Office of John Malone
CEO of Tele-Communications, Inc.
Englewood, Colorado
September 7, 1988
John Malone was arguably the most powerful man in cable. His company, Tele-Communications Inc., was the nation’s largest cable operator. He had an electrical engineering degree from Yale and a PhD in operations research from Johns Hopkins. But he built his reputation and fortune leveraging his strategic investments and acquisitions, which made him and TCI core to every major cable deal and issue for decades. It fittingly earned Malone the nickname Darth Vader.
Establishing, supporting, or eliminating players from the cable business made him a Vito Corleone-like figure. He would give as long as he could get something he wanted of lasting value in return. So when I was developing a strategy to move a reluctant NBC into cable, I knew just where to turn.
In September 1988 I traveled to Malone’s mile-high headquarters in Englewood, Colorado, to personally appeal to his better angels to help NBC get in the cable news business. I knew he would at the very least look at any startup, acquisition, or rescue, knowing his move would set the market price for cable properties. It was an eerie experience sitting across from Malone in his office, which was noticeably devoid of television screens and other technological distractions. You could almost watch the intricate thought processes as he considered putting his money, clout, and resources to work.
By the end of that meeting, the two of us had crafted the concept for a business channel as a way for NBC to enter 24-hour cable news. Malone promised his support as long as we did not directly compete with CNN, took the struggling Tempo Television channel off his hands, and gave TCI’s cable systems favorable carriage terms. Malone’s handshake guaranteed TCI’s broad, paid distribution of the new channel as long as it was backed by NBC News. The consummate deal maker sold us Tempo and leased a satellite transponder as a platform for the new Consumer News and Business Channel when it launched April 17, 1989. Half of CNBC’s initial 10 million homes were from Tempo. And that’s how NBC gained entry to the exclusive cable club.
NBC was just another chess opponent for Malone, but he had all the moves. He brilliantly leveraged what he had for more, and I left satisfied to have CNBC part of the scheme.
◆ David Zaslav. In order to launch CNBC, the cable guys had to let us in their business.
At that time, no cable channel was making money, not even CNN, and it wasn’t clear that business news would do any better. But John wanted to tap the resources of NBC News to draw cable subscribers. So with a handshake agreement from John, Bob left to literally go door-to-door to the other major cable operators seeking similar support for CNBC. The new channel launched in April 1989 as the Consumer News and Business Channel. And just like that, John Malone got us in the door and into the cable news business.
When NBC finally had a cable channel of its own, CNBC, they set up in New Jersey where no one wanted to go, Bob was the only person who visited there regularly. If they had tried to make it more a part of NBC News, it would have killed it. The power and politics of NBC looked down on it. Cable was viewed as the kids’ table for a long time; a place where NBC lost more than the cost of two primetime series pilots. But Bob just nurtured CNBC and stayed the course. ◆
◆ Tom Rogers. CNBC was a fresh voice in news that just happened to be loosely linked to NBC News, which had no distinctive presence of its own on cable. It became NBC’s and the broadcast industry’s first test with cable operators, network TV affiliates, and our own news division. No one trusted a broadcaster to get into cable and have any good come of it. And it became a real test of wills. It wasn’t enough to demonstrate your honorable intentions. You had to be able to outsmart anyone who wanted to sabotage your efforts, including GE. Bob turned out to be our secret weapon with both. ◆
Two years later, as CNBC was still straining for acceptance inside and outside NBC, we had what I believed was a golden opportunity to fortify CNBC’s resources and profits quickly and cost effectively. The long-struggling Financial News Network had filed for bankruptcy, and Tom Rogers and I negotiated a deal to acquire the troubled company. CNBC had only 18 million subscribers and mounting losses its second year. Incorporating FNN would double its subscriber base and put it on the fast track to profitability. I knew that 40 million homes were the key to success.
Then Jack Welch vetoed the deal. His argument was that it was too risky and that GE, as a rule, did not buy broken assets. But I knew NBC couldn’t afford to lose the fight for FNN, and so I asked for a meeting to try to change Jack’s mind.
The office of General Electric chairman CEO Jack Welch
Fairfield, Connecticut
May 6, 1991
A bankruptcy court judge was about to decide FNN’s fate. So, that day in Jack’s office, Rogers held on like a bulldog. “Come on, Jack!” he pleaded. “This is a rare opportunity that will make all the difference. If we didn’t think so, we would not have been camped out in your office the past two days!” I joined the discussion by speakerphone from New York. “This is what it takes to gain a more powerful foothold in the cable business, and it’s only going to get tougher and more necessary in the future,” I reminded Jack.
Welch, who insisted that each of GE’s diverse businesses lead their respective fields, bellowed, “Is this a real business? Can we win it?” GE’s board of directors was already uneasy about CNBC’s startup losses and NBC’s unpredictable entertainment economics. The unwritten rule at GE—if you bid on something, make damn sure you don’t lose!—meant GE would have to increase its bid for FNN.
Jack turned to GE vice chairman Larry Bossidy, who was seated on the other side of his sprawling wooden desk. “What do you think about it?” Welch asked. “I just don’t see how it makes any sense!” Bossidy responded. Glancing back over his shoulder, Welch could see Rogers was visibly stricken with disappointment. “Look, Tom. Do you really believe this?” And when Tom vehemently agreed, Welch said the magic words: “I’ll reverse my decision and support the proposal if you can provide tangible evidence that John Malone will support the deal and not screw us.”
“Done!” Rogers shouted. And before Welch had time to change his mind again, even before I signed off by phone from New York, Rogers was out of Welch’s office to go buy himself a bankrupt cable service.
Having worked with him to hammer out new cable regulation on Capitol Hill, Rogers knew how to tap Malone’s deep-seated influence and intellect. TCI was one of the major cable system operators that controlled Turner Broadcasting System, which was attempting to block NBC’s acquisition of FNN on the grounds that it would be anticompetitive to its Cable News Network. In fact, Ted Turner appealed to his board of directors to back his own FNN bid. It was a vote that Malone, as a lead investor, could sway in CNBC’s favor.
Rogers was betting Malone would protect his equity stake in CNBC. And he was right. Malone had every incentive to continue supporting CNBC, which was gaining a formidable, loyal viewer base and advertiser support during and after a historic stock market crash. Any disruption in the continuous stock ticker across the bottom of CNBC’s screen, which was new to television in general, would solicit calls from viewers angry about not seeing their only real-time market check in the days before widespread Internet and streaming video. It turned out that business news was a real business.
◆ Tom Rogers. I remember telephoning John Malone in May 1991 to remind him that his equity interest in our business channel was being compromised by his support for Ted Turner’s pursuit of FNN. To Malone’s credit, Turner did not get approval from his board of controlling cable operators to aggressively bid on the faltering Financial News Network. That left NBC to make a virtually uncontested bid for FNN in bankruptcy court. Malone told Turner and other TBS board members that a run at FNN was not worth the risk of creating new monopoly concerns in Washington. Malone reasserted his pledge to provide CNBC exclusive placement on his TCI cable systems. But we kept him in check, vowing to significantly raise license fees for other NBC Network programming if TCI ever supported a competing business channel. That was the hand we played. John Malone taught us everything we knew. ◆
With solid backing from Malone, and Turner out of the way, I immediately turned to negotiate an FNN deal in bankruptcy court. GE paid $154.3 million for FNN on May 21, 1991—or $60 million more than Jack Welch intended for us to spend! CNBC hired only about 1/5 of the company’s 300 employees while doubling its subscriber base to 40 million homes. Sue Herera, Bill Griffeth, Ron Insana and Joe Kernen were among the FNN anchors who became longtime contributors to CNBC.
The FNN deal provided momentum for NBC to establish CNBC’s cable value while amortizing the news division’s expenses even though everything about the operations was painfully kept at arm’s length. CNBC became a training ground for on-air talent and less costly nonunion operations headquartered in Fort Lee, New Jersey, across the Hudson River from NBC News’s Manhattan hub. Unlike broadcast television, it generated a new source of subscription and advertising revenues even as an unprofitable startup. But it wasn’t until the mid-1990s, and the launch of CNBC Asia and CNBC Europe, that Jack Welch and the GE board began to appreciate its worth.
◆ Roger Ogden, managing director NBC Europe. Today, iPads and smartphones facilitate our ability to search for and find slivers of information. It has become second nature for us to find exactly what we are looking for. But back then, CNBC’s real-time use of technology to cover business and the financial world had an impact. CNBC made the markets more democratic. It gave everyone—individual investors and senior company executives alike—the same information at the same time. It made everything about business more transparent and accountable. It created a generation of financial pundits and made names of Wall Street chief executives and their companies part of the mainstream. The new technology made it possible to push CNBC into international markets. There was no road map, so we created our own. ◆
Forging CNBC was a brutal effort. There was resistance and skepticism from everyone I had to deal with: NBC executives and TV station affiliates, advertisers, the NBC News division, and, of course, the top executives and board of directors at GE.
In the process, we demystified business news. CNBC began building segments and shows around personalities that included FNN carryovers and newcomers like David Faber. Taking their cues from ABC’s fledgling ESPN, the producers created a sense of drama and urgency with countdowns and statistics and post commentary to major announcements by the Federal Reserve or big companies. It became a data-driven business, and the stock ticker across the bottom of the screen was the center.
Once we figured out that great data attracted audience and advertising revenues, we were off and running. The audience shifted from retirees to any-age educated investors. But if all we were doing was showcasing data and business news, then we would be too much like Bloomberg, so the news personalities we brought in distinguished us from the pack. It was our way of decommoditizing the business. The growth of the Internet devalued the novelty of our running stock ticker and other data, which was suddenly available to everyone everywhere on every kind of device. That’s when viewers began listening to our business news anchors and expert contributors as equals. We had excellent presidents and chief executive officers of CNBC, including Al Barber, Roger Ailes, Bill Bolster, and Mark Hoffman.
And every pioneering step we took in cable further transformed broadcast television.
◆ Tom Rogers. It wasn’t clear then—and it’s still not—that major media companies have the ability to achieve productive integration between multiple parts of their business. CNBC, for a lot of reasons including its cost structure, was very much set up to be totally separate from NBC News. It was located across the river in New Jersey with nonunion employees and minimal direct involvement so as not to upset the news division status quo. As broadcast and cable got more comfortable with each other over time, branding and interaction increased. But the place where you really saw this take hold years later was on MSNBC. We had to take a low-key strategic approach to both cable news channels to make it look like we weren’t even breathing the same air as CNN. ◆
◆ Pier Mapes. Even before CNBC’s official launch, we faced huge dissatisfaction from our affiliates wary of cable. It came to a head at the affiliate convention in June 1988. Angry station general managers confronted me and Bob, demanding continuing cash compensation and program exclusivity—historical practices that were no longer economically feasible or justified with intensifying competition from cable and the Internet.
CNBC became the first battleground where many of these issues intersected. Even though some alignment between NBC and CNBC made strategic and economic sense, affiliates viewed it as the destruction of their way of life.
It got very, very tense during a closed-door session at the convention. Station owners stood up to read Old Testament passages from the Bible about truth and honesty. Bob and I just sat there listening to it all and catching the spears. When Bob finally spoke, he was strong and steady without raising his voice. He explained that CNBC was just good business and that cable was the future. We stood firm on our plans for CNBC, and the standoff made Bob even more resolved to keep the new cable channel separate from NBC News.
It was the opening battle of an affiliate-network war that raged for years. It eventually evolved into more of a mutual partnership that was redefined by changing technology, economics, and rules. The interaction and connection between the NBC TV network, CNBC, and other NBC channels are now commonplace. It’s just that the years in between weren’t pretty because of other major changes in network-affiliate relations that created a lot of paranoia and anxiety.
But when it came to CNBC, there were no easy trade-offs or ways to pacify their fears. All we could do is to promise there would be no encroachment on NBC News services and that the revenues generated by such cable networks eventually would offset broadcast revenue declines to keep NBC in business. It took the better part of a decade for them to see it for themselves. ◆
Ultimately, the issue became how to break through the mistrust with our own NBC insiders and affiliates while we were trying to establish an agenda for change. It was a difficult challenge because it was so unexpected. Broadcasters owned the world at that point, without teammates. No one expected cable to grow as fast and as strong as it did. When station owners realized that cable could get out of hand and that their own network was entering the fray, fears escalated about the money at stake. So their issue was protection. Broadcasters took a defensive posture with cable and satellite television, and some of their positions weren’t very logical, even in the face of undeniable ratings and audience statistics.
None of this was helped by their skepticism about me, a GE executive who had spent some time as the head of a major cable company. That got in the way of them seeing that the clock was running a lot faster than they thought and that the competitive landscape was quickly changing, whether or not they liked it or agreed with it.
By the time NBC’s cable portfolio included MSNBC, seven regional sports networks, and CNBC in 1997, the estimated value of the company’s overall cable holdings was about $2.5 billion. But it still would be years before broadcast network affiliates began to recognize that if NBC wasn’t in the cable business to win, a competitor would be.
◆ Dick Ebersol, president NBC Sports. Bob really believed that cable would be the future. He single-mindedly masterminded the whole way into CNBC and then found the right people to run it. The world was dazzled when they did that, because no one saw it coming. ◆
I made a decision when I came back to GE in 1983 after 3 years at Cox that I was going to pace myself, and I was going to pay a lot of attention to GE cultural issues. I was not going to let them get ahead of me, so that I wouldn’t get caught off guard. I also decided that I was going to enjoy what I was doing. Whenever something I was working on wasn’t enjoyable, I’d try to focus on the aspects that were enjoyable to me. It’s a little like arguing with yourself. If you get tied down in the negative stuff, it will really break your back. If you ever got into any of that too deeply, you couldn’t get out. You should keep yourself from being dragged down. It happened all day, every day.
Union-related matters—particularly during the development of CNBC, and later, MSNBC—were a perfect example of the kind of black hole I’m talking about. Ed Scanlon, who had formerly been the head of human relations for RCA, really enjoyed the union stuff and was very good at it, so I stayed out of a lot of it. I fully accepted responsibility for what we were going to have to do with the unions, but I also delegated it to people I was comfortable working with and trusting. Ed was an über negotiator—some called him a contract consigliere to me and Jack Welch who could stand up to any marquee talent or even 150 angry striking members from the National Association of Broadcast Engineers and Technicians storming Ed’s office to protest labor negotiations.
If they had gone sour—and it didn’t—I would have accepted that. It would have been my fault.
I also learned to rely on my family as an insulating factor so that I could separate from everything about the business. So that I could stay true to my roots and my principles. No matter how big you think you are, you should never forget where you came from. Because of the nature of what I did at NBC, I really could never completely separate the business because it permeated every aspect of life. But I never brought home the business problems that filled my day. The problems were fleeting; family would always be there. For a long time at NBC, I commuted back and forth from New York to Fairfield, Connecticut, so I had 3 hours in a car every day. That was a great decompression time for me. I would leave very early, at about 6 a.m., so I could get through the newspapers, read reports, and look over my agenda. I would get my thoughts clear so that when I got out of the car, I was ready to go.
That hour and a half of prep time in the morning made all the difference. The reason it is important has everything to do with leadership. Juggling so many balls, and trying to transform and grow businesses, requires motivating and monitoring teams of people to do the heavy lifting. If you don’t have a clear sight of what needs to be done, they won’t, either. And when you are constantly moving from one big issue or project to another and dozens of meetings in a day, it’s easy to find yourself tangled up in the details instead of leading with a big-picture view of things.
Everything we accomplished at NBC was the result of teams of people working together by pulling and stretching in the same direction. Trying to make sure everyone is up to speed and focused on the same goals may sound mundane, but it is mandatory for making progress. The guy with the staff has to remind everyone where they’re going and what they are doing when they get there.