Speaker 1: Get in touch with technology with tech Stuff from how
Speaker 1: Stuff Works dot com. Say that everyone, and welcome to
Speaker 1: tex Stuff. I'm Jovin Strickland and I and we are
Speaker 1: continuing our epic adventure into the story of HBO. This
Speaker 1: is part two. If you haven't listened to part one,
Speaker 1: I highly recommend you do that because otherwise you're just
Speaker 1: gonna be totally lost. And because it's probably you've never
Speaker 1: heard of HBO before. No, but no, but we've covered
Speaker 1: a lot of really is interesting territory. And we've only
Speaker 1: been with the company for eight years since its inceptions.
Speaker 1: That is how much material we had. We just moved
Speaker 1: up to nineteen eighty and HBO launched in nineteen seventy two.
Speaker 1: That just tells you how dense the history of this
Speaker 1: cable station has been. And you know, the reason why
Speaker 1: we're taking so much time. You might think all that
Speaker 1: is that just filler. No, the reason we're taking so
Speaker 1: much time is because HBO as an entity, has heavily
Speaker 1: influenced what cable television is and what entertainment delivery services
Speaker 1: are in general. If it hadn't been for HBO, our
Speaker 1: landscape would be dramatically different today. So that's why we're
Speaker 1: doing it. In fact, think about it. Without HBO, you
Speaker 1: don't have cable companies, cable system operators pushing cable copper
Speaker 1: cable into cities anywhere near as quickly. Right, you might
Speaker 1: not have ever seen it happen, or it might have
Speaker 1: taken a decade longer, which means you would not even
Speaker 1: have the infrastructure that the Internet relies on today. For
Speaker 1: high speed Internet, we'd be using telephone lines. Still. Yeah,
Speaker 1: you might furthermore not have had people adopt as quickly
Speaker 1: the idea of using satellites to beam information, uh television
Speaker 1: information out to many spread networks exactly. So, like we said,
Speaker 1: landscape very different without HBO. Whether you love it or
Speaker 1: hate it, it's a large part of why the world
Speaker 1: is as far as the cable world and entertainment worlds,
Speaker 1: why things are the way they are so so um.
Speaker 1: A little tiny bit of backstory, very tiny. HBO owned
Speaker 1: by Time, Yes, Time Incorporated, not not Time, the the
Speaker 1: physical entity like the actual not Father Time, not the
Speaker 1: progression of changes throughout, not the fourth dimension. Time Incorporated,
Speaker 1: the company that owned Time magazine or still does Time Magazine,
Speaker 1: Fortune Magazine, Sports Illustrated etcetera, etcetera. Correct, So in Time
Speaker 1: launched a second pay TV channel called Cinemax, primarily as
Speaker 1: a competitor to the less expensive Showtime. Yes, so there
Speaker 1: were a couple of different ways to compete against Showtime.
Speaker 1: One was, let's try and grab as much exclusive content
Speaker 1: as we possibly can that Showtime can't have, and thus
Speaker 1: people will say, hey, we want HBO because they have
Speaker 1: these movies and Showtime doesn't. However, that's really expensive. Another
Speaker 1: approach was to create a second page television network, Cinemax,
Speaker 1: and to run a lot of the same programming that
Speaker 1: HBO itself already had, and maybe concentrate on some genres
Speaker 1: that didn't necessarily fit into HBO's corporate appearances, like they're there,
Speaker 1: their their culture, and furthermore, that happened to be a
Speaker 1: lot less expensive to purchase. Like I like cult films
Speaker 1: and kind of obscure noir stuff. One of my favorite
Speaker 1: cult films of all time I first saw on Cinemax.
Speaker 1: I had heard about it, but I've never seen it.
Speaker 1: And that film, of course, is the brilliant movie Shock Treatment.
Speaker 1: The not a sequel, not a prequel, but an equal
Speaker 1: to the Rocky Horror Picture Show and that's how I
Speaker 1: saw it the first time I ever experienced it. It
Speaker 1: was shown on Cinemax because it fit into that realm
Speaker 1: of the Cinemax movie where it were there were some
Speaker 1: of these kind of cult, classic, schlocky, sort of cheap
Speaker 1: movies to license, but they still had their audience. So
Speaker 1: this approach did not come without criticism, specifically from Viacom,
Speaker 1: which was the parent company of Showtime. They said that
Speaker 1: Cinemax was being offered at low cost. In other words,
Speaker 1: HBO was suffering a loss to run Cinemax just so
Speaker 1: that they could undercut Showtime. Uh now, if you remember
Speaker 1: Showtime kind of if Viacom also did this thing in
Speaker 1: the last episode we talked about, where it showed Viacomm
Speaker 1: ended up buying aggressively undercut HBO. They essentially muscled HBO
Speaker 1: out of entire markets because they made this exclusive agreement
Speaker 1: with the largest cable provider in the United States at
Speaker 1: that time. So there's a little bit of a war
Speaker 1: going on. Yeah, a little bit of a oh yeah,
Speaker 1: so yeah, that's that's kind of the technical term. But Cinemax,
Speaker 1: you know, starts doing pretty well. And also in nineteen eight,
Speaker 1: HBO has an affiliate in every single state in the
Speaker 1: United States. Now, if you listen to our last episode,
Speaker 1: you realize that's a big deal. This is the first
Speaker 1: time that any channel has been able to do that,
Speaker 1: and it is because they're using this satellite delivery system
Speaker 1: where the various cable operators across the United States have
Speaker 1: the receiver dishes that bring in the signal and then
Speaker 1: they can distribute it to their customers. So now there's
Speaker 1: an affiliate in every state. Remember it started off justin
Speaker 1: Wilkes Barre, Pennsylvania. Then it's spread through most of Pennsylvania,
Speaker 1: then to New York, and then finally started to creep
Speaker 1: out into the rest of the United States. So big
Speaker 1: moment for HBO. All of this is allowing them to
Speaker 1: have a pretty incredible profit considering that they only hit
Speaker 1: profitability a year or two previously. Um they their profits
Speaker 1: have grown from which again understandable because now they're they're
Speaker 1: available in way more markets. So the company is experiencing
Speaker 1: astronomical growth at this point because because once the cable
Speaker 1: operators decide yes, we will carry HBO, that gives HBO
Speaker 1: the chance to target new customer bases that they had
Speaker 1: no access to before. Oh sure, um and there as
Speaker 1: a result able to offer their employees some pretty ridiculous benefits.
Speaker 1: Um It. Kind of the stories that I've read about
Speaker 1: it at the time remind me a little bit of
Speaker 1: what happened after the Facebook boom um and and just
Speaker 1: that that tiny, free, freewheeling startup culture that turned into
Speaker 1: this very large, very freewheeling startup culture. It reminds me
Speaker 1: a lot of what Google attempts to continue to push
Speaker 1: at the Google Plex. And of course, anyone who's worked
Speaker 1: in one of the satellite offices of Google probably is
Speaker 1: very familiar with what things what what's available at the
Speaker 1: Google Plex versus what's available in some of those satellite offices.
Speaker 1: So there was also some tension between say HBO and
Speaker 1: the folks over at time. Keep in mind that at
Speaker 1: this point they're still all working in the same building.
Speaker 1: They're working in Time Incorporate its headquarters, and so you
Speaker 1: had sort of these freewheeling young guys who are running HBO,
Speaker 1: who are having parties all the time. They said that
Speaker 1: essentially the the motto at HBO is work, work, work, party, party, party,
Speaker 1: and uh and so you know, any excuse to get
Speaker 1: together and have a big dinner and you know, they're
Speaker 1: still getting stuff done. But they also took a lot
Speaker 1: of time and develop this camaraderie. There's still some tension
Speaker 1: actually within the company itself because a very different culture
Speaker 1: existed between Time and Coorporated employees and HBO. Now in
Speaker 1: one Showtime makes a big move, which you could argue
Speaker 1: at the time was mostly posturing. Uh. They decided to
Speaker 1: go to a full twenty four hour schedule, right because
Speaker 1: if you remember from our last episode again, at the time,
Speaker 1: these cable stations would sign off at a certain point
Speaker 1: every night. Yeah, like after midnight they'd say, all right, time,
Speaker 1: time to go to bed, because we don't have anything
Speaker 1: else we can show you. So Showtime goes to twenty
Speaker 1: four hours, not necessarily being able to support that with
Speaker 1: enough content so that they're not incredibly repetitive. But HBO,
Speaker 1: not to be outdone, follow suit. So later on in
Speaker 1: N one, they also become twenty four hour uh. And
Speaker 1: so you with anytime you wanted to turn on HBO
Speaker 1: it was three in the morning, you can turn on
Speaker 1: HBO and something would be playing. Uh. And then they
Speaker 1: end up also hitting the big time on of those
Speaker 1: pre buy movies we talked about. Now, this is where
Speaker 1: HBO puts in money in the pre production phase for
Speaker 1: a movie and in return, they get exclusive rights to
Speaker 1: show that movie on HBO for a certain length of time.
Speaker 1: And in this case, they hit the jackpot. Now, it's
Speaker 1: not a movie that I think a lot of people
Speaker 1: are going to be rip roar and excited about, but
Speaker 1: it was a critically acclaimed success. It was on Golden Pond. Yeah,
Speaker 1: it won multiple Academy Awards yep. So this exclusivity was
Speaker 1: a big deal. It was a movie that people had
Speaker 1: heard about, they knew that it was award winning, and
Speaker 1: HBO was the only place you could see it outside
Speaker 1: of the theater. Keep in mind, this is before the
Speaker 1: home video craze starts, like, this is really before the
Speaker 1: VCR has taken off. So HBO exclusivity in this case
Speaker 1: was really important. Now they started moving to these output deals,
Speaker 1: which is when a pay TV service agrees to take
Speaker 1: on all the movies made by a certain studio over
Speaker 1: a certain time span. Again, tends to be kind of
Speaker 1: a grab bag situation. You might get a few big hits,
Speaker 1: you might have some mediocre films in there that you know,
Speaker 1: some people care about. But most people don't, and you
Speaker 1: can have some outright flops, so a little bit of
Speaker 1: a risky situation. There's also this idea of a multi
Speaker 1: year agreement which HBO would agree to pick up a
Speaker 1: certain number of films the studio would produce over a
Speaker 1: given period of time, but have a little bit more
Speaker 1: safe which one like you made, we want twenty movies
Speaker 1: that you guys are going to make over the course
Speaker 1: of the next five years. Yeah. So once the five
Speaker 1: year period starts coming up, you're like, well, now we're stuck. Yeah,
Speaker 1: but but we got to be choosy at the beginning.
Speaker 1: Either way, these exclusivity deals were really really expensive, and
Speaker 1: it meant that it was tough to to make a
Speaker 1: profit unless you continuously grow. Now, at this time that
Speaker 1: wasn't a problem because cable was still entering in lots
Speaker 1: more markets, which meant you had access to brand new customers.
Speaker 1: So in the early days kind of automatically growing. Yeah. Yeah,
Speaker 1: you didn't have to worry about about boosting your your
Speaker 1: customer base so much because people were still eager to join.
Speaker 1: It wasn't until a couple of years later that things
Speaker 1: got a little tougher. But we'll get there. So companies
Speaker 1: were paying these big bucks for exclusive rights to movies
Speaker 1: for just a couple of years. Eventually those exclusivity rights
Speaker 1: would expire and those movies could be carried on other
Speaker 1: pay television stations like Showtime could pick it up. So
Speaker 1: in the long run, you would have a bank of
Speaker 1: movies that was essentially identical to your competitors. So for
Speaker 1: a couple of years you have exclusivity, but it wasn't
Speaker 1: a long term you would up even out. Yeah. So yeah,
Speaker 1: one of those things that that you know, they really
Speaker 1: had to look at a little bit later because it
Speaker 1: was just it was not the best way to continuously
Speaker 1: grow your revenue. Now we get one of my favorite stories.
Speaker 1: Yeah yeah, okay, this this is a big one. So
Speaker 1: so twenty century Fox negotiated to get Star Wars onto
Speaker 1: pay TV. Yes, so Star Wars big movie. Of course,
Speaker 1: that's when Return of the Jedi came out. So the
Speaker 1: original trilogy, you know, the only one that exists, is
Speaker 1: complete at this time, and Star Wars itself, the movie
Speaker 1: that started it all. Uh, the second big blockbuster following
Speaker 1: Jaws from is available to go on to pay TV. However,
Speaker 1: it's not an exclusive deal. This is something they they
Speaker 1: negotiate to put it on every page television station essentially,
Speaker 1: so Showtime's gonna get HBO is gonna get it now. Normally,
Speaker 1: the way these channels like to try and and position
Speaker 1: the big ticket items that they get is to wait
Speaker 1: and put it out on prime time preferably like eight pm, yeah, Friday, Saturday,
Speaker 1: Sunday night, Sunday night, probably preferably to to really get
Speaker 1: all of the home viewers in right, so you would
Speaker 1: you know when the weekend would come around eight pm.
Speaker 1: That's when you could be guaranteed that that was when
Speaker 1: the biggest movies were going to be uh showcased on
Speaker 1: these pay television stations. However, Star Wars was such a
Speaker 1: big deal, being that summer blockbuster, that both Showtime and
Speaker 1: HBO wanted to make sure they took advantage of it
Speaker 1: and did not allow the other channel to show it
Speaker 1: before they did. So, HBO didn't want Showtime to show
Speaker 1: it first. Showtime didn't want HBO to show it first.
Speaker 1: According to the agreement they signed with Fox, neither could
Speaker 1: show it any time before six am on February one,
Speaker 1: so both of them scheduled the first showing of Star
Speaker 1: Wars to be six am February first, even knowing that
Speaker 1: that's not an ideal time for their customers. They just
Speaker 1: didn't want the other one to get the scoop, and
Speaker 1: HBO went a step further. So remember in that last
Speaker 1: episode where I talked about cable being a cutthroat business
Speaker 1: and nothing is really you know, off limits. That includes bribery.
Speaker 1: That's probably a strong word. HBO didn't bribe twentieth Century Fox. Well,
Speaker 1: they paid them more money. They paid them more money.
Speaker 1: That's very much like a bride. Yeah, so that they
Speaker 1: could be allowed to show Star Wars one minute after
Speaker 1: midnight on February one, so six hours before showtime could
Speaker 1: although they weren't allowed to announce it. Yeah, so you
Speaker 1: had to have been watching HBO at one midnight and
Speaker 1: one minute after midnight on February one to have noticed
Speaker 1: that this had happened. However, the they were able to
Speaker 1: say legitimately that they were the first paid television station
Speaker 1: to carry Star Wars, and that actually carried some weight.
Speaker 1: There were people who said, wait a minute, why is
Speaker 1: HBO showing it before showtime? I should have HBO not showtime.
Speaker 1: Despite the fact that we're talking about a six hour
Speaker 1: window when most people wouldn't be watching television anyway. Um,
Speaker 1: that that part didn't matter. So very interesting that this
Speaker 1: battle happened. It was another expensive battle, but an important one.
Speaker 1: As we all know, Star Wars one of the most
Speaker 1: important pieces of art created in the history. There's like
Speaker 1: the Mona Lisa Star Wars David, that's the order it
Speaker 1: goes in. So three. Also, there was another amazing piece
Speaker 1: of art premiered on HBO and original program aimed at children. Yeah,
Speaker 1: Jim Henson's Fraggle Rock. Yeah, down in Fraggle Rock. So
Speaker 1: I was a huge Fraggle Rock fan to back in
Speaker 1: the day. Um, they actually came to dragon Con and
Speaker 1: we covered the dragon Con parade. We actually shut this coverage.
Speaker 1: Me and Ben Bowlen and Lauren You were there and
Speaker 1: we did it like Macy's Thanksgiving Day parade style. It
Speaker 1: never it never saw the light of day, probably because
Speaker 1: there were long stretches where nothing was happening. Oh we
Speaker 1: we we haven't had anyone had time to edit the
Speaker 1: who whole thing was really long. It was very long. Yeah,
Speaker 1: but the Fraggles were in it. They were in it.
Speaker 1: And there is a photo gallery that I did I
Speaker 1: was running a still camera through the parade and so
Speaker 1: and and she she waved at me. Yeah. I got
Speaker 1: choked up, Yeah, I got choked up watching the Fraggles.
Speaker 1: I mean, I'm not I'm not embarrassed to admit it.
Speaker 1: The Fraggles meant a lot to be I'm getting a
Speaker 1: little tiory right now in fact, but anyway, Jim Henson
Speaker 1: Fraggle Rock. Now, Jim Henson had already had a relationship
Speaker 1: with HBO. HBO had produced a couple of years earlier
Speaker 1: a Christmas special Emitt Otter's jug Band Christmas. So now
Speaker 1: Jim Henson had the freedom to create this entire children's series,
Speaker 1: which lasted five seasons, and it ended up being a
Speaker 1: big success. It was one of the few breakaway successes
Speaker 1: of children's programming on HBO. A lot of the other
Speaker 1: programming UH people liked the idea of but no one
Speaker 1: ever bothered to watch, so Fraggle Rock was not among that.
Speaker 1: That was an incredibly popular show, in fact, so popular
Speaker 1: that HBO would end up making other versions of Fraggle
Speaker 1: Rock for other countries, and some of them would have
Speaker 1: their own version of Doc and Sprocket that wouldn't necessarily
Speaker 1: be called Doc and Sprocket and they would be different
Speaker 1: people like that. I think in England it was like
Speaker 1: a lighthouse keeper who was really crabby. But anyway, they
Speaker 1: would also be dubbed into different languages, so everyone had
Speaker 1: their own version of Fraggle Rock, which was kind of cool.
Speaker 1: It wasn't just a you know, it wasn't just switching
Speaker 1: out the soundtrack. It was actually Taylor made to these nations. Uh.
Speaker 1: And another series that premiered that year, and I remember
Speaker 1: this series too, was not necessarily The News, which was
Speaker 1: kind of a news parody sketch comedy show. It was
Speaker 1: the news thing was kind of the the conceit the
Speaker 1: bookends for these various sketches that may or may not
Speaker 1: be very loosely connected, right, And it was kind of no.
Speaker 1: Brian's very first television writing gig also uh not consistently
Speaker 1: very good, but but one of the examples of HBO
Speaker 1: getting into original programming, which is again they started looking
Speaker 1: at how to differentiate themselves from the showtimes of the world,
Speaker 1: and these exclusivity deals, like we said, could be really
Speaker 1: really expensive, so maybe making original programming would have been
Speaker 1: a better approach. Now they learned that making good original
Speaker 1: programming is very tricky. It might not be expensive, but
Speaker 1: it's very hard to do, and getting people to pay
Speaker 1: attention is also sometimes tricky. Right, Yeah, sometimes they would
Speaker 1: make an amazing show that the critics loved in nobody watched.
Speaker 1: We will talk about several of those in our third episode.
Speaker 1: But meanwhile, in nine, twelve years after its inception, HBO
Speaker 1: finally got their own offices. Yeah, they moved over into
Speaker 1: a building on Avenue, and it had the nickname the
Speaker 1: flash Cube. All right, kids, years ago, like in the eighties,
Speaker 1: cameras which had film in them, none of this digital
Speaker 1: stuff also had flash you know, flashes like a separate
Speaker 1: flash unity had to attach to the top little cube
Speaker 1: that would flash light so you could get some light
Speaker 1: on that image you're trying to capture onto film. That's
Speaker 1: why it was called the flash cube because the building
Speaker 1: looked like one. So this building that looked like something
Speaker 1: you've never seen looked exactly like just just like that thing.
Speaker 1: So now you had a building where the actual departments
Speaker 1: could all sit together. The divisions were no longer divided.
Speaker 1: They could all be in a cohesive unit. So that
Speaker 1: amazing camaraderie they had developed back at Time Incorporated when
Speaker 1: they had this kind of startup mentality went away. It's
Speaker 1: completely ruined. Yeah, Suddenly they were physically closer and yet
Speaker 1: emotionally so distant. Um. It turned out that HBO was
Speaker 1: starting to become more of a business, less of this
Speaker 1: kind of startup entrepreneur approach, and I had more of
Speaker 1: a of a corporate structure. Yeah. And it also was
Speaker 1: when HBO started to notice that growing as a business
Speaker 1: was going to get very difficult, they did what was
Speaker 1: called hitting the wall. The wall in this case was saturation.
Speaker 1: You had a saturation point where cable had pretty much
Speaker 1: entered all the markets that was gonna go into. So
Speaker 1: that meant that you no longer could expect to suddenly
Speaker 1: have access to twenty thousand new subscribers potential new subscribers
Speaker 1: because someone finally built the infrastructure out to this one region.
Speaker 1: Now all the regions pretty much had cable, So they
Speaker 1: were not going to be any of these these gift
Speaker 1: baskets of potential customers just arriving at HBO. They were
Speaker 1: gonna have to work for it. And also on top
Speaker 1: of that, they had a churn rate going on right.
Speaker 1: So churn rate is when you lose a certain number
Speaker 1: of customers over a course of a general amount of time.
Speaker 1: So there's was about two percent per month back in,
Speaker 1: which means that in order to just stay even, you
Speaker 1: have to grow by two percent, right to to just
Speaker 1: maintain the same number of customers from the beginning of
Speaker 1: the month to the end of the month. If you
Speaker 1: want to grow beyond that, then obviously you have to
Speaker 1: get more than two percent new customers to replace the
Speaker 1: two percent who who left. Now, some of the people
Speaker 1: who left, they left because they were relocating and eventually
Speaker 1: maybe they come back, but some of them were just saying, oh,
Speaker 1: I don't want to have this expense anymore. So you
Speaker 1: have to convince them, hey, we're worth the money, or
Speaker 1: you had to convince new people, hey we're worth the money.
Speaker 1: And now there are fewer new people to get access to.
Speaker 1: So this was a very scary time at HBO. You
Speaker 1: had this young company that had been used to this
Speaker 1: incredible growth suddenly realizing, oh, things are not going to
Speaker 1: be as easy anymore. We're not going to have this
Speaker 1: essentially blank check that we can hand out for these
Speaker 1: exclusivity deals. Were not gonna have this this endless line
Speaker 1: of new customers coming in through the door. What are
Speaker 1: we gonna do? And in fact, one of the first
Speaker 1: things they had to do was layoff about a hundred
Speaker 1: and twenty five employees, which was the first time in
Speaker 1: HBO's history that people had been let go like that. Also,
Speaker 1: around the same time, the VCR became a thing, and
Speaker 1: that was a boy talk about a big bite out
Speaker 1: of the business. So keep in mind, remember this is
Speaker 1: the time when HBO their main purpose was to create
Speaker 1: way for people to watch these movies that were uncut
Speaker 1: and uncensored that wouldn't be carried on broadcast television. But
Speaker 1: now with the birth of the VCR and the growth
Speaker 1: of the home video market where you could go to
Speaker 1: a rental store and rent a movie, you can get
Speaker 1: access to all sorts of movies beyond the what we'll
Speaker 1: call the playlist that HBO had access to. Remember, HBO's
Speaker 1: paying licensing fees to be able to show these movies,
Speaker 1: so they don't have licenses for every movie. They have
Speaker 1: to pick and choose, and sometimes they pick before they
Speaker 1: even know what the movie is going to be like,
Speaker 1: and sometimes they lose out on that. Oh sure, and
Speaker 1: they can only air so many things at a time,
Speaker 1: they can only pay to keep so many things on
Speaker 1: the air at a single time, and whatever they happen
Speaker 1: to have might not be what you feel like watching. Once,
Speaker 1: once stores started carrying rentable VHS tapes, it was I
Speaker 1: mean for for younger listeners. I mean, like, I have
Speaker 1: a hard time imagining this, and I remember VHS tapes.
Speaker 1: I remember all of that very clearly, and and it
Speaker 1: still sounds crazy to me that you that there was
Speaker 1: a time when you couldn't just watch whatever you wanted. Yeah.
Speaker 1: Now you would go into the store and you would
Speaker 1: hope that that one copy of Young Einstein was still available,
Speaker 1: because you know what a breakaway hit that was. Um,
Speaker 1: hey that was an important film. Hey yeah, who's serious?
Speaker 1: One of my heroes. Okay, I'm not don't take any
Speaker 1: thing away from the series, but yeah, just just the
Speaker 1: fact that you go into the store, you know, and
Speaker 1: hope that the thing is the movie that you want
Speaker 1: is there. There was an illusion that you had a
Speaker 1: more choice with the home video market. Now, the truth
Speaker 1: as dependent upon how many copies of a certain movie
Speaker 1: the rental store had and how big a customer base
Speaker 1: it had, Because there might be some movies that unless
Speaker 1: you just looked out, we're constantly being checked out. So
Speaker 1: so it even if Blockbuster had thirty copies of whatever
Speaker 1: it was, it might all be gone right. So so
Speaker 1: hypothetically you had a much larger choice, but in practice
Speaker 1: it may or may not have happened. And either way,
Speaker 1: it was probably more than just beast Master over and over. Yes,
Speaker 1: HBO started getting the There was a joke that hbos
Speaker 1: actually stood for hey beast Masters on um. Yeah, that
Speaker 1: was the That was again a comment about the repeats,
Speaker 1: uh and uh, which were the movies that had been
Speaker 1: shown multiple times within a certain licensing period, and returns,
Speaker 1: which were movies that were still under license but had
Speaker 1: been pulled out of the circulation of movies shown on
Speaker 1: HBO and then reinserted later on. So you know, HBO
Speaker 1: licensed out these movies, and those licenses were very specific.
Speaker 1: They would say you can show this movie X number
Speaker 1: of times and during these times of day, Like they
Speaker 1: were very The way you had to program and hbo
Speaker 1: schedule was dependent upon these licenses because some of them
Speaker 1: were like, Okay, we don't want you showing this this
Speaker 1: movie before six pm. Well then they would have to
Speaker 1: plan that out, you know, before six pm and also
Speaker 1: after midnight. I'm sure that FCC regulations and stuff like
Speaker 1: that would prevent some content from being shown during HBO
Speaker 1: specifically police themselves and put they would not allow anything
Speaker 1: that was R rated to go on before eight p m.
Speaker 1: So it had to be after eight pm to to
Speaker 1: go onto HBO. Uh. That was largely a self imposed rule,
Speaker 1: and it was just an easy one for them to
Speaker 1: to go with because they knew that that would be
Speaker 1: something that would most likely fit their subscribers desires and
Speaker 1: would at least mollify the kind of groups that would
Speaker 1: have had complaints otherwise exactly most of them. Yes. So anyway,
Speaker 1: those licenses put limiting factors on HBO how many movies
Speaker 1: they would have access to it a given time, how
Speaker 1: many how frequently they could show it. But then HBO
Speaker 1: also had this model, this business model, where the idea was,
Speaker 1: we're going to get this pool of movies. We're gonna
Speaker 1: make a schedule where we're going to show these movies
Speaker 1: at different times on different days, so that our customers
Speaker 1: can look at the schedule and say, oh, the movie
Speaker 1: I want to see is gonna be on at six
Speaker 1: pm on Wednesday. I'll make sure to watch it on
Speaker 1: Wednesday at six pm. But instead, what they found that
Speaker 1: was that people were treating HBO like it was a
Speaker 1: television channel. That's ridiculous. Well, I mean, you know, once again,
Speaker 1: once BCRs entered the picture and they could just record something, yeah,
Speaker 1: it didn't matter so much about when it was on,
Speaker 1: but they and also yeah, someone would just turn on
Speaker 1: the TV and just be like, oh, what's on right now? Okay, yeah,
Speaker 1: oh it's beast Master again. Yeah. That was the problem
Speaker 1: was that people were not treating it like the way
Speaker 1: the company had thought of the service. And we we've theater, Yeah, exactly.
Speaker 1: We've seen this happen in other industries, right, We've seen
Speaker 1: it where someone creates a service, let's say Twitter, great example,
Speaker 1: someone creates a service and they have in their mind
Speaker 1: the way the service is going to be used by
Speaker 1: the customers, and customers go, oh, this great thing for
Speaker 1: this entirely different purpose. And so if you're a good company,
Speaker 1: you move with the customers and you don't try and
Speaker 1: force them into a model that they don't want, because
Speaker 1: otherwise your your business suffers. So HBO started seeing, oh
Speaker 1: we're gonna have to think of some other way to
Speaker 1: change up our programming so that we don't have the same,
Speaker 1: you know, list of movies showing so frequently, because we're
Speaker 1: going to end up driving customers away. And we're already
Speaker 1: having to deal with this churn issue and the saturation issue.
Speaker 1: So all of these factors were going into HBO and
Speaker 1: the executive's minds thinking, all right, we gotta we gotta
Speaker 1: think of a new way of approaching content. Meanwhile, Michael Folks,
Speaker 1: who we had talked about in the last episode, who
Speaker 1: had come over from a talent agency and had joined HBO,
Speaker 1: he becomes the head of HBO. He replaced Frank Beyondi,
Speaker 1: who had pretty much been forced out. He had made
Speaker 1: a really expensive licensing agreement with Columbia Pictures. Uh, there's
Speaker 1: a little movie called Ghostbusters that nearly broke the bank
Speaker 1: for HBO. We're talking like millions of dollars, like forty
Speaker 1: million dollars just to have this one movie because they
Speaker 1: had agreed beforehand, before knowing what this was going to be,
Speaker 1: and there was no cap on how much they could spend.
Speaker 1: So that deal pretty much melt the in for Beyondi. Yeah,
Speaker 1: well that that was that was the first place that
Speaker 1: I saw Ghostbusters. So wow, I saw it in the
Speaker 1: theater opening day the librarians. What are I was? Two?
Speaker 1: Moving on, We're going to take a quick break while
Speaker 1: I get my walker and make sure I go out
Speaker 1: and get some insure to drink, and then when we
Speaker 1: come back, we'll talk more about HBO. Let's though, take
Speaker 1: this moment to thank our sponsor. All right, We're up
Speaker 1: to nineteen five, and that's when HBO decided to launch
Speaker 1: a big summer advertising campaign. Now, they they saw that
Speaker 1: the wall had hit. They saw this saturation in churn issue,
Speaker 1: they saw the exclusivity issue, and they thought, how can
Speaker 1: we attract more customers so that we can continue to grow?
Speaker 1: And they decided that they would really concentrate in an
Speaker 1: advertising campaign that spanned the summer of n and they
Speaker 1: would repeat this a couple of times. Oh yeah, yeah,
Speaker 1: And why the summer, you ask, Summer is a when
Speaker 1: kids are out of school and parents need something to
Speaker 1: do with these suddenly free tiny humans. Yeah, most of
Speaker 1: us have to continue to work in the summer months.
Speaker 1: And so how do you keep the tiny humans from
Speaker 1: rising up against their masters and enslaving us? All good HBO. Furthermore,
Speaker 1: as most of us know, summer is when many television
Speaker 1: shows are in reruns. All of the all of the
Speaker 1: really big primary prime time sort of things are broken
Speaker 1: for the summer. Yeah, broadcast television is tends to be
Speaker 1: pretty pretty barren over the summer, like you're either watching
Speaker 1: reruns or especially just don't care about especially back in
Speaker 1: those days. These days, it's changing a lot, and it's
Speaker 1: a little bit it's a little bit now where you
Speaker 1: can get interesting programming. Yeah, especially now that you have
Speaker 1: shows that are dividing their seasons up into season breaking bad.
Speaker 1: You don't don't perpetuate the breaking bad problem. I mean,
Speaker 1: breaking bad great show, but you know, splitting up your
Speaker 1: seasons bad, breaking bad bad. All right. But anyway, Yeah,
Speaker 1: HBO decided, hey, we can take this opportunity to really
Speaker 1: grab this this audience that doesn't yet subscribe to HBO.
Speaker 1: So what they did was they sent ads through direct
Speaker 1: mail and they also did telemarketing. They called people, cold
Speaker 1: calling people to convince them to sign up, and as
Speaker 1: irritating as it was, it worked. Yeah. They sent six
Speaker 1: hundred forty million ads to folks between six d pretty
Speaker 1: million twice the population of the United States. They also
Speaker 1: did start investing more in original programming. Yes, um and
Speaker 1: and you know, sports was something that they had been
Speaker 1: doing since the beginning. Yeah, that was one of the
Speaker 1: you remember the two things you could watch on HBO
Speaker 1: when it premiered was a movie uh that that was
Speaker 1: about logging and a hockey game. So sports had always
Speaker 1: been part of HBO. Also, stand up comedy specials had
Speaker 1: been a part of HBO since the early days. Oh yeah, yeah,
Speaker 1: those really great old rap and Williams or Richard pryor special.
Speaker 1: Steve Martin had a good one too. Yeah. You had
Speaker 1: a bunch of people who were the the kind of
Speaker 1: the loudest voices of comedy in the seventies and eighties.
Speaker 1: George Carlin another one. Some amazing comedians who would get
Speaker 1: their HBO special. And even to this day, you'll hear
Speaker 1: comedians talk about, you know, feeling like they made it
Speaker 1: when they got an HBO special like that. That was
Speaker 1: like a mark of success. You know, that's when you
Speaker 1: know you've you've arrived. They continued to do that, so
Speaker 1: stand up comedy also big. They also ended up backing
Speaker 1: several documentary series. They ended up creating several series, including
Speaker 1: a brand called America Undercover. There's several documentaries in that series,
Speaker 1: and that helped to differentiate them again more from the
Speaker 1: showtimes in the world. Now, keep in mind Showtime at
Speaker 1: this point not really getting into original programming that much,
Speaker 1: and they were still very much dependent upon the uncut,
Speaker 1: uncensored versions of movies. HBO was trying to kind of
Speaker 1: break away from that a little bit, while still having
Speaker 1: movies on the channel, but trying to differentiate themselves by
Speaker 1: adding variety that you could not get anywhere else. A right, right,
Speaker 1: it's a little bit if you remember from our cable
Speaker 1: provider and streaming media discussion, or I mean, if you
Speaker 1: pay attention to the Internet these days, a little bit
Speaker 1: of what what Netflix is doing to kind of try
Speaker 1: to move itself forward in front of channels like HBO.
Speaker 1: In fact, if HBO had not done this, we would
Speaker 1: not have a Netflix, and we certainly wouldn't have a
Speaker 1: Netflix that's making its own content. Same thing with Hulu,
Speaker 1: same thing with Amazon. The reason why they're able to
Speaker 1: make their own content, why that's a viable choice, is
Speaker 1: because HBO tried it and made it work. Now, not
Speaker 1: everything HBO did with the independent stuff that they did.
Speaker 1: The original programming stuff worked, and we'll talk a lot
Speaker 1: about some of both the successes and the failures. Um.
Speaker 1: Not everything caught on. However, they also partnered at that
Speaker 1: time with a company called Thorne E m I, which
Speaker 1: was an independent film producer and video distributor. So their
Speaker 1: main business model was to partner with other movie studios
Speaker 1: that did not have a home video distribution market. So
Speaker 1: some of the big ones did they they had they
Speaker 1: had it all in place where either they had their
Speaker 1: own production company or distribution company, or they partnered with
Speaker 1: someone already. Thorny and I would would partner with lots
Speaker 1: of smaller, smaller distribution companies, so they ended up getting
Speaker 1: a lot of um we all those cheap action movies,
Speaker 1: you know, the ones that started Internet, Darling, Chuck Norris,
Speaker 1: those were big ones. But uh. The following year six
Speaker 1: Cannon Pictures bought out thorn em I's interest, so HBO
Speaker 1: and thorny em I had um HBO and thorny em
Speaker 1: I had partnered together. Cannon Pictures comes in buys out
Speaker 1: thorn em I, but still partners with HBO and it
Speaker 1: becomes HBO slash Cannon Video and again most of the
Speaker 1: movies low budget action films, awesome movies, not taking anything
Speaker 1: away from him. By seven, HBO Cannon ends up being
Speaker 1: renamed HBO Video. Short time later, it changes names again
Speaker 1: to HBO Entertainment, and uh, they had a few successes,
Speaker 1: but really it was touch and go for a while.
Speaker 1: It wouldn't be until HBO original programming really took off
Speaker 1: in the nineties when HBO Entertainment had it made because
Speaker 1: now they became the distribution for HBO originals that everybody
Speaker 1: wanted to have, all right, but at the time it
Speaker 1: was really just scraping by moving on to Night six.
Speaker 1: That's when HBO established hbo Ocase, which was an actual
Speaker 1: production company. So they had already moved into distribution, and
Speaker 1: they had a production company over on the West Coast
Speaker 1: in Los Angeles called HBO Pictures, but now they wanted
Speaker 1: to create another production company on the East coast, so
Speaker 1: this one was based in New York and the idea
Speaker 1: was to make grittier, more you know, kind of realistic
Speaker 1: or hard hitting movies than HBO Pictures was known for.
Speaker 1: So their first picture was about a KGB agent who
Speaker 1: was involved in a big CIA operation. This was actually
Speaker 1: a true story about Uri Nasinko, so they they were
Speaker 1: going kind of this this hard, gritty route, and in
Speaker 1: general people said it felt more like HBO, whereas the
Speaker 1: stuff from HBO Pictures a little more you know, glossy
Speaker 1: and glitzy certainly had bigger budgets, had access to bigger names,
Speaker 1: so you saw more movie stars in HBO Pictures productions,
Speaker 1: but the HBO Showcase would be the kind of more
Speaker 1: down to earth stuff. So both of these would eventually
Speaker 1: merge together and become HBO Films, and Colin Callender, who
Speaker 1: had been the head of HBO Showcase, became the head
Speaker 1: of this whole department. I'm sure there were some grumblings
Speaker 1: on both sides. I'm sure the the the Showcase folks
Speaker 1: were thinking, you know, they get all the money and
Speaker 1: they get they get access to all that talent, whereas
Speaker 1: the Pictures folks were probably thinking, they have this crazy reputation,
Speaker 1: which we should have because look at what we're doing.
Speaker 1: So so everyone get together and play nice. Yeah. Uh.
Speaker 1: Fortunately they were separated by the rest of the United States,
Speaker 1: with one being in l a and the other being
Speaker 1: in New York, so I think they could they were
Speaker 1: insulated enough where it wasn't too much of a problem.
Speaker 1: Also in now, this is another big moment in HBO
Speaker 1: history because it established a practice that ended up becoming
Speaker 1: an industry wide standard. It's another reason why we really
Speaker 1: wanted to talk about HBO at length, because so many
Speaker 1: of the things they did influenced multiple industries. In this case,
Speaker 1: they began to scramble or encode signals full time. For
Speaker 1: those satellite signals. Now, if you listen to the first episode,
Speaker 1: you learned about HBO using up links to send a
Speaker 1: signal up to a satellite, which used transponders leased by
Speaker 1: HBO to amplify the signal send it back down to
Speaker 1: down links across the nation to cable providers. Because it
Speaker 1: spread out over the entirety of North America. And at
Speaker 1: this point, the cost of purchasing a satellite dish for
Speaker 1: yourself head lowered to the point where where common families
Speaker 1: could purchase one if they wanted, Yeah, if they if
Speaker 1: they saved up. I mean even back when it was
Speaker 1: still tens of thousands of dollars, you had a few
Speaker 1: crazy people with lots of money buying these things. Because
Speaker 1: the signals weren't scrambled, the signals were clear. So so
Speaker 1: once you bought in what I mean for for the
Speaker 1: purchase price of that satellite dish, you could watch whatever
Speaker 1: you wanted to absolutely free. And so pay TV stations
Speaker 1: didn't like this because you didn't have to subscribe to
Speaker 1: cable at all. Cable companies didn't like it because you
Speaker 1: didn't have to subscribe to cable at all. You just
Speaker 1: had this dish, which at the time was enormous. Uh.
Speaker 1: This was before they had developed the the dishes that
Speaker 1: are more common these days. This is when if you
Speaker 1: remember back in the eighties, the enormous satellite dishes that
Speaker 1: might be out in front of someone's yard or in
Speaker 1: the backyard. That's what I'm talking about, the big like
Speaker 1: nine footers. So you're able to get these signals clear.
Speaker 1: And not only that, broadcast television hated it. And you
Speaker 1: might think, well, why did broadcast television hate it? You
Speaker 1: could get those shows for free using an antenna. Well,
Speaker 1: it's because those shows aren't really free. The reason why
Speaker 1: those shows are are possible at almost because their ads
Speaker 1: supported right advertisers by advertising time on those shows, and
Speaker 1: that money goes to the production companies. They are more
Speaker 1: steps in here, but in general, the production companies are
Speaker 1: able to make shows because the money made through advertising. Well,
Speaker 1: if you're using a satellite to pull down the raw feed,
Speaker 1: you're getting the raw feed, you're getting what's called the
Speaker 1: back haul feed, which is before they put any commercials
Speaker 1: into the content. So you were getting commercial free content
Speaker 1: from all the different providers, something that broadcast and cable
Speaker 1: stations and cable providers all hated. So how do you
Speaker 1: fix this problem? Well, what HBO decided to do was
Speaker 1: to invest in, uh this encoding and scrambling technology. They
Speaker 1: ended up going with General Instruments video cipher to to
Speaker 1: encrypt the audio and video signals. Once they've done that,
Speaker 1: you'd have to have a decryption box on the private
Speaker 1: end in order to decrypt the signals. Right, So cable
Speaker 1: companies had these D scramblers, Right, they can just descramble it,
Speaker 1: and they had an agreement with HBO. Originally it was
Speaker 1: just HBO, but other other channels would follow suit. So
Speaker 1: HBO ended up, like I said, creating this industry standard approach.
Speaker 1: So the cable providers would all have these D scramblers,
Speaker 1: and as a private citizen, you could get a D scrambler,
Speaker 1: but uh, it wouldn't necessarily work. You'd have to pay
Speaker 1: HBO to have access. You could actually go out and
Speaker 1: buy chips that would decrypt things for you, but often
Speaker 1: these chips would only be good for about a month,
Speaker 1: and what would happen is that the provider on the
Speaker 1: other end would see that someone usually it's some fake
Speaker 1: address that's been made out to a customer has not
Speaker 1: paid their bill, and so they cut off the service.
Speaker 1: So for a month you have service, and then suddenly
Speaker 1: you don't. So people kept trying to find ways to
Speaker 1: get around this, but it meant that for the most part,
Speaker 1: it was much harder to pirate a signal. Now, this
Speaker 1: made satellite dish owners very, very angry. They felt entitled
Speaker 1: to the stuff they were stealing because, in their minds,
Speaker 1: they had paid thousands of dollars for a salar dish,
Speaker 1: therefore they should have access to all this content, despite
Speaker 1: the fact that all the content providers are saying, yeah, see,
Speaker 1: the money you spent didn't go to help pay for
Speaker 1: the actual content, and unless we get paid for the
Speaker 1: content we make, we can't make it. So you're actually
Speaker 1: talking about a behavior that ultimately will completely destroy the
Speaker 1: business that you want to to enjoy. You want this content,
Speaker 1: you want to be able to watch stuff, but if
Speaker 1: we're not getting money for it, we can't make the
Speaker 1: stuff you want to watch. But the satellite provide. Satellite
Speaker 1: owners said, I want my free HBO. So Jonathan has
Speaker 1: some opinions. I don't side with the pirates on this one.
Speaker 1: To be honest, I mean I understand. I understand the
Speaker 1: other arguments, which we'll get into when we talk about streaming.
Speaker 1: I'll you know, it's not that I don't feel empathy
Speaker 1: for folks who want to have access to content. It's
Speaker 1: just that if you had the choice of either spending
Speaker 1: thousands of dollars for a satellite dish and then stealing
Speaker 1: everything or the just sub that that is a different issue,
Speaker 1: and it's a little bit on the silly end um.
Speaker 1: But meanwhile, also in six uh, Jeff Bukes became HBO's
Speaker 1: chief financial officer. He wouldn't be finished rising the ranks
Speaker 1: because if you listen to our last episode, we kind
Speaker 1: of gave it away. Seven HBO launches festival. This is
Speaker 1: gonna sound like it's a like it's a deja vu
Speaker 1: all over again. All right, Right, Remember take two. Yeah,
Speaker 1: that was the idea of creating a kid friendly network
Speaker 1: that was lower priced, so people who weren't either willing
Speaker 1: to pay the full subscription price for HBO or objected
Speaker 1: to the content would have an alternative. It also did
Speaker 1: not work. Yeah, apparently they didn't learn anything from Take
Speaker 1: two because Festival, to me, sounds like it was the
Speaker 1: same thing, exactly the same thing. Yeah, it would it
Speaker 1: would find up getting canceled entirely than a year. Yeah.
Speaker 1: The problem was that they were trying to target two
Speaker 1: different populations. They wanted to target the conservative older people
Speaker 1: who didn't want all that filth on their TV, and
Speaker 1: they wanted to target families with young children who wanted
Speaker 1: to have kid friendly programming. But the problem was all
Speaker 1: the older conservatives said, why do you have all this
Speaker 1: children programming on my station? I don't want any of this.
Speaker 1: This is not interesting to me. And all the families
Speaker 1: were saying, I got this channel so that I could
Speaker 1: watch stuff and my kids could watch stuff. But when
Speaker 1: my kids have gone to bed, the only stuff you
Speaker 1: have on is on Golden PONDT times in a row.
Speaker 1: I don't care about that. So neither target audience was satisfied.
Speaker 1: So it's the lesson here is, if you want to
Speaker 1: target two very different audiences, splitting the difference hardly ever works. Yes.
Speaker 1: Um the next year though in something with kids did
Speaker 1: work out. Yes, The Kids in the Hall in fact
Speaker 1: premiered on HBO. Canadian sketch comedy Troupe Brilliant, one of
Speaker 1: my favorites. Seen him live, good stuff. Yeah, yeah, I've
Speaker 1: only seen him live once. My wife seen him live twice.
Speaker 1: She likes to hold that over me, but yeah, no,
Speaker 1: fantastic one of the one of the moves where HBO
Speaker 1: Original programming really started to break away. And we've got
Speaker 1: a lot more to say about HBO Original programming, so
Speaker 1: much so that we've done another episode of HBO coming up.
Speaker 1: So here's the thing, guys, if you have any ideas
Speaker 1: for episodes that we should definitely take on in the future,
Speaker 1: let us know. Send us an email. All address is
Speaker 1: tech Stuff at Discovery dot com, or drop us a
Speaker 1: line on Facebook, whether or Tumbler or handle it. All
Speaker 1: three is tech Stuff hs W and we will talk
Speaker 1: to you again really soon for more on this and
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