Speaker 1: Welcome to Tech Stuff, a production from I Heart Radio.
Speaker 1: Hey there, and welcome to tech Stuff. I'm your host,
Speaker 1: Jonathan Strickland. I'm an executive producer with I Heart Radio
Speaker 1: and I love all things tech and it's time for
Speaker 1: us to continue our exploration of the history of Warner Media.
Speaker 1: So in our last episode, I talked about the founding
Speaker 1: of two major parts of Warner Media, which was a
Speaker 1: Time Incorporated, a magazine publisher, and Warner Brothers as in
Speaker 1: Warner Brothers Studios, the film and then later TV and
Speaker 1: record label studios. I focused a lot on Warner Brothers
Speaker 1: in that last episode for pretty obvious reasons, but it's
Speaker 1: time to go back to Time Incorporated. That is for
Speaker 1: a moment anyway. Now. In the last episode, I said
Speaker 1: that Time grew as a publisher, adding more publications to
Speaker 1: its name as it evolved, and that it continued to
Speaker 1: do so right up to nine nine, when it would
Speaker 1: begin the process of merging with a company that at
Speaker 1: that point was called Warner Communications. And I'm not going
Speaker 1: to go all over that again because it's crazy complicated,
Speaker 1: and you know, I just did that in Monday's episode.
Speaker 1: But one thing I did not cover was Times own
Speaker 1: multimedia empire. See, Time wasn't just in the business of
Speaker 1: publishing magazines or even those Time Life books. You might
Speaker 1: remember if you grew up in the seventies and eighties
Speaker 1: like I did, and you saw the commercials all the time.
Speaker 1: You know, I never did get that series about ghosts,
Speaker 1: but I always wanted it. Anyway, we're backtracking a bit
Speaker 1: to the nineteen sixties to talk about another element of
Speaker 1: the Warner Media empire, and it came to Warner Media
Speaker 1: through Time Incorporated. And it's a very important piece of
Speaker 1: that empire. In fact, it's a composent that would end
Speaker 1: up being transformational, so much so that I've done a
Speaker 1: full series about this company, or rather this channel, and
Speaker 1: I'm talking about HBO or Home Box Office, the subscription
Speaker 1: cable channel best known today for like original series like
Speaker 1: Game of Thrones and stuff. So since I did a
Speaker 1: full treatment of this company in the past in full
Speaker 1: episodes of tech stuff, and in fact have aired some
Speaker 1: of those episodes as classics, not not in the not
Speaker 1: too distant past, I'm not going to dive into excruciating detail,
Speaker 1: but we do need to cover some of it because
Speaker 1: HBO is a really important part of Warner Media today. Alright,
Speaker 1: so let's put ourselves in the mindset of the typical
Speaker 1: American consumer, uh, someone who watches television back in the
Speaker 1: nineteen sixties. This person has spent a not insignificant amount
Speaker 1: of money to purchase a television set, and they most
Speaker 1: likely get their television using an end anna to tune
Speaker 1: into over the air broadcasts from nearby TV stations. Now,
Speaker 1: maybe if they live in a rural area, or if
Speaker 1: they're in a really dense urban area with lots of skyscrapers,
Speaker 1: they would actually be using cable. It's more likely to
Speaker 1: be in a rural area in the nineteen sixties because see,
Speaker 1: over the air broadcasts have a limited range, and once
Speaker 1: you get far enough out from where there's a transmitter,
Speaker 1: the signal you pick up might be so weak that
Speaker 1: you can't see or hear anything on a given channel,
Speaker 1: or it's just you know, a really poor quality, like
Speaker 1: a lot of static or whatever. So cable was a
Speaker 1: way to deliver television signals to distant locations over a
Speaker 1: physical wire or cable rather than over the air, and
Speaker 1: by the nineteen sixties there were more than six hundred
Speaker 1: cable systems in the United States. Mostly serving rural areas
Speaker 1: that were not or you know, small towns that were
Speaker 1: not close to transmitters. And the way most of these
Speaker 1: worked was that you would have a dedicated antenna in
Speaker 1: a location that could get a pretty good signal. So
Speaker 1: you might build a really tall antenna at the top
Speaker 1: of a hill, for example, and then you would pick
Speaker 1: up signals using that antenna, and you'd send that signal
Speaker 1: down cables to various households, which had to pay a
Speaker 1: fee to access the cable feed. But the alternative was
Speaker 1: to either get really cruddy TV signals or go with
Speaker 1: nothing at all. So for some regions, cable TV was
Speaker 1: really the only option if you actually wanted to watch television. Now,
Speaker 1: it was a guy named Charles Dolan who really pioneered
Speaker 1: cable for dense urban environments. Like I said, it was
Speaker 1: already being done out in rural areas, but Dolan was
Speaker 1: looking at places like New York City. Dolan had started
Speaker 1: out as a film editor. He was splicing together stuff
Speaker 1: like sports films and industrial films in Cleveland, Ohio. But
Speaker 1: he got a lucrative offer to sell his business and
Speaker 1: he took it. Then he relocated to New York City,
Speaker 1: and that's where he saw the opportunity to potentially create
Speaker 1: a cable system to serve the needs of folks who
Speaker 1: were living in Downtown Manhattan and Lower Manhattan. Many of
Speaker 1: these people, because of skyscrapers, weren't able to get a
Speaker 1: good signal just using you know, antenna. Meanwhile, folks in
Speaker 1: New Jersey could pick up signals from Manhattan without a problem.
Speaker 1: So it was really a disconnect, right. You had people
Speaker 1: living miles away who were picking up signals there were
Speaker 1: just a few blocks away from Lower Manhattan, and the
Speaker 1: folks at Lower Manhattan couldn't see anything. Well. Dolan decided
Speaker 1: to start up a business called Sterling Information Services in
Speaker 1: nineteen and the company's focus was to provide cable TV
Speaker 1: service for Lower Manhattan. But while the demand for television
Speaker 1: was there, the actual reality of wiring up customers was
Speaker 1: another matter. Because after a mass of blizzard that happened
Speaker 1: in the late nineteenth century, the city of New York
Speaker 1: had made a decision regarding infrastructure. You know, back then,
Speaker 1: numerous utility poles were destroyed in that blizzard, so New
Speaker 1: York decided to install power lines underground rather than using
Speaker 1: utility poles, and stringing them above ground. Now that meant
Speaker 1: there were no utility poles for Dolan to use in
Speaker 1: order to wire up cable, so that meant he was
Speaker 1: going to have to lay cable underground. That is incredibly expensive.
Speaker 1: The estimates were somewhere in the neighborhood of three hundred
Speaker 1: thousand dollars per mile of cable, and getting the cable
Speaker 1: to a customer's location was just part of the problem.
Speaker 1: Manhattan residents largely lived in apartment buildings, so Dolan would
Speaker 1: not just have to get the cable to the building,
Speaker 1: he would then have to install cable into the buildings themselves,
Speaker 1: you know, snake it up through the structure itself, in
Speaker 1: order to wire up each of the apartments that would
Speaker 1: subscribe to his service. So by nineteen sixty seven, you know,
Speaker 1: two years into his endeavor, Dolan had only signed up
Speaker 1: four hundred customers and had spent more than two million
Speaker 1: dollars in the process. And he was losing money at
Speaker 1: that time, Like he the costs were vastly outpacing the revenue.
Speaker 1: Dolan got an investor to help offset those costs, and
Speaker 1: that kept him afloat. And that investor was drumroll, please,
Speaker 1: Time incorporated. Time, the publisher was eyeing cable as a
Speaker 1: possible means of diversifying its portfolio of businesses, and the
Speaker 1: folks at Time had this feeling that cable TV could
Speaker 1: become a really big thing. So Time bought a stake
Speaker 1: in Sterling, which gave Dolan the money he needed in
Speaker 1: order to stay in business. But Dolan was still having
Speaker 1: trouble convincing people to actually sign up for the cable service.
Speaker 1: The content that already existed for TV isn't always compelling
Speaker 1: enough to convince most folks to agree to a subscription
Speaker 1: based model in order to access it. See. The main
Speaker 1: issue really was that TV content at that time was
Speaker 1: free quote unquote free Now I say free because it's
Speaker 1: free the same way this podcast is free, and that
Speaker 1: the content on television received revenue from advertisers. Content was
Speaker 1: ad supported. In other words, This also gave rise to
Speaker 1: companies like Nielsen, which created systems that could measure the
Speaker 1: relative popularity of different programs. That popularity would then lead
Speaker 1: to estimates about how many people were watching any given
Speaker 1: show at any given time. Yeah, this was done by
Speaker 1: projecting numbers. You would distribute a number of devices that
Speaker 1: would essentially monitor what channel televisions were set at in
Speaker 1: a given time, and then you would multiply that number
Speaker 1: by a factor in order to kind of project that
Speaker 1: out to the general public. Not the most precise way
Speaker 1: of doing things, but it was the only real way
Speaker 1: of handling it at the moment. So that popularity level
Speaker 1: would lead to, you know, estimates about how many people
Speaker 1: were watching at any given show at any given time,
Speaker 1: and that gave TV executives an idea of what their
Speaker 1: most popular programming was. That would lead to TV executives
Speaker 1: being able to negotiate bigger ad deals for the most
Speaker 1: popular programs. And all of this makes sense, right, I mean,
Speaker 1: you can ask for a higher price to run an
Speaker 1: ad during a really popular show because presumably way more
Speaker 1: people are going to see ads that run on that
Speaker 1: show than they would if you had an episode of
Speaker 1: I don't know, Johnny tech boy talks about gadgets. Trust me,
Speaker 1: I should know. Anyway, this sort of set up a
Speaker 1: general expectation among viewers TV programming was quote unquote free.
Speaker 1: And it's funny because the same sort of thing happened
Speaker 1: the Internet, right People got used to this idea that
Speaker 1: they could access content on the Internet for free, which
Speaker 1: meant when some companies try to generate revenue not through advertising,
Speaker 1: which has its own set of drawbacks, but rather through
Speaker 1: things like subscriptions or paid for content. A lot of
Speaker 1: people balked at that the so called paywall became a
Speaker 1: barrier to entry, and I get it. You're asking people
Speaker 1: to pay out of pocket for something when there's tons
Speaker 1: of other stuff out there that does not require that
Speaker 1: kind of direct investment. It's one of the big reasons
Speaker 1: we don't go for paid subscription approaches with our podcasts
Speaker 1: in general. We feel that anytime you put a paywall
Speaker 1: in front of content, you're going to see a much
Speaker 1: smaller audience, and we would rather be able to reach
Speaker 1: a lot of people, because it turns out we like
Speaker 1: people anyway. The landscape and TV was that most people
Speaker 1: were used to getting their programming for free, and so
Speaker 1: a lot of just didn't see the value in subscribing
Speaker 1: to a service to get something that other people got
Speaker 1: just by using an antenna. So Dolan would end up
Speaker 1: doing something that lots of other people and companies had
Speaker 1: tried before. He would create content that would not be
Speaker 1: available anywhere else, and the only way you would be
Speaker 1: able to get it is if you bought into the
Speaker 1: cable subscription. Our c A essentially did this back in
Speaker 1: the day with radios. The company made radio sets, but
Speaker 1: it really got into the radio station business largely because
Speaker 1: it created the demand among consumers to buy the radios themselves.
Speaker 1: Right Like, you wouldn't buy a radio if there were
Speaker 1: no stations to tune into. So our c A had
Speaker 1: to get into the radio station business to create the
Speaker 1: content so that people would want to go out and
Speaker 1: buy the radio sets. It's this kind of cyclical approach. Now,
Speaker 1: the story goes that Dolan went on vacation with his
Speaker 1: family and took a cruise to France aboard the ship
Speaker 1: the Queen Elizabeth the Second, and on that trip he
Speaker 1: came up with this idea for an exclusive channel that
Speaker 1: would only go to his cable subscribers, and his working
Speaker 1: name for the channel at that point was the Green Channel.
Speaker 1: The Green Channel would have to have special programming on it,
Speaker 1: It had to have stuff that you just couldn't find
Speaker 1: on over the air broadcasts had to be set apart
Speaker 1: with premium content. And this was going to be a
Speaker 1: pretty big gamble because other people had attempted to create
Speaker 1: versions of pay TV in the past, and no one
Speaker 1: had really succeeded at it so far. Now. Some of
Speaker 1: those schemes involved over the air transmissions. Those are kind
Speaker 1: of hard to do as a pay TV service because
Speaker 1: there's always a chance for people to try and pirate
Speaker 1: the air waves and thus watch that precious content without
Speaker 1: actually paying for it. And because it's over the air broadcasts,
Speaker 1: you would have no way of knowing as a broadcaster
Speaker 1: that people were doing that, right, I mean, you're just
Speaker 1: sending a signal out. There's no return signal that tells
Speaker 1: you if people are, you know, legit paying for your service,
Speaker 1: or if they're just stealing it like the dirty TV
Speaker 1: thieves that they are. There were also encoding and decoding strategies,
Speaker 1: in other words, scrambling a signal, which in theory, on
Speaker 1: the other end, when you have a paying customer, would
Speaker 1: be de scrambled to play properly on the television. But
Speaker 1: a lot of those approaches were really limited and not
Speaker 1: very good. So there were a lot of legit customers
Speaker 1: who were getting poor experiences on the other end, like
Speaker 1: they were actually paying for the service, but the results
Speaker 1: were subpar cable bypassed those types of issues, and it
Speaker 1: had another benefit because it wasn't broadcast over the air
Speaker 1: because the f c C was trailing behind technology, FCC
Speaker 1: restrictions that applied to over the air providers did not
Speaker 1: apply to cable. Time surveyed potential customers. That is, Time
Speaker 1: Incorporated surveyed potential customers for this new cable service with
Speaker 1: a premium channel, and the results were not exactly promising.
Speaker 1: They looked pretty bad, and they actually did a couple
Speaker 1: of surveys and a lot of them looked bad. However,
Speaker 1: after Time suggested that the first month of service would
Speaker 1: be free and the installation charges would be refundable, they
Speaker 1: got a slightly better response, though it still wasn't like
Speaker 1: overwhelmingly positive. It was essentially like a fift approval. Meanwhile,
Speaker 1: the Green Channel went through a name makeover. No one
Speaker 1: had really come up with a killer name yet, so
Speaker 1: they had a placeholder, a temporary name, and this was
Speaker 1: called Home Box Office, which everyone was absolutely sure would
Speaker 1: be changed before it launched, and it totally didn't. Interestingly,
Speaker 1: when HBO was finally ready to debut, it wouldn't do
Speaker 1: so on Sterling Communications. That is, it would not be
Speaker 1: on Dolan's cable network UH. Instead, it was a community
Speaker 1: in Allentown, Pennsylvania that Time would choose as the debut
Speaker 1: spot for HBO, at least initially UH, and it was
Speaker 1: wired up on a totally different cable service that was
Speaker 1: created by a guy named John Walson. That's the man
Speaker 1: who actually gets the credit for inventing cable TV in
Speaker 1: the first place. However, Time then changed its mind decided
Speaker 1: to actually pilot the service in Wilkes Bar, Pennsylvania. The
Speaker 1: reason for the shift was that some of the programming
Speaker 1: that HBO wanted to carry happened to be NBA basketball games.
Speaker 1: But the NBA, like a lot of sports organizations, has
Speaker 1: a blackout rule, and that blackout rule says you are
Speaker 1: not allowed to broadcast a game played within a certain
Speaker 1: radius of where that game is taking place unless that
Speaker 1: game happens to be sold out. This is a way
Speaker 1: to make sure that venues like stadiums are selling as
Speaker 1: many tickets as possible. The idea being that if you
Speaker 1: can stay home and why the game on TV, you
Speaker 1: might not make the effort of buying a ticket and
Speaker 1: going to the stadium. I mean that would be much
Speaker 1: more expensive. So these blackouts meant that if you happened
Speaker 1: to be within a certain region, like a certain range
Speaker 1: from the stadium, you could not broadcast there. Well, Allentown
Speaker 1: was a little too close to Philadelphia for that to
Speaker 1: work out, So wilkes Bar was outside that range and
Speaker 1: thus wouldn't have any issues. It wouldn't It would mean
Speaker 1: that HBO wouldn't have to go dark for certain types
Speaker 1: of programming. So Time moves the pilot program to wilkes Bar,
Speaker 1: and again that was outside of that that UH radius. Now, initially,
Speaker 1: the subscription for HBO to add HBO to your cable
Speaker 1: plan if you lived in wilkes Bar at this time
Speaker 1: was six dollars a month. Fewer than four hundred people
Speaker 1: signed up for it when it launched on November eighth,
Speaker 1: ninety two, and the first two pieces of programming on
Speaker 1: HBO included a hockey game of the Rangers versus the Canucks,
Speaker 1: followed by a movie from nineteen seventy called Sometimes a
Speaker 1: Great Notion. The growth of HBO at first wasn't exactly inspiring.
Speaker 1: Time incorporated oversaw deals with various regional cable companies, most
Speaker 1: of them in Pennsylvania, and got agreements for them to
Speaker 1: be able to carry the channel in return for subscriptions.
Speaker 1: Customers of those cable companies would still have to add
Speaker 1: a subscription to HBO in order to actually access that channel.
Speaker 1: This would go on top of their normal cable subscription,
Speaker 1: so they're already paying their cable bill, they'd have to
Speaker 1: pay extra to get HBOS, something that I think most
Speaker 1: of us are familiar with because that's kind of how
Speaker 1: it operates now. And this was still a pretty hard
Speaker 1: sell at that point. There were also other paid cable
Speaker 1: channels emerging around this time, including one that would be
Speaker 1: called Star Channel, which was part of Kenny National Company
Speaker 1: slash Warner Community Sans within a division of Warner Communications
Speaker 1: called Warner Cable. Meanwhile, the Sterling Cable Company was still
Speaker 1: struggling in New York and losing money. The subscriber base
Speaker 1: was modest, and the cost of installing cable in Manhattan
Speaker 1: had not gotten any cheaper. Time acquired controlling Steak in
Speaker 1: Sterling and then renamed it Manhattan Cable Television in nineteen three.
Speaker 1: The growth in HBO largely came from a new method
Speaker 1: of distributing signals so early on the way that Time
Speaker 1: would broadcast HBO to cable stations. Is so they've got
Speaker 1: their starter signal. They would then send that signal to
Speaker 1: a microwave transmitter. And you have a tower, a radio
Speaker 1: tower that can send out microwave transmissions. This tower would
Speaker 1: beam out of microwave signal that carries that channel to
Speaker 1: various cable stations in the region. These stations would receive
Speaker 1: that transmission using a microwave antenna, and then they would
Speaker 1: say and that signal through their cables to their customers.
Speaker 1: But this new approach would go much further. In fact,
Speaker 1: it went all the way out into space. The new
Speaker 1: approach involved beaming the channel signal up to a communications
Speaker 1: satellite in orbit, which then could beam down that same
Speaker 1: signal to a receiving antenna connected to various cable stations.
Speaker 1: This removed the need to build out microwave transmission antenna
Speaker 1: across the United States and helped HBO to go national. Now,
Speaker 1: when we come back, will transition over to some other
Speaker 1: elements that would become part of the Time Warner slash
Speaker 1: Warner Communications slash Warner Media Empire, and some that would
Speaker 1: not stand the test of time. But first let's take
Speaker 1: a quick break. HBO would continue to grow year over year,
Speaker 1: and of course it got into the business of creating
Speaker 1: original content on top of carrying stuff like sports events,
Speaker 1: films that had recently left their theatrical runs. It also
Speaker 1: created a companion channel that was a slightly lower tier
Speaker 1: premium subscription channel. That channel was Cinemax, which launched in
Speaker 1: nineteen Cinemax would focus solely on carrying movies at first,
Speaker 1: while HBO continued to carry a variety of programming. The
Speaker 1: reason Time launched Cinemax was primarily to compete with the
Speaker 1: Movie Channel, which at that point was part of the
Speaker 1: Warner Amex satellite entertainment venture. The Movie Channel, by the way,
Speaker 1: would merge with another channel called Showtime, and that new
Speaker 1: channel would just be called Showtime. Ultimately, Warner an American
Speaker 1: Express would sell off this joint venture to Viacom. Anyway,
Speaker 1: Cinemax would go on to experiment with various content over
Speaker 1: the years, and while from the outside it seemed like
Speaker 1: it was kind of a competing cable service to HBO,
Speaker 1: in reality, both entities fell under the umbrella of Time
Speaker 1: and after nine Time Warner. Okay, so that's the basis
Speaker 1: of the HBO and Cinemax elements of what is now
Speaker 1: Warner Medium. I'm sure we're gonna come back because we're
Speaker 1: gonna have to talk about HBO Max later on that
Speaker 1: that's going to have to come in the next episode.
Speaker 1: And we've got a lot more to cover because there's
Speaker 1: just so much and it is exhausting. But let's let's
Speaker 1: take quick stock before we move on. So we're up
Speaker 1: to about Time Warner has merged, So Time Incorporated and
Speaker 1: Warner Communications are now Time Warner, and we've got a
Speaker 1: true goliath of a multimedia company, one that would set
Speaker 1: the stage for other massive media companies in the future.
Speaker 1: So you had the assets of Time, which included a
Speaker 1: publishing company with several popular weekly magazine titles, plus books
Speaker 1: and beyond. That also includes the pay cable channels and
Speaker 1: HBO and Cinemax, which we're now established entities, and they
Speaker 1: were solid revenue general raiders. By nine. You had the
Speaker 1: Warner Brothers movie and animation studios. UH Animation at this
Speaker 1: point was it was a little quiet, but they still
Speaker 1: had them. You also had the Warner Brothers television studios.
Speaker 1: You still had the Warner Music Group, which was kind
Speaker 1: of an umbrella for numerous music companies, not just Warner records.
Speaker 1: Warner had sold off its stake in cable channels like MTV, Nickelodeon,
Speaker 1: and Showtime to Viacom, so those were gone, but the
Speaker 1: company still had actual cable operations as in cable service,
Speaker 1: that is, the ability to act as a cable service provider.
Speaker 1: That was Warner Cable. Oh and they also owned d
Speaker 1: C Comics. Time had also acquired a cable service provider
Speaker 1: called American Television and Communications or a TC, back in
Speaker 1: nineteen seventy three, So Warner Cable became Time Warner Cable
Speaker 1: after the merger, and a t C became Time Warner Communications.
Speaker 1: Both of these divisions were then lumped in together into
Speaker 1: a collected division called Time Warner Cable Group. However, this
Speaker 1: part of the Time Warner would not stick around by
Speaker 1: the time we get to Warner Media. This is a
Speaker 1: part of the company that would get spun off and
Speaker 1: sold off. The Time Warner Company would spend off Time
Speaker 1: Warner Cable as an independent company in two thousand nine.
Speaker 1: But let's just follow that bunny trail a bit more
Speaker 1: because it is interesting. So we're gonna flash forward to
Speaker 1: two thousand thirteen and in Time Warner Cable, which remember
Speaker 1: at this point is an independent company. It's no longer
Speaker 1: part of Time Warner itself. Uh. It was looking at
Speaker 1: the possibility of finding a buyer to take over the company,
Speaker 1: and old t WC founded two suitors in Charter Communications
Speaker 1: and Comcast. These two companies competed for the lovely hand
Speaker 1: of Time Warner Cable in proverbial marriage, and Comcast looked
Speaker 1: like it was going to win out, but then the
Speaker 1: US depart I'm gonna have justice stepped in and said,
Speaker 1: hang on, Comcast, if you buy out Time Warner Cable,
Speaker 1: then you're going to have control of more than half
Speaker 1: of all broadband connections in the United States, and that's
Speaker 1: just a bit too anti competitive for our tastes, which
Speaker 1: was probably a good thing because Comcast was also building
Speaker 1: out its own ginormous media empire, which is a totally
Speaker 1: different story. By Comcast had enough with all the various
Speaker 1: inquiries and pushbacks and they jumped out of the picture.
Speaker 1: So Charter went on to acquire Time Warner Cable and
Speaker 1: eventually phased out the branding to merge it with Charters
Speaker 1: brand Spectrum, so that former part of Time Warner is
Speaker 1: now with Charter as Spectrum. Okay, so we've dealt with
Speaker 1: that piece. What's next? Alright? Okay, Turner Broadcasting CALSA. All right,
Speaker 1: So Time Warner acquired Turner Broadcasting in NIX. But that
Speaker 1: means we need to learn at least a little bit
Speaker 1: about Turner Broadcasting. And this is kind of getting into
Speaker 1: my own backyard here as I live in Atlanta, Georgia.
Speaker 1: So this is largely the story of Ted Turner. Now,
Speaker 1: Ted Turner came from money. His father owned an advertising
Speaker 1: company that actually was mostly focused on billboard advertising, and Ted,
Speaker 1: after some uh Shenanigan's in college that got him booted
Speaker 1: from college, he joined the family business in nineteen sixty. Tragically,
Speaker 1: Ted Turner's father committed suicide in nineteen sixty three, and
Speaker 1: at that point Ted took over the family business and
Speaker 1: the company was struggling at at that time, but Turner
Speaker 1: was able to move the business around, get it back
Speaker 1: on its feet, and made it profitable again. Now having
Speaker 1: succeeded at rescuing one business, Turner saw a chance to
Speaker 1: do it again, but in a totally different industry. So
Speaker 1: there was this ultra high frequency or UHF television station
Speaker 1: out of Atlanta that was having its own financial struggles
Speaker 1: and was in danger of going on a business so
Speaker 1: Turner purchased this company and within three years turned it around.
Speaker 1: Two it was making a profit, and in nineteen seventy five,
Speaker 1: Turner did something pretty forward thinking. He made a deal
Speaker 1: that allowed him to beam this station's signal up to
Speaker 1: a satellite and broadcast it to various keble television audiences.
Speaker 1: So not that different from what channels like HBO we're doing.
Speaker 1: Only Turner's station was ad supported, so it didn't require
Speaker 1: a special subscription. He called it w TBS or just
Speaker 1: TBS for Turner Broadcasting System, and Turner reorganized the parent
Speaker 1: company for TBS and named it Turner Communications Company later
Speaker 1: on just changing that to Turner Broadcasting System Incorporated. He
Speaker 1: launched the first twenty four hour news channel that was
Speaker 1: CNN in nineteen eighty. He also launched t NT or
Speaker 1: the Turner Network Television station, in nine Um let's see.
Speaker 1: He bought the Atlanta Braves baseball team in nineteen seventy six.
Speaker 1: He bought the Atlanta Hawks basketball team in nineteen seventy seven.
Speaker 1: He bought the MGM Slash United Artists Entertainment Company in
Speaker 1: nineteen eighty six that included a library of more than
Speaker 1: four thousand movies. He did not hold on too that, however,
Speaker 1: that story by itself MGM story that one also will
Speaker 1: make your head spend, but I'll not go into a
Speaker 1: lot of detail here. In ninetee, Turner entered a joint
Speaker 1: venture with Apollo Investment Fund to acquire the Hanna Barbera Studio.
Speaker 1: Hanna Barbara was in animation studio um known for producing
Speaker 1: tons of famous cartoons, including Johnny Quest, The Flint Stones,
Speaker 1: The Jetsons, Yogi Bear, Scooby Doo, tons of them. He
Speaker 1: also acquired a lot of other studio libraries. He managed
Speaker 1: to acquire the pre nineteen fifty Warner Brothers Film Library,
Speaker 1: He got the a AP Library, which included some Warner
Speaker 1: Brothers animation in it, and the Fleischer Studios Library, which
Speaker 1: included Popeye cartoons plus lots of other stuff. So he
Speaker 1: was just acquiring all this content. He also purchased w
Speaker 1: c W, the Professional Wrestling Federation in nineteen eight nine.
Speaker 1: But all these acquisitions accrued an enormous amount of debt
Speaker 1: for Turner, so he also sold off some of them
Speaker 1: pretty quickly. So MGM u A went fairly early on
Speaker 1: In fact, Turner sold it back to the guy who
Speaker 1: sold it to him, but Turner was holding onto the
Speaker 1: library of films, which is why the recently announced Amazon
Speaker 1: acquisition of MGM doesn't necessarily include all of the movies
Speaker 1: that MGM has made over the years, because a lot
Speaker 1: of those rights don't belong to MGM anymore. But again,
Speaker 1: that's a story for another incredibly complicated podcast episode. Anyway,
Speaker 1: Turner also oversaw the creation of the Cartoon Network in
Speaker 1: nine and Turner Movie Classics in nineteen. He supervised the
Speaker 1: acquisition of both New Line Cinema and Castle Rock Entertainment,
Speaker 1: a pair of motion picture production companies, And then we
Speaker 1: get to nineteen six. So in nineties six, Time Warner
Speaker 1: made Turner and offer he couldn't refuse. It was a
Speaker 1: seven point five billion dollar acquisition deal for Turner Broadcasting System.
Speaker 1: This meant the Time Warner and thus Warner Communications and
Speaker 1: thus Warner Brothers Studio had a lovelier reunion with the
Speaker 1: pre nineteen fifties Warner Brothers Film Library because Turner owned that.
Speaker 1: So yeah, this particular acquisition also meant that some Warner
Speaker 1: Brothers rights which had been sold off years earlier to
Speaker 1: help cover debt came back to the entity that first
Speaker 1: created those works, sort of. I mean a lot had
Speaker 1: changed by then. The Warner of nine six was very
Speaker 1: different than pre nineteen fifties Warner, but TBS, TNT, CNN,
Speaker 1: New Line Cinema, Castle Rock Entertainment, Hanna Barbera, the Cartoon Network,
Speaker 1: et cetera. All of these things made their move over
Speaker 1: to Time Warner, as did Ted Turner. He became an
Speaker 1: executive for Time Warner. While the acquisition of Turner Broadcasting
Speaker 1: System was taking hold, Time Warner also got involved in
Speaker 1: the launch of a new broadcast television network. That network
Speaker 1: was the w B, which launched on January eleven, nine,
Speaker 1: and this was a joint venture between Time Warner, specifically
Speaker 1: the Warner Brothers Entertainment division of Time Warner and a
Speaker 1: company called Tribune Broadcasting. The WB would stick around a
Speaker 1: little more than a decade, during which time it served
Speaker 1: as the launchpad for shows like The Steve Harvey Show,
Speaker 1: Buffy the Vampire Slayer, Dawson's Creek, Felicity, and Charmed, among
Speaker 1: many many others. Oh yeah, Supernatural was one of the
Speaker 1: shows that debuted on the w B. Because I keep
Speaker 1: forgetting that that show was on the air forever. That show,
Speaker 1: I think it ran fifteen seasons, which I mean, all
Speaker 1: it did was really teach me that if you hear
Speaker 1: the song carry on my Wayward Son, it means that
Speaker 1: one of two brothers is going to have a really
Speaker 1: terrible time, and possibly both of them. But as I said, uh,
Speaker 1: it only stuck around a little more than a decade.
Speaker 1: So by the mid two thousand's, the w b's numbers
Speaker 1: were in decline. Meanwhile, over at Viacom CBS, there was
Speaker 1: another network called up N that was facing a similar situation.
Speaker 1: By the way, the story of Viacom and CBS is
Speaker 1: just as convoluted as this history of Warner Media is. Now,
Speaker 1: both channels w B and up N we're trying to
Speaker 1: compete with Fox, and Fox was performing far better than
Speaker 1: either of the other two channels. So both the w
Speaker 1: B and up N were losing money somewhere in the
Speaker 1: neighborhood of like two billion dollars total between them. So
Speaker 1: CBS and Warner Brothers Entertainment decided to join forces rather
Speaker 1: than compete against each other. Both the w B and
Speaker 1: up N would shut down within a couple of days
Speaker 1: of each other and CBS and Warner would then launch
Speaker 1: a joint venture television network called the c W. I
Speaker 1: took the C from CBS and the w from Warner Brothers.
Speaker 1: Some shows from both networks made the jump over to
Speaker 1: this new network, like Supernatural and Smallville came over from
Speaker 1: the w B to the c W, and to this day,
Speaker 1: Warner Media owns half of the c W, with the
Speaker 1: other half belonging to CBS, So we can put that
Speaker 1: in the big old bucket of Warner assets. Okay, we're
Speaker 1: zeroing in on what Warner Media is today, but we
Speaker 1: still have a lot of ground to cover, and part
Speaker 1: of that ground means going over what has frequently been
Speaker 1: called one of the worst mergers of all time. So
Speaker 1: when we come back, it'll be time to get back online.
Speaker 1: But first, let's take another quick break. All right, time
Speaker 1: for yet another quick history lesson, and this time we're
Speaker 1: going to be talking about America Online a k A
Speaker 1: a O L. Now I've done episodes about A O
Speaker 1: L as well, so we're going to get the summarized
Speaker 1: account of its history, because again, uh, extra bonkers really, So,
Speaker 1: America Online started out as an online service provider or
Speaker 1: OSP and Technically was founded in nine in Dulles, Virginia. Now.
Speaker 1: The company grew out of a couple of earlier ventures
Speaker 1: that focused on connecting computers with each other through modems
Speaker 1: and phone lines. And when I say an online service provider,
Speaker 1: I'm really talking about something that's sort of a predecessor
Speaker 1: to the Internet, or rather, it existed while the Internet existed,
Speaker 1: but it was something that was publicly accessible, and the
Speaker 1: Internet typically wasn't unless you were part of an academic
Speaker 1: institution or research facility or something like that. So back
Speaker 1: in the day, OSPs had their own networks, their own contained,
Speaker 1: you know, closed off networks, so customers could use a
Speaker 1: modem and they would dial into an OSP and they
Speaker 1: would access various features. These typically included stuff like, you know,
Speaker 1: you could get news headlines or weather forecasts, or contact lists,
Speaker 1: assuming that your contacts were, you know, using the same
Speaker 1: service you were using, and also some messaging services like
Speaker 1: email or early instant messages. But again, these tools only
Speaker 1: worked if the people you were chatting with were also
Speaker 1: on the same service you were on. There wasn't a
Speaker 1: lot of at least in the early days, there wasn't
Speaker 1: a lot of opportunities to send messages to someone who
Speaker 1: is on a different osph. Some of these OSPs also
Speaker 1: had online games and a few other applications, and this
Speaker 1: was before the debut of the World Wide Web, so
Speaker 1: these were all kind of self contained islands. Now gradually
Speaker 1: some of these islands made connections with one another, and
Speaker 1: then the Web developed and these OSPs began to create
Speaker 1: ways to access the Internet at large. So what started
Speaker 1: off as a sort of walled off kingdom now became
Speaker 1: a portal to the Internet at large, and A o
Speaker 1: L was one of the big early players in the space.
Speaker 1: This was helped considerably by the fact that at the time,
Speaker 1: telecommunications companies had to abide by restrictions that kept them
Speaker 1: from getting into the I s P business right away,
Speaker 1: So businesses like A o L became associated with the Internet,
Speaker 1: so much so that for some people A o L
Speaker 1: and the Internet were effectively synonymous. In the early days,
Speaker 1: A o L charged users on an hourly basis, so
Speaker 1: the more time you spent online, the more you had
Speaker 1: to pay. Toward the end of nineteen a o L
Speaker 1: swapped over from hourly rates to a a monthly rate
Speaker 1: of nineteen dollars and cents, and the service grew very
Speaker 1: quickly after that. And it when I say grew very quickly,
Speaker 1: I mean it was like Gangbusters. Now, this was the
Speaker 1: heyday of the dot com bubble. Before the bubble would burst,
Speaker 1: internet based companies were proliferating and growing like crazy, at
Speaker 1: least on paper. A O L was flush with cash
Speaker 1: and a sky high stock price really was fueling this.
Speaker 1: In nine, in China during the fiftieth anniversary of the
Speaker 1: establishment of the People's Republic of China, which I know
Speaker 1: it sounds like I'm doing a non secretary, but stick
Speaker 1: with me anyway. At this event, the celebration of the
Speaker 1: founding of the People's Republic of China, there happened to
Speaker 1: be two people important to our story. The then head
Speaker 1: of Time Warner, Gerald m. Levin, happened to be sitting
Speaker 1: right in front of a O L. Co founder Stephen Case,
Speaker 1: and the two got chatting. Now, A O L was
Speaker 1: already kind of looking to make a big acquisition of
Speaker 1: a traditional company, with the goal being to form a
Speaker 1: company that would define future corporations like the new media
Speaker 1: meets the old world. So Time Warner popped up as
Speaker 1: a possibility. I mean Time Warner represented old media, film
Speaker 1: TV Music Publishing. Meanwhile, over at Time Warner, Levin was
Speaker 1: in discussions about how to move the company into the
Speaker 1: next century. Levin and his team recognize that there was
Speaker 1: a digital revolution underway and that it would be good
Speaker 1: to evolve Time Warner and stay ahead of this curve.
Speaker 1: One possibility early on was a merger between Time Warner
Speaker 1: and Yahoo, but Yeah Who's founder Jerry Yang ultimately decided
Speaker 1: not to pursue that opportunity. Case and Levin had a
Speaker 1: few more conversations with each other, and gradually the idea
Speaker 1: came about of merging Time Warner with a O L.
Speaker 1: Except really it was more more of an acquisition than
Speaker 1: a merger because a O L's stock price was just
Speaker 1: so incredibly high and Time Warners wasn't. So. This deal
Speaker 1: that they worked out stated that a O L would
Speaker 1: have fifty ownership of this new company and Time Warner
Speaker 1: would have forty five percent ownership of it. The board
Speaker 1: would have an equal number of folks from directors on
Speaker 1: A O L side and directors from Time Warner side.
Speaker 1: Eleven of Time Warner would become the CEO of the company,
Speaker 1: and Case from a O L would be the chairman
Speaker 1: of the board, and they kept this deal pretty darn quiet.
Speaker 1: In fact, a lot of people in senior leadership positions
Speaker 1: for both companies didn't find out about the merger until
Speaker 1: the companies announced it publicly in early two thousand. In
Speaker 1: a way, this sort of played right into the overall
Speaker 1: narrative of Time Warner. After all, the Warner properties were
Speaker 1: mostly focused on media like TV, film, music, publishing, and
Speaker 1: you know that was it. And then a O L
Speaker 1: would bring new media into the mix, adding in yet
Speaker 1: another aspect to this already incredibly complex story. The combined
Speaker 1: value of the companies was estimated to be more than
Speaker 1: three fifty billion dollars, thus making this the largest merger
Speaker 1: up to that point. And while they begin the merger
Speaker 1: in two thousand, it would take a full year to complete.
Speaker 1: In the meantime, things took a very serious turn. Actually,
Speaker 1: it took a few turns, but one is one that
Speaker 1: I'm sure most of you are already familiar with, and
Speaker 1: that is the dot com bubble. In fact burst that
Speaker 1: process was not instantaneous. I mean it sounds like it is,
Speaker 1: because you're talking about a bubble bursting, and you know
Speaker 1: when that happens, it's an instant that wasn't the case
Speaker 1: with this. This was more of a very slow, painful,
Speaker 1: dramatic decline and value. So the stock market value of
Speaker 1: the internet companies that were really going like crazy. It
Speaker 1: peaked in the early spring of two thousand. Like March
Speaker 1: of two thousand, it was at its highest ever, but
Speaker 1: a confluence of events led to much of the market collapsing,
Speaker 1: with many companies going out of business as a result.
Speaker 1: Some of the problem was because of the overvaluation of
Speaker 1: companies that had yet to produce any revenue, and some
Speaker 1: of them had no business plan whatsoever. So essentially these
Speaker 1: were companies that, again they were incredibly valuable on paper
Speaker 1: because people were pouring money into it from an investment standpoint,
Speaker 1: but they didn't really have any means of generating revenue. Uh.
Speaker 1: Some of this had to do with companies that were
Speaker 1: over extending themselves. They got flush with cash, and then
Speaker 1: they started spending the cash like crazy, either in order
Speaker 1: to try and scale the business up as fast as
Speaker 1: possible or on you know, luxuries like penthouse offices and
Speaker 1: daily massages and all the kind of stuff you hear
Speaker 1: about from the dot com days. Some of it also
Speaker 1: had to do with economic recessions that happened in other
Speaker 1: parts of the world, such as Asia that had an
Speaker 1: impact on the tech sector. Some of it had to
Speaker 1: do with proposed mergers that fell through. Not Time Warner
Speaker 1: in a O L. That one did go through, but
Speaker 1: other mergers that were planned fell flat, and that hurt
Speaker 1: the market too, and thus stock prices began to fall.
Speaker 1: By May of two thousand, a O L was having
Speaker 1: to make some pretty tough choices in order to stay
Speaker 1: on track with earnings in order to meet the requirements
Speaker 1: that were set by the merger that was already in progress.
Speaker 1: The market continued to go through a decline. Meanwhile, things
Speaker 1: were not going smoothly between the two companies. There was
Speaker 1: a serious clash of cultures between Time Warner and A
Speaker 1: O L. And then there were some dealings of a
Speaker 1: somewhat shady nature. So one day Alec Klein, who was
Speaker 1: a reporter for the Washington Post, gets this anonymous tip
Speaker 1: from someone at A O L. And that leads Alec
Speaker 1: on this investigation, and that investigation uncovered that A O
Speaker 1: L had been misrepresenting its AD revenue numbers. Big no
Speaker 1: no for a publicly traded company. I mean that is fraud.
Speaker 1: So Klein publishes a story, which then prompted the U. S.
Speaker 1: Securities and Exchange Commission or SEC, and the Department of
Speaker 1: Justice the good old d o J, to investigate another acronym,
Speaker 1: a O L. That investigation eventually led to a O
Speaker 1: L being required to pay some really big fines, which,
Speaker 1: as you know, another big blow to a company that
Speaker 1: was seeing its stock price plummet. And it also had
Speaker 1: to post corrected past earnings, so, in other words, didn't
Speaker 1: just have to pay a fine, it had to publish
Speaker 1: earnings that that showed how they had fudged those numbers.
Speaker 1: This was not a great moment for the new AO
Speaker 1: L Time Warner, though it did give folks over on
Speaker 1: the Time Warner side a little bit of a boost
Speaker 1: because they suddenly saw that they're part of the company
Speaker 1: was perhaps the more valuable piece In the meantime, The
Speaker 1: terrorist attacks on the United States on September eleven, two
Speaker 1: thousand one had obviously an enormous impact on all aspects
Speaker 1: of life in America, and that included business. It also
Speaker 1: exacerbated the market troubles for the dot com industry, which
Speaker 1: continued to fall, and A O L, which had been
Speaker 1: in such a dominant position at the end of nineteen
Speaker 1: was in a very different state towards the end of
Speaker 1: two thousand one, just a year into the merger with
Speaker 1: Time Warner. Levin retired in December two thousand one. Case
Speaker 1: stayed on a bit longer, but ultimately decided to not
Speaker 1: run again for Chairman of the board in two thousand three.
Speaker 1: He had received a pretty good deal of abuse from
Speaker 1: shareholders and leadership of both companies about the merger, about
Speaker 1: the falling stock price for the company, about the need
Speaker 1: to get things moving in a better direction. According to
Speaker 1: Ted Turner, who was once the largest shareholder of A
Speaker 1: o L. Time Warner, he had continued to sit on
Speaker 1: the board of directors for a while. According to him,
Speaker 1: it cost him around eighty percent of his worth, which
Speaker 1: he said amounted to around eight billion dollars yikes. The
Speaker 1: executives on the Time Warner side were resentful, largely because
Speaker 1: A o L, which initially was seen as the juggernaut
Speaker 1: with huge momentum, was now viewed as a kind of
Speaker 1: anchor weighing down the rest of the company. The A
Speaker 1: O L. Time Warner years had to be really hard
Speaker 1: ones for people at both companies. The period lasted for
Speaker 1: less than a decade, with the company announcing in two
Speaker 1: thousand nine the Time Warner, which remember was effectively acquired
Speaker 1: back in two thousand uh, that it was going to
Speaker 1: spin off a O L as an independent company. So
Speaker 1: now the acquired company has is acting like the parent company.
Speaker 1: So when we talk about Warner Media, one property that
Speaker 1: does not come up is a O L. That that
Speaker 1: is not part of Warner Media any more. But we
Speaker 1: still have to talk about a O L because that
Speaker 1: merger was a transformative experience for both companies. I suspect
Speaker 1: a huge combination of things like culture clashes, the dot
Speaker 1: com market collapsing, poor communication, a failure to align the
Speaker 1: missions of both companies so that they supported one another.
Speaker 1: I think all of those are partly to blame for
Speaker 1: this mess. And the vision was to create the media
Speaker 1: company of the future, but the reality saw just chaos
Speaker 1: that did not work. AOL. Time Warner was in a
Speaker 1: rough spot, and you know, in two thousand two it
Speaker 1: had reported a loss of ninety nine billion dollars billion.
Speaker 1: That was a third of the company's value lost in
Speaker 1: a year, and at that point it was the largest
Speaker 1: loss any company had ever reported in a single year.
Speaker 1: So there were a lot of executive shuffles there, with
Speaker 1: leaders shifting into new roles or taking on joint responsibilities
Speaker 1: for both companies, and it was a very messy time.
Speaker 1: And one of those executive to try and hold things together,
Speaker 1: only to ultimately resign from the company in two thousand
Speaker 1: two was Bob Pittman, who today is the leader of
Speaker 1: I Heart Media. Howdy Boss. Anyway, Pittman was one of
Speaker 1: several executives who really tried to align the companies together
Speaker 1: but faced enormous hurdles along the way. And Pittman had
Speaker 1: a long history in media already. He was one of
Speaker 1: the co founders of MTV back in the day, and
Speaker 1: so he had worked on the Time Warner side before
Speaker 1: the merger. Maybe one day I'll convince him to come
Speaker 1: onto the show and talk about his various experiences, because
Speaker 1: I'm sure that guy's got some stories. He has seen
Speaker 1: it all. He's the head of a big media company today,
Speaker 1: co founded MTV, he played an enormous part in the
Speaker 1: development of media in America over the last thirty years.
Speaker 1: So maybe I can get him on the show sometime.
Speaker 1: That brings us up to ten and we still have
Speaker 1: a lot more story to get through. Heck, we haven't
Speaker 1: even mentioned A T and T yet, And in our
Speaker 1: next installment will learn where Time Warner would go next
Speaker 1: after parting ways with A O. L. And where Warner
Speaker 1: Media would come from and why A T and T,
Speaker 1: which currently holds Warner Media, is now looking to spend
Speaker 1: off the company so that it can merge with my
Speaker 1: old employer, Discovery Communications. So that'll be our episode on
Speaker 1: Monday next week, which is a holiday, so I'm gonna
Speaker 1: have to get it recorded soon. Note to self, I promised, Harry. Anyway,
Speaker 1: that's it. If you have suggestions for topics you would
Speaker 1: like me to cover on future episodes of tech Stuff,
Speaker 1: reach out to me on Twitter. The handle for the
Speaker 1: show is tech Stuff H. S W and I'll talk
Speaker 1: to you again really soon. Tech Stuff is an I
Speaker 1: Heart Radio production. For more podcasts from Heart Radio, visit
Speaker 1: the I Heart Radio app, Apple Podcasts, or wherever you
Speaker 1: listen to your favorite shows. H