Interview Date: Tuesday September 19, 2006
Interview Location: New York, NY
Interviewer: Tom Umstead
Collection: Hauser Collection
NELSON: David, let’s start out and just talk about your earliest days, your childhood. Where were you born; where did you come from?
ZASLAV: I was born in New York, here in New York.
NELSON: In the city?
ZASLAV: Outside of New York, Rockland County. I have an older brother and a younger brother, grew up with a nice family. My folks are still healthy and they live here in the New York area. A close family. I played a lot of sports, tennis especially, and had a nice childhood.
NELSON: So does that you to do with you bringing McEnroe in?
ZASLAV: No, but he was one of my early idols.
NELSON: Agreed. So you went off to college I assume, at some point.
ZASLAV: I went to Cornell to play tennis and I stayed there for about a year. I did quite well, but I decided it was too much studying and not enough fun. My brother had gone to SUNY Binghamton and had gone off to medical school. In visiting him he seemed to have the right balance of experience. He was having a lot of fun and he was also having a very good educational experience. So I moved over to Binghamton and it turned out that way for me. I had a great run there and I enjoyed it a lot more than Cornell, and turned out to really be a fun college experience for me.
NELSON: You must have done well enough because you went on to law school from there, correct?
ZASLAV: Yes, so then I went on to law school at BU; spent three years in Boston, which was fantastic. We used to sneak into Fenway Park in the 7th inning to watch the Red Sox.
NELSON: For people who don’t know, BU is right by Fenway Park.
ZASLAV: Right by Kenmore Square which is right next to Fenway Park. I met a lot of good friends. BU was a really good experience for me and it led me into the law which led me into the cable industry, which has been a real passion for me over the last 20 years.
NELSON: Now did you have a focus in law school or just did your three years and got your degree?
ZASLAV: Basically did my three years. I did take an entertainment law class at BC, which was very interesting, and I went out as a summer associate to Los Angeles after my second year of law school and I split my summer between two law firms. Both of them did some entertainment work. That’s where I started to really think that maybe the entertainment area of the law was something that was more interesting for me.
NELSON: And maybe more fun?
ZASLAV: Maybe more fun, yeah. And it’s turned out to be, really.
NELSON: So when you got out of law school where did you go?
ZASLAV: I went to work for a big firm in New York called LeBoeuf, Lamb, Leiby & MacRae. It was in 1985. It was at a time when there was a lot of IPOs going on, and I started out as a corporate lawyer. Within six months of joining LeBoeuf, the general counsel from Warner Cable came in as a partner and he represented the Discovery Channel and he represented MTV, which at the time were really start-up business, neither one of them were making money, particularly Discovery Channel was struggling. I started doing a little bit of work for both of those businesses and found it really fascinating. So that was really my first introduction to the cable business and I would say my first big break was I was doing some work for John Hendricks and Judith McHale, and Judith, who is now the president and CEO of Discovery, she was the general counsel at the time and she was pregnant with one of her children and she decided she wanted to take six months off after the baby. So my law firm lent me to John Hendricks for six months to fill in for Judith and at the time Discovery was a very small operation and Judith was the lawyer, but really there weren’t a lot of functional areas. So during those six months I was traveling with John and Ruth Otte was there at the time also, who was the president of the company working for John. They were really looking for financing. They were struggling to get carriage; they were meeting with all the cable operators at the time trying to figure out is there a place for us, and that whole entrepreneurial side of the business and the excitement of building a business just really convinced me that it wasn’t the law that I was passionate about. It was the cable business and the idea of building a business.
NELSON: Can you think of some anecdote from your travels around the countryside with John that kind of reflected on him and who he was and who he became?
ZASLAV: You know, I’m still very close friends with John now. We’re on the TiVo board together and I have great admiration for him. I think he’s one of the people in this business that really helped make it what it is, and he would always talk about brand. I think one of the things that’s really a touchstone of the cable business is this idea of niche brand. When people turn on broadcast television they’re not sure what they’re going to get. There’s a sensibility about what NBC is in terms of its demographic and the type of person it appeals to, but this was in the mid ’80s when cable was trying to find a voice. What was it? John was really one of the pioneers for this idea of we’re going to be something and we’re going to be true to it. The Discovery Channel really was not just a leader in brand and communicating in a very clear way to viewers “here’s what you’re going to find when you tune to my channel”, but it really grew out of his interest in trying to educate people. He spoke to me at times about how there were enormous libraries at colleges that weren’t being used of content that could educate people and the Discovery Channel could be a voice to not just entertain but to educate, and he’s really followed through on that promise with all of these channels that he’s launched in the last few years and he’s been a great innovator.
NELSON: So I imagine he was also an inspiration at that time.
ZASLAV: Absolutely, and in fact, there was a good side and a bad side. The good side is that I got to spend a lot of time with John and Discovery Channel; the bad side was that I had to come back when it was over.
NELSON: Because this was a six month period, right?
ZASLAV: Yeah, so I came back to work more in a traditional law firm environment and it just convince me that I was so much happier in a more entrepreneurial environment. It was probably a few more months after I got back from that stint that I was reading Multichannel News, which I had started to read because we were doing work for MTV and Discovery and I was really bitten by the bug, and on the cover of the magazine was a picture of Bob Wright with a headline saying “NBC Wants To Get Into Cable”. At the time that was a very novel idea because NBC was a broadcast company and the idea of a broadcast company being in the cable business was kind of threatening. It wasn’t clear that they were going to be accepted and there was really not much of an understanding on the broadcast side of the business as to why would Bob Wright want to get into the cable business? Cable programming businesses weren’t making money; who knew at that time if they ever would, and why would he want to do that? But when I saw that article – and I didn’t know Bob at the time – I just wrote a letter to him where I said I’ve spent the last three years working with MTV and Discovery; I spent a fair amount of time with John Hendricks going around the country trying to raise money and grow Discovery Channel. If you’re serious about launching CNBC or getting into the cable business, I’d love to sit down and talk to you. We did talk and I came on board with Bob Wright and Tom Rodgers at the time, and we’ve had a hell of a run.
NELSON: I’d say so! So you basically just wrote him a cold letter and the next thing you know you’re in the cable business. Now at this point when you joined, had they actually launched CNBC yet or was that just on the near horizon?
ZASLAV: That article was the press release where Bob Wright was saying to the world “I want to be in the cable business.” At the time, we were looking at the idea of launching CNBC, which I then came on board and we did a business plan for launching CNBC, but we also looked at the same time at buying into Turner’s networks. In fact, there were two very serious looks that we made at taking over Turner’s operation and the question really was valuation and control. Depending on which time… one time it was a valuation issue, the second time it was a control issue, but we came very close and that just showed, I think, Bob’s vision and commitment to be in this business because at that time the Turner operation was losing a lot of money, but Bob had come from Cox – he was chairman of Cox Cable for a number of years – he spent his career, really, at GE and then GE got into the cable business and so he was at Cox where GE was a partner and he stayed on for a period of time when GE got out of that business as the chairman of the Cox Cable business and then he left to go back to GE and eventually made his way to NBC many years later. But his experience at Cox convinced him that behaviorally people were not going to be comfortable with broadcast television alone and that ultimately they would migrate to a broader platform and that if cable could program effectively that it could be a business. That was a visionary thought at that point in time because there was a lot of resistance on the broadcast side when Bob wanted to get into that business and we just kept looking at all of these cable programmers that wanted funding because they were all losing money. I think people forget that in those early years it was the MSOs that were really fostering this idea of “Please, we need more programming,” because the broadcast content alone in clear signal wasn’t enough to drive cable as a business and so there was this reaching out by Chuck Dolan and by Bill Bresnan and John Malone and Alan Gerry, and these pioneers, Brian Roberts and Ralph Roberts saying we need some more content to build this business. There were two groups that got in. There was the group that got in, the entrepreneurs that got in on the program side without subsidy from the MSOs, and then there was the group where the MSOs actually said here, we’ll help you. We’ll give you some money to do this. But for many years those businesses really struggled. Advertisers didn’t want to come on those businesses. Even when we first launched CNBC I would say 70-80% of the advertising on cable was direct response, it was the Ginsu Knife, so it was a struggle and it took some courage to say we’re going to invest real capital and take some real losses in order to invest in this new programming genre.
NELSON: Now you talked about the MSOs looking for content and yet at the same time there was a long history of antagonism between cable and broadcast, or maybe it was a little bit of paranoia, but cable always saw itself as us against them, cable against the broadcasters, cable against the phone companies, cable against this guy, that guy. Did you see any of that? Was there an ambivalence toward this big guy NBC come tromping in there and people thinking, well, do we really want to do business with these guys?
ZASLAV: Absolutely. Our first meetings when we went out to talk about CNBC it was the broadcasters are coming. It was really the cable guys who were these real entrepreneurs that had built businesses literally with their own hands…
NELSON: Cable cowboys.
ZASLAV: Cable cowboys, and they were so successful, and then there was this kind of bureaucratic broadcast company. They didn’t view us as part of their team; they didn’t view us as part of their world, and so there was a lot of resistance to us being in the business. I think that on a practical level, when we got into the business at least, the thing that broke that down was the real need for meaningful content and that maybe if we had come earlier maybe we wouldn’t have been accepted. It took a few years to be accepted, but we came at a time when Turner was struggling, FNN was going bankrupt, CBS had tried to get into the news business and they had failed. The cable operators needed more content and they were subsidizing it, essentially, in two ways: by agreeing to this basic cable tier, which now many of them feel that there are a couple of people that have pushed too hard on that model, but essentially they said, “Look, we’ll pay you monthly fees and we’ll grow those every year if you’ll reinvest in programming.” So that was arguably a way to create a business model or subsidy for getting in the business. And on a more practical basis, they came to the rescue of many of these businesses when it looked like they were going to go under, the ones that they believed in. They came to the rescue of John Hendricks because they believed in him. They came to the rescue of Ted Turner because they believed in him. If you looked in the late ’80s and early ’90s, an overwhelming number of the services that were successful, many of which started out as entrepreneurial services, became owned by the cable operators, really in many ways not because they thought those businesses were going to be substantial, but because they thought they needed those businesses in order to have a substantial cable business, in order to grow their cable penetration. But when we came in, I think it was at a moment when the promise of more and better content on that platform was really accepted as you know, we need it. We may not like these guys; they may be outsiders, but if they’re going to put real money against programming maybe we should let them in. But it was a struggle.
NELSON: At that point in time, cable had just recently passed the 50% penetration mark and was starting to be taken seriously as a real medium, as opposed to just basically a reception service. So I think the dynamic of the industry was changing. When you looked at the niche that you chose to go in, NBC obviously had lots of resources and fantastic entertainment programming, you picked a niche where there was already a player and whether you knew it or not that player was in deep trouble as well. It certainly wasn’t really that successful from a financial standpoint. Why target the financial sector as your entry point?
ZASLAV: Well, it wasn’t exactly an exact science. One of the reasons we chose it is because we went around and we talked to the distributors, and there were only MSOs at the time because there was no DBS, and we spoke to them about where do we have an opening? Where is there an opportunity for us? Having spent a lot of time with the Turner organization and because we had the number one news organization in America we were looking very hard at news. But the view from the cable industry was there already are two news services with Headline News and CNN. So there was a struggle there. I think we could have launched but there wasn’t an invitation to launch and there wasn’t a welcoming committee for another news service, so we were sort of sniffing around and looking around. We looked at FNN and at the time they were doing a lot of what’s called infomercials during the day. They were selling portions of their daytime to financial companies and brokerages. It was hard to tell sometimes whether it was real news or whether it was a purchased half hour. There was a scrappiness to it that we thought we could do better, we can make it look better. They were doing just data and we thought that they were essentially just the data section of the Wall Street Journal and we thought that there was a real opportunity to do more. But we also saw a much broader service, and so what we actually launched CNBC with was it was called CNBC but it was the Consumer News and Business Channel. We thought that what we would do is business news during the day better than FNN and when the markets closed we would do consumer news, and so we were going to be this hybrid. In fact, in the very early stages, the first week or two, we thought that maybe we could even blend them together. That we could do business and some consumer news during the day and do just consumer news at night, and we learned a lot just walking the walk. We learned a lot from listening to the cable operators react to what we were doing on the air because we had experience as programmers on the broadcast side, but we were learning as we were walking on the CNBC side, and we heard from the consumers what they liked and what they didn’t like, and so it evolved very quickly. Our first day we spent a fair amount of time talking about where the markets were and then we would go to a consumer reporter in a grocery store – and I remember this! So Sue Herera would talk about where stock option is trading and then we’d cut to a consumer reporter who was in the grocery store talking about how to pick a ripe lemon. So we got feedback pretty quickly from the cable operators and from consumers that said, “Look, we like the idea of FNN. We like a business news service, but we want one with integrity. We want one that we can count on and that’s going to be real.” And so we very quickly migrated the consumer programming off of the daytime and we put a lot of resources against making CNBC first in business, really a class dependable business news service from early in the morning until late at night, and then we did consumer programming in the evening.
NELSON: And from a branding standpoint you pretty much dropped the use of that Consumer News and Business Channel. You had the NBC initials right in the middle of it, so that really…
ZASLAV: It took a few years. For a few years, we thought that this idea of business news during the day and consumer news at night was going to work. We had a show called Steals and Deals, which was about getting good bargains and we had all kinds of consumer reporters that would talk to you about where to go and where to get the best restaurants. What we found was that it didn’t work that well. It was kind of limiting, and so we began to experiment much more aggressively in primetime and we drifted away from the consumer news. So I’d say three or four years out we dropped that Consumer News and Business Channel and we branded CNBC with the market place as being synonymous with business and first in business.
NELSON: Now talk about the takeover battle for FNN because you obviously got involved with that and ultimately prevailed. Takeovers have always been great fodder for programming and print coverage of business because it’s kind of an exciting battle going on. You were kind of in the thick of that. Just talk about that a bit. Dow Jones, Westinghouse, it was not trivial competition even for something as big as NBC.
ZASLAV: Dow Jones was in the game, as was Westinghouse. FNN went into bankruptcy, and for anybody that hasn’t been involved in the bankruptcy court, which I hadn’t been in before, it’s kind of the Wild West. It’s very fast moving; the judge makes their own rules and it’s all about getting the most value for the shareholders or debt holders. The process took a long time, it took a few months, but once we were in the actual moment with the judge – there was a one day period where the judge said, “This is the day we’re going to decide what happens to FNN,” and in advance of that they had set out some very clear rules, and we thought if you get rules from a judge these are the rules. The rules were the bid had to be all cash and anything but all cash would not be accepted or reviewed or considered.
NELSON: Is that due to pressure from the creditors in terms of paying that off?
ZASLAV: I think so, and I think it was probably the easiest way of determining apples to apples what’s the best bid. So we spent a fair amount of time looking at the asset and there was a fair amount of risk. At the time CNBC had about 25 million homes and FNN had about 30 million homes. There was about 8 million subscribers overlapped. So if we could put the two together our view was that we would have a meaningful service and we would have a leadership role in the business news niche, but we had some real competition. Dow Jones, Wall Street Journal was in there, as I said, Westinghouse was in there. We got to court and we place our bid. Bob Wright was there, Tom Rodgers, we had a crew with us, we had a crew of lawyers, and we placed our bid on a table with the judge and submitted it and then Dow Jones submitted their bid. We took a look at it because our bid was one page and we saw them…
NELSON: So many bucks.
ZASLAV: That’s it. This is what it is and when it’s payable. We saw the Dow Jones bid was very thick, and right away we started talking to each other. “What’s with that bid? It looks like it was this thick!” And they submitted it to the judge and our lawyers right away said, “We object Your Honor. The bid is supposed to be simple. Exactly what it’s going to be, what the amount is that you’re going to pay for FNN and on what terms.” The judge said he wanted to take a few minute recess to review what they had submitted, and they submitted a very comprehensive bid that involved all kind of elements that were not cash and the judge came back half an hour later and said that he was going to accept their bid and we had literally three hours to review it and to come back with a response. So, their bid was complicated, but they agreed to take on a number of the liabilities of the debtors and liabilities of the channel and to accept. So we went back and we looked at their bid. We really couldn’t understand all of it because it was too comprehensive, but Bob Wright made a call, he took a look at their bid and he said, “We’ll match everything that they say they’re going to do and we’ll put up this much more cash,” and the judge slapped down the gavel and FNN was ours. We spent the next year and a half… Bob would call me on a regular basis and say, “What else did we agree to in that thing?” Because people would call him up and say here’s another liability that we have to take on. So the Dow Jones bid lived on in our hands for really two or three years we ended up having to… there were all kinds of things that would creep in that was a Dow Jones liability. They said in their bid they would pay it so we have to pay it, or they said they would accept that so we have to accept it, but ultimately the two assets came together and it really became the foundation for what CNBC is today. Really, we think, not just a meaningful domestic asset but a worldwide brand that stands for first in business.
NELSON: Was there anything that you recall as kind of an interesting moment or anecdote when you were going through this bidding process?
ZASLAV: I think the most interesting moment was we had spent a lot of time thinking about should we buy FNN and what would it look like? What would be the financials? How would it stack up? We were preparing to go up to talk to Jack Welch and see if we could get the GE approval to make our bid. So it was Bob Wright, Tom Rodgers and I went up there, and I remember because I had spent two or three days in advance of this getting ready for this meeting – here’s the internal rate of return and after three years it turns cash positive if we can capture this many subscribers – and we had all these different scenarios. We went up and we started to present to Jack to talk about FNN and what it could mean and what it would look like. I was the guy that was in charge of all of the… I could turn to page 7 and tell you here’s what it looks like under scenario B and under this condition. We got about a half an hour into the presentation and Jack just said, “Let’s stop for a second here.” He wanted us to answer one question, which now when you look back seems odd, but it was a basic question. It was, “Is business news a niche?” Is it a business? CNBC was losing money, FNN was going out of business, we had been up there talking about Turner a year before; he was losing money. Discovery had to be funded in order to stay alive. So here we are in 1991 and Jack said, “Look, I don’t care about whether this is cash positive in the third year or the fifth year. If we’re going to bid on this thing, we’re going to win. So we need to know, do we want to go all the way for this? And so take all those materials and go back to square one. Come on back up here and let’s talk about whether business news is a meaningful niche and whether we want to own it, and if owning it is going to be a real business for us going forward.” And so Bob went back and talked about that very issue and the two of them were really convinced at the time, which was not clear to everybody. It was a real question whether business news was a niche and based on that we went in and we went in to win. We knew we were going in to win, and we got FNN and we put a lot of resources against it to grow it and to make it meaningful. Now it’s a very successful business and for those that come into the business today and look at these big niches and say, “Wow, they’re terrific businesses and look at the valuations and the revenue that they generate,” it was only 13 years ago that we sat in a room up in Fairfield and pondered the basic question, “If the broad niche of news is not a business, cannot make money, does not have a good return on investment, is this sub-niche business news, is that a business long-term?” And it took some vision to answer that question vigorously and with real resources against it that “Yes, we believe in that.”
NELSON: What was your feeling when the judge raps down the gavel, whether literally or not, and says, “Okay, guys, it’s yours.” You walk out of there – are you saying “Fantastic!” or “What have we gotten ourselves into?” Or a little bit of both?
ZASLAV: I think it was both. We were super excited that we had it, but there was an enormous risk. We had the basic risks of running a business – how do we transition these two brands, how do we pull these two businesses together? Can we get the cable industry to support this transition? Are people going to drop FNN? We also had the issue of Headline News was a general news service, is Headline News going to become a business news service to compete with us? Is somebody else going to take this moment where we’re trying to pull these two businesses together to compete with us? Is Dow Jones going to walk away from this auction and say, “Forget that! We have the Wall Street Journal. We’re number one in business news. Let’s take this on from scratch.” There were a lot of services launching at that time, so we felt that we needed to put these businesses together. We needed to work very hard to get the cable industry to support it and then we needed to grow it aggressively and quickly because we recognized that it was a very competitive marketplace.
NELSON: And what was your role at the time?
ZASLAV: I was running cable business development, so that was essentially my deal, working with Bob and Tom, and I was also the lawyer for the cable division.
NELSON: And Tom Rodgers role?
ZASLAV: Tom was the president of the whole cable group at the time.
NELSON: And what did the cable group consist of at that point?
ZASLAV: We had an interest in A&E…
NELSON: These were minority interests?
ZASLAV: Yes, we had a minority interest in A&E. I think right around that time when we did FNN we had already done a deal or were on the heels of doing a deal with Chuck Dolan to get involved with News 12 Long Island. We did deals to get involved with Sports Channel America; we launched these regional sports networks around the country. We launched American Movie Classics and Bravo. Quickly thereafter we did a deal with a number of partners to launch Court TV with Time Warner and with Liberty.
NELSON: That was a three-way?
ZASLAV: That was a three-way. At that time that was common. In fact, when we launched CNBC we were 50/50 partners with the Dolans, with Cablevision. When we decided to acquire FNN, the Dolans opted out. CNBC was losing a lot of money at that time. The Dolans opted out. Essentially the question was were we going to double down on this niche and pay up to take a bigger stake and a bigger swing, or was this the time to exit? For the Dolans they decided that they had a group of cable assets and they exited CNBC at that moment. So when we took over FNN, we acquired FNN but we also became the sole owner of CNBC. At the time, most program services were owned jointly by a group and that was really to cover the risk. There were a lot of people that thought this could be a real business but there weren’t that many business leaders at the time that were willing to say I’ll take all of those losses and place that bet because the losses… you could see them. It wasn’t like this was two years to break even or three years to break even. The losses were going on for long periods of time, so you really had to have long-term vision.
NELSON: What was the business press – just turning the tables on you a bit – what was the business press at the time saying about NBC doing this deal? Do you recall? Were they saying, “What are these guys, crazy? This is going to drag them down.”
ZASLAV: There was a question about whether we would get support from the cable industry because there was this whole issue of broadcast versus cable, and is cable going to take this opportunity to say, “We’re not with you.” So when you turn that key and it goes from FNN to CNBC/FNN, which is what it was called for the first six months, that they would take that opportunity to shut us off. So there was a question about whether we would get the cable industry support, and then there was a question about whether business news was really a good bet. But Bob spoke to that pretty aggressively and he put himself out there.
NELSON: We’ve been talking about how you’ve been working with the cable industry, but at the time NBC itself wasn’t doing that well. There were cutbacks as I recall in their news division, so what was the internal reaction at NBC to going off and spending all this money on this crazy cable venture?
ZASLAV: There wasn’t a lot of support. I remember, in fact, that there was a real fight between the NBC entertainment group and us, the cable guys because there was a real feeling that all of the money should be used for pilots and to drive the entertainment group and if we were going to spend 100 million dollars on FNN that that was money that could have been used by the entertainment group. I remember being at a meeting with Don Ohlmeyer, and Don, who’s a great guy and a great visionary and he’s the one that really led NBC out of the shadows and into first place with huge profits and greatness and he really started the ball rolling for us in the ’90s, he had real questions as did the whole west coast and many of the NBC divisions that said, “Bob, what are you doing? This is nothing but a loser. It’s going to lose money every year. That money could be used for six more pilots; it could be used to buy this many more sports franchises.” It was tough. There were a lot of tough meetings. In fact, making our numbers was a struggle because the whole business was struggling and nobody wanted to come out to CNBC. When we set this place up in Ft. Lee, Bob’s idea was that we were all one team, but even with all of his push and drive and excitement that broadcast culture was very different than the cable culture. We were young and entrepreneurial and excited and even though the business looked like it was against all odds, we all believed. The broadcast culture was really that the whole world was about broadcast and that this is what people watch and they don’t care about that other stuff and advertisers don’t care about that other stuff. “What are we doing? Here’s how we win – we make the broadcast platform as strong and as compelling as possible.” And the answer, really, is that they were both right, and I guess Bob really tried to create that balance. He was very supportive of us and our culture and yet he never said to the broadcast guys, “You’re wrong,” because he had to keep their drive and vision alive for them to be the best they could be and he had to keep us pushing in our entrepreneurial environment. There wasn’t a lot of synergy between the two in those days. You didn’t see a lot of promotion for our cable channels on the broadcast platform, and talent wasn’t moved back and forth that effectively because who wanted to go to CNBC? It was this cable business in Ft. Lee, and it wasn’t the broadcast guys that felt that way about cable. It was sort of the entertainment culture that felt that way about cable. It was all these cable channels were sort of little businesses that probably weren’t going to amount to very much. “We’re the media business.” Slowly that culture started to change and it changed because the business model really started to foster a meaningful business that the subscriber fees and the advertising revenue, both of which were very modest in early years… it’s all the wind, essentially, that was in our face for those early years in the cable business. So it turned around and pushed at our backs to give us a tremendous amount of economic and consumer momentum because in the early days when there were very few subscribers and the subscriber fees were low we had very little money and the advertisers didn’t want to be part of the cable business, and so both revenue streams were low and reach was low, but as the years passed, as the sub fees went up we really had a multiplier. We had more sub fees but every year there were more subscribers. So if our sub fee went up 10% and the subscriber growth was 15% we had that multiplier on that revenue side, and on the advertiser side as that reach started to grow by definition the advertising started to grow. But we started to get a switch out. We had all direct response in the beginning where advertisers said, “We’re not part of that game. Cable is irrelevant.” The relevance and importance of cable, partly because of MTV, because of Turner with CNN, because of HBO, it started to become something that was hip, that was cool, that was important, and so the advertisers started to come in. But as that happened all the arrows were positive. So as you get into the mid-90s the business starts to look pretty good for us and pretty good for a lot of the guys that got in, and now the money starts to look meaningful and the scale of the asset value starts to look meaningful. So that’s when Bob was really able to get more of the broadcast guys saying, “Maybe we should be part of this.” And then all of the sudden there was a talent exchange. Producers would come back and forth, but I think probably most surprisingly, most of the talent exchange was from us, from the cable side, to the broadcast side, and that’s because our producers were producing six hours a day of content every day. So we’d have producers that were in six hour shifts where a broadcast producer was producing a half an hour a day or they were producing a six minute piece that aired twice a week on Nightly. The producers here were producing all day long; we were a machine. So you took these very young entrepreneurial talented kids and three or four years later they had the equivalent of ten or fifteen years experience, and so they went on.
NELSON: In terms of the hours on-air.
ZASLAV: Huge! And they had dealt with all kinds of issues of being live and on-air and they went on to be producers for Dick Ebersol in sports and for the news division and for the entertainment division, and so a lot of the talent that was developed within our cable group went on and today it’s very synergistic across all the platforms, but it was a slow process.
NELSON: But that sounds like it was more of a one-way flow as if you’re playing triple A and you get to go play in the majors – NBC. Was there a time when that kind of equaled out and it wasn’t seen as that was a big step up, getting out of Ft. Lee and going to Rockefeller Center?
ZASLAV: During the early ’90s, the idea of going to the big network that was, as you say, “I made it! I’m going to NBC.”
NELSON: I’m outta here!
ZASLAV: Yeah, I’m outta here! I think it has changed. I think there are two cultures. There’s a broadcast culture and there’s a cable culture. We do have a lot of interchange, but there are a lot of people – I’d say the majority of people that are working at CNBC, Bravo, MSNBC, USA, SciFi – they’re here because they can do more, it’s more entrepreneurial, it’s a young, more exciting environment and they can be more creative here. So most of the people that work on the cable side, if they got the call tomorrow saying, “Hey, come on over,” most of them wouldn’t go, and in fact, a lot of them get that call and don’t. Vice-versa, there’s advantages to both but I think there’s a different sensibility to the broadcast culture and the cable culture and it’s now kind of evolved where the people that are on the cable side are here because this is where they want to be and vice-versa. It’s more defined.
NELSON: Well, obviously some people moved on and went over to NBC, but there are people like Sue Herera and Bill Griffeth, Ron Insana, they’ve been around forever, some of them from the earliest days of FNN. So obviously there’s something about being here, covering this area that for many people is very attractive and really the ultimate place to be.
ZASLAV: I think what it comes down to is the people that are here have a passion for this niche. There’s a very big difference between cable channels and broadcast channels. We focus on at CNBC, the people that are here, they’re passionate about business news. That’s what they want to do all day, that’s what they want to look at, that’s what they want to talk about, that’s their life. The people that are at MSNBC, they feel that way, at the news division, that’s the way they feel about news. For USA it’s about entertainment. For Bravo it’s about arts and culture. So the same way there’s an audience that’s specific to each of these cable channels, the people that work at these channels are there because this is what they love. They get up every day and this is what they want to do. So it’s taken awhile for us to get here. There are people that just came over to work at CNBC because they didn’t know what they wanted to do, but the people that are here now, and as you look across our broadcast platform and our cable channels, it’s really based on passion. So, for instance, Ron Insana – Ron will go on the Today Show and on Nightly and talk about business news, but this is what he loves. This is what Sue loves and Bill Griffeth. We have people here, both in front of the camera and behind the camera that are here because this is their passion, and if we went hand in hand over to MSNBC and to our other cable channels that’s what you’d find. So I think what cable affords people is they can live in their sandbox. This is what they love. The people that are at ESPN, it’s sports. That’s what they care about. Because of that, I think, cable affords people to be more defined about going to work in their passionate area, and so that may be why there’s more energy. That may be why there’s more excitement around a lot of the cable channels because I think what it’s all about is usually finding something that you love. For me it was. I love the cable industry and so my energy level is higher, I’m reading about it even in my free time because that’s what I love and if you can find work in the area that you love then it’s not work, and that’s how, I think, most of the people that are here at CNBC, if they last, if they’re here for a period of time, it’s because they’re passionate about business.
NELSON: Well, one of the things that cable does is really addresses the passions of the audience who are passionate for business news, who are passionate for music videos, sports, whatever, and that’s what’s really made it work. The passion for business news really grew in the ’90s to a point where it was at a fever pitch. Now how did that help drive CNBC forward?
ZASLAV: Well, we were in vogue for awhile. There was a time, I think, when CNBC because more than a business news service. It became the place to look every day to see how much money you made, and so there was that bubble that really fostered CNBC. It was part of that bubble and excitement in that we were a communicator of good news every day. Every day things got better and every day people made more money and more and more people invested in the market. And so our audience grew but it grew in a very positive way for a period of years because it was all good. The aftermath of that is a challenge for us in that we have a much larger group of people in America that own stocks that have an understanding of the business marketplace, which I think we’ve had something to do with but a lot of it was just that there was a lot of wealth creation and this tremendous excitement around participating in equity markets. So we got all of that growth, but now as the markets have gone down and been flat, the real challenge for us, which we’re focused on, is we can’t just be a data service. If we’re a place that people got to see how much money they made they’re not going to be watching. If the Wall Street Journal was a newspaper about just where was your stock yesterday then it would be a two minute check, and in today’s world where you can look at the computer, where you can check your Blackberry, if we’re just about stocks and prices than we’re a commodity. So the challenge for CNBC is to be really not just the front section of the Wall Street Journal, but the second and third section as well. It will be a place where you can learn about business, where you can figure out what is Michael Milken doing and why does it matter, and what happened behind the scenes at Adelphia and why did that happen, and what’s going on in the business world. So that’s what we’ve been struggling with, the balance between data and reporting on where the markets are, which was this hyper interest during the ’90s and being a broader business news service that plays to not just the interest in where is my stock, but what is the marketplace doing and why. That’s the balance and that’s going to be a continuing challenge for us.
NELSON: Now speaking of growth, you had earlier talked about your initial projections when you went in to see Jack Welch about turning cash flow positive in three years. How did your projections work out?
ZASLAV: We did well, we did well. A lot of that has to do with the fact that the cable industry was very effective in growing subscribers over those years, very, very effective. They worked very well with us in rolling out CNBC. I think they saw CNBC as an important niche. It was really their determination and the viewers’ determination that business mattered. CNBC in the early ’90s, if you look at the statistics on the number of people that participated in equity markets it was very small, and so we got the benefit of the fact that there were those Clinton years when the market was so strong and when the economy was so strong. It fostered the American interest in business news and the cable operators saw that and they rolled out CNBC everywhere. We, I think, kept our end of the bargain, which was that we were going to take those sub fees and reinvest them in the service to make the service stronger, more important and more compelling. We grew together. The cable industry grew, it was good for them, and it turned out to be very effective and good for us.
NELSON: So I guess in market terms you got in at the right time.
ZASLAV: We got in just at the right time, I think. As you got into the mid-90s it became more difficult and in the late ’90s it became really a struggle. It became a struggle for two reasons. Behaviorally, this idea of how people watch television – people in the early ’90s were watching 8 or 9 channels; now they’re watching 12 or 13 channels, but as more and more channels get offered people only tend to watch a few channels and if you’re one of those channels then it’s very good, and if you’re not one of those channels it’s really a struggle. Being in early and having an opportunity to build a relationship with the viewers and to have an established niche that’s meaningful is really a huge leg up. Trying to get in late to the party and trying to build new businesses and build the relationship with the consumers is tough and a lot of those late entrants have had a real struggle.
NELSON: Now you also talked about the primetime evening programming and some struggles you had with that early on as to what that would be. Talk some about how that evolved to the point where it is today.
ZASLAV: One of our first meetings on CNBC was with Malone and we talked about what are we going to be and how do we make this business work, and in fact, when we did an agreement with John, which was our first agreement for CNBC, CNBC was going to be business news during the day, consumer news in the evening, and sports on weekends. So that was our first agreement, which we needed to renegotiate a couple of weeks into it. The answer is we were struggling. We were trying to figure out what should we be. We didn’t think at that time saying we were business news back in early 1989, late ’88 when we launched CNBC was going to be enough, so that’s why we were struggling. The consumer news was a struggle to bring in more audience. The sports on weekends idea was a struggle to bring in more audience. How do we make CNBC bigger? How do we help the business model and try and essentially bolster it so that we have a better chance of being successful? It’s been a struggle for us because business news is basically like a live game with a pre-game show and then you’ve got the game and you’ve got the post-game show.
NELSON: And that takes up a big part of the day.
ZASLAV: It takes a big part of the day, but then it ends and when it ends everybody knows where the market ended, everyone knows what happened. So right after the market ends companies come out with their announcements so we talk about what’s happened to the market, what’s happened with the companies, and then here you are and it’s six o’clock or it’s seven o’clock and you’re done. So now what do you do? We’ve tried a lot of things and we haven’t come up with the magic recipe. I think that in terms of our execution on the business news side, it’s an A and we’ve really established ourselves as a great credible brand with a great relationship with our viewers. In the evenings I think we could do better. We’re a fully distributed network; we have a great brand, and yet if you ask people what we’re doing at night, they have a sense, I mean we have some real excitement with Dennis Miller and with McEnroe and I think we’re on the right track, but for 15 years we’ve been very effective with business news and we have a real place in the history of cable. We have yet to establish ourselves in primetime in that same way and that’s a challenge for us.
NELSON: And I assume, likewise, the weekend is an even bigger issue with more time to deal with. Is there something you can look back on as one of the great failures of what you’ve tried to do in the evening? Something that after the fact you said, “Oh, why did we ever do that?” That you’d like to admit to.
ZASLAV: Well, there were a lot of them.
NELSON: Something that was a real misfit for who you are because FNN obviously had the same problem.
ZASLAV: We had a show, and I’m trying to remember… it was called Real Personal and we put it on at 11 o’clock at night on CNBC…
NELSON: Bob Berkowitz.
ZASLAV: It was with Bob Berkowitz who’s a great guy!
NELSON: He is.
ZASLAV: And he is super serious and he could say anything with a straight face, but it was Real Personal and it was a personal discussion show about sex.
NELSON: And very out there.
ZASLAV: In very graphic terms. So the cable operators that were supporting us on CNBC and the idea of CNBC as a business news service and consumer news at night were a little taken aback when they turned on CNBC at 11:00 o’clock at night and saw Bob Berkowitz start talking about private parts. It was actually our number one rated show in primetime in those days.
NELSON: Even at that late hour?
ZASLAV: Even at that late hour. But you know, what we have come to learn, and this goes for sort of our overall view of cable, is we came to cable as a broadcaster and so where John Hendricks had this great understanding of niche and brand and that when you are something you have to really be that all the time and that cable is about being dependable. It’s about having your viewer turn on your network at any time and saying, “I get that. I would expect to see that on Discover Channel and that’s what Discovery Channel stands for and that’s the kind of programming I like.” Maybe they didn’t like that exact hour, but when they turned on Discovery Channel they saw programming that was true to that brand. If you turn on the History Channel, Nick Davatzes – we’re invested in that business – has been very effective in that if you turn on the History Channel you know what you’re going to get. You may not want to see that particular program but you’re true to it. So the viewers are never started. They always understand what they’re going to see. Coming out of the broadcast heritage, we have this heritage of NBC where you can do cartoons followed by a serious documentary followed by a soap opera followed by the news, so we have this idea that you can be eclectic and you can have a brand, and so we came to cable with that overall view. That was very different than the cable view. The cable view was really the John Hendricks view, which is what are you? Tell me what you are and I want to know that all your programming follows that niche. We’ve struggled because we really philosophically for many years believed that we have permission to be a lot more than what our niche is, and the cable industry in good faith believed no, if you’re Home and Garden then you’re Home and Garden. If you’re business, you’re business, and if you’re news, you’re news. Our struggle to sort of bring in a bigger audience and this idea coming out of our broadcast heritage that we have permission to do more made us feel we could reject that idea of being only one thing and has pushed us in the direction over the years of trying different things. We put National Geographic on CNBC. It’s a great brand, and we were struck by the fact that it was on Turner and it got a 1 and then it went on CNBC, which had almost the same level of distribution and it was a .3.
NELSON: Where did the audience go?
ZASLAV: Where did the audience go? And then we thought we’ll just promote it, so we promoted it on the Today Show and then the audience didn’t come to CNBC. So, one of the hard fought lessons for us is that broadcast and cable are really two different platforms and the permission that you get from a viewer, behaviorally how people watch television, although you think they’re sitting with a clicker and they’re watching the same way, it’s very different. When they’re watching a broadcast network their expectation is broad and vast. When they’re watching a cable channel there’s a certain expectation and whether that’s been driven by how cable has grown and therefore that’s what drove it, or whether it’s driven by consumers interest in a niche and therefore when they go there it’s driven by their needs and their wants – it doesn’t really matter. We find that if we put something that doesn’t make sense on a channel, if we put senior PGA golf on CNBC, which we did, and there’s a lot of logic for that – the same demographic of people that watch CNBC during the day are the people that watch senior PGA golf and we could send our people out to the tour to talk to the pros, which we did research and it showed that our viewers would love that, they want to talk to Ray Floyd, they want to hear from Arnie Palmer, they want to hear from Nicholas, the idea of doing that was greatly synergistic, yet when we put it on the air they didn’t come in the same numbers that they would have come if you put it on ESPN or if you put it on USA Network. Maybe that’ll change, but the way consumers consume cable is different than broadcast and we’ve made a number of missteps in that area. Maybe they’re not all missteps because each of those experiments maybe brought some new people into CNBC, but if you just look at it as how have we done financially on those experiments it would lead you to the conclusion that when you are a niche you need to be true to it, sort of where John Hendricks started this business, you need to be true. If you look at what happened in 2000, 2001, 2002, as there was a huge proliferation of cable channels, many of the channels that had meaningful niches that were understandable, they had had so much growth in the ’90s and the leaders of those companies and the boards of those companies were looking for continued growth – 10, 12, 15 per cent growth every year, and the pressure to grow that way, many cable channels during those years, many of them, in order to get more audience did the same things that we did. We have to be broader. If we stay to our niche our niche is only going to be a .7. We have to grow to a .8 or .9, so let’s go a little bit outside and a little bit broader. There’s been a coming home, I think, in the cable industry that there was a loss of… a lot of the key brands lost some of their equity value and I think the overall lesson for the industry has been maybe we can’t get a higher rating every year, but for the long-term we’ll lose our identity, we’ll lose our relationship with our viewers if we try and grow outside of what we are. So we need to be clear about what we are.
NELSON: So does that suggest that in primetime, overnight, weekends that you’re just going to have to kind of live with the fact that your main brand identity is not going to carry an audience over those deadlines?
ZASLAV: Yes, I think what it means is we’re essentially going to have two brands. CNBC, which stands for first in business worldwide and has this great heritage and this great acceptance is going to be the service that’s on from 4:30 or 5:00 o’clock in the morning until 7:00 or 8:00 o’clock at night, and what we’re going to do thereafter with Miller and with McEnroe and on weekends, we are now in the process of establishing what that brand is and building that relationship with the viewers so that they’re comfortable with it and they come to us, but it’s not going to be something that’s both. It’s not going to be under an umbrella; it’s going to be two brands.
NELSON: And is your expectation that you’re going to get lower ratings in those time periods because you don’t have this core of loyal viewers you’ve built up for 15 years?
ZASLAV: We are getting lower ratings right now than a lot of our competitors. If you took… the programs we have right now on CNBC and primetime are very good programs but people aren’t used to watching us in primetime so we need to build that up and we need to build our relationship with the viewers. When we launched Geraldo back before O.J. he was getting .1s and .2s, then .5s then 1.5s. Cable is a slow build. On the broadcast side you launch a show and you can tell in a week is it successful. O’Reilly was a .1 for a long period of time. Some of the most successful cable shows are about dependability and relationship, and so we need to be patient and we need to establish ourselves in primetime the way we have… we’ve been very effective with Bravo, we’ve been very effective right out of the shoot with Sci Fi and with USA and I think we’re on the right track with CNBC, but it’s going to takes some time before we can aggregate big numbers.
NELSON: Well, speaking of USA, Bravo, etc., just talk a little bit about the difference now of running this whole stable of networks versus having CNBC, having some minority positions in some other networks, obviously you picked up Bravo some time back, but for you the difference in terms of your day and what you have to stay focused on.
ZASLAV: Well, we’ve made a much bigger bet on content. We now have 11 cable networks and where before this deal about 93% of NBC was the broadcast business and the remaining 7% was the cable business…
NELSON: From a revenue standpoint?
ZASLAV: From an overall revenue perspective. This overall deal makes cable a much more important piece. We also have the motion picture division which is a very big piece and the theme parks, so it stabilizes the overall asset base so that we have more diversity, but cable plays a much more important role. We have the number one cable entertainment channel in America with USA, Sci Fi is one of the top five rated cable channels, we have CNBC, which we’ve talked about as the number one news service. We also have a big place in the Hispanic market with Telemundo, the number two Hispanic service in America, and there’s really on two, Telemundo and Univision. So we’ve placed a big bet and the view is that we have a market advantage, and the advantage is that we have the number one network platform in America to promote to and that we recognize that people aren’t going to watch 150 channels, and even though there are 150 channels available people don’t consume TV that way. So they’re only going to watch a few channels and even with VOD and multiplex and PVR people tend to want to watch a few channels that they’re comfortable with, and we think that if we can take each of these channels which are very strong and these brands which are strong and enhance them a little bit and use our network platform to promote, so that if we have the goods on these services, if we have the really good original content that we can use the network to brand, we could use the theme parks to brand, and we could use our experience in programming and our experience in the cable business, and we’ve learned a lot. We’ve made a lot of mistakes but we’ve learned a lot that we have the resources to continue to grow in an environment that now is very tough. On the cable programming side I think it’s turned the corner. It’s much tougher today to grow. In the ’90s there was that period where there was just huge growth and it was a little easier for everybody. Today I think it’s much more difficult. It’s harder to get subscriber fees, it’s harder to get audience because there are so many more channels, it’s harder to have a brand that’s meaningful because there is so much clutter fighting for the consumers and the viewers, and the cost of content has gotten irrational, the same way sports content was irrational for a period of time and it spun out of control and everybody was losing money on their sports deals. Today when you look at a lot of the product that people are buying on the cable side, because there are so many more bidders, the overall cost of content is higher. So it’s not going to be easy, but I think that what this deal stands for for us is that we think we have the experience, we have the core competencies and we have some big advantages in being able to run a number of networks together, which can all promote each other and we can save by having an opportunity to look at content across all of them and we have the number one network in America, which I think is a very big advantage in having that voice and that relationship with viewers and being able to lead them.
NELSON: David, what’s your role here at NBC Cable Networks?
ZASLAV: I’m the president of NBC Universal Cable and I oversee all of the strategic development for our cable services, oversee all of our cable investments. We have investments in History Channel, A&E, National Geographic, TiVo. I’m the point person to figure out how do we grow, what deals do we do to get larger. I also oversee the revenue side of the cable business with all the cable operators and DBS distributors in growing CNBC and MSNBC and USA and Telemundo and Bravo and Sci Fi. So basically it’s to figure out how do we grow our existing revenue on the cable side and how do we get into new cable businesses and grow in the cable area.
NELSON: How do you see now the relationship as it’s evolved from the broadcast side to the cable side of your same business, which you talked about earlier was not entirely smooth in the early days? Let’s put it that way.
ZASLAV: In looking at the Vivendi deal, it was really a moment where we had to decide, I think, where are we going to, where are we going to get bigger and how are we going to get bigger? When we took a good look at the Vivendi deal we really felt that it had this big cable business and we looked at all the trends in cable and most of them were down, but we felt that if we could take all of those cable businesses and really synergistically put it together with the broadcast network, that we could outperform the market in a meaningful way, and so coming out of this Vivendi deal, this is probably the most synergistic we’ve been and the most together we’ve been as a broadcast and cable company because we have to be. We launched 4,400 on USA Network in original series two weeks ago, and in launching it we promoted it on the network, we discussed it on the Today Show and when it launched it launched to the highest rating of an original series in the history of cable. The week before that we launched Stargate, which has been on for many, many years on Sci Fi. We did a huge promotion across all of our cable platforms and the network and it launched with the highest rating for Stargate in its history on Sci Fi, and the highest rated program on Sci Fi to date. So our model really is sort of a three-piece model: one, we’re going to use all of our marketing platforms to enhance the brand and to deliver viewers to all of these cable platforms; two, is we’re going to put real resources and all of our creative energies against putting the best content, original content, on all of these platforms and enhancing and developing them. We have a lot of experience with that, we have a stable of great programmers and we’re going to develop it. On the third side, which is the revenue side, we’re going to work with the broadcast network in driving together the most revenue that we can. So we’re going to have marketing and programming to build an audience, to build a relationship with the audience and to build the ratings, and once we get that we could be more effective by using the network and cable group together to sell advertising and by taking all of those assets together and going to the cable industry to get the most value. So what we’re hoping comes out of that is better cable channels, higher ratings, and an ability to monetize that in a more meaningful way by using all the resources of the broadcast network and the cable channels. I think what comes out of this that’s exciting is that there are no more walls. In pulling this deal together we all had to sign up together that we were going to grow these businesses, and so what started out 16 years ago as being that CNBC cable business over in Ft. Lee, the cable business proved itself to be a nice revenue generator and a meaningful brand developer for NBC. That peacock on all these cable brands. We became accepted in the ’90s and now as we go into this next generation with Universal and Vivendi it’s really one company. It’s not about the broadcast network anymore, it’s not about the cable channels, nobody’s sitting around saying, “But I could have spent that money on another pilot,” it’s really a focus on entertainment and the entertainment on the television side is the broadcast network and the cable channels, and they’re probably the most synergistic they’ve ever been.
NELSON: How about internationally? How does that impact what you’re doing? Obviously CNBC has very wide international distribution.
ZASLAV: We were pretty small internationally before. CNBC was our one brand that we went around the world with. We had taken NBC out for a period of years but the fact that NBC was so broad and the appetite across most of Europe was for more localized content, we decided the CNBC brand was really more compelling. So we’ve spent the last few years building CNBC around the world. When we acquired Vivendi Universal they have a number of international cable channels, and so we’ve put those together now and we have a meaningful presence and we’re going to look to take the libraries and the resources of Universal and NBC now and see if we can push those channels and figure out how to get more channel space around the world so our brand starts to become more prevalent.
NELSON: And how do you live in this evolving on-demand world? I think it’s a little more obvious on the entertainment side, okay, you can watch an episode of Monk when you want to watch it, but how about with CNBC? How do you deliver that information into that kind of the universe?
ZASLAV: The whole new technology and in-demand universe I think presents a lot of opportunities, particularly for us. One of the exciting things about the NBC Universal deal is that we have huge libraries now. NBC was mostly an original… we did some original content but a lot of what we had on NBC we acquired and we acquired the rights to air it on NBC and then it went back to its original producer. When we acquired Universal they have a huge film library and they have a huge TV library, and so one of the exciting things that we’re looking at is what can we do with this great TV and movie library in an on-demand world and we’re having a lot of discussions with MSOs about VOD and how they could use all of that content to provide a more meaningful viewing experience for their customers. So that’s exciting. On the side of on-demand for MSNBC and CNBC it’s probably less, but there are other opportunities. CNBC and MSNBC, I think, have a good future in the business environment. We haven’t taken advantage enough yet of CNBC in the institutional world and that’s something that we’re going to try and advance over the next year or two. If you go into a country club or if you go into a CEO’s office, CNBC is on, but it should be in the corner of the computer on every trader in America. Many of them have TVs and they’re looking back and forth, and many of them don’t, but CNBC is really a unique cable channel. Most cable channels are about building viewer ship and ratings and then monetizing that on the marketplace and keeping an established relationship with those home viewers and with most cable channels the home viewer ship represents 97, 98, 99 per cent of where people watch it and how they watch it because most viewer ship is in the evening and where most people are watching these channels during the day. CNBC is an odd bird in that if you took a look at what our ratings are in home viewer ship, more than 50% of the people who watch CNBC are not rated by Nielsen. They’re watching it in their country club, they’re watching it in their office, they’re watching it in their gym, they’re watching it at their desk on their computer, and so when you try and figure out what is CNBC it’s really not a traditional cable channel in the traditional way that you would think of it. It’s really a hybrid between a direct to business service and a cable channel and one of the reasons why we’ve been able to generate so much revenue against a not such a large audience is one, the demographic of the audience that watches us at home is terrific, but the marketplace accepts and understands that whatever that number is it’s two or three times that because many people are watching it.
NELSON: Even without a measurement they just accept that.
NELSON: Well, that is unusual because more networks don’t get the benefit of…
ZASLAV: Which is one of the reasons why we have a great CPM. I would argue that we don’t get enough of the benefit of that.
NELSON: Well, you’re not alone in the cable business there. How about just kind of wrapping up, the overall legacy of CNBC and what it’s meant to cable and to the business community and to the viewer.
ZASLAV: Well, I think one of the things that CNBC did was lead the way for smaller niche services. Before CNBC launched most of the services were very broad and we struggled with this issue of is business news too tight? Is there enough there to make a business? I think we’ve gone too far in the other direction. Maybe now some of these new services that have launched are too niche-y, but it was as we became successful I think it opened up two doors. It pushed other people to move forward in the more narrow niche area and fostered this idea that even if it’s a narrow niche, if you’re best of class, if there’s a constituency out there for you, that you can have a meaningful business; and two, I think that Bob Wright really knocked down the doors on this issue of broadcast versus cable. He had the heritage and the
UMSTEAD: This is Tom Umstead, programming editor from Multichannel News. This is The Cable Center; we’re putting this together for our oral history and we’re here talking to Bob Zitter, Executive Vice-President and Chief Technology Officer for HBO. Hello, how do you do?
UMSTEAD: I want to start with a little bit of history, your history in particular. Talk to me a little bit about some of the early jobs that you had within the industry. I understand you started with the broadcast television area.
ZITTER: Actually, I went back to college, Tom. When I was in college I was a pre-med but started working at the local campus radio station and really fell in love with that. I got involved in starting a television station at my school and then ran the radio station. So when I graduated, I had a choice to make and I decided not to go to medical school and got a job at ABC television in New York typing the daily network log. They gave me five dollars more a week because I was a college graduate, but it was a foot in the door. I worked at ABC and that was during the Vietnam era, so I was drafted as were many other people. Fortunately, instead of going to Vietnam, I directed television shows for the Army for two years and during that time I also worked at a local television station in Augusta, Georgia and a local radio station during my off-hours, so I really got into it then. After my tour in the Army I went back to ABC and worked there until 1972, and that’s when I made the move into cable television and I did it because I was just getting married and the dream that I had was to learn enough so that someday I could pull together some investment money and at that time I was thinking of buying a radio station or a group of radio stations, something like that, and I wanted to get some management experience of a small communications facility. I really didn’t care whether it was radio or anything else. I found a job in Hagerstown, Maryland and I was hired to be general manager of this cable television system at the age of 25. It was 8,000 subscribers, and needless to say, I knew very little about cable television, certainly knew very little about managing a business, and the owners said that they hired me because they had four managers in four years, each of them supposedly had some expertise and they realized that at that stage of the game no one had any expertise in cable television. So that was how it started for me.
UMSTEAD: Before we move more into cable, what were your first early memories of television as a child?
ZITTER: Well, I was born and really spent some of my youth in Los Angeles, so I watched the television shows that kids did and of course everything was black and white. But it was all what I later learned to be called Kinescope, which meant that the quality on the west coast television was really, really bad. But I watched kids’ shows and I think the first thing that sticks in my memory is there was an oil refinery fire somewhere in the Los Angeles area and you could see the smoke off in the distance, and then I’d be watching the coverage on the news on the TV. I must have been about five because I moved away around the age of six, and it just stuck in my mind that you could see on television the news coverage of what was going on. I didn’t really want to watch news at the age of five. I watched the basic kids’ shows. When we moved to New York and as I was growing up, it was simply normal kids Saturday morning and Sunday morning, vast wasteland cartoons. I think Newton Minow was correct. I was very glad that my kids had something like Sesame Street and the Electric Company to grow up with.
UMSTEAD: Talk to me a little bit about the beginnings of cable. When you came in, cable was in its infancy. What was the environment like back then?
ZITTER: It was very interesting. There were really three areas that stick with me very much. The telephone companies were doing their level best, and this is in the 1970s, to make life difficult for cable television in its infancy, to put them out of business if they could. The telephone companies owned all the power poles and the issue at that time was how much they were going to charge to attach cable wires to the poles. I remember AT&T would come to my office once a year with a contract that was outrageous and there was no way we could afford it, and they’d say “Oh, well, they tell me who signed it.” And I said, “Well, I’m not.” And they go away and they come back next year with more and more people. That became an issue that got a lot of political traction and during my time in Hagerstown I became president of the Maryland Delaware Cable Television Association, and working on trying to make pole attachment fees reasonable was something we spent a lot of time on. The other thing that was very interesting for me was – it seems interesting these days – there was no copyright legislation and so the broadcasters and other people were asserting that cable television operators were stealing their signals without compensations. The operators in Pennsylvania, which was one of the bastions of cable television, were dead set against it and the law of the Supreme Court had ruled that cable wasn’t responsible for paying these fees. At the end of the day I think a number of people recognized politically that the only way this industry could grow would be if we could put this behind us. So there was some proposed copyright legislation, I believe it was 1976, and the hardest issue we had was – and I was one of the people who believed that we needed some legislation, we needed to pay some money, it went into a copyright royalty tribunal at that time – to legitimize cable TV. The difficult fight was within the industry and ultimately it prevailed to get support for the legislation. During that time, a guy named Bob Johnson was head of government affairs for the NCTA and so I spent a lot of my time, I’d go into the cable office in the morning, make sure everything was fine for the day, then drive into Washington which was about an hour and a half away, and I’d spend my time either in Washington or Annapolis lobbying with Bob on the copyright issue or in Annapolis on the pole attachment issue, and the fact that my wife worked in Washington was convenient. We’d go shopping after dinner and then go home.
UMSTEAD: When did you make the move to HBO?
ZITTER: In 1981. I was a cable operator in Maryland for nearly five years and had enjoyed that very much. At that time I had a decision to make. The parent company that owned this cable system was based in South Bend, Indiana, and they were a company that owned newspapers, broadcast stations, and cable systems around the country – a small MSO that’s still in existence called Schurz Communications. They offered me a job of running the electronic media – their broadcast and cable properties – and the president was going to run the newspapers. I was thinking of that or going forward and as I said we had this dream of owning radio stations. I decided to take the job in South Bend. I guess it showed that I was more risk averse than I thought. So my family and I moved to South Bend for five years and in that role the managers of our broadcast stations and cable systems reported to me, I was involved in acquiring new ones and hiring the people to fix problems if they existed. I spent five years there. After that, we had two children and most of our family was in New York and we realized that if we wanted to be close to family that was a good time to move. So it was ’81 that I joined HBO.
UMSTEAD: HBO’s been on the cusp of many technical innovations over the last 20 years actually. Initially, they were one of the first networks to implement scrambling of the signal. How important was that back then and how difficult was that to develop?
ZITTER: HBO has been a pioneer in many respects and technology included. The reason that we do any of the things that we’ve done over the years is not just to be a pioneer, it was because it made good business sense. So for example, if I may, even before we talk about scrambling the satellite signals, HBO was the first television network in the world to use satellite for distribution and the reason we did that was if you wanted to start a television network in those years the only way you could do it was either getting a microwave channel from AT&T or building your own. AT&T had built only three channels across the country; there were only three networks and they would say to people and they said to us, “There’s no more room.” So HBO built a microwave network along with one of our partners called Eastern Microwave – by the way, they became Newhouse and Western Microwave became TCI – and we got as far as New England and as far west as Ohio, and that’s when we realized that if you leased a satellite channel this thing could rain the signal down over the entire United States. At that time the dishes were 11 meters, 30 feet wide, every expensive and so you didn’t have to worry about securing the signal. No one’s going to spend $100,000 on a dish in the 1970s. So when we started transmitting that way it really opened up opportunities for us and others. We had been looking at the typical cost decline of electronic equipment and in the early 1980s when I joined the company, in 1981, one of the first jobs that Ed Horowitz gave me – the person I worked for – was to work on getting our network scrambled. It took us until 1985-’86 to get that done, but what we had projected was that by ’85 or ’86 the cost of the satellite system would be under a thousand dollars and we knew that that would be a consumer product and would mean that if you were a pay television network, as we are, the only money we get is if people are going to pay for the service, so we realized the cost of getting access to our service without paying for it was going to become a reasonable price. So for that reason we started looking and talking to different technology companies seeing what we could put together. We actually found a company that, since none of this existed, this company worked on encryption for the government, they did the encryption systems that were on the B-52 bombers and they worked on video for some of the deep planetary space probes, digital video. So we said, well, if we can put these two together, scramble our satellite signals… So there was the technical side of it and I was not working on that. My job was the business side and to negotiate the deal with these companies, but then at the time to try to convince the cable television industry that this would be not only something we’d like to do but something that would be beneficial to them. The cable operators who operated in rural areas got it and they understood it. I remember having some very difficult debates with… there was a cable company called Warner Amex at that time and they operated in urban areas, and they had no interest in this. They said people in New York or Houston aren’t going to build large satellite dishes, forget it. Even though we were paying for it they just didn’t want to. But eventually we won people over and rolled out the scrambling system in ’86. Technically, like anything new, it had bugs, it took time to work the bugs out. It had an education learning curve to get up with not even the system managers who would make the decisions, but the technical people who had to install this stuff and keep it working. The most novel thing that they never really could get their arms around was that someone in New York could turn on and off the device, the satellite receiver, if you will, in their headend. They realized what that meant when people in our credit and collections department would call some cable operator who forgot to pay the HBO bill, and maybe they forgot for six months or something like that, and he showed them how we would turn off the signal unless we got the check. So it did actually help in our collections.
UMSTEAD: I can imagine! Back then, did you realize how big HBO, in particular, and the cable industry, in general, would become in terms of its distribution and its influence on the television industry?
ZITTER: I think what people saw… When I was a cable operator early on, pay television originally didn’t exist and then HBO and some others started. As a matter of fact, I started my own pay TV service for our local cable system. I didn’t think that HBO was right for us at the time. What some people realized, and I think I bought into it, was that as cable was starting to be more than an antenna reception service and offered choices to people, it became more valuable, particularly if you were going into areas where people could receive over the air four, five, six channels. But what we realized was that at the time – remember, this is before home video, before VHS tapes – the concept of watching television without commercials, and also watching things unedited without changes from the way they were in the movie theater, was something unique and so what many of us believed was, and I think it really became the fact, was that HBO and then other services that followed it really became the driver for why people would buy cable other than to make their pictures better. Did we envision how far it would go? The phrase we used to use at that time inside HBO was this is a rocket ship that’s just on a deep trajectory and we don’t know where it’s going to end up but don’t get in the way. Quite frankly, the business was easier then, much easier than it is now because it was a great concept, it made economic sense for the cable industry and it was a great consumer proposition.
UMSTEAD: Moving into the ’90s, HBO again sort of advanced the industry but introducing digital compression which helped lead to SVOD, subscription video on-demand, and video on-demand that we all take for granted today. At that time, while it was introduced in the ’90s, we really didn’t see it implemented until the next decade. What happened in between there and was cable hurt because of that?
ZITTER: Well, let me say initially, I don’t believe that cable was hurt because of that. We were the first television network to introduce digital television in the world, and the reason that we did it was… well, we did it because we were introducing multiplex. Pay television, the growth rate of pay television was plateauing and everyone had different ideas of what to do to supercharge pay TV at the time. We believed that what you needed to do was to give the consumer more choice, more value for the price and our answer was multiplex because we had a lot of content, we had far more content than we could ever put on the air between 8:00 PM and 11:00 PM, prime viewing time. And so we said if we can have more screens so that HBO is more than just one channel that would be a way to add value, to add content. Well, you couldn’t manufacture space on a cable television system and we were talking to people about, actually in those days about high definition, and they were talking about digital technology. We said, well, okay, high definition is going to be a few years out but what if you apply that same thing of compressing the digital signal, digitizing a signal and then compressing it with regular television. So the answer was that in the space of one television channel we could deliver four HBO signals, and we delivered them that way to the cable headends and so we began that in ’92 – excuse me, we announced it in ’92, and did it in the beginning of ’93. What happens with any technology is the first implementation is big and expensive and then all the powers that know how to cost reduce and size reduce do that. So it was affordable for us to buy the digital compression equipment that could at least go one in every headend, and if I remember that equipment maybe was… a decoder was maybe $2,000. But you couldn’t spend $2,000 to put something on a consumer’s set top. The companies that were developing this technology, and at this time it was General Instrument, used our order and our deployment to get their production process online so that they could start reducing the cost because TCI gave them an order that got implemented a few years later at a reduced cost that was suitable for set tops. So the first step was to deliver the signals via satellite digitally, then to lower the costs so that you could do it down to a set top. Now, where cable maybe was at a disadvantage was Eddie Hartenstein and soon thereafter Charlie Ergen recognized that they were able to get the cost down to a price point that could go on a set top and they deployed it before cable did and it was the tool that enabled direct broadcasting. As a matter of fact, the driver of the direct broadcasting services at that time was multiplex pay television, which was the thing that we used to start digital. So the technology was there. TCI worked with General Instrument to reduce the cost and to deploy it but then the DBS guys just rolled it out faster.
UMSTEAD: That was going to be my next question.
ZITTER: The one thing I would say, though, is and I really believe this, I think out of all the things that I’ve been involved with, and HBO’s been involved with, and the industry’s been involved with, the most major advance in technology certainly out of those that we’ve been dealing with has been the move to digital television. It’s been the tool that’s enabled not just on-demand but high definition, internet television, internet video, many production techniques so that you can produce television using a small device. Being able to digitally compress signals I think has changed television forever, and so that’s one we’re very proud of.
UMSTEAD: You mentioned the digital revolution; we’re now in the new millennium and we’re looking at various ways of distributing product digitally, whether it’s cable, whether it’s through portable devices – that’s also brought up a number of issues regarding rights. Is there a balance between the ability to give the consumer what they want when they want it with the whole digital rights situation where we have to protect the rights on the content side?
ZITTER: Absolutely there is. People might be viewing this tape sometime in the future and so to kind of put it in context, when television became digital what people could do with it changed. We’ve always had theft of television signals and HBO as a pay television service has lived with that and thrived. People have been stealing HBO via cable, via satellite, via whatever. But once you digitize a television signal, instead of making one copy at a time you could make a million copies at a time and those copies don’t have to be right in your living room with one tape machine to another tape machine. Those copies can be in China and everywhere else in the world. So the impact of that theft – I don’t like to use the word piracy, I think that’s too sexy – can be more harmful, which just means that the protective measures that we take always need to be evolving. However, I think too many people in the last several years have been focusing on “I have to protect my business, I have to protect what we have” and that’s true, but I very much believe, and I know HBO believes, that if consumers are going to want portability, if they’re going to want to be in London and watch programming that’s on their recorder at home, or watch something from their cable subscription that’s going to be home, we’re going to have to find ways to deal with that. If, with the exception of broadcast television which is free, the consumers pay for cable television whether it’s ad supported or whether it’s premium like HBO, and so I think the answer to your question is we need to be on whatever platforms using whatever technologies consumers want wherever they want the content. We need to have, and we call it protective measures, we call it digital rights management, so that if you’re going to be charging for what you’re doing, and hopefully it’s reasonable prices so that you stay in business – and by stay in business, if the prices are too high no one’s going to buy, if they’re too low you don’t stay in business. So the purpose of the digital rights management is to make sure that people who want it can get it and people who don’t want to pay for it don’t get it. But the mistake the music industry made was they didn’t make their content available in the ways that they consumers wanted it. They didn’t make it available on the platforms, on the technology, and they didn’t even make it available on the business offerings the way consumers wanted. What I mean was they wanted to buy singles and not be forced to buy an album. So our approach at HBO, and what I’ve been working on for the last five years, has been to understand where all this technology is going, to find the ways that we can be there and work with the people at HBO who will create the business models to do that, and then work with our existing distributors, work with new distributors based upon whatever the technology is. And so we regard digital rights management as a tool that’s going to enable more consumer choice. And if I may just for one more piece of it, what that means is that, for example, today in cable television you have pay-per-view for movies, for example, and let’s say for $3 you can watch a movie and if you wanted to buy that movie and keep it forever and take it wherever you wanted to go, you could buy it today on a DVD form and that’s maybe $17. Well, if people were able to digitally master, digitally record that pay-per-view thing for $3 and keep it forever and take it wherever they’re going to go, what’s going to happen is that pay-per-view would no longer be offered. The studios would just make you buy the $17 thing. So what digital rights management is enabling us to do is to create business models that say, okay, you want to watch it for one day, it’s $3. If you want to watch if for a week, it’s a different price. If you want to watch it while you’re on a business trip in Europe, maybe there’s a different business model. If you want to keep it forever and do everything you want with it, okay. Digital rights management would let people come up with all these different choices. What it precludes is giving the consumer the right to take something and to make an unlimited number of copies and send it to everyone they want wherever they want without paying. That was and will still be theft.
UMSTEAD: Will you ever be able to cut the ability of people to steal the signal whether it’s digitally protected or not? Will the pirates always be a step ahead?
ZITTER: Always. One day when I was working for Jeff Bewkes when he was at HBO and I was suggesting to him here are some things we need to do to protect ourselves in this digital era and here’s how much it costs, so Jeff said to me, “Okay Bob, if we do this and this and this we’ll be ahead of them, right?” I said, “No. If you do this you’ll be one step behind and every year you’re going to continue ratcheting it up because people are that way.” Our focus is this: you want to put a lock on the door. It’s really to keep honest people honest. Anyone who’s technically sophisticated is going to be able to break whatever you put there and if you were to spend the kind of money like the National Security Agency or something like that it would not be feasible. So the combination of if you have some technology and then you have laws so that people who break the technology for commercial gain are violating those laws, then those two things I think work hand-in-hand. By and large, if we educate people to recognize that intellectual property is as valuable as physical property and if you steal my car it’s the same as stealing my TV show, that if people understand the ethics of that, by and large most people will be fine as long as you’re offering your products and your services and your content on the platforms and the way that they want. If people want portable devices and we say hell, no, we’re not going to offer them, yeah, it will be stolen. I’ll give you a very good example: everyone talks about piracy today with the internet. I’ve had some conversations with many of the public officials in Canada. HBO is not allowed to sell its services in Canada. It’s one of the named services that the Canadian government has always felt that they wanted to protect Canadian television and programming companies, and so when we started our direct broadcast service, virtually all of the satellite dishes in Canada were pointed to U.S. satellites. When Direct TV started and Echo Star started, most of the… well, the first time the Direct TV security system was pirated the technology to pirate it was developed in Canada, manufactured in South America and distributed everywhere, and it was because no one in Canada was legally allowed to buy the HBO service or other services, but HBO is a popular service. So when you don’t have a product in a way that people want it, they’ll find other ways to get it. So I think our mission is, and HBO’s strategy now, and I and a couple of others have really been involved in formulating it, is as technology evolves and creates new ways for people to use entertainment content and new platforms, we’re going to have to be there. If you’re not, it’s very shortsighted.
UMSTEAD: You mentioned working with the technology along with laws. Are you lobbying Congress right now to try to update the laws that are currently on the books?
ZITTER: Yes! Did you see my travel schedule? What’s very interesting is all of the digital rights management that’s been put in place today, as of today, was done collaboratively between the programming community, cable operators, and the consumer electronics industry and the computer industry, and they’ve come up with all of the technology that’s built into the digital equipment today, and they did it voluntarily by setting up license to which everyone’s agreed. That’s been enabling people like us and others with high value content to make our content available digitally. There’s one problem that exists today that we hope is going to diminish over time in the future where all of the programming that comes into the home comes out of an analog spigot of a set top box, either cable or satellite, and it has to do that because all the television sets are analog and all the VCRs have an analog input, and there’s 250 million of them so they’re not going away anytime fast. So what happens is once a show is on HBO, it’s on the internet within four hours. That’s true with many other services. What happens is that people take that analog video, they digitize it, compress it, then redistribute it on the internet, they burn DVDs, they do all these things that violate the current law which is the Digital Millennium Copyright Act. So there are some companies that are looking out for and being protective of this analog recording of DVDs and things like that. Microsoft is doing it on the computer side, but not everyone. So if people from a company in China sell DVD recorders that don’t follow the rules and others follow the rules, there’s an uneven playing field. So we and others believe that there needs to be some legislation that says that if you’re going to have digital content security you have to close this analog hole and make the rules the same for everyone. So we’re hopeful that that’s something that can be addressed in the next Congress.
UMSTEAD: Going forward, cable faces a lot of competition from a number of sources. It used to be just DBS and the broadcast stations. Now you have Apple, Google, My Space, You Tube, even Wal-Mart now distributing content directly to consumers into the home. Where do you see the cable industry going forward in terms of its ability to compete with these various competitors?
ZITTER: Well, first of all, I agree. Competition is growing and is going to continue to grow, and I think, as someone who grew up in the cable industry, that competition is the best thing that ever happened to cable TV and the reason I say that is, look, I was a cable operator when it was a monopolist. I remember my first price increase which was from $4 a month to $5 a month for basic cable, and hearing the thing from people about no alternatives. I think the transition that I’ve been witnessing in the cable industry of just even the mindset with the management of the companies, they needed to bring in people who were coming from competitive businesses, who knew and cared about consumers. I believe in the early days of cable, cable operators didn’t care that much about consumers. Well, now you’d better, and now you better understand consumers. One of the reasons HBO was such a big success in the early years was cable operators didn’t care about marketing. They spent no money on marketing and marketing is understanding your potential customers and then coming up with services for them, and HBO came up with all the marketing plans, funded them, taught the customer service representatives, did all of that stuff. So, nowadays, for a cable company to be viable, they have to have people who’ve come from competitive industries, who know how to create products, who know how to work and succeed in a competitive marketplace, and I think they’re moving in that direction, some faster than others. I’m a believer that competition just really makes you better. I think the best indicator of that was… if you look at the days we started multiplex, the cable industry didn’t really care for it that much. The DBS operators said, “Wow! For the same price of HBO or Showtime, cable’s going to carry one channel and we’re going to carry 15 of them.” Well, the cable operators were led kicking and screaming to that. Now cable was the one who’s doing that to the telephone industry and they realize that they could offer something very compelling to consumers, be a good competitor to the phone companies, and now the phone companies are on the defensive. And so I think the cable industry has recognized that in a competitive world they need to be the innovator again and not just reacting more as a monopolist would.
UMSTEAD: Over your career, what would you say were your greatest accomplishments?
ZITTER: Oh! It’s not business related, but my children. I say that just because from my sense of priorities, to me – I’ll say this at the Hall of Fame thing – I think my first priority is my family. My second is giving back to the community I’m part of, and the third is my career. I have such a passion for my career that I keep on saying… my wife was working at something that she didn’t enjoy for many years and I said, “Boy, you only go around once, you really ought to be doing something that you love.” And I love and I’ve loved everything that I’ve done over these years. But to put that on a plane, if my kid had a soccer game or there was something to be done with my daughter, I might take a plane at 5:00 AM so that I could take care of my work, but that was my priority and I’m just so pleased with how my kids have turned out. In terms of the career, the thing that I really feel the best about, oddly enough, is not the tangible things of digital compression or SVOD, which is something I really think is the way television is going to go in the future. What my biggest accomplishment has been has been putting together a team at HBO and my job has changed a lot over the years from being the operations person to really trying to chart out a direction and a strategy and to put as many top flight people as I can in the right seats and to be supportive of them. Recently we’ve just done some restructuring and I just feel so good when I see things working well, or when I see someone who started at a level and is now taking on some responsibilities that neither he nor I thought possible. So to me, that’s an accomplishment that I’m most proud of and I think it will benefit our company far more than any particular project that I’ve worked on.
UMSTEAD: On the same lines, what do you think your legacy will be in the industry?
ZITTER: Legacy are for people not like me.
UMSTEAD: What do you want your legacy to be?
ZITTER: I want to be known as someone who really tried to make things different and make them better. What I’m so proud of is how television has evolved and how cable was really the change agent, and I believe that HBO more than others was really a major force for doing things differently whether it was satellites, whether it was digital, whether it’s high definition. I think one of the things that’s going to live on for the longest is that television is going to change from a linear model programmed by people in New York to an on-demand model where the consumer can really control what they’re interested in, how they get it and all of that. Those are things that are the pieces of it, but what I hope I’ve done during my career is bridged technology, pure technology with business to try to make the television industry do some new things that weren’t possible before.
UMSTEAD: You touched upon it a little bit – 20 years from now, if you could take out your crystal ball, what will the cable industry look like? Will it continue to be based on linear channels or will it be literally an on-demand product?
ZITTER: With hopefully some… I hope I’m not held to too hard a task by people in the future who look at this, I think that television will be on-demand. I think there’s going to be some way of, I’ll call it curating. Linear television was curating where people looked at all the available things, rejected some bad things and if you’re watching HBO, you could tell it’s HBO; if you’re watching Fox, you knew that that’s Fox because it had the Fox edge to it, but I think one thing we’ve learned is that whether it’s through PVRs or downloads or podcasts or SVOD, that given the choice consumers now are watching nearly ¾ of their television who have it available to them on-demand. So I think it’s not just 20 years from now, it’s going to be a lot sooner than that. They’re still going to want and need people to sort through all the chaff that’s out there, particularly these days the latest thing is personalized TV, it’s consumer to consumer, and there’s going to be so much stuff that how do you find things that fit your particular interests or needs, how do you find the good stuff, and I think that’s going to be done through user interfaces more than something that’s linear. There’ll still be some scheduling to it. It’s just like, okay, we’re going to make something first available tonight at 9:00 PM, and it’s just like the people who will get in line for Yankees or Mets tickets or for the next Harry Potter book. They want to buy it at midnight, they don’t care to wait until the store opens at 9:00 AM. Okay, so you’ll have some anchor points, but by and large consumers like to control their lives and the more control they have, I think the happier they’ll be. The one thing that when I came to HBO out of the various other places that I’ve worked – I mean, they’ve each been an experience I’ve built upon – the thing that I found so thrilling about HBO and stimulating to me was the caliber of excellence of the people here, and I worked at a broadcast network, I worked at local and regional companies, but when I came to HBO and I saw in each department – it was the marketing department, the programming department, the legal department, all of these departments – the people who were running them and the people who were in them were so damn sharp and they were really good. So that set a bar for me that I strove to achieve and it always stayed that way. Even when people would leave HBO… There’s an HBO alumni club, okay, and the people who run various channels or have run various networks around the country, many of them are HBO alumni. So we all stay friendly, even though sometimes we’re competitors, but what it’s done is it made HBO very much a collegial place, and by that I mean people who come from different backgrounds, different expertise feeding off each other to create this good product and while it was easy in the early years, it became much more difficult in the later years because cable operators used HBO as a tool to pull people through higher and higher price points, and so we had to get better at what we did and the competition got better, and we had to figure out, well, do you want to be first in things or do you want to be a little bit more selective about where you want to go. So the fact that for me I was part of a team of what I consider to be the best people in each of their disciplines in the television industry was, I think, something really, really special, and frankly any time when headhunters would call and you’d think of do I want to make a change, or something like that, it was really very difficult to find something else that I would find as stimulating. It’s not just the job, or it’s not just working for a company that’s at the top of its game, but it was really being part of a group of people who are all just very stimulating in that regard.
UMSTEAD: Thank you very much, Mr. Zitter, for sitting down and talking to us, and thank you very much for joining us. I’m Tom Umstead for The Cable Center. Take care.
elationships coming out of Cox as a former CEO but he took a leadership position on the broadcast side in putting a flag down and saying we have to be in this business and we have to be in it in a meaningful way. We took a lot of heat, there was a lot of struggle, there was a lot of push back but I think that Bob really laid out an invitation for a lot of the other broadcast companies to get in and stay in. If you look back, CBS got into the cable business and they didn’t make it.
NELSON: Yeah, there was a notable flameout in the early ’80s, in fact.
ZASLAV: We got in despite that. They got in the news niche and they didn’t make it. We went in with a narrower niche and we lost a lot of money and there were a lot of people that said why don’t you hang it up, so we stuck with it and part of it has to do with a real belief that ultimately the cable business was going to succeed because the cable business had to succeed for us to be successful. The scale of the business wasn’t big enough at the time in the early ’90s for CNBC to be a meaningful business. It need to grow the sub base in a real meaningful way, so part of it was a bet that the MSOs would be effective in marketing their product to consumers and that more and more consumers would raise their hand and say yes I’ll take cable and I’ll pay for it.
NELSON: So CNBC’s legacy is exploiting a niche, staying true to that brand, building it, and NBC’s is essentially bridging the divide between the broadcast and the cable side?
ZASLAV: Bridging the divide and putting the pedal to the metal. It’s not just CNBC. It’s CNBC and then investing in Court TV, A&E, green lighting the launch of History with our partners, investing in Sports Channel America, we did a deal with Chuck Dolan to start News 12, getting involved in the local news business, Bravo, American Movie Classics, WE, National Geographic. So there was a real belief, and the belief was backed up by losses and money, that we think it’s going to work. We said we thought it was going to work at a time when we had to go to meetings every quarter and people looked at us and said, “You think this is going to work? It better work!” So we’ve been redeemed.
NELSON: How about you personally in terms of… I know you’ve got a lot of your career in front of you, but your legacy to date? How could we sum up how you feel what you’ve contributed thus far?
ZASLAV: Well, I think I’ve been a good partner for Bob Wright in trying to effectuate his vision of getting us into the business. I was at the leadership table to try and figure out how do we make this work and took a lot of heat to make it happen. When you look today at where we are, Telemundo, Bravo, MSNBC, which was a huge struggle, getting the cable industry to support us and continuing to get the support of NBC and GE in this endeavor, there were some very, very tough times and some dark times, but I think that overall the excitement of the cable industry even at times when we were missing our numbers, even when it seemed like we were out of favor, it’s the excitement of being in this entrepreneurial business and it’s the fun of hanging around with the people that are in this business, not just on the programming side but a lot of the great people that are in this business that always made me feel like if it doesn’t work out it’s been a great run and I’ve met a lot of great people and I’d rather be having fun failing with this group than working and making more money with anybody else.
NELSON: When you’re out of your suit and tie mode and at home because you obviously have a great love and passion for the cable business, what do you do to relax when you’re in front of the TV set, other than watching some of your own networks checking on what’s going on?
ZASLAV: I watch a fair amount of TV, but I have three kids so I’m trying to catch up with them, trying to make up for the fact that I’ve been on the road and running around, so I spend most of my time with my wife and kids just relaxing.
NELSON: One more thing, you’ve got in terms of this whole synergy, at the time this interview’s being done, we’re just waiting for the Olympic Games to start and the whole way you’re using that, talk about that because that’s really in a way the ultimate synergy of all these networks working together and the same event being carried on multiple networks.
ZASLAV: We look at the Olympics as this great, one-time asset. It only comes around every two years but when we were growing up you’d go to school the next day and everybody watched the episode of Laugh In or everybody watched the episode of Dallas. The world has changed now and people have personalized the way they watch television, so emotionally and culturally, the Olympics is something where everybody stops for three weeks every two years and they watch the Olympics with pride and excitement, and so for us those Olympic rings mean a lot because we’re going to be the Olympic provider through the next, how many Olympics? Through 2012. But more importantly, we’ve tried to innovate with it, and I think you’re right. It is an example of how the barriers have changed where the Olympics for years were just on the broadcast platform. Our last Olympics, when we really evolved, it was on CNBC and MSNBC, and now for this Olympics it’s going to be on CNBC, MSNBC, Bravo, USA, it’s also going to be in Spanish on Telemundo, and we’re doing an HD Olympic feed that’ll be available as a separate 24-hour HD channel that’ll be available to the cable operators and to the DBS distributors and to our NBC affiliates, and that’s just he beginning. But I think it does really represent the fact that there are no more walls. The Olympics was a deal that was done with the sports division that was really meant for the broadcast platform and it was Dick Ebersol’s vision to say, “Wait a minute, we’re not a one platform company. We have all of these platforms, so how do we use all of these platforms to make the Olympics more exciting, more effective and touch more people.” So that’s what we’re doing and we have on the drawing board all kinds of ideas for the next Olympics, which will include not just HD but VOD and other meaningful ways to reach viewers with all the platforms and I guess that’s really what this deal was about for us. More platforms, more ways to reach viewers and more ways to get our brand as an important place with people.
NELSON: Just tell me, you’ve had some experience with The Cable Center, what you feel the role of The Cable Center is for the cable business, and its importance?
ZASLAV: To me I’m a huge fan and involved in The Cable Center because I think it’s the one place that has a real sense of where we’ve come from, what’s the history of the cable industry, how did we grow up, what did we do well, what didn’t we do well, and as importantly, it’s a place you can go not just to see where we’ve been but where we’re going. If you want to see where HD is, if you want to see what’s going on with VOD, if you want to talk to somebody about where the business is succeeding and where we’re struggling, it’s a great place to go to find out those answers. We need to find out those answers.