to sell it to us.” And I said, “Well, how much would you give me?” He said, “I’ll give you a million dollars.” Well, we had just closed three weeks before for $662,000. So, I thought, well, okay. We’ll do that. But we wanted stock, so he immediately gave us…
KELLER: TCI stock, at what time?
MARCUS: TCI stock. This was in ’77.
KELLER: So it was probably a very down area, too, for TCI stock.
MARCUS: Yeah, it wasn’t a bad deal. Later in the morning, we got up and were having breakfast and he said, “You know, I think you may have gotten to me a little bit last night. Before we go forward, you’re going to have to get a rate increase.” So, I think the rate was $5 and our deal was I had to get a rate increase to $7.50, and so I was able to do that with the promise of more channels.
KELLER: If you got to Malone, you were probably the only one that’s ever done it.
MARCUS: That was the first and only time anybody did. So, anyway, we ended up selling the system, but it gave me a taste, a very short taste of ownership, and we bought a few other systems.
KELLER: Now you say “we”, that would be CEA?
MARCUS: Well, it was Rick and me and some other individuals, not really within CEA itself. But I got the bug, and I had worked since ’76 in the brokerage business.
KELLER: We were just talking about your initial entry into the cable television operations. You had the one small system up in Minnesota, was it?
MARCUS: Wisconsin.
KELLER: Wisconsin, that you sold to TCI, and then you said you got involved in other systems with Rick and some other people. How big did that operation grow?
MARCUS: Well, we had some success and we had some challenges. We had a system out near Tulsa; we called it Conestoga Cablevision and we owned that for a short period of time, sold it at a big profit. We had Northampton, New Hampshire, which was a franchise, an unbuilt franchise, which I think we ultimately sold before we built it, and then we had something around Louisville, Kentucky, where one of Rick’s former partners had sold us some franchises and he was in such a hurry to close and we were like Blanche DuBois, we were counting on the kindness of strangers. He had overcounted the homes, and we had overcounted the homes and undercounted the miles, and we ended up losing money. We were the only ones ever to lose money on cable.
KELLER: No, a lot of other people lost money in that Louisville area. At that time, it was a tough go, Jefferson County.
MARCUS: It was tough, but as we were finishing up the ’70s, I began to realize that what I wanted to do was to own cable systems and I knew what Rick wanted to do was not that. He really loved the day to day challenge of CEA, and building a big brokerage company, and I guess it was towards the end of ’81, we sat down and negotiated a buyout of my interest.
KELLER: Had he at that time built it into an investment banking business also?
MARCUS: No, this was just a brokerage business, a successful brokerage business nonetheless, but I’m not sure that that was not even in his imagination at the time, but Rick is a person with lots of ideas, and lots of energy, so… We engineered a buyout of my interest, which I think occurred around April of ’82, maybe it was the second quarter of ’82, and I decided to go into the cable business. Now, I didn’t own any cable systems at the time.
KELLER: Did you take the systems that you had an interest in then?
MARCUS: Actually, in winding up CEA, we had a few small systems, one in Aiken, Minnesota, one in Blue Earth, Minnesota, and one in Black River Falls, Wisconsin, and I ultimately bought Rick and some of the others out of that, but that wasn’t really part of the breakup of CEA, although I ended up managing those systems under a management agreement. It was all very amicable.
KELLER: Well, you’re still very close friends, aren’t you?
MARCUS: Absolutely, absolutely, in fact, we’re working together for the Republican party right now.
KELLER: I had the distinct honor of doing his oral history, also, not too many months ago, so some of these things are dovetailing together.
MARCUS: Yes, absolutely.
KELLER: Now, I want to back up just a little bit, before you get into your successful entrepreneurship in cable television, but to go back, when you were executive director of the Minnesota and the Wisconsin Cable Television Associations, do you have any stories to tell about what happened during those periods?
MARCUS: Well, that was a great time for me, because it dovetailed with the time that I really made the commitment to leave General Television, and to really be an entrepreneur, and I’d always, after Markit Communications, always had a paycheck, and I was concerned that that was no longer the case, and I had a new wife and a mortgage by then, and so I took a job first as the executive director of the Minnesota Association, and I was a member of the association as the assistant to the president of General Television, and so I got to know all the guys and became active in state affairs.
KELLER: Do you remember any of those people?
MARCUS: Oh, yeah.
KELLER: George Meyers?
MARCUS: Sure, George Meyers, Buddy Langout, Bob Baker, who used to work for us, and a lot of folks. We had a meeting, actually in the association offices, which were then moved over to CEA offices after awhile, but the thing I remember most is really getting to know the people, and I would go out to these small systems, and Buddy Langout as an example, and go and have dinner with he and his wife, Ada, and his kids, and talk about the early days of cable, which we were in, but his father started that system in Bemidji.
KELLER: I built the cable system in Little Falls, Minnesota in the winter time, so I remember what it’s like.
MARCUS: You know, you know. There were a lot of characters and it was so much fun, and I did the same thing over in Wisconsin and that’s how I got to know this fellow who owned the Richland Center system, Theron Moon. And that association, I was there, I don’t even know how long I was there, maybe a year and a half, two years, in both states, and those associations benefited me so much going forward because when I did start MARCUS: Communications and I did look to buy cable systems, I felt like I knew Wisconsin and Minnesota cold, pardon the pun.
KELLER: They’re both cold, too.
MARCUS: Right. And I had a relationship with these folks, and they trusted me and they knew me, and so we could do business together and we did business with a lot of them. And really, when I decided to start MARCUS: Communications, Nancy and I, by then, had had our two children and it was 1982, and we decided to move to Greenwich, Connecticut. We chose Greenwich not knowing anything about Greenwich, not knowing anyone in Greenwich, but knowing we wanted to be near New York City, did not want to live in the City with two small children, did not want to live in a state with a state income tax, and Connecticut sounded great. And so we went up to Greenwich and we rented a house and rented an office, and I put out a shingle, and I think I was on the phone with Malone one day, and he told me that he had just…
KELLER: Who was that you were on the phone with?
MARCUS: John Malone, and they had just done a deal with Elmer Balaban to buy out their cable company, and they had some systems up in Wisconsin, about 8,400 customers, it really didn’t fit anything they were buying, they were small, they were spread out, and would I be interested in buying them? I said that I would love to. I knew those systems, and I would love to buy them, and so we negotiated a price, and I said, “Well, give me some time to go out and raise the financing, and as it turned out, the next call from John Malone was to say that they’d be interested in being my partner, so we ended up arranging a partnership for MARCUS: Communications, where they owned the preferred stock and I owned the common stock, and we went out and raised the debt from, I think it was First National Bank of Rochester.
KELLER: That was the period in which they wanted to get a lot of that debt off of their books at that time, didn’t they?
MARCUS: Well, I think so, and also, John, I think, really wanted to back entrepreneurs and I think I was one of the first, if not the first.
KELLER: Gerry Lenfest, Bill Bresnan, and lot of them had the same types of things.
MARCUS: Exactly. I think we were a couple years ahead of the others, but this was the beginning of what was the TCI farm team in many ways, and the off-balance sheet investments. And so that’s how MARCUS: Communications was born, and they were such a pleasure to deal with because never would they question anything we wanted to do and they helped us to expand in buying additional systems. I remember one system I really was just so enthused about buying; it was St. Cloud, Minnesota, and that was owned by General Television. I had brokered General Television to Storer, so here I worked managing the St. Cloud system when I was assistant to the president of General Television, and then I sold it to Storer when I was at CEA, and now with MARCUS: Communications I bought the St. Cloud system back.
KELLER: What goes around comes around.
MARCUS: Right, it was the first of a few round robins that I had, but that was the beginning, and I would commute out of, or not really commute, but I’d travel out of Greenwich, and we started building MARCUS: Communications and we ended up with about 135,000 customers in Wisconsin and Minnesota.
KELLER: Was TCI guaranteeing your debt?
MARCUS: No, no. It was all stand alone, and they owned the preferred stock and I owned the common stock, and we ended up being 50/50 partners, and that’s what it was. And that ran from 1982 to 1987, and we owned 135,000 customers.
KELLER: You said something about the Bank of Rochester?
MARCUS: Yes.
KELLER: How did you get involved with them?
MARCUS: Well, I can’t really recall. I think there was a guy by the name of Chuck Coon, who was their lending officer in the communications group, and I think he just came and called on me one day and just said if you ever need any money to buy a cable company let me know, and I called him.
KELLER: Hello there!
MARCUS: Right, I wanted to see if he was serious.
KELLER: Then did you continue to do business with him after that?
MARCUS: Yeah, yeah we did, and then we ended up, because they weren’t really a big communications lender and we ended up doing business with Rocco Commisso, who was our loan officer at Royal Bank of Canada, and I think Toronto Dominion was one of our major banks, and sort of the normal kinds of banks. I remember there was a guy, what was his name? Ian Gilchrist, I think he was with TD, and I was buying a system down in Greensburg, Pennsylvania, a big competition with Adelphia for that, and we ended up buying it, and I was going to get it financed, and the best way to see it would be to go by helicopter, and it was a big system – 40,000 customers all around east of Pittsburgh. So, I chartered a helicopter to take the lenders and I took them by private plane from Greenwich down to Latrobe, PA, and then we got in the helicopter and I wanted to do it quickly and make it easy for them. Ian Gilchrist was scared to death of helicopter, and he didn’t like flying at all. We were flying all over and he was just white-knuckled and white-faced, so finally I told the pilot, I said, “When we get back to the airport, get up to about 50 feet over the field and just hover, and I’ll tell you when to land.” And so he did, and I could see Ian was counting the seconds until we were going to land, and there we were hovering over the field, and I said, “Alright, Ian, this thing isn’t going to land until you give me your commitment.” He said, “I’ve seen enough, you’ll get the money.” And we landed, and we got the money, and we closed.
KELLER: This was MARCUS:. Was your joint venture, to use the broad term, with TCI called WestMarc?
MARCUS: No, that was called MARCUS: Communications.
KELLER: Okay. What was WestMarc?
MARCUS: Well, WestMarc came right after that. What happened was, in 1987 Nancy and I decided to move down to Dallas. This is where Nancy’s from and we’d been gone for 13 years, and we decided to move back. So we moved the whole company down here, and I think ended up moving here in August. But the May convention of the NCTA was held in Las Vegas, the ’87 convention, and once again John Malone and I had dinner, and we always seem to have been able to cook something up at these dinners. So we had dinner and I think he had gotten a new airplane, I think he got a new Westwind or something, and he wanted to show it to me. So we got in this big limousine, and we went out to McCarron Airport and went to see his new plane, and then on the way back we started talking about MARCUS: Communications and what I wanted to do with it. It had really grown and the value of our equity had really grown and literally I woke up one day and I had gone from selling cable door-to-door, and I had achieved some real value in these cable assets. Of course, I was very happy, but I was also a little frightened because you don’t want it to go away once you have it. So, I was talking to John about my concern and…
KELLER: What year was this, can you remember?
MARCUS: ’87. This was at the convention, we were in the limo having had a lot to drink. So, once again, as he did that night at Acton, Massachusetts, he said, “Well, why don’t we do this?” And he described a merger scenario, where we would merge Marcus Communications into Western Telecommunications, which had been their microwave subsidiary.
KELLER: That was primarily a microwave company, wasn’t it? Ron Romrell?
MARCUS: Larry Romrell.
KELLER: Larry Romrell, right.
MARCUS: Larry was running it, and they had actually bought, WTCI had bought Televents from Carl Williams, so they had about 128,000 customers, and John was thinking that we could merge Marcus Communications in, create some liquidity for me, I could be the chairman and CEO, we’d have 270-80 thousand customers, have this microwave group, and go off and try and create a bigger company. Boy, that sounded terrific, and it really was giving me an opportunity to harvest some of the gains.
KELLER: He paid you for your interest in Marcus, is that it?
MARCUS: Well, we did a merger where I got…
KELLER: Because you say it became liquid.
MARCUS: Yeah, I got some cash and I got stock in WestMarc, and I did become the chairman and CEO, and Larry was the president, and we agreed that I would remain in Dallas, commuting to Denver from time to time, and Larry would come down to Dallas from time to time, but all of the microwave division and Televents, the people running Televents, were up in Denver, and the people running Marcus Cable, obviously, were in Dallas, but we had just moved there. So before long, it became clear that this would be run out of Denver, and I would literally commute to Denver to work, and I had an airplane at the time, which was great, but even with an airplane it’s still an hour and half flight up there and it’s an hour and a half flight back, and I’d get up in the morning and I’d fly to Denver and I’d work all day and then get in the plane and come back and I’d be home at 8:00, and I had small kids, and after awhile it just became a little much. So we concluded, or I guess we announced the merger in, I think it was late ’87 and by November ’88 I’d had enough of running back and forth. I enjoyed working with Larry and the group, and we did grow the company significantly. In a very short period of time we went from 280,000 customers to 550,000. We bought the Taft Cable Partners systems and some others, and it just was too much though in terms of the commute, and so I resigned my position there at the end of November. What I did was a trade of my stock in WestMarc for about 15,000 cable customers, back in Wisconsin, the ones that I originally bought – Ladysmith, and Bloomer, and Spooner, and Ashland and all those, and that original group of 8,400 customers had grown through some acquisitions.
KELLER: But you had had more than just those systems in Marcus before you went in with TCI, did you not?
MARCUS: Right, right.
KELLER: But that was your portion that you came out with?
MARCUS: Right, and basically what we did is we said – I gave back the WestMarc stock that I owned and they gave me these cable systems subject to a proportionate amount of the debt, so I owned about 15,000 cable customers and I bought another system nearby, and so I owned 18,000 cable customers, and I made a commitment to my wife that I wouldn’t do anything for a year because, again, our kids were little. This was in 1987, I think, or ’88. Our daughter was 10 and our son was 8, and this was a very important time to be home and spend some time at home, and so I did. Fortuitously, actually, that happened, because I had an office of people running the cable systems for me and I would come in every now and then, and I started looking at some other things that interested me, and so I got involved in some real estate, but the thing that I got involved in that was the most fun was the Texas Rangers baseball club. That was when George W. Bush and another fellow here in Dallas, Rusty Rose, put together a group of people together to buy this baseball team.
KELLER: Had you known any of them before that?
MARCUS: Well, not before I moved to Dallas, but when I moved to Dallas I got to know some of them, and George Bush had moved here in ’88, and we moved here in ’87. And so he invited me to join the team. What they tried to do is they tried to get people that would be willing not only to invest, but had expertise in different areas, and I had the expertise in the cable side. So I joined the investment group and that has really played a pretty big role…
KELLER: I bet it has.
MARCUS: …in what I’ve been doing lately.
KELLER: Were you a baseball fan before that?
MARCUS: No, not at all. But what a great time to be in the ownership of a team, because my boy was 8, and he was baseball crazy and he knew everything about baseball, and we would go to the games and he and George Bush would talk about the players and talk about the stats, and David Marcus was as smart about baseball as anybody, and George really took a liking to him and he’d take him into the dugout. I remember one time he introduced him to Nolan Ryan and Nolan took him around and introduced him to all the players and took him into the locker room. This would happen on a regular basis, and it was a wonderful investment for lots of reasons, and a wonderful experience for lots of reasons, but to have that experience for my son is as good as it gets. But anyway, after a year, I got a call from a fellow at Goldman Sachs, who I had befriended, and they had come to call on me at both Marcus Communications and at WestMarc and we had lunch one day, and this fellow asked me if I’d be interested in getting back in the cable business, and if so, they would like to be my partner.
KELLER: You still had those small systems, though, up in Wisconsin?
MARCUS: Right, right, that now had 18,000 customers. So I flew up to New York and I met with the guys in their principle investment area, and we went to this restaurant, and over dinner, literally on a napkin, we sketched out a deal on how we would partner, and I threw in my cable systems, and they threw in some cash, and as luck would have it, a guy by the name of Don Jones, out in Wisconsin, was looking to sell about 60,000 cable customers. We’ve always seemed to be able to take advantage of adversity during those years because this was the time of HLT.
KELLER: I was going to bring that up. Yes, I was going to bring that up. The ’90s through the enactment of the Cable Act were tough years.
MARCUS: A terrible, terrible time, and so we made a deal with Don Jones, and this was through an auction process, and we were really the only ones left standing at the end of the auction and we made a deal with him to buy those 60,000 customers and it was really tough to get the debt, because HLT had just come into existence and we renegotiated that contract about three times, but we finally closed, I think it was in August of 1990, and that’s when Marcus Cable was born, and we had 78,000 customers.
KELLER: It was born out of adversity. Do you feel that you were able to make a better deal for those systems because of the impending impact of the Cable Act?
MARCUS: Absolutely, absolutely.
KELLER: And Malone was dumping things, too, at that time.
MARCUS: If it wasn’t for bad times I wouldn’t have been able to enjoy the good times, and I think that it’s easy to be at the party when everybody else is, but you have to swallow hard to be willing to buy when everybody else is selling.
KELLER: There’s no question, and it was difficult times for the industry. I think many people, and John Malone was buying out his limited partners at about that time, too, and making, I think, a pretty fair deal because they were also getting pretty concerned about what was happening.
MARCUS: Sure, they had no path to liquidity.
KELLER: So you do feel that that had a major impact on the beginnings of your company?
MARCUS: Absolutely, absolutely.
KELLER: ’90-’91, I remember those years very, very well.
MARCUS: Well, everybody dropped out. We thought that Crown Media was going to beat us to these systems.
KELLER: That was the Kansas City company? Hallmark?
MARCUS: Yeah, it was Hallmark Cards.
KELLER: Along with Glenn Jones, wasn’t it?
MARCUS: Yeah, and Glenn was interested, Hallmark was interested, and that was Jim Hoak that was running that, and they were going to be very aggressive, and they had Hallmark Cards, but Hallmark, boy, they got very concerned about what was going on in the economy and the business and whatnot, and at the end of the day they didn’t bid.
KELLER: Well, I think, and please correct me if I’m wrong, and I’m going to ask this is the way of a question, that those people who really knew cable television in the early ’90s recognized, especially after things started to wash out, that the ’92 Act was not going to be a major impact on the industry. Now that was not necessarily the case with the financial institutions, but I think a lot of people, including you, were able to make pretty good deals.
MARCUS: Well, there’s an old saying that you can make money at any business, it just matters when you own it, and I think those of us who had been in the business long enough, we saw the cable freeze in ’68, and we saw the ebb and the flow and the cycles, but the thing that we always knew, and the thing that I always knew, was that people were still watching television and they were watching television 7 hours a day, and the advent of the satellite in ’75 just gave them more to watch. And that old trite saying, “There’s more to see on cable TV”, was really true.
KELLER: Yes.
MARCUS: And it made for a very stable investment and you could make a prediction of your cash flow for the year, and boy, we were never off by more than a point or maybe a point and a half either way, up or down, because it was a very, very predictable business.
KELLER: Oh, yeah. That was one of the things that the lenders liked about it, because you could guarantee what that cash flow is going to be.
MARCUS: Sure, right. It took us awhile to convince them that pay TV was here to stay.
KELLER: That was going to be my next question. When did they finally recognize that they would allow that income from pay television?
MARCUS: I don’t if they do yet.
KELLER: Oh, I think they do.
MARCUS: They do, but that took awhile. I remember I teased Tom Riefenheiser all the time about trying to convince him about that, and they were always slow to come to the party because it took awhile…
KELLER: I can remember they would allow us 25% of the potential revenue from it, and then maybe 50% of the potential revenue from it, and they finally came around. But those were tough, tough, tough times between ’75 – well, that was between ’75 and ’80 – but after ’80 they started to recognize that it was here to stay.
MARCUS: Right.
KELLER: Although the multiple pays were not here to stay.
MARCUS: Well, that’s right. That’s right. And now it’s the digital customers and the modem customers, and I don’t know, I’ve been away from it for a few years, but I don’t know how the lenders look at all that.
KELLER: I don’t know either, and I’m glad I don’t have to do the projections.
MARCUS: Right, yeah, the business is more complex.
KELLER: Yeah! So you built up Marcus then, from this very Spartan beginning into a major, major company, didn’t you?
MARCUS: Well, we did, and had some great challenges and triumphs along the way.
KELLER: Was TCI still in there as your partner?
MARCUS: No, TCI was gone. When I left WestMarc that was the end of the TCI relationship, and now my partner was Goldman Sachs, and Goldman, I guess, it was in ’94 that we bid for…
KELLER: You were playing with the big boys now.
MARCUS: Yeah. We went to bid for the Hallmark Cards systems and we teamed up with Jerry Kent and Barry Babcock at Charter and we split up the systems and we bid on them together. Again, it was an auction process. I think it was, ironically I think it was Goldman that was representing – it was, Goldman representing Hallmark. So, that Chinese wall was tested, but at the end of the process, again, this was in ’94, very tough times, and nobody else was really there to bid, and Charter and Marcus Cable were the ones that ended up buying it, and we split the company up and that’s where I not only got…
KELLER: You say you split the company up. Which company was that?
MARCUS: This was Crown Media, and that’s what formed… Charter got a lot more of the customers because they bought the partnerships. I bought a lot of the wholly owned customers, which I think they had…
KELLER: These were Jones Intercable limited partners?
MARCUS: These were the old Cencomm. Remember Hallmark bought out Cencomm?
KELLER: Oh, okay. That’s right, I do remember that.
MARCUS: And so what they really bought was the general partnership interests of, I don’t remember the numbers, maybe 700,000 customers, and then owned 200,000 customers. Well, I bought the 200,000 customers they owned because these were the ones in Wisconsin, and the others were scattered about and they were the general partners. But that really put Charter on the map. I think that was one of their first, if not the first, acquisition.
KELLER: This is after Barry had left Bob Brooks, or were they still together?
MARCUS: Yes.
KELLER: That’s when he left Bob Brooks.
MARCUS: Right, Barry and Jerry and Howard Wood were together in forming Charter, and that was a funny negotiation because we were not only negotiating with Hallmark, but we were negotiating amongst ourselves, and I think we probably had more disagreements with the Charter people than we had with the Hallmark people.
KELLER: Barry is not the easiest guy in the world to negotiate with.
MARCUS: Barry was fine; it was Jerry!
(LAUGHTER)
KELLER: Jeff, we were at a point where you and Charter had just bought out the Hallmark people and their operations with Jones and other people were involved in that. How was that divided up and how much did that affect the growth of Marcus?
MARCUS: Well, we went from about 360,000 customers to, I think we gained 200,000 customers in that acquisition, so we were beginning to get on the radar screen at that point, and back in ’94, 550,000, 560,000 customers…
KELLER: Why did you share this with Goldman Sachs, why did you share this with Charter, with Barry? Why didn’t you take them all?
MARCUS: Well, we were really interested in the Wisconsin group and they had 200,000 customers in Wisconsin. The rest of the systems were spread out all over the country; I don’t know how many states, but it was not part of our clustering strategy at the time. Now that strategy was soon to be disavowed, I guess, because I remember it was January 18, 1995, I was in New York, we closed that day, and between Charter and ourselves and all the private equity – we brought in some new private equity people to help fund this acquisition – I can’t tell you how many people were in the closing room, it was amazing. I actually went out that morning and bought our team a bunch of ties, and we had our MARCUS: Cable team ties; you could tell the players. The next day the Charter guys showed up, and I had gotten Ferragamo ties, and the Charter guys went out to a Hallmark card shop and they got Mickey Mouse ties, or some $2.95 tie. They were very proud of that; that was funny. But I got home from the closing on January 18th, and I remember I went to the hockey game that night, and my friend Tom Hicks, Hicks Muse, said that he had just received a book on Sammons Communications, and would I be interested in going after Sammons Communications with him. I was so tired from this ordeal, and I said I’d tell him in the morning, I’m going to sleep on it, and the next morning I assembled a team, and I said, “Okay, here we are. We just climbed this mountain, are you ready for the next trek?” And we decided to do it.
KELLER: Sammons was on the block at that time?
MARCUS: Sammons was on the block. Shearson Lehman was the investment banker, and Tom wanted to make a preemptive bid and we went in within several days and we made a bid to the Sammons family.
KELLER: But you already knew the players, though, too.
MARCUS: Yeah, I knew the players. I mean, heck, we officed a few floors apart, Hicks and Muse did, I officed just down the block. And so we asked them for a meeting and they brought their investment bankers in and we made them an offer, I think, of about $1.8 billion for their company, and they ended up not even wanting to talk about it, because they were going to get $2.5 billion. So then we retreated and made the decision that we wanted to go after it, but not in partnership with Hicks Muse, but by ourselves, and Hicks Muse agreed to put equity into Marcus Cable to help fund it, and that was an incredible saga, because you remember….
KELLER: Go into the detail of it, please.
MARCUS: You remember the cable industry in ’95 was not in the best of times, not in the best of shape, and there was a consortium that was formed to buy Sammons, and it was like the Group W deal, back in ’93, I guess, where a bunch of cable operators…
KELLER: Or the Storer deal.
MARCUS: Or the Storer deal, right. And so a consortium that consisted of TCI, and Lenfest, and Charter, and gosh, I think Falcon might have been a part of it, and several others, this consortium came together and they all sort of divvied up the systems and who was going to get what, and they had these big meetings, and they were going to buy it.
KELLER: Who’s “they”?
MARCUS: The consortium, they were going to buy Sammons. And they basically, they got all the, sort of the usual suspects in the cable industry to join this consortium and here’s poor Sammons with nobody left except Marcus Cable, and we were concerned that we couldn’t buy the whole thing, so we tried to make a deal to bring in another company ourselves.
KELLER: Why was that? Because you still had the backing of Goldman Sachs, didn’t you?
MARCUS: Well, we did, but again, to try to raise that much equity and get it all financed, we were concerned, so we actually started talking to Adelphia about joining us in our bid, but they ultimately – they were very interested, and ultimately…
KELLER: That was another one of the TCI farm teams, wasn’t it?
MARCUS: Adelphia, no. I don’t think the Rigas’s ever were.
KELLER: No, the Rigas’s never were. It was Lenfest.
MARCUS: Yeah, they never were. But anyway, Lenfest had an investment from TCI. Leo was running TCI at the time.
KELLER: Leo Hindery.
MARCUS: Yeah, this was one of many areas where Leo and I would have some sparks, but I remember that process so well, and the consortium were absolutely confident they were going to get it. They didn’t think we could raise the money and I had instructed our team to really be low-key, and to sort of scuff up our shoes and say, “Oh, shucks, how are we going to do this?”
KELLER: Well, you knew Sammons and the Sammons people.
MARCUS: Right. “How are we every going to compete with these guys.” And I even went on vacation the week the bids were due, and so if anybody called the office and heard I was on vacation, nobody would take us seriously, and when the time bids were due we made our bid and it was a compelling bid. I remember we were to go to New York to make a presentation on our bid and show our financing, and the consortium, they were there one day, and we were there the next day, and we were able to buy it.
KELLER: Did Mr. Sammons get personally involved in this?
MARCUS: I think he was actually deceased at that point, but Jim Whitson, who ran the company – Bob Korbin and Jim Whitson, who I knew both from Dallas…
KELLER: Strange was already out of it by then?
MARCUS: Yeah, Bill was gone. But my relationship with Whitson, when I was an employee of Sammons Communications, certainly came into play. He knew me and he knew that if I said I could do it, I would, and we ended up buying it and I think the whole industry was shocked. However this wasn’t all clustered in Minnesota and Wisconsin.
KELLER: That’s where your tentacle started to move out.
MARCUS: Somebody said, “Well, this is a new definition of clustering. Clustering in the lower 48.” But anyway, that put us up to over 1.2 million customers. So from 1990 to when we closed that in 1995, in five years we had grown to, I guess, be the number 9 MSO at that point.
KELLER: How did you ever, as a small company, how did you ever get close to Goldman Sachs, to the point that they became your partner in these ventures?
MARCUS: Well, I think it was part luck and it was part hanging around the hoop. I remember one time that the Goldman Sachs guys – the guy that ultimately ran the private investment group, Rich Freedman, and my friend here in Dallas, Peter Brundage, they came out to see us at WestMarc and they were trying to get us to do some sort of financing, when I was CEO of WestMarc. I was supposed to meet with these guys, and I started the meeting, and I had my daughter with me and she was about 8 or 9 at the time, and she had a day off from school, so she flew up to Denver. And I got called out of the meeting to go see Malone, and when you’re seeing John you don’t say, well excuse me, I’ve got to go back in and see these bankers, so I was probably gone for about 45 minutes, and so my little 8 year old, Becca Marcus, was left to entertain them. So after they got done talking about, I guess, what it was like to be in the third grade and what it was like to fly up on daddy’s jet, and all of this, the story is Becca looked at them and said, “Do you want me to go get daddy?” And they just melted, and Jeff Marcus then was not just WestMarc, and not just the corporate person, but a real human being with a kid, and so we became friends, and they actually came to me a year later and asked me if I wanted to do this.
KELLER: That’s great. And they were great partners.
MARCUS: Great partners, and remain great friends.
KELLER: Did they also then bring you into the deal with Paul Allen?
MARCUS: Well, what happened with that is…
KELLER: I don’t want to go into that in detail right now, but I do want to go into it before we finish.
MARCUS: Well, they were our investment banker, and as part of their investment in Marcus Cable they got the right to represent us. Had they not had that right contractually, I still would have had them do it because I think so highly of them.
KELLER: Jeff, you said you were involved then in a partnership with Goldman Sachs and that they then brought to you the Paul Allen deal, in effect, or they brokered that deal for you?
MARCUS: Well, actually what happened, we decided to sell the company right at the beginning of 1998, and we asked Goldman to act as our investment banker in looking for buyers, and I don’t recall exactly how it happened. I think that Paul was probably not on their list because no one had really thought of Paul as being a buyer of cable, and I remember one day our CFO, Tom McMillin, came into my office and he said, “I just got a call from a fellow from NationsBank Securities, and he was saying that Paul Allen would like to come see us to talk about buying Marcus Cable.” He asked me if I would be willing to see him, and I said, “I think that would probably be a pretty good idea.” The big issue surrounding his visit was where he was going to fly into, because there weren’t any FBOs at Love Field that would have a stair for a 757 Boeing jet, but we got that sorted out and he came to see us.
KELLER: So he did come in, liked what he saw, and then made the buy?
MARCUS: Well, it was really a very compressed timeframe. We had interest from the usual suspects around the industry. I’ll never forget, again, the war of words with Leo Hindery when he was quoted, I think here, in the press – we were at a conference together and he said to a reporter afterwards, “Well, it is reported that Jeff Marcus is looking for in excess of 3 billion dollars for Marcus Cable.” And so Leo said, “Well, if Marcus Cable is worth 3 billion dollars, then TCI is for sale.” And it was, and it was. We got $3.3 billion and TCI was sold shortly thereafter, as you know.
KELLER: Was this after Gates made his investment in Comcast?
MARCUS: Yes, yes, this is about a year after that.
KELLER: So apparently they talked, or they knew something about it and wanted to get into the whole thing.
MARCUS: Right, right. But anyway, Paul moved very quickly and we did have interest from other players in the cable business, including at one point, TCI might have expressed some interest to Goldman. But Paul just kept coming, and really within a very short period of time, did his due diligence and we negotiated the transaction, and it was, I think it was March 25, 1998, I flew to Los Angeles to have dinner with him, and it was over that dinner that we negotiated the sale of Marcus Cable.
KELLER: You had already indicated that you had attempted, or you tried, to keep your cable systems upgraded so that they would be able to handle some of the things that he was looking to do with the systems.
MARCUS: Well, that’s right. We were on a fast track and had put a lot of capital against it, and really, my decision to sell in early 1998 was really a function of the fact that Goldman had been in the business, or in the investment, for over 7 years, going on the 8th year, some of the other private equity firms had not been in that long. They were not putting any pressure on me to sell, but I knew we had another major round of capital expenditures to go through to do the modems and to do the digital cable after the upgrade, and I thought that rather than put our partners through that that it might make some sense at that point to sell. Cable values were on the upswing, and when Marcus Cable was sold, it actually was sold, I think, for the highest price up to that point that was ever paid for a cable company, and of course prices went up significantly from there, but I think ours was that first bell weather transaction.
KELLER: And how’s he doing with the company?
MARCUS: Well, I think he’s doing alright. I think that probably you’d have to ask him, or ask Jerry. Cable values have moved around some since then. I think when they went public, was it two years ago? They went public at 19 and today the stock’s about 22.
KELLER: It’s hung in there, then.
MARCUS: Yeah, so it’s hung in there, hadn’t moved one way or another very much, but I know that they’re doing a lot of work upgrading. I read their reports and I own stock in the company.
KELLER: Oh, you did keep some stock?
MARCUS: Well, actually we sold for cash, but I then turned around and made a small investment, and that was a real dilemma for me, because when we first sold the company, Paul actually bought the limited partnership interest in the company and I remained a general partner, and Paul wanted me to stay and continue to be the chairman and the CEO of the company, and to run the company. His proposal was to continue to make acquisitions under the Marcus Cable banner, and to do what he ultimately has achieved, but to do it as Marcus Cable. I, having had 31 years in the industry at that point, and really had done nothing in my career except cable since that day in July in 1967 when I became a door-to-door salesman, I wanted to do something different, and I had an opportunity at that point to become the CEO of what quickly became the largest radio company in America, and to do it with people that I know here in Dallas.
KELLER: Did you make an investment in the radio company?
MARCUS: Yes, and I’d been on the board of that company since 1994.
KELLER: Which company is that?
MARCUS: It’s called Chancellor Media. And that was ultimately sold, actually in a very short period of time, to Clear Channel Communications, and they’re the largest radio company now in the world.
KELLER: They own the Denver market, I know that.
MARCUS: They own a lot of markets, a lot of markets.
KELLER: When did you get involved in Latin America, in Argentina and Venezuela?
MARCUS: Well, that was as a board member of first, a company called Mandeville Cable, and about the same time that I was asked to be on the board of Chancellor Broadcasting then in 1994, this was a Hicks Muse investment, and Tom Hicks is a friend of mine and invited me to be on that board. He also, when they made their investment in Marcus Cable when we bought the Sammons systems, they began to look for other cable investments outside the U.S., and they found a company called Mandeville Cable, which was a company that was buying small cable systems in Argentina, in rural areas, and doing a very quick roll-up of those systems and they asked me to be on that board and I agreed. Mandeville grew very, very quickly to serve several hundred thousand customers in Argentina, was then sold to a company called CEI, which Hicks Muse then, through a series of transactions came into control of CEI, and I actually served on the CEI board for awhile.
KELLER: CEI being?
MARCUS: It was the old Citicorp Ventures down in Argentina and Latin America, and at the same time, Hicks Muse backed a start-up called Intercable Venezuela, and that did not fare as well. The consolidation of cable in Venezuela did not occur as it did in Argentina, and I think I left that board when they sold out. That was not a very active company, but the Mandeville situation, and then subsequently CEI, rolling into CEI, was very exciting. CEI now owns, through a series of transactions, owns the control of a company called Cablevision, which is the largest cable company in Argentina, which Hicks Muse, through their ownership in CEI owns jointly with Liberty Media. What I’ve learned is that all road lead back to John Malone one way or another.
KELLER: Seems to be. Well, now that you’re out of the cable business and you’re out of the radio business, what are you going to do now?
MARCUS: Well, I think for the first time in my life, Jim, I’m going to not worry about that, and I’m going to let events just take their course, and we’ll see what happens. I have two grown children; those children that were born in Tampa during the CEA times are now… our daughter is married and living in New York and going to medical school, and our son is a junior at Duke, and we’re having a great time being empty nesters and keeping track of the kids, but my wife is about to get her doctorate, and I really don’t know what’s next. I’m active in Republican politics, I was very active in the George W. Bush campaign through my relationship with him at the Texas Rangers years ago, and I seem to be spending a lot of time on that. My wife Nancy and I are chairing the Republican Presidential gala coming up in May and that’s taking a lot of work.
KELLER: Are you going to run for office?
MARCUS: No, I’m not going to do that. I’ve had enough of being in the government area, in terms of cable franchises.
KELLER: Jeff, is there anything else you’d like to add before we wrap this thing up? I know our time is getting pretty short. You’ve had a wide and varied career in cable television, almost like the door-to-door salesman makes good type of situation, and I don’t mean in any way to belittle you along those lines, but it’s just a great success story, I think, that you’ve shown. There are a lot of them in the industry, but none that have made the wide jump that you have without some substantial family backing and other things, but you’ve done it mostly on your own.
MARCUS: Well, I’ve been so fortunate, Jim, and I’ve got to feel like somebody up there smiled on me because there were a lot of times when there were dark days, and it’s just been such a pleasure to have had 31 years in the cable television business, and meeting the people and making friends along the way. I must say I’ll miss, if I have to say what do I miss the most about the cable business, it really is the people.
KELLER: The people, I agree.
MARCUS: Because at the end of the day, bricks and mortar are bricks and mortar, and it’s the soul and the heart of the people that you interact with on a daily basis, and I have been blessed to have really gotten to know so many wonderful people, and when I go to the Entrepreneurs Club meetings that I still go to, most of us are out of the cable business now, and I know that everybody talks about that. Maybe cable’s unusual, maybe all industries are like this, but those of us that were fortunate to be in the business for a long time saw it grow from really the antenna service that I was selling door-to-door in 1967 to a major component of the information age today and the entertainment business. And to see it mature along the way and to have continuity of people, and to have us all sort of grow together, it was quite an adventure.
KELLER: I say amen to that. Again, thanks Jeff. We appreciate it. This has been the oral history of Jeffrey A. Marcus. The date is April 25, 2001. We are in the offices of Jeff in Dallas, Texas. Again, this is a presentation financed, I shouldn’t say financed, but provided for by The Hauser Foundation as part of the oral history program of The Cable Center. Again, thanks Jeff.
MARCUS: Thank you, Jim. I really appreciate you being here.
