May 14, 2021 • 39 mins
How did the Home Box Office network get its start? And how did it grow into the giant it is today?
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Episode Transcript
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Speaker 1 (00:04):
Welcome to Tech Stuff, a production from I Heart Radio.
Hey there, and welcome to tech Stuff. I'm your host,
Jonathan Strickland. I'm an executive producer with iHeart Radio and
I love all things tech and it is time for
a classic episode. And this is gonna be a doozy
because it's actually a three partner. So for the next
(00:26):
three weeks, we're going to have some classic episodes play
out over a full story and it's one that, uh
that you know continues today. This is the HBO story.
And obviously a lot has happened with HBO since I mean,
there's HBO Max. That alone deserves a full episode. But
(00:46):
let's learn about how HBO and the cable industry really
were tightly knit back in the early days. And uh,
what better way to do it than to jump right
in here we HBO Home Box Office. That is what
we are talking about for the next three episodes because
(01:08):
there's so much history involved and and I never realized
it before we started researching this, but if it weren't
for some of the people who were working in HBO's
early days, we might not have cable TV or or
satellite cable as we know it, right, Yeah, For example,
all those other basic cable stations that you are familiar
with may not have existed had it not been for
(01:30):
some of the efforts on the part of multiple players
in the story. And also some of the other issues
everything from scrambling signals to piracy to streaming online. All
of these things come into play with HBO and and
original content as many many of you statistically probably know, yes,
(01:51):
whether whether you are subscribers or the other type. So
we're going to um, we're gonna have to journey back
in time. So yeah, I know, we just we just
tossed it off recently, but it's gonna getta workout. Let's
file into the way back machine. As it turns out,
we're gonna have to go back way before HBO was founded,
all the way back to nineteen twenty two. So let's
(02:15):
let's just set that right here, and uh push the button.
Lauren pushed. All right, here we are sunny nineteen two.
N's when Henry Loose and Brittain hadn't decided to u,
(02:35):
you know, pack it up. They had been working for
the Baltimore News and they decided they didn't want to
do that anymore. They cut their ties, said their goodbyes
and went to the Big Apple. Because if you can
make it there, well you know the rest. So they
had this crazy idea they wanted together to launch a
brand new magazine with the title of Time, and they
(02:58):
got about eighty five dollars and startup money from initial
stockholders and uh and incorporated in that November of nineteen two.
That's right, So the very first issue of the magazine
launched on March third, nineteen twenty three. Now, this company
would actually debut lots of other titles. It wasn't just Time.
(03:18):
Time was the starting point. But then they also launched
Fortune in nineteen thirty, which was a year after the
great stock market crash of nineteen twenty nine when a
lot of people lost their fortunes. UH. They also launched
Life in nineteen thirty six. The magazine Life, the actual
you know, point of existence, had existed for billions of
(03:38):
years we know, yes, at least on Earth, perhaps longer
in other places, but the magazine itself didn't come into
existence till nineteen thirty six. And then, of course the
most important magazine of all time nineteen fifty four, Sports Illustrated.
I've never read a single issue I know, of sports.
But it's pretty it's pretty big. All of these are
(04:00):
pretty big. The company has certainly become a print media giant,
and I mean, at the time was a print media
giant and would go on to become an other media giants, right,
because why why would you limit yourself to print media?
They wanted to diversify. So moving into the nineteen sixties,
just just come along with us. The nice thing about
(04:21):
the way back machines that lets us go forward in
time much faster than backward. We don't even have to
get into it. So nineteen sixties, Time Incorporated starts looking
at a way of getting into this crazy television business
to branch out from print media, and so as doing that,
they looked at a little company called Sterling Communications and
(04:42):
they bought up a twenty steak. In that company, there
was a man running that by the name of Chuck Dolan,
who um was it was a bit of a visionary, Yeah, oh,
huge visionary. He's talked about sometimes. I mean, despite the
fact that he's kind of unassuming and and pretty off
spoken and doesn't really he's not a public figure the
(05:03):
way that some of our other tech visionaries are. I mean,
he's not he doesn't have the stage presence of say
a Steve job, but nonetheless, without him, we probably would
not have cable TV as we know it. Um He
was born in Cleveland and served in the Air Force,
dropped out of John Carroll University and started up a
company that edited sports reels for TV syndication. Eventually he
sold that and moved to New York where he founded
(05:25):
Sterling in nineteen sixty. Yeah, that little company where he
was adding sports footage. He did that out of his home.
He and his wife, He and his wife in Cleveland,
in their house, ran this entire company UM and and
sold it for enough money that he was able to
found a cable television company. And at the time, cable
was not what it is today, right. Yeah. In fact,
(05:45):
cable at that time was really meant to deliver broadcast
television as an over the air television. This is the
stuff that normally you would put an antenna on top
of your TV or perhaps on top of your home
or apartment building, and you would get signals over the
air which would then run down to your television. A
lot of people considered this free television. It's not like
you had to subscribe to it. However, it's ad supported TV,
(06:08):
I'm sure, and I mean nothing's nothing's free there in
its freelance. Yeah, so even public television that exists on
on grants and donations, the other commercial TV that existed
through ads supported. But anyway, the issue was that in
rural areas you couldn't necessarily get a good signal because
if you did not live near a transmission tower, the
(06:30):
transmission tower might not have enough power to put out
there so that you could get the same sort of
content that you could if you lived closer. Al Right,
So cable stations were really just ways of getting TV,
regular old broadcast airway TV out to those rural areas exactly.
It didn't exist in big cities like New York, right,
because the thing about New York was that you happen
(06:51):
to live really close to all those transmission towers. Yeah,
everything was being broadcast out of the Empire State Building basically.
Except the thing is is that New York has other skyscrapers,
and if you lived, say behind a skyscraper, you might
not I mean you absolutely wouldn't be able to get
that signal from that tower. Right. If you got a
signal at all, it would be really weak, so you
would have lousy reception, which meant that there were people
(07:13):
in New York who might live a few blocks away
from the Empire State Building, but their reception on their
televisions were worse than what you might see in the
suburbs in New Jersey. You can get a better in Jersey.
Why why you come on? Look, you gotta pay to
get out of Jersey. Why would you have to You
know that that was the way they got you. You
have to pay to get out. So then you're like, well,
I get better TV over here. Anyway, I'll just stay
(07:33):
in Jersey. I apologize everyone for starting Jonathan on that.
I promise I won't I won't continue. I apologize as
well that at any rate, this is exactly the case.
So what Dolan thought was, why don't I bring cable
into the city. That way we can have the same
single over cable and even if you live right behind
a skyscraper, you're still going to have great reception. Sure.
(07:55):
The thing is that it's really I mean, it was
and still is really expensive to late this cave. We
we're talking copper cable at the time. By the way,
fiber optics wouldn't come into the picturing until the nineteen eighties. Yeah.
And not only that, but it was in New York.
They had had a blizzard several decades earlier that had
wiped out a lot of the power lines and and
telephone lines, and as a result, city officials said, hey,
(08:18):
you guys, you're gonna have to bury this. Everything has
to be buried so that way we will never have
an outage on this scale ever again, which meant that
the cable that Dolan was gonna lay would have to
be underground. Two. This meant that per mile of cable minimum,
you'd have to spend ten thousand dollars per mile. Now
in New York to get those uh apartment buildings, those
(08:41):
high rise apartment buildings wired, you have to build a
cable through the apartment building to eat with a branch
to each unit, right, that's the only way you could
do it. That made it go up to around three
hundred thousand dollars per mile. And this is in nineteen
sixties dollars. We're not talking about adjusting for inflation here,
so this is really expensive stuff. And Dolan, you know,
(09:03):
this was a very ambitious plan. And Dolan saw the
long tail, right, He saw that this could be profitable,
but it was going to require a lot of work,
and it perhaps more work than he anticipated when he
first got into the business. Yeah, Sterling almost certainly would
have gone bankrupt if it hadn't been for times investment
in them at that at that time. Exactly, So you're
gonna say the word time as many times. There's no
(09:26):
way of avoiding it. Uh, just wait till Warner gets
in there, because I use that word all the time.
Nineteen seventy one. So, still trying to make Sterling Communications
a profitable company, Dolan begins to brainstorm ideas that would
convince subscribers to join on to this, to to actually
willingly become a customer of cable, because again you have
(09:47):
to convince people, Hey, I know you could get this
free over the air on your antenna, but the reception
is lousy. Pay for it on cable, you'll get it.
You'll get a great experience. And the people who they
were contacting we're saying, but why would I Why what
I do that? Yeah? I mean yeah, the stuff I
get over the air is lousy. But if it's going
to be the same thing, just better quality on cable,
I feel like I'm getting the rough end of the
(10:09):
deal here if I have to pay for it. So
he says, what what can I do to differentiate cable
to make it more more attractive? Ah? What if we
made a special channel just for cable. It's not for
over the air, Only people who are subscribers to the
cable will get it. And it has to be something
that's really really compelling, something maybe that carries a lot
(10:32):
of sports with it. That was his first approach, and
he called this idea the Green Channel. He he referred
to it and as the Macy's of television. And this
was not an entirely new idea. Actually, our CIA had
created a radio network specifically to give people a reason
to go out and buy our Cia radios. So why
would you buy something where there's no content? This is
(10:54):
sort of the argument people have about four K televisions
right now. Why would you go out and get a
four K TV? No? Same argument. That argument has been
around ever since we started making this kind of tech.
Oh yeah, and and understand that at the time there
was some programming on cable stations, but most of it
was either extremely load budget or or very local, like
(11:14):
a clock streaming the local Time, or just weather reports
or at the very best public access, although that didn't
become a mandatory thing, uh, you know, branching into the
Wayne's World kind of kind of end of the deal
until after the FCCS Telecommunications Act of two, wherein they
said that any station that had more than subscribers had
(11:34):
to have public access content. Yeah at this time, but
but not even that. I mean we did not even
have Wayne's World, so that it was not Party Time,
It was not excellent, it was not and nor Anton jessp.
We had no doctor Anton Jessip. That's no. I don't
want to imagine a world where there's no Anton Jessip.
But so so it was considered a very commercially unviable
space exactly. Yeah, this was really again just an alternative
(11:58):
to deliver broadcast over the air TV. It wasn't thought
of as a way to create new types of content,
and also very regionalized, very much spread out and separated.
Like we didn't have these massive cable companies that had
enormous networks. You had all these different, smaller regional companies
that serviced little rural areas. And so even if you
(12:18):
wanted to launch a big idea like a big program.
Let's say that it's a company that's out in the
middle of nowhere, in the in the middle of a
state where there's hardly anything else, and they think, we've
got a great idea of our show. We're gonna produce
a show. They might only be able to deliver that
show to a very small audience because it wasn't a
nationwide network. So very different world than the one we
(12:40):
live in now. So how do you make the Green
Channel a must buy product? You know, we had a
lot of these attempts to make pay television channels before,
but they had failed. And again that over the air
for free model was very compelling. Well, nineteen seventy two,
Dolan decides to pitch this idea to Time, which had
(13:01):
invested in Sterling Communications. Right. He wound up talking with
one of their lawyers, a man named Jerry Levin, and
the two convinced the company to take on the idea. Yeah,
and so, fifty years after the founding of Time Incorporated,
remember those back in ninety two. Now we're in nineteen
seventy two, Time Incorporated launches a new cable television channel.
(13:21):
They had taken the Green Channel idea. They renamed it
after a series of long and arduous meetings, and they
figured that this name wouldn't really stick for that long
because it was pretty lame. Yeah, this was supposed to
just be a temporary kind of placeholder home box office.
That was the name HBO for short. They thought, will
will home box office until we figure out something better.
They never figured out anything better, and they went with it.
(13:43):
Uh So this was again the idea originally was a
paid television premium channel that would carry uncut, uncensored movies
that you wouldn't find on broadcast television, plus a few
live sports events from Madison Square Gardener Right, So again
very new thing. The cable television itself did not have
that many subscribers, and they in time, was not ready
(14:04):
to commit full on with this, you know, and so
they said, well, let's find a test market. Let's look
around and see if we can figure out what we can,
you know, how to develop the strategy to make sure
it works before we really throw in. And they did
have on their side the fact that TV execs were
eager for a way to make television unfree. I mean,
you know, if if you can turn a profit on
(14:24):
something that's always better than giving it away for free
and UM and stealing cable is a lot harder than
it is to steal signals out of thin air, right, Yeah,
if you were just broadcasting this over the air, then
obviously anyone with an antenna could get at it. There'd
have to be some other kind of scrambling thing. And
we'll talk about scrambling later on in another episode. Sure,
But okay, So, so this test market wound up being
(14:44):
UM in Pennsylvania and New York. Yeah, so the very
first one was just Wilkes bar Pennsylvania, tiny community like people. Yeah, yeah,
we're talking. I mean, I think they had four hundred
subscribers at first. I think three five was the estimate,
and I saw a title so even even fewer than that.
But the reason for that, uh, well, they wanted to
(15:05):
do Wilkes Barre Pennsylvania mainly because one of the big
partnerships that Time had struck was with the NBA, and
the idea was to be able to cover NBA games
live so that people who wouldn't have access to that
kind of programming could actually watch it live and that
would be really exciting and be a good reason to
subscribe to the service. However, the NBA, like a lot
of different sporting organizations, has blackout rules where where they
(15:31):
don't want you to uh to publish too broadcast, broadcast
a game within a certain radius of the stadium where
it's being played exactly. And so if they had launched
in say Alan Town or Philadelphia, that would have been
in the radius for all the Philadelphia teams. So they said, well,
why don't we do Wilkes Bar. It's just outside that radius.
(15:51):
We're not going to be hit by any blackout dates.
It'll be the best possible experience and that will give
us the test that we need that can be used
as word of mouth. So subscriptions six dollars per month
for HBO. So uh it goes live on November eighth,
ninety two. And the very first movie carried on HBO
(16:14):
was titled Sometimes a Great Notion, A fantastic film about logging. Yeah,
Henry Fondo was in it and Paul Newman was in it,
and it was really a story about individualism and being
able to strike out on your own and to survive
against odds both from nature and man. And I'm making
(16:34):
it sound way more exciting than what it really was.
But yes, that's that was the movie. And then the
other thing that they aired was a hockey game, not
an NBA after all that travel. Yeah, the NBA does
not tend to play in hockey games. Uh. This was
a game featuring the Rangers against the Canucks. And I
know you're all dying to know who won, Rangers five
to ALRIGHTMG spoilers. Yeah, well, you know, for those other
(16:58):
people who are using way back machineans of their own
to go back into nineteen seventy two and watch all
those games, forget I said that. So back in these
early years, the service would only be on the air
for a few hours each day. It was not a
twenty four hour channel, all right. They would sign off
at a certain point. Yeah. I actually watched the little
cartoon that used to play at the very end. It's
very cute. This is it's actually like several minutes long.
(17:21):
It wasn't like a little twenty second thing. But it's
a cartoon showing, you know, lights going out in the
city and setting an alarm clock and fluffing a pillow.
And this is all cartoonish, right, all cartoons. It was
essentially saying good night, good night. Yeah, it was at
almost had a night veil moment again there. Boy, it
just creeps in, doesn't it. So meanwhile, on the back
(17:43):
on the corporate side of things, so so that's what's
going on on the actual television. On the corporate side
of things, you have Time Incorporated, and they had to
carve out space for this new uh, this new enterprise HBO.
So originally they started making space in their own office
building and Time Incorporated headquarters in New York, which was
(18:03):
already a bustling office. Yeah. So that meant that as
HBO began to grow, and it grew pretty quickly, Uh,
it meant that they had to start getting creative finding
places to stick people. So departments wouldn't necessarily be all
set together. You might have a department head who's on
a different floor from the rest of the office. Uh.
There were stories about people having to find an office
(18:24):
space in an old broom closet, or or four or
five people all sharing a common office area that used
to be a meeting room. That kind of stuff, things
that we can kind of identify with here at how
stuff works. But the interesting thing was that this actually
promoted a kind of camaraderie among the office workers. They
had a closeness and kind of a party atmosphere too.
(18:47):
Is this idea that we're all in it together, We're
doing this exciting thing. A lot of the people who
were working there were very young. It was. It was
a very happening, very startup kind of vibe in despite
the fact that it was being owned operated by this
very large company exactly that had been in business for
fifty years, and yet it had a very start up feel.
That's a very good way of putting it. We've got
(19:08):
so much more to say about HBO, but before we
get to that, let's take a quick break. All right,
we're back and it's nine. This was the year that
Time bought HBO outright from Chuck Dolan and the rest
(19:29):
of the Sterling investors. And poor Chuck Dolan, he must
have I mean, he must have really missed out on everything,
right that just uh yeah, no, no not but the
the the opposite of that. In fact, if we can
set the way back machine to be the way forward
machine for just a second, I'll just get on in
here and you just you keep going, I'm gonna I'm
gonna work on this, okay, okay. So Dolan would would
(19:51):
use this buyout money to found Cable Vision, which would
make him billions. Today, it is the largest cable provider
in the New York metro area, along with its spinoffs
like AMC and i f C, the two very popular
channels which you might know from everything from using your
remote control. Yeah, well, walking Dead and etcetera. Madman Um
(20:14):
and his resulting properties like Madison Square Garden and the
New York Nixon Rangers. This from a guy who had
a little business out of his kitchen right in Cleveland. Cleveland. Boy,
So he's he's still kicking as at this podcast. He's
worth some three point six billion. He has six children
who um more or less run a lot of his empire.
(20:34):
And it's a huge success story. And someday he's a
very interesting person and I would really like to do
more on him and or Cablevision and or all of that. Yeah,
but okay, back in, I just got this thing fixed
to go for Oh forget it, We'll just stay here, Okay, alright, So,
uh seventy three, Jerry Levin continues working with the HBO brand,
(20:58):
but it only has about eight thousand subscribers, and uh
that's spread across maybe fourteen different cable operating systems, all
of which are still in Pennsylvania. Yeah, it still hasn't
moved into New York yet. So the big, the big
irony here is that it was possible because of the
stake in Sterling Communications, but that was based solely in
New York, and Sterling Communications did not yet carry HBO.
(21:22):
It was all still in Pennsylvania. Meanwhile, that same year,
nineteen seventy three, you saw several other pay television channels launch.
They had names like Star Channel from Warner Cable, Theater
Vision and Channel one. And if you're asking yourself, okay,
well where did those go? Yeah? Nowhere. Yeah they didn't.
They did not succeed. They did not, in the long
run survive, so but they it did show that HBO
(21:45):
was starting to kind of set a precedent, and other
other companies were thinking, how can we also capitalize on this?
They just hadn't quite figured out the best way of
doing it. Nineteen seventy four, we see HBO clawing its weight,
you know, just inch by inch, to fifty seven thousand
subscribers in Pennsylvania and finally also in New York, also
finally available on Sterling Communications. But now time had bought
(22:10):
out the rest of the interest in Sterling and it
renamed it Manhattan Cable so nine yeah. Yeah. In an
effort to reach an even broader audience, Levin convinced the
then president of Time to let HBO begin to deliver
content via satellite. And this was crazy. No one, no
one wanted to believe that this was going to work
at all. This is the very first television station in
(22:33):
the United States to use satellite as a means of distribution.
And it didn't mean that they were using satellite to
beam it two households that had satellite dishes, because because
satellite dishes at the time cost some seventy five thousand
dollars in that day's money, something your average homeowner probably
wasn't going to probably invest in. I wouldn't know. I
(22:55):
wouldn't have either. So what they were doing was sending
beaming the signal up to a satellite that would then
beam down to satellite receiver dishes that were owned by
other cable systems, all right, So the cable operator would
then send that signal out via cable. Right. Because originally
what these companies were doing was using microwave transmission, but
(23:15):
microwave transmission has a limited range and you need line
of sight for it to work. So in other words,
if you had even a really powerful microwave radio station
in say Pennsylvania, it's not going to reach all the
way out to the other side of the United States,
not without a bunch of relays exactly between exactly you'd
have to end line of sight relays. So getting those
(23:37):
rocky mountains be kind of tricky. But what they decided
to do was instead use geo stationary satellites. So geo
stationary orbit it means that the satellite is actually maintaining
its position above a specific point on the Earth. And
these satellites are way the heck out there. Okay, So
our satellites that we tend to think of in our
(23:58):
you know, the ones that, by the way, in the
in the biz, they're called birds. Apparently I did not
know that until I started reading all the information to
call them birds. So these birds up there, like if
you're talking about normal ones that just pass over in
low earth orbit, we're talking to maybe a hundred hundred
fifty miles out from the surface of the Earth, like
where the ISS is. Yeah, these these satellites, they don't
(24:21):
maintain a position directly over a point, you have to
go much further out. So the geo stationary UH satellites
that that HBO was interested in, we're twenty two thousand,
three hundred miles out. Because from that distance they had
a broadcast footprint that covered all of North America. So
with one satellite you could then being the signals that
could be picked up across the United States. Because the
(24:44):
further out you kind of think of it like a flashlight.
The further out you go, the more area it covers. Yeah, yeah, absolutely,
And I mean to put it in perspective, if you
remember from our A T and T episode, the very
first active communication satellite had only been launched like twelve
years earlier, in nineteen sixty two. So so although twelve
years a long time and technological thinking, that's still this
is this is cutting edge technology at the time. Exactly
(25:06):
no one else had done it yet. You know, no
one else had managed to do the television stuff yet
like HBO did. So they the technical term for beaming
it up, that's using the up link satellite to antenna.
So you're that's the transmission, use the up link to
send it up to the satellite. The satellite has transponders
on it, specifically that have been leased by whatever company
(25:28):
in this case HBO to then beam this amplify that
signal that it picks up, and then beam it back
down to the Earth. And then you have the down
link receiver dishes that capture that signal and then send
it onto the cable station for transmission. It might do
that might be transmitted over microwave at that point, depending
upon whether or not the receiving station and the cable
(25:49):
station are adjoining or if they're separated by several miles
or whatever. So that was the basic principle behind it,
and so on September was able to carry the Muhammad
Ali Joe Frasier boxing match also known as the Thrilla
in Manila. They were the only live carrier in the
US for for this programming, and the organizers time to
(26:11):
the fight to happen during East Coast prime time, and
so those Pennsylvania and New York subscribers who could already
enjoy HBO because it was being transmitted via microwave transmission
to to cable operators were joined by folks in Florida,
like fifteen thousand of them who were able to see
this simultaneously. Because of this, it actually could technically be
(26:31):
picked up across the entire United States, just whichever ones
were affiliated with HBO. Three towns in Florida. I think
we're the only ones that actually had the satellite down
link at that time. Yeah. So the thing was that
because HBO was able to do this, and because they could,
they could back up the claim that they could do
this to anywhere in the United States that happened to
have cable service as long as the cable operator carried HBO.
(26:54):
So if they partner with us, we can let you
see this stuff too. It ended up being a huge boon.
In fact, uh there there are reports that if someone
came out to install cable in a neighbor's house and
other neighbors notice, they would chase down the cable car,
don't see HBO on the side of the van, and
like run down the street and like knock on the side,
and so could you also hook me up? I would
(27:16):
love to have that too, So big big boost to HBO.
If it hadn't been for the satellite move, it probably
never would have gone much further than the regionalized pay
TV network that it was. Maybe eventually would have crept
further along, but it wouldn't be near where it is
now certainly. And by the end of nineteen seventy five,
they had more than three hundred thousand subscribers in sixteen
(27:37):
states to show for it. Furthermore, I mean, this really
proved that there was a lot of money and space
in the cable and satellite TV field. Yeah. And not
only did they prove that to their subscribers, they proved
it to competitors, all right, because in n Yeah, HBO
had a rival pop up, a rival known as Showtime.
Now here's an interesting thing to me, Lauren. Uh. When
(28:00):
I started doing the research for this episode and we
started building out these notes, I did not realize that
HBO dated all the way back to nineteen seventy two.
Nor did I realize that Showtime dated back to nineteen
seventy six, probably because I didn't have cable as a
kid until I was at least seven or eight years old. Uh.
And and so to me, and and we didn't have Showtime.
(28:20):
We did get HBO. But to me, I always thought
of this, why it must have been late seventies, maybe
early eighties. I didn't realize that it was actually much
older than that. Now, if you subscribe to HBO, you
know that there aren't any commercials there. Well, this is
an HBO, folks. We're going to take an ad break,
but we'll be right back now. Showtime very similar in
(28:50):
concept to HBO. It also would run uncut, uncensored movies.
In fact, HBO and Showtime would often have a very similar,
if not nearly identical, list of movies that they could
run at any given time at this early beginning stage, Yes, yea,
and some would argue moving forward, same thing, um within
two years, so Showtime would follow suit. It would follow
(29:12):
HBO's example and go nationwide with a satellite service, which
at that time had only been done by one other
channel besides HBO, which was ted Turner's superstation w TBS
also known as just TVs are Turner Broadcast System. So
TBS and HBO together were companies that made cable subscriptions
more attractive. Keep in mind it's still really expensive to
(29:35):
install cable into cities. It wasn't just New York that
was a special case. That was an example that was
mirrored in cities across the United States. So although supposedly
Ted Turner and and TVs got into the game because
he heard about HBO mostly after that that big prize
fight had occurred. Legend has it that someone said, yeah,
(29:58):
someone convinced time to to use the satellite hook up
and they're and they're getting the fight live. It's on HBO,
and he was like, what's an HBO, which was a
common refrain at the time. Apparently right in those early
days before that boom, no one had really heard of it,
but everyone was fascinated once they did, because again, in
those early days, it was only available to a few
(30:20):
tens of thousands of people. So if you didn't live
in one of those regions that that was currently served
by HBO, why would you have heard of it. So, yeah,
it was one of those things where Turner ended up
jumping on that that strategy, even though he had not
really heard of the the channel that had already done it.
It's also why we all got to enjoy Georgia Championship Wrestling,
(30:41):
So thank you, Mr Turner. Um. So, then uh, we
start seeing some competition showing up with showtime there and
some actual competition that that lasts. It's not like those
other channels we mentioned earlier that faded away. Yeah, that
made it go into it and didn't succeed. So nineteen
seventy seven, HBO, for the first time since it started
the nineteen two turns a profit, which not again not
(31:04):
very surprising. You've got a lot of money that has
to go out from HBO for it to be able
to run its business. It had to pay licensing fees
to movie studios in order to get the rights to
show the movies on HBO. So it had to spend
money in order to even have content, and then it
had to try and make that up in subscriptions. Also,
all of that infrastructure was certainly not cheap, right, So
(31:25):
while HBO probably didn't have to put the bill for
most of that, considering that they would partner with cable companies,
they had to convince cable companies to go through the
trouble of installing all that cable into major metropolitan areas,
uh in order to have a larger subscription base, right,
I mean, they had to say, like, hey, cable company
that services Nashville, Tennessee, you want to put cable in
(31:48):
all your homes. I know that it's a lot of money,
poor concrete and build a nine foot dish to get
a satellite down link so that you can run, you know,
dollars worth of cable per mile these homes. But just
keep in mind that over the long term you're gonna
make lots of money. So that was an argument they
had to make over and over again. They got really
good at making that argument. Also, in ninety seven, a
(32:11):
law your name Michael Fooks came over to HBO from
the William Morris Agency. He'll be pretty important later on
in the story. That's why I decided to mention when
he showed up. Sure, absolutely, um, but at the time
in so, at this point, HBO has about one point
five million subscribers, but they are losing tens of thousands. Yeah,
(32:35):
because of a pretty nasty business move on the part
of Showtime. So here's the thing about the cable business, y'all.
It's it's not polite. This is it is a competitive,
cutthroat business, so that the gloves are off. Yeah. No,
(32:55):
we've seen this in multiple ways, both as consumers and
on the other side. I mean, there are a lot
of considerations you have to make when you're running a
cable business, whether you're an operator, there are a lot
of of considerations you have to make, or if you're
a content creator, there are a lot of considerations you
have to make. Absolutely um and so okay, so so Showtime.
(33:16):
Showtime's parent company was Viacom. Yeah, big big company, big
competitor to Time, and they had made a deal with
a cable provider called Teleprompter, which was the largest cable
operator in the United States, to be their exclusive pay
TV movie channel, which meant that any Teleprompter subscriber could
get Showtime, but would not be able to get HBO
(33:38):
even if they wanted it. It was not an option.
So that meant that HBO was suddenly cut off from
a large portion of potential customers. So what does Time
Incorporated do? They purchase American Television and Communications Corporation, which
was the second largest cable system operator in the US.
They were hoping that perhaps the six thousand or so
(34:00):
Steamers would also subscribe to HBO, and HBO also continue
to add premium films to its collection, making some pretty
interesting business deals. They were able to negotiate a block
of forty MGM and United Artists titles for about thirty
five million dollars. Now, these were titles that were movies.
(34:21):
Some of them hadn't come out yet, so this was
just kind of a you know, here's thirty five million,
we want to be able to grab forty titles that
you guys come up with, right right. They were investing
in pre production in return for exclusive rights to these films,
um and it was a huge gamble because you don't
know if that film is going to be a flop
or not. You you don't know if people are going
(34:41):
to want to subscribe to your service. Right right, You
might be like, wow, HBO has exclusive rights to some
of the worst movies I've ever had in fever. That's great. Yeah, sorry,
Cabin Fever. I'm not sure where that came from, but yeah,
sometimes it paid off, sometimes it didn't. And in fact,
they also began to learn lessons down the line. One
of the early lessons they learned, actually I guess it
(35:02):
wasn't that early. One of the lessons they would eventually
learn is that they could set minimums for how much
money they would spend for a title. This was something
that was negotiated with the movie studio. So they might say,
all right, at minimum, will pay you fifty dollars for
this title. That's I'm just pulling a number out of
the air. By the way, that's not necessarily a real number.
But what they didn't think to do is set a
(35:24):
cap on how much ultimately a movie might be valued at.
And if they entered an agreement ahead of time to
purchase a certain number of movies from a certain studio,
and one of those movies becomes a runaway hit and
they are obligated to purchase the rights to that movie,
and the movie studio is in the the bargaining position
(35:46):
where they can demand huge amounts of money for that.
That became a huge, uh expense for HBO. We'll talk
about a specific example of that a little bit later
on in another episode. So yeah, yeah, big risks, but
it also what meant that it was paying off and
helping differentiate HBO from Showtime. Now we move up to
nineteen seventy nine. This is where we're going to conclude
(36:06):
this episode. But nineteen nine, we see a man named
Jeff Bukes who had started as a trainee at City
Bank in their law department, and also, by the way,
is rumored to have had a very what's HBO response
when he first heard about the network and figured out
what the network was, and and left his entire career
in order to go be a part of this new
(36:27):
media company. Yeah, he had worked, he had entered City
Banks trainee program. He worked there in the law department
for two years and then said I'm going to HBO.
And I'm sure some of the people at that time said,
what's HBO? So he would end up doing pretty well
over at HBO. We'll talk more about Bukes throughout the
next few episodes, but in general, just to give you
a little preview. In n he became president of HBO,
(36:49):
so pretty good, became the CEO's that's even better, and
into those night he became CEO of the parent company
Time Warner than now, granted Time Warner itself is still
off in the future. It's back in nineteen seventy nine,
it was still just Time Incorporated. But yeah, he he
became the head honcho. And the same year, back in
(37:10):
nineteen HBO decided to experiment with launching a complementary pay
TV channel that ran more kid friendly PG rated movies
and was priced at a lower price point because some
people were saying, you know, it's too expensive or I
don't really want all this sex and violence on my television,
and so they thought, oh, well we'll we'll caeter to this.
This group of people will be able to get people
(37:32):
who can't justify the expense of a monthly subscription to
HBO or who wants something that's kid friendly. Well we'll
give them this and it'll be terrific. We'll call it
Take two, which if you start searching for it's gonna
take you a while to find, because terrific. It didn't know, Yeah,
no one really cared. It died out pretty quietly. Um so, yeah,
(37:52):
finding finding mentions of Take two somewhat challenging. I mean,
I'm pretty sure Wikipedia has a short little entrigue about
not not an entry on Take two, but I think
it mentions it in the overall article for HBO. It's
a little red link. Yeah probably. Yeah, one of those
things where like you've you may have heard of it
if you worked for HBO. That's how how oscure we're talking.
(38:13):
That wraps up part one of the HBO story. So
next week we will jump right to part three, and
then we'll come back to part two. No, no, no,
I'm kidding. We're going to do them in order because reasons.
But I hope you enjoyed it. If you have any
suggestions for future topics I should cover, or perhaps a
topic that I have covered that requires an update, let
(38:36):
me know. Reach out on Twitter. The handle we use
is tech stuff h s W and I'll talk to
you again really soon. Tech Stuff is an I Heart
Radio production. For more podcasts from my Heart Radio, visit
the I Heart Radio app, Apple Podcasts, or wherever you
(38:57):
listen to your favorite shows. Eight
Welcome to Tech Stuff, a production from I Heart Radio.
Hey there, and welcome to tech Stuff. I'm your host,
Jonathan Strickland. I'm an executive producer with iHeart Radio and
I love all things tech and it is time for
a classic episode. And this is gonna be a doozy
because it's actually a three partner. So for the next
(00:26):
three weeks, we're going to have some classic episodes play
out over a full story and it's one that, uh
that you know continues today. This is the HBO story.
And obviously a lot has happened with HBO since I mean,
there's HBO Max. That alone deserves a full episode. But
(00:46):
let's learn about how HBO and the cable industry really
were tightly knit back in the early days. And uh,
what better way to do it than to jump right
in here we HBO Home Box Office. That is what
we are talking about for the next three episodes because
(01:08):
there's so much history involved and and I never realized
it before we started researching this, but if it weren't
for some of the people who were working in HBO's
early days, we might not have cable TV or or
satellite cable as we know it, right, Yeah, For example,
all those other basic cable stations that you are familiar
with may not have existed had it not been for
(01:30):
some of the efforts on the part of multiple players
in the story. And also some of the other issues
everything from scrambling signals to piracy to streaming online. All
of these things come into play with HBO and and
original content as many many of you statistically probably know, yes,
(01:51):
whether whether you are subscribers or the other type. So
we're going to um, we're gonna have to journey back
in time. So yeah, I know, we just we just
tossed it off recently, but it's gonna getta workout. Let's
file into the way back machine. As it turns out,
we're gonna have to go back way before HBO was founded,
all the way back to nineteen twenty two. So let's
(02:15):
let's just set that right here, and uh push the button.
Lauren pushed. All right, here we are sunny nineteen two.
N's when Henry Loose and Brittain hadn't decided to u,
(02:35):
you know, pack it up. They had been working for
the Baltimore News and they decided they didn't want to
do that anymore. They cut their ties, said their goodbyes
and went to the Big Apple. Because if you can
make it there, well you know the rest. So they
had this crazy idea they wanted together to launch a
brand new magazine with the title of Time, and they
(02:58):
got about eighty five dollars and startup money from initial
stockholders and uh and incorporated in that November of nineteen two.
That's right, So the very first issue of the magazine
launched on March third, nineteen twenty three. Now, this company
would actually debut lots of other titles. It wasn't just Time.
(03:18):
Time was the starting point. But then they also launched
Fortune in nineteen thirty, which was a year after the
great stock market crash of nineteen twenty nine when a
lot of people lost their fortunes. UH. They also launched
Life in nineteen thirty six. The magazine Life, the actual
you know, point of existence, had existed for billions of
(03:38):
years we know, yes, at least on Earth, perhaps longer
in other places, but the magazine itself didn't come into
existence till nineteen thirty six. And then, of course the
most important magazine of all time nineteen fifty four, Sports Illustrated.
I've never read a single issue I know, of sports.
But it's pretty it's pretty big. All of these are
(04:00):
pretty big. The company has certainly become a print media giant,
and I mean, at the time was a print media
giant and would go on to become an other media giants, right,
because why why would you limit yourself to print media?
They wanted to diversify. So moving into the nineteen sixties,
just just come along with us. The nice thing about
(04:21):
the way back machines that lets us go forward in
time much faster than backward. We don't even have to
get into it. So nineteen sixties, Time Incorporated starts looking
at a way of getting into this crazy television business
to branch out from print media, and so as doing that,
they looked at a little company called Sterling Communications and
(04:42):
they bought up a twenty steak. In that company, there
was a man running that by the name of Chuck Dolan,
who um was it was a bit of a visionary, Yeah, oh,
huge visionary. He's talked about sometimes. I mean, despite the
fact that he's kind of unassuming and and pretty off
spoken and doesn't really he's not a public figure the
(05:03):
way that some of our other tech visionaries are. I mean,
he's not he doesn't have the stage presence of say
a Steve job, but nonetheless, without him, we probably would
not have cable TV as we know it. Um He
was born in Cleveland and served in the Air Force,
dropped out of John Carroll University and started up a
company that edited sports reels for TV syndication. Eventually he
sold that and moved to New York where he founded
(05:25):
Sterling in nineteen sixty. Yeah, that little company where he
was adding sports footage. He did that out of his home.
He and his wife, He and his wife in Cleveland,
in their house, ran this entire company UM and and
sold it for enough money that he was able to
found a cable television company. And at the time, cable
was not what it is today, right. Yeah. In fact,
(05:45):
cable at that time was really meant to deliver broadcast
television as an over the air television. This is the
stuff that normally you would put an antenna on top
of your TV or perhaps on top of your home
or apartment building, and you would get signals over the
air which would then run down to your television. A
lot of people considered this free television. It's not like
you had to subscribe to it. However, it's ad supported TV,
(06:08):
I'm sure, and I mean nothing's nothing's free there in
its freelance. Yeah, so even public television that exists on
on grants and donations, the other commercial TV that existed
through ads supported. But anyway, the issue was that in
rural areas you couldn't necessarily get a good signal because
if you did not live near a transmission tower, the
(06:30):
transmission tower might not have enough power to put out
there so that you could get the same sort of
content that you could if you lived closer. Al Right,
So cable stations were really just ways of getting TV,
regular old broadcast airway TV out to those rural areas exactly.
It didn't exist in big cities like New York, right,
because the thing about New York was that you happen
(06:51):
to live really close to all those transmission towers. Yeah,
everything was being broadcast out of the Empire State Building basically.
Except the thing is is that New York has other skyscrapers,
and if you lived, say behind a skyscraper, you might
not I mean you absolutely wouldn't be able to get
that signal from that tower. Right. If you got a
signal at all, it would be really weak, so you
would have lousy reception, which meant that there were people
(07:13):
in New York who might live a few blocks away
from the Empire State Building, but their reception on their
televisions were worse than what you might see in the
suburbs in New Jersey. You can get a better in Jersey.
Why why you come on? Look, you gotta pay to
get out of Jersey. Why would you have to You
know that that was the way they got you. You
have to pay to get out. So then you're like, well,
I get better TV over here. Anyway, I'll just stay
(07:33):
in Jersey. I apologize everyone for starting Jonathan on that.
I promise I won't I won't continue. I apologize as
well that at any rate, this is exactly the case.
So what Dolan thought was, why don't I bring cable
into the city. That way we can have the same
single over cable and even if you live right behind
a skyscraper, you're still going to have great reception. Sure.
(07:55):
The thing is that it's really I mean, it was
and still is really expensive to late this cave. We
we're talking copper cable at the time. By the way,
fiber optics wouldn't come into the picturing until the nineteen eighties. Yeah.
And not only that, but it was in New York.
They had had a blizzard several decades earlier that had
wiped out a lot of the power lines and and
telephone lines, and as a result, city officials said, hey,
(08:18):
you guys, you're gonna have to bury this. Everything has
to be buried so that way we will never have
an outage on this scale ever again, which meant that
the cable that Dolan was gonna lay would have to
be underground. Two. This meant that per mile of cable minimum,
you'd have to spend ten thousand dollars per mile. Now
in New York to get those uh apartment buildings, those
(08:41):
high rise apartment buildings wired, you have to build a
cable through the apartment building to eat with a branch
to each unit, right, that's the only way you could
do it. That made it go up to around three
hundred thousand dollars per mile. And this is in nineteen
sixties dollars. We're not talking about adjusting for inflation here,
so this is really expensive stuff. And Dolan, you know,
(09:03):
this was a very ambitious plan. And Dolan saw the
long tail, right, He saw that this could be profitable,
but it was going to require a lot of work,
and it perhaps more work than he anticipated when he
first got into the business. Yeah, Sterling almost certainly would
have gone bankrupt if it hadn't been for times investment
in them at that at that time. Exactly, So you're
gonna say the word time as many times. There's no
(09:26):
way of avoiding it. Uh, just wait till Warner gets
in there, because I use that word all the time.
Nineteen seventy one. So, still trying to make Sterling Communications
a profitable company, Dolan begins to brainstorm ideas that would
convince subscribers to join on to this, to to actually
willingly become a customer of cable, because again you have
(09:47):
to convince people, Hey, I know you could get this
free over the air on your antenna, but the reception
is lousy. Pay for it on cable, you'll get it.
You'll get a great experience. And the people who they
were contacting we're saying, but why would I Why what
I do that? Yeah? I mean yeah, the stuff I
get over the air is lousy. But if it's going
to be the same thing, just better quality on cable,
I feel like I'm getting the rough end of the
(10:09):
deal here if I have to pay for it. So
he says, what what can I do to differentiate cable
to make it more more attractive? Ah? What if we
made a special channel just for cable. It's not for
over the air, Only people who are subscribers to the
cable will get it. And it has to be something
that's really really compelling, something maybe that carries a lot
(10:32):
of sports with it. That was his first approach, and
he called this idea the Green Channel. He he referred
to it and as the Macy's of television. And this
was not an entirely new idea. Actually, our CIA had
created a radio network specifically to give people a reason
to go out and buy our Cia radios. So why
would you buy something where there's no content? This is
(10:54):
sort of the argument people have about four K televisions
right now. Why would you go out and get a
four K TV? No? Same argument. That argument has been
around ever since we started making this kind of tech.
Oh yeah, and and understand that at the time there
was some programming on cable stations, but most of it
was either extremely load budget or or very local, like
(11:14):
a clock streaming the local Time, or just weather reports
or at the very best public access, although that didn't
become a mandatory thing, uh, you know, branching into the
Wayne's World kind of kind of end of the deal
until after the FCCS Telecommunications Act of two, wherein they
said that any station that had more than subscribers had
(11:34):
to have public access content. Yeah at this time, but
but not even that. I mean we did not even
have Wayne's World, so that it was not Party Time,
It was not excellent, it was not and nor Anton jessp.
We had no doctor Anton Jessip. That's no. I don't
want to imagine a world where there's no Anton Jessip.
But so so it was considered a very commercially unviable
space exactly. Yeah, this was really again just an alternative
(11:58):
to deliver broadcast over the air TV. It wasn't thought
of as a way to create new types of content,
and also very regionalized, very much spread out and separated.
Like we didn't have these massive cable companies that had
enormous networks. You had all these different, smaller regional companies
that serviced little rural areas. And so even if you
(12:18):
wanted to launch a big idea like a big program.
Let's say that it's a company that's out in the
middle of nowhere, in the in the middle of a
state where there's hardly anything else, and they think, we've
got a great idea of our show. We're gonna produce
a show. They might only be able to deliver that
show to a very small audience because it wasn't a
nationwide network. So very different world than the one we
(12:40):
live in now. So how do you make the Green
Channel a must buy product? You know, we had a
lot of these attempts to make pay television channels before,
but they had failed. And again that over the air
for free model was very compelling. Well, nineteen seventy two,
Dolan decides to pitch this idea to Time, which had
(13:01):
invested in Sterling Communications. Right. He wound up talking with
one of their lawyers, a man named Jerry Levin, and
the two convinced the company to take on the idea. Yeah,
and so, fifty years after the founding of Time Incorporated,
remember those back in ninety two. Now we're in nineteen
seventy two, Time Incorporated launches a new cable television channel.
(13:21):
They had taken the Green Channel idea. They renamed it
after a series of long and arduous meetings, and they
figured that this name wouldn't really stick for that long
because it was pretty lame. Yeah, this was supposed to
just be a temporary kind of placeholder home box office.
That was the name HBO for short. They thought, will
will home box office until we figure out something better.
They never figured out anything better, and they went with it.
(13:43):
Uh So this was again the idea originally was a
paid television premium channel that would carry uncut, uncensored movies
that you wouldn't find on broadcast television, plus a few
live sports events from Madison Square Gardener Right, So again
very new thing. The cable television itself did not have
that many subscribers, and they in time, was not ready
(14:04):
to commit full on with this, you know, and so
they said, well, let's find a test market. Let's look
around and see if we can figure out what we can,
you know, how to develop the strategy to make sure
it works before we really throw in. And they did
have on their side the fact that TV execs were
eager for a way to make television unfree. I mean,
you know, if if you can turn a profit on
(14:24):
something that's always better than giving it away for free
and UM and stealing cable is a lot harder than
it is to steal signals out of thin air, right, Yeah,
if you were just broadcasting this over the air, then
obviously anyone with an antenna could get at it. There'd
have to be some other kind of scrambling thing. And
we'll talk about scrambling later on in another episode. Sure,
But okay, So, so this test market wound up being
(14:44):
UM in Pennsylvania and New York. Yeah, so the very
first one was just Wilkes bar Pennsylvania, tiny community like people. Yeah, yeah,
we're talking. I mean, I think they had four hundred
subscribers at first. I think three five was the estimate,
and I saw a title so even even fewer than that.
But the reason for that, uh, well, they wanted to
(15:05):
do Wilkes Barre Pennsylvania mainly because one of the big
partnerships that Time had struck was with the NBA, and
the idea was to be able to cover NBA games
live so that people who wouldn't have access to that
kind of programming could actually watch it live and that
would be really exciting and be a good reason to
subscribe to the service. However, the NBA, like a lot
of different sporting organizations, has blackout rules where where they
(15:31):
don't want you to uh to publish too broadcast, broadcast
a game within a certain radius of the stadium where
it's being played exactly. And so if they had launched
in say Alan Town or Philadelphia, that would have been
in the radius for all the Philadelphia teams. So they said, well,
why don't we do Wilkes Bar. It's just outside that radius.
(15:51):
We're not going to be hit by any blackout dates.
It'll be the best possible experience and that will give
us the test that we need that can be used
as word of mouth. So subscriptions six dollars per month
for HBO. So uh it goes live on November eighth,
ninety two. And the very first movie carried on HBO
(16:14):
was titled Sometimes a Great Notion, A fantastic film about logging. Yeah,
Henry Fondo was in it and Paul Newman was in it,
and it was really a story about individualism and being
able to strike out on your own and to survive
against odds both from nature and man. And I'm making
(16:34):
it sound way more exciting than what it really was.
But yes, that's that was the movie. And then the
other thing that they aired was a hockey game, not
an NBA after all that travel. Yeah, the NBA does
not tend to play in hockey games. Uh. This was
a game featuring the Rangers against the Canucks. And I
know you're all dying to know who won, Rangers five
to ALRIGHTMG spoilers. Yeah, well, you know, for those other
(16:58):
people who are using way back machineans of their own
to go back into nineteen seventy two and watch all
those games, forget I said that. So back in these
early years, the service would only be on the air
for a few hours each day. It was not a
twenty four hour channel, all right. They would sign off
at a certain point. Yeah. I actually watched the little
cartoon that used to play at the very end. It's
very cute. This is it's actually like several minutes long.
(17:21):
It wasn't like a little twenty second thing. But it's
a cartoon showing, you know, lights going out in the
city and setting an alarm clock and fluffing a pillow.
And this is all cartoonish, right, all cartoons. It was
essentially saying good night, good night. Yeah, it was at
almost had a night veil moment again there. Boy, it
just creeps in, doesn't it. So meanwhile, on the back
(17:43):
on the corporate side of things, so so that's what's
going on on the actual television. On the corporate side
of things, you have Time Incorporated, and they had to
carve out space for this new uh, this new enterprise HBO.
So originally they started making space in their own office
building and Time Incorporated headquarters in New York, which was
(18:03):
already a bustling office. Yeah. So that meant that as
HBO began to grow, and it grew pretty quickly, Uh,
it meant that they had to start getting creative finding
places to stick people. So departments wouldn't necessarily be all
set together. You might have a department head who's on
a different floor from the rest of the office. Uh.
There were stories about people having to find an office
(18:24):
space in an old broom closet, or or four or
five people all sharing a common office area that used
to be a meeting room. That kind of stuff, things
that we can kind of identify with here at how
stuff works. But the interesting thing was that this actually
promoted a kind of camaraderie among the office workers. They
had a closeness and kind of a party atmosphere too.
(18:47):
Is this idea that we're all in it together, We're
doing this exciting thing. A lot of the people who
were working there were very young. It was. It was
a very happening, very startup kind of vibe in despite
the fact that it was being owned operated by this
very large company exactly that had been in business for
fifty years, and yet it had a very start up feel.
That's a very good way of putting it. We've got
(19:08):
so much more to say about HBO, but before we
get to that, let's take a quick break. All right,
we're back and it's nine. This was the year that
Time bought HBO outright from Chuck Dolan and the rest
(19:29):
of the Sterling investors. And poor Chuck Dolan, he must
have I mean, he must have really missed out on everything,
right that just uh yeah, no, no not but the
the the opposite of that. In fact, if we can
set the way back machine to be the way forward
machine for just a second, I'll just get on in
here and you just you keep going, I'm gonna I'm
gonna work on this, okay, okay. So Dolan would would
(19:51):
use this buyout money to found Cable Vision, which would
make him billions. Today, it is the largest cable provider
in the New York metro area, along with its spinoffs
like AMC and i f C, the two very popular
channels which you might know from everything from using your
remote control. Yeah, well, walking Dead and etcetera. Madman Um
(20:14):
and his resulting properties like Madison Square Garden and the
New York Nixon Rangers. This from a guy who had
a little business out of his kitchen right in Cleveland. Cleveland. Boy,
So he's he's still kicking as at this podcast. He's
worth some three point six billion. He has six children
who um more or less run a lot of his empire.
(20:34):
And it's a huge success story. And someday he's a
very interesting person and I would really like to do
more on him and or Cablevision and or all of that. Yeah,
but okay, back in, I just got this thing fixed
to go for Oh forget it, We'll just stay here, Okay, alright, So,
uh seventy three, Jerry Levin continues working with the HBO brand,
(20:58):
but it only has about eight thousand subscribers, and uh
that's spread across maybe fourteen different cable operating systems, all
of which are still in Pennsylvania. Yeah, it still hasn't
moved into New York yet. So the big, the big
irony here is that it was possible because of the
stake in Sterling Communications, but that was based solely in
New York, and Sterling Communications did not yet carry HBO.
(21:22):
It was all still in Pennsylvania. Meanwhile, that same year,
nineteen seventy three, you saw several other pay television channels launch.
They had names like Star Channel from Warner Cable, Theater
Vision and Channel one. And if you're asking yourself, okay,
well where did those go? Yeah? Nowhere. Yeah they didn't.
They did not succeed. They did not, in the long
run survive, so but they it did show that HBO
(21:45):
was starting to kind of set a precedent, and other
other companies were thinking, how can we also capitalize on this?
They just hadn't quite figured out the best way of
doing it. Nineteen seventy four, we see HBO clawing its weight,
you know, just inch by inch, to fifty seven thousand
subscribers in Pennsylvania and finally also in New York, also
finally available on Sterling Communications. But now time had bought
(22:10):
out the rest of the interest in Sterling and it
renamed it Manhattan Cable so nine yeah. Yeah. In an
effort to reach an even broader audience, Levin convinced the
then president of Time to let HBO begin to deliver
content via satellite. And this was crazy. No one, no
one wanted to believe that this was going to work
at all. This is the very first television station in
(22:33):
the United States to use satellite as a means of distribution.
And it didn't mean that they were using satellite to
beam it two households that had satellite dishes, because because
satellite dishes at the time cost some seventy five thousand
dollars in that day's money, something your average homeowner probably
wasn't going to probably invest in. I wouldn't know. I
(22:55):
wouldn't have either. So what they were doing was sending
beaming the signal up to a satellite that would then
beam down to satellite receiver dishes that were owned by
other cable systems, all right, So the cable operator would
then send that signal out via cable. Right. Because originally
what these companies were doing was using microwave transmission, but
(23:15):
microwave transmission has a limited range and you need line
of sight for it to work. So in other words,
if you had even a really powerful microwave radio station
in say Pennsylvania, it's not going to reach all the
way out to the other side of the United States,
not without a bunch of relays exactly between exactly you'd
have to end line of sight relays. So getting those
(23:37):
rocky mountains be kind of tricky. But what they decided
to do was instead use geo stationary satellites. So geo
stationary orbit it means that the satellite is actually maintaining
its position above a specific point on the Earth. And
these satellites are way the heck out there. Okay, So
our satellites that we tend to think of in our
(23:58):
you know, the ones that, by the way, in the
in the biz, they're called birds. Apparently I did not
know that until I started reading all the information to
call them birds. So these birds up there, like if
you're talking about normal ones that just pass over in
low earth orbit, we're talking to maybe a hundred hundred
fifty miles out from the surface of the Earth, like
where the ISS is. Yeah, these these satellites, they don't
(24:21):
maintain a position directly over a point, you have to
go much further out. So the geo stationary UH satellites
that that HBO was interested in, we're twenty two thousand,
three hundred miles out. Because from that distance they had
a broadcast footprint that covered all of North America. So
with one satellite you could then being the signals that
could be picked up across the United States. Because the
(24:44):
further out you kind of think of it like a flashlight.
The further out you go, the more area it covers. Yeah, yeah, absolutely,
And I mean to put it in perspective, if you
remember from our A T and T episode, the very
first active communication satellite had only been launched like twelve
years earlier, in nineteen sixty two. So so although twelve
years a long time and technological thinking, that's still this
is this is cutting edge technology at the time. Exactly
(25:06):
no one else had done it yet. You know, no
one else had managed to do the television stuff yet
like HBO did. So they the technical term for beaming
it up, that's using the up link satellite to antenna.
So you're that's the transmission, use the up link to
send it up to the satellite. The satellite has transponders
on it, specifically that have been leased by whatever company
(25:28):
in this case HBO to then beam this amplify that
signal that it picks up, and then beam it back
down to the Earth. And then you have the down
link receiver dishes that capture that signal and then send
it onto the cable station for transmission. It might do
that might be transmitted over microwave at that point, depending
upon whether or not the receiving station and the cable
(25:49):
station are adjoining or if they're separated by several miles
or whatever. So that was the basic principle behind it,
and so on September was able to carry the Muhammad
Ali Joe Frasier boxing match also known as the Thrilla
in Manila. They were the only live carrier in the
US for for this programming, and the organizers time to
(26:11):
the fight to happen during East Coast prime time, and
so those Pennsylvania and New York subscribers who could already
enjoy HBO because it was being transmitted via microwave transmission
to to cable operators were joined by folks in Florida,
like fifteen thousand of them who were able to see
this simultaneously. Because of this, it actually could technically be
(26:31):
picked up across the entire United States, just whichever ones
were affiliated with HBO. Three towns in Florida. I think
we're the only ones that actually had the satellite down
link at that time. Yeah. So the thing was that
because HBO was able to do this, and because they could,
they could back up the claim that they could do
this to anywhere in the United States that happened to
have cable service as long as the cable operator carried HBO.
(26:54):
So if they partner with us, we can let you
see this stuff too. It ended up being a huge boon.
In fact, uh there there are reports that if someone
came out to install cable in a neighbor's house and
other neighbors notice, they would chase down the cable car,
don't see HBO on the side of the van, and
like run down the street and like knock on the side,
and so could you also hook me up? I would
(27:16):
love to have that too, So big big boost to HBO.
If it hadn't been for the satellite move, it probably
never would have gone much further than the regionalized pay
TV network that it was. Maybe eventually would have crept
further along, but it wouldn't be near where it is
now certainly. And by the end of nineteen seventy five,
they had more than three hundred thousand subscribers in sixteen
(27:37):
states to show for it. Furthermore, I mean, this really
proved that there was a lot of money and space
in the cable and satellite TV field. Yeah. And not
only did they prove that to their subscribers, they proved
it to competitors, all right, because in n Yeah, HBO
had a rival pop up, a rival known as Showtime.
Now here's an interesting thing to me, Lauren. Uh. When
(28:00):
I started doing the research for this episode and we
started building out these notes, I did not realize that
HBO dated all the way back to nineteen seventy two.
Nor did I realize that Showtime dated back to nineteen
seventy six, probably because I didn't have cable as a
kid until I was at least seven or eight years old. Uh.
And and so to me, and and we didn't have Showtime.
(28:20):
We did get HBO. But to me, I always thought
of this, why it must have been late seventies, maybe
early eighties. I didn't realize that it was actually much
older than that. Now, if you subscribe to HBO, you
know that there aren't any commercials there. Well, this is
an HBO, folks. We're going to take an ad break,
but we'll be right back now. Showtime very similar in
(28:50):
concept to HBO. It also would run uncut, uncensored movies.
In fact, HBO and Showtime would often have a very similar,
if not nearly identical, list of movies that they could
run at any given time at this early beginning stage, Yes, yea,
and some would argue moving forward, same thing, um within
two years, so Showtime would follow suit. It would follow
(29:12):
HBO's example and go nationwide with a satellite service, which
at that time had only been done by one other
channel besides HBO, which was ted Turner's superstation w TBS
also known as just TVs are Turner Broadcast System. So
TBS and HBO together were companies that made cable subscriptions
more attractive. Keep in mind it's still really expensive to
(29:35):
install cable into cities. It wasn't just New York that
was a special case. That was an example that was
mirrored in cities across the United States. So although supposedly
Ted Turner and and TVs got into the game because
he heard about HBO mostly after that that big prize
fight had occurred. Legend has it that someone said, yeah,
(29:58):
someone convinced time to to use the satellite hook up
and they're and they're getting the fight live. It's on HBO,
and he was like, what's an HBO, which was a
common refrain at the time. Apparently right in those early
days before that boom, no one had really heard of it,
but everyone was fascinated once they did, because again, in
those early days, it was only available to a few
(30:20):
tens of thousands of people. So if you didn't live
in one of those regions that that was currently served
by HBO, why would you have heard of it. So, yeah,
it was one of those things where Turner ended up
jumping on that that strategy, even though he had not
really heard of the the channel that had already done it.
It's also why we all got to enjoy Georgia Championship Wrestling,
(30:41):
So thank you, Mr Turner. Um. So, then uh, we
start seeing some competition showing up with showtime there and
some actual competition that that lasts. It's not like those
other channels we mentioned earlier that faded away. Yeah, that
made it go into it and didn't succeed. So nineteen
seventy seven, HBO, for the first time since it started
the nineteen two turns a profit, which not again not
(31:04):
very surprising. You've got a lot of money that has
to go out from HBO for it to be able
to run its business. It had to pay licensing fees
to movie studios in order to get the rights to
show the movies on HBO. So it had to spend
money in order to even have content, and then it
had to try and make that up in subscriptions. Also,
all of that infrastructure was certainly not cheap, right, So
(31:25):
while HBO probably didn't have to put the bill for
most of that, considering that they would partner with cable companies,
they had to convince cable companies to go through the
trouble of installing all that cable into major metropolitan areas,
uh in order to have a larger subscription base, right,
I mean, they had to say, like, hey, cable company
that services Nashville, Tennessee, you want to put cable in
(31:48):
all your homes. I know that it's a lot of money,
poor concrete and build a nine foot dish to get
a satellite down link so that you can run, you know,
dollars worth of cable per mile these homes. But just
keep in mind that over the long term you're gonna
make lots of money. So that was an argument they
had to make over and over again. They got really
good at making that argument. Also, in ninety seven, a
(32:11):
law your name Michael Fooks came over to HBO from
the William Morris Agency. He'll be pretty important later on
in the story. That's why I decided to mention when
he showed up. Sure, absolutely, um, but at the time
in so, at this point, HBO has about one point
five million subscribers, but they are losing tens of thousands. Yeah,
(32:35):
because of a pretty nasty business move on the part
of Showtime. So here's the thing about the cable business, y'all.
It's it's not polite. This is it is a competitive,
cutthroat business, so that the gloves are off. Yeah. No,
(32:55):
we've seen this in multiple ways, both as consumers and
on the other side. I mean, there are a lot
of considerations you have to make when you're running a
cable business, whether you're an operator, there are a lot
of of considerations you have to make, or if you're
a content creator, there are a lot of considerations you
have to make. Absolutely um and so okay, so so Showtime.
(33:16):
Showtime's parent company was Viacom. Yeah, big big company, big
competitor to Time, and they had made a deal with
a cable provider called Teleprompter, which was the largest cable
operator in the United States, to be their exclusive pay
TV movie channel, which meant that any Teleprompter subscriber could
get Showtime, but would not be able to get HBO
(33:38):
even if they wanted it. It was not an option.
So that meant that HBO was suddenly cut off from
a large portion of potential customers. So what does Time
Incorporated do? They purchase American Television and Communications Corporation, which
was the second largest cable system operator in the US.
They were hoping that perhaps the six thousand or so
(34:00):
Steamers would also subscribe to HBO, and HBO also continue
to add premium films to its collection, making some pretty
interesting business deals. They were able to negotiate a block
of forty MGM and United Artists titles for about thirty
five million dollars. Now, these were titles that were movies.
(34:21):
Some of them hadn't come out yet, so this was
just kind of a you know, here's thirty five million,
we want to be able to grab forty titles that
you guys come up with, right right. They were investing
in pre production in return for exclusive rights to these films,
um and it was a huge gamble because you don't
know if that film is going to be a flop
or not. You you don't know if people are going
(34:41):
to want to subscribe to your service. Right right, You
might be like, wow, HBO has exclusive rights to some
of the worst movies I've ever had in fever. That's great. Yeah, sorry,
Cabin Fever. I'm not sure where that came from, but yeah,
sometimes it paid off, sometimes it didn't. And in fact,
they also began to learn lessons down the line. One
of the early lessons they learned, actually I guess it
(35:02):
wasn't that early. One of the lessons they would eventually
learn is that they could set minimums for how much
money they would spend for a title. This was something
that was negotiated with the movie studio. So they might say,
all right, at minimum, will pay you fifty dollars for
this title. That's I'm just pulling a number out of
the air. By the way, that's not necessarily a real number.
But what they didn't think to do is set a
(35:24):
cap on how much ultimately a movie might be valued at.
And if they entered an agreement ahead of time to
purchase a certain number of movies from a certain studio,
and one of those movies becomes a runaway hit and
they are obligated to purchase the rights to that movie,
and the movie studio is in the the bargaining position
(35:46):
where they can demand huge amounts of money for that.
That became a huge, uh expense for HBO. We'll talk
about a specific example of that a little bit later
on in another episode. So yeah, yeah, big risks, but
it also what meant that it was paying off and
helping differentiate HBO from Showtime. Now we move up to
nineteen seventy nine. This is where we're going to conclude
(36:06):
this episode. But nineteen nine, we see a man named
Jeff Bukes who had started as a trainee at City
Bank in their law department, and also, by the way,
is rumored to have had a very what's HBO response
when he first heard about the network and figured out
what the network was, and and left his entire career
in order to go be a part of this new
(36:27):
media company. Yeah, he had worked, he had entered City
Banks trainee program. He worked there in the law department
for two years and then said I'm going to HBO.
And I'm sure some of the people at that time said,
what's HBO? So he would end up doing pretty well
over at HBO. We'll talk more about Bukes throughout the
next few episodes, but in general, just to give you
a little preview. In n he became president of HBO,
(36:49):
so pretty good, became the CEO's that's even better, and
into those night he became CEO of the parent company
Time Warner than now, granted Time Warner itself is still
off in the future. It's back in nineteen seventy nine,
it was still just Time Incorporated. But yeah, he he
became the head honcho. And the same year, back in
(37:10):
nineteen HBO decided to experiment with launching a complementary pay
TV channel that ran more kid friendly PG rated movies
and was priced at a lower price point because some
people were saying, you know, it's too expensive or I
don't really want all this sex and violence on my television,
and so they thought, oh, well we'll we'll caeter to this.
This group of people will be able to get people
(37:32):
who can't justify the expense of a monthly subscription to
HBO or who wants something that's kid friendly. Well we'll
give them this and it'll be terrific. We'll call it
Take two, which if you start searching for it's gonna
take you a while to find, because terrific. It didn't know, Yeah,
no one really cared. It died out pretty quietly. Um so, yeah,
(37:52):
finding finding mentions of Take two somewhat challenging. I mean,
I'm pretty sure Wikipedia has a short little entrigue about
not not an entry on Take two, but I think
it mentions it in the overall article for HBO. It's
a little red link. Yeah probably. Yeah, one of those
things where like you've you may have heard of it
if you worked for HBO. That's how how oscure we're talking.
(38:13):
That wraps up part one of the HBO story. So
next week we will jump right to part three, and
then we'll come back to part two. No, no, no,
I'm kidding. We're going to do them in order because reasons.
But I hope you enjoyed it. If you have any
suggestions for future topics I should cover, or perhaps a
topic that I have covered that requires an update, let
(38:36):
me know. Reach out on Twitter. The handle we use
is tech stuff h s W and I'll talk to
you again really soon. Tech Stuff is an I Heart
Radio production. For more podcasts from my Heart Radio, visit
the I Heart Radio app, Apple Podcasts, or wherever you
(38:57):
listen to your favorite shows. Eight
TechStuff News
Hosts And Creators
Oz Woloshyn
Karah Preiss
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