Interview Date: April 3, 2019
Interview Location: The Cable Center, Denver, CO USA
Interviewer: Stewart Schley
Collection: Cable Center Oral History Program
Schley: Greetings, and thank you for pressing play on this episode of the Cable Center’s Hauser Oral History Series. An hour from now, you and I are going to know a lot more about the business intricacies of getting television to the screen than we do now, because we are blessed to have us with us, Patty McCaskill, who’s a veteran figure in programming acquisition and content licensing in the cable industry during the time when that was absolutely a critical part of how the industry worked. So, Patty, thanks for taking some time and coming out from St. Louis to visit here at the Cable Center.
McCaskill: Thank you.
Schley: I have a fun question because I’m looking at your timeline and it tells me that you studied English literature and biology as an undergrad. So, of course, you ended up in the cable industry. What happened? How did you find your way in?
McCaskill: Well, it’s a long story. I graduated from an all-girls school in 1970. Back in 1970, if you were in an all-girls school, you could be a nurse, you could be a teacher, or you could get married. There weren’t a whole lot of other choices. I never had a business course in my life when I was in college because they didn’t exist in this all-girls private college, and I knew that I didn’t want to teach. I had done some practice teaching and I knew that wasn’t what I wanted to do, and I didn’t know what I wanted to do. So my first job out of college was working for Stan Musial, the baseball player, in his restaurant in St. Louis. And I got involved in sales and catering with his restaurant.
Schley: What was the name of that restaurant?
McCaskill: Stan Musial and Biggie’s. And then I got married and my husband got transferred to Minneapolis. We lived in Minneapolis for two years and I worked for the Radisson Hotel Corporation and was in the sales and catering division of the hotel. The only woman executive in the hotel. It was secretaries and me and the men, which was very interesting. Then my husband got transferred to Milwaukee, and I worked for the performing arts center in Milwaukee, heading up all its food and beverage and public space. And we were there for a year, and it was fascinating because the symphony was there, the repertory theatre was there. So one night I might be in the green room doing Three Dog Night, and the next night it might be Beverly Sills and putting on a private luncheon with Beverly Sills, and it was an amazing facility and a great job. But I didn’t like the North, and I didn’t like the cold. So we moved back to St. Louis and I worked for three hotels in St. Louis. Then went to work for a trade show company, doing all the sales and marketing for a company that put on trade shows. I decided I kind of had been burned out on all that and saw something in the newspaper and went on an interview. It was Bob Brooks. It was just when cable was being franchised in St. Louis. I knew nothing about cable. I mean, there was no cable in St. Louis, so we had no experience at all.
Schley: This was when?
McCaskill: 1980. And he didn’t get the franchise he was going after, and I saw another ad in the newspaper for the Warner AMEX Qube system for the head of sales and marketing and customer care. So I went in and interviewed with them and flew up to New York and interviewed with Larry Wangberg, and Nick Davatzes up in New York, and Bob Russman, names that you probably recognize. And got the job. I came in the first day and Frank Webb, who was the general manager, was on vacation. And my desk was a cable spool. We were in the warehouse. We had cables coming down from the ceiling for the phone and an electric typewriter. And on the desk were four big binders with the franchise. And the note was, “Read the franchise. I’ll call you when we come down from camping in the Rocky Mountains.” So I read through the whole thing, and Frank gave me a call and said, “OK, are you ready? One thing I forgot to tell you. We have a franchise in this one community, and we have four days to get three people hooked up, or we get fined $1,000 a day. So go to the chief engineer and find out where the four houses are and go sell them cable.” And I said, “OK, that’s interesting, where are the sales forms?” And he said, “Why do you think I hired you?” So I put together a sales form and got a reverse directory because we couldn’t go door-to-door because of the way the community was, it prohibited door-to-door.
Schley: So you had to call these people.
McCaskill: I had to call these people and get them to agree to see me. And I actually, over the next two days, sold three of them, and we got them installed in time. There were people pulling cable in the backyards as somebody was installing in the front yard, and I was out buying them turkeys to thank them for being our first customers.
Schley: What was the pitch? What did you tell them this cable thing was at the time?
McCaskill: Basically, I told them it was great cable reception. We were building a 450-megahertz two-way interactive system. But I think we had 22 channels maybe at that point. So basically it was great over-the-air reception, you don’t have to worry about going from room to room in your house and doing the monkey ears to try to be able to get it, and we had HBO and Showtime. And Showtime had been in St. Louis as an MMDS—
Schley: An over-the-air transmission.
McCaskill: It did have a brand awareness as something really cool with lots of movies. So I sold good reception and movies.
Schley: You must have been good just from the hospitality industry side and then segueing into this business. You must have been good at sales. I mean, you probably had an aptitude, I presume.
McCaskill: Yes, I was good at sales.
Schley: Where did that come from?
McCaskill: It just came from experience in the hotel business and trade show business. You know, I had to go out and call on companies and sell them booths in the show and run the sales force.
Schley: So you guys built out the St. Louis metro area…
McCaskill: Well, we started. We built out our franchise. St. Louis was—I don’t know if you know St. Louis. St. Louis City and St. Louis County are two separate entities. St. Louis County has 96 municipalities, each with their own mayor, their own police department, their own everything. And it got divided up. Group W was there, United Video was there, Sammons was there, Continental was there, Warner AMEX was there, TCI was there. So we each had our own little piece. We built out our piece as Warner AMEX.
Schley: It’s really a very telling story about the patchwork nature of the cable industry early on.
McCaskill: Yes.
Schley: Since then it’s been more consolidated.
McCaskill: Charter ended up consolidating all of St. Louis.
Schley: Where did the job take you from having achieved your three or four sales in this neighborhood? What next?
McCaskill: Then I had to hire a sales force. And I had to train them and teach them to go out and sell cable. I had to refine the sales order form because after that first day, my boss called me from the mountains, and said, “What did you charge for additional outlets?” And I said, “Additional outlets? What’s an additional outlet? There’s nothing in the franchise book about additional outlets.” And he said, “You’re right. What do you think we ought to charge?”
Schley: You admit you were making it up as you go along.
McCaskill: Absolutely.
Schley: What did cable cost around that time?
McCaskill: I think HBO and Showtime were about $4.99. I think it was about $12.99 for the package of the 18-20 channels.
Schley: But did it feel like you could literally connection by connection watch this industry sort of take shape?
McCaskill: Absolutely. And in some areas, people would come out with shotguns and say, “Install me next.” I mean, it was this huge demand. We called it the “truck chasers.” So we had a lot of truck chasers.
Schley: And what was compelling? What were people buying? You talk about reception, you talk about the premium services. But you also had the beginnings of some original networks at that time, right?
McCaskill: Very, very few. It was a little later and Bob was there before we sold the system. MTV and Nickelodeon launched and MSG [Madison Square Garden] became USA Network. We started having more networks that we were able to sell.
Schley: And then, Patty, obviously you would go on to devote your career to this industry…
McCaskill: I fell in love with it.
Schley: Why, why? What did you like?
McCaskill: It was just exciting. It was just something different. I was there two weeks and I went to CTAM up in Boston and all the other Warner AMEX-Qube people were there and I got to meet them, and it was just so refreshing to be in a room with people that were sharing their business plans. Sharing what worked, what didn’t work. Ted Turner came and announced that he was launching CNN, and he was going to bury CBS. And I thought, this is a hoot.
Schley: This is big.
McCaskill: This is something just totally different.
Schley: We talk about that at this table a little bit how the structure of the industry lent itself to collaboration and camaraderie.
McCaskill: Absolutely.
Schley: You saw that.
McCaskill: Absolutely. Until the telcos got in and we started playing things closer to the vest. And DBS got in.
Schley: Very collegial business.
McCaskill: Very collegial. You know, we played hard and we partied hard.
Schley: You know, I think that if you asked someone who was active in the cable industry during the 1990s and beyond, what Patty McCaskill’s role was, people would associate you with programming. And relations with programmers. So how did you begin to become involved with that side of the business?
McCaskill: After we sold the Warner AMEX-Qube system to Cencom—Jerry [Kent], Barry [Babcock] and Howard [Wood]—then they sold it to Hallmark. And it moved down to Texas and they left, and they stayed in St. Louis. They decided they wanted to get back in the cable business. So they formed Charter Communications. And one day I got this call from Barry Babcock. He said, “Patty, we’re buying McDonald Management Systems down in Alabama and Louisiana, and you’ve been doing some consulting. Could you work for us two days a week and do our programming for us?”
Schley: No kidding.
McCaskill: So I went down and visited the systems, which were just a real eye-opener of a place. One had a window that had been shot out and they just put chicken wire on it and left the window there, down in Bogalusa, Louisiana.
Schley: Bogalusa, Louisiana.
McCaskill: Bogalusa, Louisiana. And then I was doing that—I guess it was about six weeks and I got another call from Barry saying, “We’re buying back our old Cencom systems. And now we’re going to be pretty darn big. I think I’m going to need you full-time. Are you willing to fold your consulting practice, and come to work for us full-time?” And that’s how I got into doing programming.
Schley: Paint a picture of what the industry was like at that time from a programming standpoint. You had new networks developing and being spawned?
McCaskill: We had new networks being developed all the time. They were generally very anxious to get distribution.
Schley: The networks were?
McCaskill: The networks were. So the negotiations were not as difficult as they became later on because they were willing to do just about anything to get distribution. Because there were lots of networks competing.
Schley: How many channels did a cable system carry around that time? 35 channels?
McCaskill: More than that. These were rebuilt 750-megahertz so you could do probably 60 channels.
Schley: But you—this sounds like a fundamentally naïve question and it may be—but you had to pay to carry a lot of these new networks.
McCaskill: Almost all of them.
Schley: And talk about how that relationship worked. They were charging you a fee per—
McCaskill: Per customer. Per subscriber. So they would come in and—
Schley: Pennies per month?
McCaskill: It depended upon who they were. Some of them were pennies per month. ESPN was dollars per month.
Schley: So you’re making a financial commitment to these networks. How did you decide who to put on, and who not to put on?
McCaskill: You would sit down and look at the programming. Looking at their programming philosophy, looking at how much money they were going to invest in the programming. Whether it was different from something else we were carrying. Looking at who their executives were, who their programming heads were, kind of if you knew what kind of a track record they might have. Looking at the license fees they’re asking for. And you negotiated all those things.
Schley: So you did pretty hard due diligence on these programmers?
McCaskill: Absolutely.
Schley: You’ve mentioned a theme that I’ve heard John Malone and others talk about. A real concern about, OK, we’re going to pay you to carry your network. How much money are you going to put back into it, so we all get better? That was a consideration?
McCaskill: Absolutely. We were looking at what their business plan was. Then you had networks like Fox News that came to us and said, we want distribution. We’ll pay you $10 a subscriber.
Schley: I was going to get to that and talk about it because it’s interesting. But the general tenor was, were there more channels than you could physically carry at the time?
McCaskill: At the time, we probably had space to carry more of them, but the concern was that if we put them on, it would be very, very hard to take them off. So we wanted to be selective about what we put on and curating it. Because no matter what a network was, even if we didn’t think it had a lot of value, it was going to have some customers that that was their favorite network.
Schley: That was what I was going to say. So at some point, the program had some leverage, once they were on the cable system.
McCaskill: Yes, they did.
Schley: Is that fair?
McCaskill: That’s fair.
Schley: I remember in Denver around this era, maybe a little later, VH1 for some reason was knocked off the Denver Mile-Hi Cablevision system and it caused a big ruckus. So you were sensitive to that.
McCaskill: Very sensitive to that. Because we were trying to grow the business and we were trying to gain market penetration. And so the last thing you want to do is if you had someone that was a customer, make them unhappy because you took away some program that was valuable to them even though we didn’t see perhaps the same value in it.
Schley: So you had two areas to pursue. One, you were building this collection of what I generally would call basic cable channels, right? These were generally advertising-supported channels?
McCaskill: Basic expanded. Basic became your public affairs, your broadcast channels, that type of thing. And then all of the ad-supported networks that we were paying license fees for became the expanded basic.
Schley: Then you also dealt with the premium programmers.
McCaskill: We dealt with the premium programmers. Then eventually we dealt with the digital networks, when we got to the point where we got into digital.
Schley: Patty, how would you characterize the tenor of the dialogue in the negotiations between a cable company like Charter and the programming community at the time?
McCaskill: It changed over time. When we were small, we didn’t have a lot of leverage. Over the years, Charter grew; eventually it had 7 million customers when I left, up from a small number.
Schley: You were a prize, you were a plum to get carried on Charter.
McCaskill: Yes, and so the negotiations became different because we were one of the top three MSOs in the United States.
Schley: I’ve always been curious. In the early days of let’s say it’s MTV, or it’s maybe HDTV, but somebody comes to you seeking carriage. What were some of the little oddities or intricacies that might be involved in a contractual relationship like that? For instance, they gave you advertising time, was one.
McCaskill: They gave us local avails that our ad sales people could sell. They would come back and offer us marketing support dollars. And we could use those marketing support dollars for direct mailers and other customer-facing marketing tactics. They could give us money for customer care and customer service training and incentives for our customer service people, or for our technicians. So there were other things that at that point were kind of sweeteners in the pot. You’re going to pay this much in license fee, but we’re going to be your partner and we’re going to give you back funds to help you grow your business because if you grow your business, we grow our business.
Schley: That’s right, that’s kind of the virtuous cycle that you guys had going. It was the heyday of what we used to call the affiliate relations departments of these networks.
McCaskill: It was truly affiliate relations. I mean, we worked together, and they saw themselves as a partner. They spent a lot of time with us. They would come visit us regularly, they would visit our regional offices, they would do training for our technical forces.
Schley: Bring you trinkets and mousepads?
McCaskill: Oh, gosh. The tchotchkes were always amazing in the industry.
Schley: The tchotchke business.
McCaskill: But that dried up. Near the end, there was very, very little of that.
Schley: We watched that come and kind of dissipate.
What could you see from the chair where you sat in your office? It had to be rewarding to see—I would imagine every month you’re getting more and more subscribers because partly of the programming.
McCaskill: Absolutely. It was truly a partnership and a symbiotic relationship.
Schley: What was your sort of job title or function in those—was it called—what was it? Was it programming acquisition?
McCaskill: Vice-president of programming. And at Charter, pay-per-view, because I also had—we had three channels of pay-per-view and I did the negotiations with the pay-per-view providers, then at that time In Demand.
Schley: That was an interesting business. It’s very different today when so much television is on-demand and available at a press-play. But pay-per-view took a while to develop.
McCaskill: It did.
Schley: What were the obstacles to that?
McCaskill: I think the customers didn’t understand it. There was a real hesitancy to push the button and find out you ordered something that you didn’t realize and now it was going to show up on your bill. And now I’ve got to call customer service and tell them that I didn’t really watch it. You had households where you had kids coming home from school that were latchkey kids and you would be amazed at what they would be watching, and their parents would have to put in parental controls. It was an education more than anything else and you really could have access to this content.
Schley: For our younger viewers, I don’t think people today understand that the pay-per-view movie, let’s say was a movie, didn’t start whenever you decided it should start. It was pre-scheduled, right?
McCaskill: They were in the beginning pre-scheduled. And when we got to true on-demand, video-on-demand, that changed things. Then, this is much later on, when you got to TV Everywhere, it became total on-demand. Anything you want to watch, when you want to watch it, on any device you want to watch it, wherever and whenever. That changed everything.
Schley: Pay-per-view was sort of this halting interim technology. But was it a business?
McCaskill: It was a business, yes. It was sort of a step between if you don’t want HBO, Showtime, Cinemax, the Movie Channel—
Schley: All the time. Monthly.
McCaskill: That you could choose the movies you wanted. And the windows were different. They went from the theaters to pay-per-view to the premium services. And then it went to a window back on to say, USA or TNT. It was a very specific windowing.
Schley: What was the role of let’s say, sports, boxing particularly, as a propellant of pay-per-view?
McCaskill: That was huge. That was real dollars.
Schley: Because you sold fights for $40-50?
McCaskill: By the end, it was probably close to $70 for a fight. Then you had WWE, which became very, very big. And the MMA that became very, very big. But none of that was there in the early days.
Schley: I want to take you into the next era in a minute. But what was fun about that business at that time? Besides a paycheck, what did you enjoy?
McCaskill: I enjoyed the people I worked with. We were all pulling in the same direction. We all were there because we were entrepreneurs and loved being entrepreneurs, the idea of being in a rigid rules-based company was not me. I worked for Southwestern Bell for a short period of time after Warner AMEX, between that and the Travel Channel that we haven’t talked about. Oh, the Army was less rigid than Southwestern Bell. So I knew that it was going to be very difficult for them to get into the cable industry. It was a very, very rock and roll entrepreneur.
Schley: Because you had to be agile…
McCaskill: You had to be very nimble. You had to be willing to try different things and if it didn’t work, say, fine, let’s try something else.
Schley: Was it hard to say no to programmers who came knocking, or did you say no from time to time…you know, we just don’t have the space…?
McCaskill: Absolutely. If I’d looked at their business plan and I looked at their content and I thought, this is never going to fly. One of the other things we were careful about is if we were not sure about a network, we’d step back and let them develop. Because many of them went into business and within a year they were out of business because they couldn’t get distribution. So you didn’t want to go to the cost of changing all your channel lineup cards—
Schley: Rolling out the channels.
McCaskill: Changing your guide, rolling out the channel and then having it go dark on you. Because customers often blamed you, not realizing that the channel had gone bankrupt.
Schley: But you did say yes a lot and in saying yes, you produced this world where television used to be “mass,” right? It was sort of lowest common denominator, biggest audience. Now you had these interesting little slivers that were being served.
McCaskill: That’s right.
Schley: Can you identify an example of—I mean, MTV is probably one, but were there others out there?
McCaskill: MTV would be one, BET would be another. Nashville Network or Country Music Television would have been there.
Schley: TNN.
McCaskill: TNN. Financial News Network.
Schley: I remember.
McCaskill: It was later sold. Daytime that eventually morphed into Lifetime. There was a lot of this—
Schley: Cable Health Network?
McCaskill: Yes, Cable Health, and Daytime became Lifetime. There was a lot of morphing going on. People coming up with concepts and finding that they couldn’t be compelling enough 24/7 with that concept, so they would either morph into something else, or go away. Which became a challenge when you were negotiating a contract because we learned to put in language that was content description. And content warranty language so that if they morphed into something that was not something we wanted or would have ever carried in the first place, we needed protection so we could drop them if they morphed into something that would not have been acceptable.
Schley: Good point. And I’m not trying to diss anybody, but I remember when the predecessor became CBS Cable came out—I think I have the order right—very kind of artsy focus, and then it did become something else.
McCaskill: It did become something else. The Entertainment Channel came in, yes. It was an interesting time. We were trying to fill content to add value to our customers for what we were charging them because you needed to make sure you were having content that was valuable. And we were raising their rates every year, so we were able to say, “Look, we added five channels last year.”
Schley: OK, so you sort of justified it. I think it’s important for people to understand. As you added more programming and as that programming developed, it started to cost more to you. That is really a big reason the cable bills ritually tended to increase every January.
McCaskill: Absolutely. You know, it was a phenomenon that someone would come and say, “I’ve got this wonderful channel. I’d like you to launch it. It’s only going to be five cents a subscriber a month.” And I would think, this is a good value. Well, finally after we invested a lot of time and money, as they did, and they got very successful, they’d come back and say, “Now we’re worth 25 cents because we have the same ratings as USA. Or we have the same ratings as—” So suddenly you were in a conundrum. Do I give them more money and keep them, or do I drop them and anger my customers, who had their cable bills justified because they had new channels that they had gotten used to. So it became a chicken and an egg situation, but unintended consequences in some cases.
Schley: Did you go to the ultimate step of dropping channels from time to time?
McCaskill: We did.
Schley: At least temporarily?
McCaskill: Sometimes forever. We did drop channels from time to time. It was not something that was done lightly because we knew it was going to cause an outcry, and we tried to make sure if we were dropping one channel, we had another channel that was similar in genre, similar in demographics that we could point them to.
Schley: I want to take you to an interesting era. I think we talked about this previous to this interview. Around 1992-93—this may require a little explanation, but the regulatory regime that described the relationship between free over-the-air television and cable television, changed. Can you walk us through that?
McCaskill: Oh, those interesting times. 1992. What the Cable Act did was to say to broadcasters, you can either every three years elect must-carry, in which case the cable operator must carry you. So shopping channels and religious networks or very local broadcast channels with questionable value, all demanded must-carry.
Schley: I’m going to even take you back one step. Must-carry—tell me where I’m wrong—meant that a local over-the-air TV station could insist on being delivered by the cable company to its customers.
McCaskill: We “must carry” them. We had no choice in carrying them, OK? And then the alternative was a broadcast station could elect re-transmission consent. If they elected re-transmission consent in the fall of the year, by the end of the year, we had to negotiate with them whatever terms and conditions there would be for us to be able to re-transmit their signal.
Schley: So let’s take an example of a Fox affiliate in one of your markets. A naïve view might be why would they not take advantage of the must-carry protection? Why would they risk that Patty may decide not to carry this channel? They all did, so what was the calculation there?
McCaskill: I think they looked at their viewership. They had Nielsen data and they looked at how many people were watching. And it wasn’t so much because that local broadcaster had really strong syndicated programming in the afternoon, or very strong local news. Although in some cases they did have strong local news. Or they might have some sports that was their local sports team before the RSNs really took off and took all those rights. But it was what they had in primetime programming that was very, very popular.
Schley: So “Married with Children.”
McCaskill: Think of—must-see TV. And they had sports on the weekend. They had the NFL. They had major league baseball. So they felt that they had a strong hand that we would want to negotiate. But in the early years, the first round, the first three years because there were three-year cycles, most of them just opted to trade cross-channel spots during sweeps. And we would run their spots on our networks on a run-of schedule during sweeps. We might agree to co-sponsor some kind of a teachers’ award or we might agree on our local—
Schley: OK. It sounds so innocent.
McCaskill: Our local channel to air some kind of public affairs programming that they were doing. The Junior Achievement Awards dinner, we might agree to co-air it with them. I mean, it was very, very simple stuff. And it was like, OK, we’re partners in marketing.
Schley: So you would sort of get along.
McCaskill: We live in this marketplace. Your viewers are our customers. So, while it’s not exactly the regime we had, we found a way to work with it.
Schley: And that was a three-year, that was the first of the three-year cycles. So things were OK.
McCaskill: Things were OK.
Schley: Then?
McCaskill: Then the next cycle around, John Malone, in dealing with Fox—and this was Fox Broadcasting, not the individual Fox affiliates—this was the network parent, came up with this grand idea that in order to do it, he would launch FX. And he would pay a license fee for FX in exchange for re-transmission consent for all of the Fox owned and operated.
Schley: So let’s unpack that. So the condition by which Fox will let you carry its station signals, is you don’t have to pay any money, Patty. I’m fine with that. But you know what I’d really like, I’d like a channel so I can—I’d like space on your dial.
McCaskill: I would like a channel and I want you to pay me for that channel.
Schley: OK. So that was clever. You’ve got to hand it to the Murdochs and the Fox people.
McCaskill: It sounded pretty good and then so of course ABC said, “That sounds like a grand deal.” So ESPN came along as a re-transmission consent. And ESPN Classic came along as re-trans. And ESPN News came along for re-trans. And suddenly it took off and you have Scripps, that’s launching Home and Garden and Food, and they decide they’re going to do it. So there’s a lot of money going to the owned and operated stations. NBC—
Schley: Great.
McCaskill: Yes.
Schley: It took the broadcast industry and made it a big player in cable programming.
McCaskill: A big player in cable. So then you have all of the smaller groups, the Nexstars and the Sinclair, that are not owned and operated.
Schley: Yes.
McCaskill: And they said, Huh. There’s money to be had here. So they started coming in and saying, we’re not going to take these cross-channel spots anymore during sweeps. We want you to pay us on a per-subscriber basis because we have more viewership than CNN does. Or we have more viewership than this. So we want money. So they started charging on a per-subscriber basis.
Schley: Just like an old-fashioned cable network would have done.
McCaskill: And they started charging—some good money. It wasn’t huge numbers, but they were charging enough that it went straight to their bottom line and they started bragging about it on their reports to their shareholders and to Wall Street. Found money. And they got greedier and greedier every three years and asked for more. Finally I went to one of them and said, “You’ve got yourself a problem. Because you’re getting this money not because of your local news. You’re getting this money because you’re an ABC affiliate and you’ve got all their programming.”
Schley: …primetime?
McCaskill: They’re going to say, “We want some of that back.”
Schley: The network would then ask its affiliated TV stations—
McCaskill: So reverse compensation came in.
Schley: Share the bounty.
McCaskill: And so once reverse compensation came in, then Sinclair, who’d promised its shareholders “I’m going to get this much of the bottom line plus 3% a year” now has to make up the difference in reverse compensation to keep themselves whole with what they promised.
Schley: By charging you more?
McCaskill: Yes.
Schley: So it’s a really…
McCaskill: It’s a vicious cycle.
Schley: I’ve got to believe—the reason I wanted to talk to you about the early days—new networks would come into your office. They have a great pitch. You like their content. You agree to pay them seven cents a subscriber, whatever…that was kind of fun. You’re spawning this new collective of television.
McCaskill: We’re offering real value to our customers.
Schley: Now, and I think this was an unintended consequence of re-trans (as we call it), the broadcasters not only are getting money from you for the right to carry their over-the-air signal to your customers, but they’re taking all your channel space because their parents have said, quid pro quo, launch.
McCaskill: So you had the owned and operated—ABC, NBC, CBS. And then you have the affiliated stations with NBC, ABC, CBS. And Fox. So you have two different groups of people, each trying to put their hand in your pocket.
Schley: What did this do to Patty McCaskill? How did it change the nature of the job and the kind of vibe around it?
McCaskill: It became very, very, very difficult. Because it was every three years. So we started moving them off-cycle.
Schley: You got this barrage of…
McCaskill: I had 120 of them to do before midnight on New Year’s Eve one year.
Schley: From individual TV stations?
McCaskill: Yes, individual broadcast groups or TV stations. I never had a holiday for years. I never had a New Year’s Eve for years because I was working and neither did any of our people. Because all of the regional people—we had a phone open so that we could communicate what was happening with the deal because if we didn’t get the deal done, we had to take their signals down at midnight because we no longer had permission to re-transmit their signal. Or we would be fined by the FCC. So it became a bigger part of my job, I can tell you that.
Schley: I would love for you to comment on this. It just happened that one evening at one of the big cable shows I was riding on a shuttle bus back to the hotel next to a woman who had been what we just described as an affiliate relations specialist with a program group in the cable industry. She was kind of in a dour mood, and she said, “I think re-trans sort of ruined—maybe that’s a strong word—but it really changed the nature of what used to be kind of an entrepreneurial cable network programming community.” Do you buy that? Do you think it veered the industry off in a different direction?
McCaskill: I think it sucked some of the money out of the whole ecosphere. So the ability to take a gamble and invest with somebody who had a new network concept; you had to look at it. If your programming costs are going up 10-18% a year and your rate increases to your customers are 4-6% a year, you could look at what your margins are doing. So you don’t want to add a lot more expense because you know you’ve got this animal out there.
Schley: Patty, why did we not see more cable companies slam the fist on the table and say, no, we’re not going to pay you for this signal. We’re going to try to live without the Fox affiliate in Milwaukee on our channel dial. And good luck to both of us.
McCaskill: I think that the first time someone did that, Cox did that, with Nexstar. And with Cox Systems, that were the old TCA systems we later bought at Suddenlink. And they were dark for close to a year. And they lost, and we saw a number of customers that they lost. Because DBS was there. At a time when DBS wasn’t there—when we didn’t have Dish and DirecTV—we were the only option. Who wants to go back to broadcast only?
Schley: But you could still get that station and DirecTV.
McCaskill: Once Congress ruled that we had to sell all of our programming to DirecTV and Dish, which never made any sense to me—like General Mills has to sell Cheerios to someone else? We created all this programming, and now we have to make it available to our competitor. So suddenly there were other places our customers could go to get the programming if we went dark.
Schley: Correct. So in the end, it seemed like a lot of the balance of power stayed with the broadcaster. Really. If you take a hard, hard look at it.
McCaskill: It moved very much that way. Then after Fox had gotten as many new channels as it wanted launched, and ESPN ran out of channels to launch, then they started asking for cash.
Schley: So the relationship that was once very collegial and very “we’re in this together”—that changed. You saw that.
McCaskill: It did change. Certainly on the broadcast side, it changed. It became much more adversarial and much more difficult negotiations.
Schley: What about the cable side, though. Did you see—?
McCaskill: On the cable side, it took a little bit longer to get there and it got there as more of these companies were public companies. And they were being squeezed for performance as well. So as time went by, it used to be you had your affiliate relations person. And we became—we had really tough negotiations. I’m not going to lie about that. We fought for every last dime on either side. But at the end of the day then we’d go out and have a glass of wine and we’d share pictures of our kids. We got to know each other because we’d worked together for 5-7 years. And it wasn’t nasty, it wasn’t “somebody’s got to win, somebody’s got to lose.” It was, how do we figure out win-win here for both of us to find some kind of a solution that both of us can walk away. I used to joke that if we both walk away holding our nose, it’s a really good deal because if one of us loves it, the other one has not done a really good deal.
Schley: Fair enough.
McCaskill: And there were shows. There was the National Show, there was the Western Show, there was the CTAM conference. There were state shows. There were a lot of ways that we went out and socialized together. We shared a lot of knowledge. We did educational seminars and then we would party at night. We’d go out to dinner. And so you found real friendships with people because you did have that. And that’s mostly gone.
Schley: In your part of the industry particularly because you were dealing with dozens of networks, each of whom employed dozens of affiliate relations people. So your circle was pretty wide.
McCaskill: Yes.
Schley: Interesting things were going on outside of re-transmission consent in the industry that you were very much a part of the digital transformation. What we call the digital transformation leveraged technology to just explode the carrying capacity of your systems. What did that mean from a programming standpoint?
McCaskill: From the beginning, because we had all this bandwidth. You know, you had networks—Viacom, for example, or Discovery, that took over six megahertz and put on six of their networks that I always called the “tertiary” sort of “who knows” networks?
Schley: In the space that used to hold one channel, now you could get—
McCaskill: You could get 7 or 8 channels. So they were putting anything out there as a placeholder because they knew that we needed content, and they were trusted partners of ours with some kind of a track record, and so we were willing to give them that space to let them develop that content. Over time it became apparent that there wasn’t that much need for all that content.
Schley: Maybe we had more bandwidth than…
McCaskill: So maybe we needed to be thoughtful about it. And maybe we ought to start holding bandwidth back for video-on-demand because we were going to need that capacity for other things. Or Internet—high-speed Internet. You had to take a good hard look. If you follow Discovery, for example, and I think Discovery is a wonderfully run company, an excellently run company. But if you look at their diginets, they seem to change formats and names about every two years.
Schley: Right…
McCaskill: As they’re still trying to figure out how to justify the space that they’re occupying.
Schley: Did that create sort of a feeling of a renaissance, though? It almost feels like you went back to the future, whatever it was, because now you had all these new channels to at least consider, right?
McCaskill: And there were lots and lots of channels that you just didn’t even consider. You had to really think about it as it became apparent that digital bandwidth could be used for so many other things. That we had to be careful that we weren’t giving it all away.
Schley: To the wrong thing.
McCaskill: To the wrong thing, or just not giving it away at all. We had to husband it and hold it for Internet and be able to go to 5 meg service or 10 meg service, or whatever we were going to do. There’s only so much bandwidth capacity within those megahertz.
Schley: I like your word “husband.” You really did have to be careful. Are you getting the most value out of this amazing machine that you built?
Around this time, your life and career intersected with that of a well-known individual called Paul Allen.
McCaskill: Yes.
Schley: Paul—correct me if I’m wrong—purchased a controlling interest in your company…in Charter Communications?
McCaskill: He bought a controlling interest in the company. We had been there at Charter for, at that point, probably for five or six years. And we had private equity. And private equity has a time limit when they want to turn their investment. And they were kind of getting ready to want to turn their investment. So we knew it was time that some of them wanted to get out.
Schley: So this legendary figure from the early days of computing and software, and an early partner with Bill Gates and Microsoft, suddenly is sitting across the table from you.
McCaskill: Comes in and makes an offer to Jerry Kent and the investors that they thought was a very, very good offer. And it was. So they sold the company to him. We were 1.2 million customers at that point. A month later we merged with Marcus, that was 1.2 million customers. So now we were at 2.4. And then we bought Falcon and we bought Bresnan. Suddenly we were 7 million customers.
Schley: You were at the center of a consolidation.
McCaskill: Yes, yes. We did 23 acquisitions during the time I was at Charter. So integrating 23 acquisitions. But also I got to see contracts from 23 different MSOs. So I got a really good insight into the art of the deal that was out there.
Schley: How interesting. Generally, did you feel like you had done pretty well when you looked at these other agreements?
McCaskill: Yes. It was reassuring.
Schley: Good. A credit to you.
McCaskill: And to Jerry.
Schley: 7 million customers. Now you’re a big influence on the fame and fortune of a programmer of a TV network.
McCaskill: I used to joke—somebody said, “What was the difference between 1 million and 7 million?” And I said, “Respect.”
Schley: Did it feel like the pressure was elevated, in terms of decision making and stewardship of the brand…?
McCaskill: Certainly. We were very conscious of it. Conscious of the customers. And conscious of the fact that we were now a major MSO and there were lots and lots of people knocking on our doors, wanting a chance to take on a piece of what we had.
Schley: Did you begin to even contemplate—let’s put you in 1998, for instance, just as a placeholder. Could you begin to see how television and video would begin to transform, even at that stage, as we started to push a little bit of video out on the Internet? And do some streaming media stuff? What was going through your head?
McCaskill: We were doing a lot of video-on-demand at that point.
Schley: Video-on-demand, great.
McCaskill: So I was out negotiating with the studios for video-on-demand rights, access to Warner Brothers or Universal or whatever. So we were negotiating that, and we were working with a company called TVN, which is now Vubiquity, and they were our content delivery network to be able to do video-on-demand. They would encode it to the adapted bit rate, they would get the metadata, or the studio art and they would send it down to our video-on-demand servers where it would be stored, and the people could access it. So we were looking at server capacity, we were looking at simultaneous users to make sure that no one was disappointed when they went to go in for a piece of content. So there was a lot of technology that was getting into it that had not been there in the simpler days when we were purely one-way or two-way with pay-per-view. But it became a different world. And then it became even more complex after I left and went with Suddenlink. I can’t remember what year it was; I went to NCTA and the Consumer Electronics Show. I came back and sat down in Jerry’s office. I said, “Jerry, there’s this thing out there that I don’t think any of us really understand that people are talking about, called ‘TV Everywhere.’ And we’re going to have to figure this out. Can you just let me ad hoc take this on as a project?” And he said, “You know, Patty, Bob Putnam, who was our CIO, head of IT, came back with the same thing. Why don’t you and Bob get joined at the hip and for a year figure out how we can cost-effectively, scalably, get into this business. You can travel wherever you want, you can visit whomever you want. And in a year, I’ll expect you to come back to me with a business plan.” But that was sort of Jerry Kent. You’re not in a pigeonhole doing what you do. You see something that is an offshoot of what you’re going to have to learn and figure out—I’m going to say, go do it.
Schley: It’s kind of a dream assignment. I mean, that’s unusual. To say, here’s a big, big thing. Go figure it out.
McCaskill: Go figure it out.
Schley: What is “TV Everywhere?” Explain to us what TV Everywhere is.
McCaskill: TV Everywhere is the ability for our customers to be able to validate that they are customers. For example, if they want to watch something on ESPN on their laptop, on their television, on their iPad, on their phone device, they have to be validated or authenticated that they are a customer and they subscribe to expanded basic. So you have to have all of this integrated with your billing system.
Schley: That should prove to you I have the right to watch ESPN on my iPhone.
McCaskill: Because I’m paying you for ESPN. So that’s what TV Everywhere is. It’s a lot of content so you need to be able to figure out how to do it. So we looked at it. Bob and I spent time with Comcast and realized they had 2,000 software engineers working on this project. And we had two of us working on this project. We talked to Comcast about having them work with us in doing this because they agreed there was a vested interest and I think all the big players with a vested interest in the cable industry to be able to stave off the telcos, to stave off the other competitors that were coming out there and making a lot of noise. But their first interest was taking care of, and rightfully so, Comcast customers.
Schley: Their own footprint.
McCaskill: And our billing systems were different than their billing systems. Our content delivery networks were different. So we came up with a creative way of doing it using TiVo for the—we had Suddenlink-branded TiVo boxes, so they had the best user interface that was out there. And they could integrate into that user interface all of the metadata, all of the adaptive bit rates, everything that we needed to be able to deliver it. Because what you send to a television is a different bit rate than what you send to a telephone.
Schley: Just to muddy the waters.
McCaskill: So you had to sniff out what device you were sending to, to send the right bit rate to that.
Schley: Right. So there’s complexity at every level here.
McCaskill: Then we had TVN Vubiquity already doing our VOD and they had contracts with some of the cable networks to deliver their content. So we partnered with them on that part of it. Then we had to have a customer portal, and we contracted with Synacor to build our customer portal. And we said, OK, Synacor, you have now got to create a TV Everywhere space within our portal. So that someone can go there, click on TV Everywhere, and then they click on a folder that’s CNN, and then the folder opens up all of the content that is currently available from CNN. And then the customer can click on that content and start viewing it from the computer or the device that they’re using with suddenlink.com.
Schley: You know, I have a question. I wondered when you began this evolution, which is fascinating, I always thought to myself, you know the cable industry is going to charge an extra fee to get this content on these various devices. Did you ever contemplate that?
McCaskill: No. We looked at it as “stickiness.” Keeping the customers we had and giving them what they wanted and what they were asking for. And we felt if we didn’t do that, they were going to find it somewhere else. And over-the-top was starting, and so you knew that we had a limited amount of time to be able to do this. So we found different partners. Then the last thing that we did that was unique, and we were the first ones to do it and I think others have done it since, we didn’t want to be doing hosting and streaming.
Schley: I was going to ask you about this.
McCaskill: We didn’t want to pay TVN Vubiquity for all of the hosting and streaming. So we went to, I went to, the networks and said, “Look, you’re already hosting and streaming. Tell you what. We will build you your own branded space in our portal and when someone clicks on A&E’s program, we will send them to your site, but when it’s done, you want them to stay there and play in your space, we’re not going to allow that. You’ve got to send them back to our space, but all of your content will be in our space and you will have your branded space and your branded folder so that if they want to go from one A&E program to another, they can do it, but you’re paying all the cost in hosting and streaming because you’re doing it already and we’re already paying you a license fee.”
Schley: So you’re leveraging the relationship to extend it to these new media devices and screens. Was it dizzying?
McCaskill: It was dizzying, and you had to get the grant to rights to all of this. So all of the contracts that were pure linear programming, you now had to get all of the rights for all of the ways you’re going to use that content and deliver that content to customers.
Schley: Because we’re transitioning to an on-demand profile?
McCaskill: Because we’re transitioning to a grant of rights. They own those rights. If we didn’t have every one of those rights, we could not utilize that content. So suddenly contracts went from 12 pages to 35 pages. The engineers were involved. IT was involved. It became much, much more complex.
Schley: Did you realize from the TV Everywhere introduction the stickiness you had hoped for? What did it do in the marketplace?
McCaskill: It took some time and there was a lot of work. CTAM was doing a lot of work within their committees for the single sign-on. Because if every time you went to a site, you had to put in your user name and password, it was not a very good.
Schley: We wanted one credential.
McCaskill: And if somebody wanted to go to A&E, they could go to A&E. But if they wanted to come to our site, they could go to our site. They could choose how they wanted to do it, but we had to work on—and I think it’s pretty close to done at this point, but it’s been now many years, six years. A single sign-on. So once you put in your credentials once, it kind of travels with you across your devices.
Schley: I don’t know that anybody could have foreseen the rapidness with which this all developed.
McCaskill: It is a little mind-boggling. It was fun to be a part of it. It changed my whole perspective on things.
Schley: I want to make sure we get on the record. You talked about Suddenlink. You had made a transformation to a different company after Charter.
McCaskill: After Charter, I was there, Jerry left right after 9/11. His contract was up, and he and Paul Allen were kind of butting heads. Paul Allen was used to being in a private company and being “I’m everything.” He was very innovative, entrepreneurial. And Jerry was the president and CEO and chairman of the company after the IPO, a public company. And it was, “I can’t just do what you want and spend more than it makes sense because I don’t look good in orange.” So 9/11 happened, and Jerry was away from home, and he just decided he didn’t need it anymore. So he didn’t renew his contract and he left.
Schley: He still sort of loved the cable industry, right?
McCaskill: He did love the cable industry. And I stayed on for two more years after that. It just wasn’t the same place, it wasn’t the same culture, I wasn’t having as much fun. And Jerry had gone off and he and Howard had formed Cequel III. And they were looking to get back in the cable industry. They didn’t know if they could do it, but they were looking to get back in the cable industry. And he called me one day and said, “You want to come play? We can have so much fun. But this is going to be interesting. We’re taking Classic Cable out of bankruptcy. And it’s about 100,000 subs. And it’s about 200 headends, the smallest one being ten customers…very dispersed.” They were still trapped, they were not digital, they were not any of the things that you might imagine. I didn’t realize how much fun it was going to be until we got there and dug into it. But it became a stepping stone and two years later we bought back the Charter systems in West Virginia and brought back the strong regional manager who was there. And then we bought the Cox systems that were old TCA systems in Texas and Louisiana. And then we bought St. Joe Cable and got Lake Havasu, Arizona, and St. Joseph, Missouri. And we had Eureka, California. So we built a new company and had fun doing it. We knew how to integrate, and Jerry brought back probably half of his management team, his former management team.
Schley: I can’t resist. He got the band back together.
McCaskill: He got the band back together. So we started having fun together.
Schley: It amazes me that you could still cobble together, that there were enough cable systems that would be sold, owners were willing to sell, you could put a company together.
McCaskill: You could put a company together.
Schley: So programming-wise, you kind of had to go back in and re-establish relationships with these programmers.
McCaskill: It was very challenging because Classic had been in bankruptcy, and part of the bankruptcy judgment was, we had twelve months to negotiate new contracts with every single one of the programmers and if they didn’t agree to it, they got paid 50 cents on the dollar. So there was an incentive for them to do deals with us.
Schley: And you did it, though. I mean, you put together a legitimate…
McCaskill: But you know, when you’re 100,000 subs instead of 7 million subs, it becomes a little bit of—someone would come and put a contract on the table and I’d say, “That’s not the right price.” And they’d say, “Well, you’re not a big player anymore. This is what the little guys pay. And this is just what it is.” So they became some very, very interesting conversations. One large major program network, I called and said, “Would you come in and let’s sit across the table like we’ve done before?”
Schley: Like the good old days.
McCaskill: For ten years. And he said, “Because I liked you and Jerry so much, I’ll send my top lieutenant, but it will be for one time. We only send our most junior people to little people like you.”
Schley: Well, this coincided with how you and I saw the degradation of these big affiliate relations departments. Really shrunk.
McCaskill: Really shrunk. The lawyers and the accountants got involved. It became very much a numbers game rather than a relationship game.
Schley: But you were able to build, you guys built suddenly into north of a million subscribers before it was sold, ultimately to Altice?
McCaskill: To Altice.
Schley: So there you go again…
McCaskill: We built it up again and I left before Altice. I had retired at the end of 2014 and they bought out—with BC Partners and CCPIP, which is the Canadian pension fund. And at Altice, they bought out Jerry at that point and the other investors.
Schley: I should have asked all along through this journey, from transitioning from the hospitality industry to this wild world of cable. Were you a television fan? Do you like television?
McCaskill: I do like television. Interestingly enough, the longer I’ve been in the industry, the more particular I am about what I watch. Because I watched so much for so long, because trying to evaluate networks, trying to evaluate their programming, I consumed an awful lot of television. And now I don’t consume nearly as much television. I’m more particular about what I watch.
Schley: I was always curious about in the early days when someone brought to you a new brand or an idea for a channel that you hadn’t seen it. How did you physically watch it? Did you get tapes?
McCaskill: They usually had sizzle tapes, sizzle reels.
Schley: But all sizzle reels are great, right?
McCaskill: Oh, they all look great. One of the funniest ones that we got—all the heads of programming got this tape—it was the Puppy Channel. And basically it was watching puppies cavort all day long, and it was just like, “I don’t think so. I don’t think I can do this.” And I got on the bus at one of the cable conventions and one of the other heads of programming and I were talking about the Puppy Channel. And another head of programming, he said, “That wasn’t a joke? That’s a real channel? I threw it in the wastebasket. I thought somebody was pulling my leg.”
Schley: I guarantee you now, Patty, you could find some derivation of that on YouTube, or somewhere online.
McCaskill: I’m sure you can.
Schley: And over-the-top video.
You mentioned Jerry Kent’s name a couple of times. Sort of throughout your odyssey or your journey in cable, who else sort of loomed large as an influential person in your time?
McCaskill: Sure. Early on, Bill Bresnan. When I was at the Travel Channel, Bill befriended me. I was just really learning the programming side of things and traveling 17 states. And he had cable operations up in the Northwest. He really spent some time with me and helping me and introducing me to some of the other people that were within those states. So that was a big help for me. Others that were there: Fred Dressler. Once I got to Charter and got bigger, Fred and I developed a pretty good relationship and we shared war stories. We certainly didn’t—
Schley: Where was Fred at that time?
McCaskill: Time Warner.
Schley: He was buying programming. He was doing your job at Time Warner.
McCaskill: He was doing the same thing I was doing at Time Warner.
Schley: So you were peas in a pod…
McCaskill: Peas in a pod. And we’d share war stories. We certainly didn’t share specifics of contracts, but we did talk about where the industry was going and what kinds of things we might have to build into contracts in the future.
Schley: Trying to foresee what might evolve.
What’s been fun about the career at large? Because it’s taken you to so many places and involved so many transformations that you couldn’t have foreseen. But what’s been the kind of the satisfaction or the glue that held it altogether?
McCaskill: I think one thing has been it’s never boring. There’s always something new and I was given the opportunity to stretch and learn something new. And go out there and try to figure it out. So I wasn’t doing the same thing day in, day out.
Schley: As exemplified by, for instance, the TV Everywhere experience.
McCaskill: Absolutely. And the people. The one thing I miss most since retiring is the people. I made so many, so many good friends, whether it was through Women in Cable, whether it was through CTAM, whether it was through Cable Positive, whether it was through the shows, being on CTAM boards. It was just a wonderful way to find other people that were as passionate about the business as I was.
Schley: The list of awards and honors is too long for me to mention. Let’s just say that there are a lot of them.
McCaskill: Nice recognition, but not what it’s all about.
Schley: What would you advise the next-gen Patty McCaskill, who is charged with maintaining programmer relationships in a changing industry to center on? What counsel would you give?
McCaskill: I would say if they were going to be doing program contracts—I used to go to SCTE every year because I figured engineering was what was going to drive what was happening next. People would say, “The head of programming goes to SCTE?” And I said that I needed to learn what was coming so I could think ahead of what I needed, and often I was suggesting things in contracts before the programmers had thought about it.
Schley: That’s so interesting, because you saw the kernels of an idea beginning to formulate?
McCaskill: That’s right. So I think that’s important relying on the other people within your operation. You know, I used to joke and so did other people that I had an honorary engineering degree, I had an honorary legal degree because I’m not a lawyer, I had an honorary marketing degree because I had to figure out what marketing was going to do. We all worked together collaboratively.
Schley: You weren’t pigeon-holed…
McCaskill: No. Every Monday morning we all got together, and we all shared what we were working on and what we were doing and asked for advice from the others. It wasn’t siloed. That was very much Jerry Kent and Howard Wood. There are no silos in this company and no one is the star of the company. We all succeed together, or we all fail together.
Schley: The anecdote you told about TV Everywhere—and I’m sorry, was it Mr. Putnam that…?
McCaskill: He was the CIO.
Schley: So he’s a tech guy. You’re a programming person.
McCaskill: He’s an Internet guy.
Schley: You invented this new way of distributing…
McCaskill: And then marketing and engineering came on later as we’d gotten so we had someone join the team, one person from marketing, one person from engineering. That was pretty much our 2000 software.
Schley: Another subject that’s a big subject, Patty, and will probably continue to be a big subject, is what happened with sports and television and cable distribution, where you firsthand saw these enormous expenses begin to build up for sports rights.
McCaskill: Yes. What you had was two major players, two major ones. The Fox RSNs, regional sports networks, and ESPN going for sports rights. And then you had the Comcast ones [RSNs] that were there in the mix of the whole thing. What happened was they kept on bidding against each other, and as they bid against each other, the sports rights went up. And then they decided that the one thing with fragmentation, cord-cutting, that was going to hold people was sports. Because people have to have their sports and there are no sports available with cord-cutting. So then they started doing deals through 2025, 2030. Numbers that are just impossible because they figured the cable operator was going to continue to pass it on to the customers. The owners loved it and the leagues loved it because now they can do these incredible deals paying $330 million for a baseball player. And they just figured, we would pay for it because our customers would not allow us to drop it. And it became a real, real problem. And then you had ESPN doing deals with the ACC. Then you had the YES network and then you had the colleges. So now the SEC gets involved and has their own channel. And all of these rights keep bidding up and they’re the most expensive rights that are out there.
Schley: And they’re all coming to you.
McCaskill: And they’re all coming to us because they figure we’ll pay for it because we can pass it on to our customers with no thought that there’s going to become a point where you can’t pass it on to the customers. There was a little “come-to-Jesus” at one point when ESPN was getting 20% increases and Jim Robbins said, “This is insane,” and went to Washington and complained about it. And they went down to 5 or 6%. Well, they’re back up again. They’re not at 20%, but they’re back up again.
Schley: Right.
McCaskill: I don’t know what it is now, but I could bet that ESPN is getting close to $10 per customer per month.
Schley: Unbelievable.
McCaskill: And the regional sports networks that have a lot of football. I said to one of the senior executives at ESPN, who has since retired, I said, “Where is this going to go? This is absolute insanity. We can’t keep raising rates like this and absorbing the hits to our margins.” And he said, “Patty, I don’t know where it’s going to go. We’ve got to do what we’ve got to do for our survival today. You and I will be retired, and the young people are going to have to figure this mess out.”
Schley: But I guess that’s the question. Right now there is no sort of resolution in sight.
McCaskill: They have no way to claw back from the different sports rights holder what they have agreed to pay. There’s nothing in those contracts that says, if I started out and I had 50 million customers and cord-cutting brings me back to 36 million customers, I can pay less in the sports. It never goes away. So now they’re paying more with fewer customers and we’re still paying on a per-subscriber basis. So it’s a real challenge for those people that own those sports rights.
Schley: I always wondered from afar if people like you in your job capacity, every time you saw a major league baseball player sign a multimillion-dollar five-year contract, if you sort of cringe.
McCaskill: Absolutely.
Schley: Bet you kind of knew where that was coming from!
McCaskill: Absolutely. You knew it was coming back to us, whether it was in the short term or it was in the long term.
Schley: I guess you call it a conundrum that, as you said, as of today, people in 2019, I don’t see a resolution.
McCaskill: I don’t know how either the Fox networks, regional sports networks, which is probably why they’re having a hard time selling them with the Fox-Disney thing, and getting someone to pay for it. I don’t know how ESPN is paying for those rights. Disney is propping them up. It used to be ESPN was propping up Disney. I think it’s the other way around. The theme parks and the studios and the Disney networks are propping up ESPN. But that can’t last forever.
Schley: You have the two revenue sources that have always supported the business, of course, or advertising and subscriber fees. And now you’re seeing pressure on both of those at the same time as the rights, so tough formula.
McCaskill: Very tough formula.
Schley: Thank you for addressing that.
McCaskill: You’re welcome.
Schley: So this has been just fascinating stuff. I think the relationship between programmers and distributors has never been really well understood by the general population. So we’re doing our small part to sort of help people understand it. But you have been so at the center of it so thank you for sharing your story and some of your reflections on the industry.
McCaskill: Well, thank you. This has been fun.
Schley: Thank you for tuning in for the Cable Center and the Hauser Oral History Series. Patty McCaskill, Stewart Schley, signing off.
END OF INTERVIEW
