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: job on Strickland. I'm an executive producer with iHeart Radio
Speaker 1: and I love all things tech. And it is time
Speaker 1: front of a classic episode and it's actually gonna be
Speaker 1: a continuation of our previous classic episode. So this episode
Speaker 1: the HBO Story Part two, originally published on May seven,
Speaker 1: and um, we are just going to jump right in,
Speaker 1: get back into the story. Let's go. HBO as an entity,
Speaker 1: has heavily influenced what cable television is and what entertainment
Speaker 1: delivery services are in general. If it hadn't been for HBO,
Speaker 1: our landscape would be dramatically different today. So that's why
Speaker 1: we're doing it. In fact, think about it. Without HBO,
Speaker 1: you don't have cable companies, cable system operators pushing cable
Speaker 1: copper cable into cities anywhere near as quickly. Right, you
Speaker 1: might not have ever seen it happen, or it might
Speaker 1: have taken a decade longer, which means you would not
Speaker 1: even have the infrastructure that the Internet relies on today.
Speaker 1: For 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 far spread networks. Exactly So, like
Speaker 1: we said, landscape very different without HBO. Whether you love
Speaker 1: it or hate it, it's a large part of why
Speaker 1: the world is as far as the cable world and
Speaker 1: entertainment worlds, why things are the way they are so
Speaker 1: so um. A little tiny bit of backstory, very tiny.
Speaker 1: HBO owned by Time, Yes, Time Incorporated, not not Time,
Speaker 1: the the physical entity like the actual not Father Time,
Speaker 1: the progression of changes throughout not the fourth dimension that
Speaker 1: we know of, Time Incorporated, the company that owned Time
Speaker 1: magazine or still does Time Magazine, Fortune Magazine, Sports Illustrated, etcetera, etcetera. Correct. So,
Speaker 1: in Time launched a second pay TV channel called Cinemax,
Speaker 1: primarily as a competitor to the less expensive Showtime. Yes, so,
Speaker 1: there 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 paid 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 below 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 Viacom also did this thing in the
Speaker 1: last episode we talked about, where it showed Viacom end
Speaker 1: up by aggressively undercut HBO. They essentially muscled HBO out
Speaker 1: of entire markets because they made this exclusive agreement with
Speaker 1: the largest cable provider in the United States at that time.
Speaker 1: So there's a little bit of a war going on. Yeah,
Speaker 1: a little bit of a oh yeah, so yeah, that's
Speaker 1: that's kind of the technical term. But Cinemax, you know,
Speaker 1: starts doing pretty well. And also in nineteen HBO has
Speaker 1: an affiliate in every single state in the United States. Now,
Speaker 1: if you listen to our last episode, you realize that's
Speaker 1: a big deal. This is the first time that any
Speaker 1: channel has been able to do that, and it is
Speaker 1: because they're using this satellite delivery system where the various
Speaker 1: cable operators across the United States have the receiver dishes
Speaker 1: that bring in the signal and then they can distribute
Speaker 1: it to their customers. So now there's an affiliate in
Speaker 1: every state. Remember, It started off justin Wilkes Bar, Pennsylvania.
Speaker 1: Then it's spread through most of Pennsylvania, then to New York,
Speaker 1: and then finally started to creep out into the rest
Speaker 1: of the United States. So big moment for HBO. All
Speaker 1: of this is allowing them to have a pretty incredible
Speaker 1: profit considering that they only hit profitability a year or
Speaker 1: two previously. Um. They their profits have grown from which
Speaker 1: again understandable because now they're they're available in way more markets.
Speaker 1: So the company is experiencing astronomical growth at this point
Speaker 1: because because once the cable operators decide yes we will
Speaker 1: carry HBO, that gives HBO the chance to target new
Speaker 1: customer bases that they had no access to before. Oh sure,
Speaker 1: um and there as a result able to offer their
Speaker 1: employees some pretty ridiculous benefits. Um It kind of the
Speaker 1: stories that I've read about it at the time remind
Speaker 1: me a little bit of what happened after the Facebook boom,
Speaker 1: um and and just that that tiny, free, free wheeling
Speaker 1: startup culture that turned into this very large, very freewheeling
Speaker 1: startup culture. It reminds me a lot of what Google
Speaker 1: attempts to continue to push at the Google Plex and
Speaker 1: of course, anyone who's worked in one of the satellite
Speaker 1: offices of Google probably is very familiar with what things,
Speaker 1: what what's available at the Googleplex versus what's available in
Speaker 1: some of those satellite offices. So there was also some
Speaker 1: tension between say HBO and the folks over at Time.
Speaker 1: Keep in mind that at this point they're still all
Speaker 1: working in the same building. They're working in Time Incorporate
Speaker 1: its headquarters, and so you had sort of these freewheeling
Speaker 1: young guys who are running HBO, who are having parties
Speaker 1: all the time. They said that essentially, the the motto
Speaker 1: at HBO is work, work, work, party, party, party and uh.
Speaker 1: And so you know, any excuse to get together and
Speaker 1: have a big dinner, and you know, they're still getting
Speaker 1: stuff done. But they also took a lot of time
Speaker 1: and developed this camaraderie. There's still some tension actually within
Speaker 1: the company itself because a very different culture existed between
Speaker 1: Time and Coorporated employees and HBO. Now in one Showtime
Speaker 1: makes a big move, which you could argue at the time,
Speaker 1: Time was mostly posturing. Uh. They decided to go to
Speaker 1: a full twenty four hour schedule, right because if you
Speaker 1: remember from our last episode. Again, at the time, these
Speaker 1: cable stations would sign off at a certain point every night. Yeah,
Speaker 1: like after midnight they'd say, all right, time, time to
Speaker 1: go to bed, because we don't have anything else we
Speaker 1: can show you. So showtime goes to twenty four hours,
Speaker 1: not necessarily being able to support that with enough content
Speaker 1: so that they're not incredibly repetitive, but HBO, not to
Speaker 1: be outdone, follow suit. So later on in they also
Speaker 1: become twenty four hour. Uh. And so you with anytime
Speaker 1: you wanted to turn on HBO it was three in
Speaker 1: the morning, you can turn on HBO and something would
Speaker 1: be playing. Uh. And then they end up also hitting
Speaker 1: the big time on one of those pre buy movies
Speaker 1: we talked about. Now, this is where HBO puts in
Speaker 1: money in the pre production phase for a movie and
Speaker 1: in return, they get exclusive rights to show that movie
Speaker 1: on HBO for a certain length of time. And in
Speaker 1: this case, they hit the jackpot. Now, it's not a
Speaker 1: movie that I think a lot of people are going
Speaker 1: to be rip roar and excited about, but it was
Speaker 1: 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: could 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 have agreed to pick up
Speaker 1: a certain number of films the studio would produce over
Speaker 1: a given period of time, but have a little bit
Speaker 1: more safe which one like you made. We want twenty
Speaker 1: movies that you guys are going to make over the
Speaker 1: course of the next five years. Yeah, so once the
Speaker 1: five year period starts coming up. You're like, well, now
Speaker 1: we're stuck. Yeah, but but we got to be choosy
Speaker 1: at the beginning. Either way, these exclusivity deals were really
Speaker 1: really expensive, and it meant that it was tough to
Speaker 1: to make a profit unless you continuously grow. Now, at
Speaker 1: this time that wasn't a problem because cable was still
Speaker 1: entering in lots more markets, which meant you had access
Speaker 1: to brand new customers. So in the early days kind
Speaker 1: of automatically growing. Yeah. Yeah, you didn't have to worry
Speaker 1: about about boosting your your customer base so much because
Speaker 1: people were still eager to join. It wasn't until a
Speaker 1: couple of years later that things got a little tougher,
Speaker 1: but we'll get there. So companies were paying these big
Speaker 1: bucks for exclusive rights to movies for just a couple
Speaker 1: of years. Eventually those exclusivity rights would expire and those
Speaker 1: movies could be carried on other pay television stations like
Speaker 1: Showtime could pick it up. So in the long run,
Speaker 1: you would have a bank of movies that was essentially
Speaker 1: identical to your competitors. So for a couple of years
Speaker 1: you'd have exclusivity, but it wasn't a long term You
Speaker 1: would wind up evening out. Yeah. So yeah, one of
Speaker 1: those things that that you know, they really had to
Speaker 1: look at a little bit later because it was just
Speaker 1: it was not the best way to continuously grow your revenue.
Speaker 1: Now three, we get one of my favorite stories. Yeah, yeah, okay,
Speaker 1: this this is a big one. So so twenty century
Speaker 1: Fox negotiated to get Star Wars onto pay TV. Yes,
Speaker 1: so Star Wars big movie in ninety seven. 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 Live 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.
Speaker 1: Well they paid them more money. They paid them more money.
Speaker 1: That's very much like a bribe. 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 after
Speaker 1: midnight on February one to have noticed that this had happened. However,
Speaker 1: the they were able to say legitimately that they were
Speaker 1: the first to pay television station to carry Star Wars,
Speaker 1: and that actually carried some weight. There were people who said,
Speaker 1: wait a minute, why is HBO showing it before showtime?
Speaker 1: I should have HBO not showtime, despite the fact that
Speaker 1: we're talking about a six hour window when most people
Speaker 1: wouldn't be watching television anyway. Um that that part didn't matter.
Speaker 1: So very interesting that this battle happened. It was another
Speaker 1: expensive battle, but an important one. As we all know,
Speaker 1: Star Wars one of the most important pieces of art
Speaker 1: created in the history. There's like the Mona Lisa Star
Speaker 1: Wars David, that's the order it goes in. So three
Speaker 1: also was there another amazing piece of art premiered on
Speaker 1: HBO and original program aimed at children. Yeah, Jim Henson's
Speaker 1: Fraggle Rock yep down in Fraggle Rock. So I was
Speaker 1: a huge Fraggle Rock fan back in the day. Um.
Speaker 1: They actually came to dragon Con and we covered the
Speaker 1: dragon Con parade. We actually shut this coverage. Me and
Speaker 1: Ben Bowen and Lauren You were there and we did
Speaker 1: it like Macy's Thanksgiving Day Parade style. It never it
Speaker 1: never saw the light of day, probably because there were
Speaker 1: long stretches where nothing was happening. We we we haven't
Speaker 1: had anyone had time to edit the whole thing really long. Yeah,
Speaker 1: but were in it. They were in it. And there
Speaker 1: is a photo gallery that I did. I was running
Speaker 1: a still camera through the parade and so and and
Speaker 1: she she waved at me. Yeah. I got choked up. Yeah,
Speaker 1: I got choked up watching the Fraggles. I mean, I'm
Speaker 1: not I'm not embarrassed to admit it. The Fraggles are
Speaker 1: meant a lot to be I'm getting a little tiory
Speaker 1: right now. In fact, all right, Well that was the
Speaker 1: first segment of HBO Story Part two. We've got more
Speaker 1: chapters here. The Game of Thrones, I think I guess
Speaker 1: we'll find out, but first let's take a quick break. Now,
Speaker 1: Jim Henson had already had a relationship with HBO. HBO
Speaker 1: had produced a couple of years earlier a Christmas special,
Speaker 1: immitt Otter's jug Band Christmas. So now Jim Hinson had
Speaker 1: the the freedom to create this entire children's series, which
Speaker 1: lasted five seasons, and it ended up being a big success.
Speaker 1: It was one of the few breakaway successes of children's
Speaker 1: programming on HBO. A lot of the other programming UH
Speaker 1: people liked the idea of but no one ever bothered
Speaker 1: to watch, so Fraggle Rock was not among that. That
Speaker 1: was an incredibly popular show, in fact, so popular that
Speaker 1: HBO would end up making other versions of Fraggle Rock
Speaker 1: for other countries, and some of them would have their
Speaker 1: own version of Doc and Sprocket that wouldn't necessarily be
Speaker 1: called Doc and Sprocket, and they would be different people,
Speaker 1: like the I think in England it was like a
Speaker 1: lighthouse keeper who was really crabby. But anyway, they would
Speaker 1: also be dubbed into different languages, so everyone had their
Speaker 1: 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
Speaker 1: Nations and another series that premiered that year, and I
Speaker 1: remember the series too, was not necessarily The News, which
Speaker 1: was kind of a news parody sketch comedy show. It
Speaker 1: was the news thing was kind of the the conceit
Speaker 1: the book ends for these various sketches that may or
Speaker 1: may not be very loosely connected, right, And it was
Speaker 1: kind of Brian's very first television writing gig also uh,
Speaker 1: not consistently very good, but but one of the examples
Speaker 1: of HBO getting into original programming, which is again they
Speaker 1: started looking at how to differentiate themselves from the showtimes
Speaker 1: of the world, and these exclusivity deals, like we said,
Speaker 1: could be really really expensive, so maybe making original programming
Speaker 1: would have been a better approach. Now they learned that
Speaker 1: making good original programming is very tricky. It might not
Speaker 1: be expensive, but it's very hard to do, and getting
Speaker 1: people to pay attention is also sometimes tricky. Right. Yeah,
Speaker 1: Sometimes they would make an amazing show that the critics
Speaker 1: loved in nobody watched. We will talk about several of
Speaker 1: those in our third episode. But meanwhile, twelve years after
Speaker 1: its inception, HBO finally got their own offices. Yeah, they
Speaker 1: moved over into a building on Avenue, and it had
Speaker 1: the nickname the flash Cube. All right, kids years ago,
Speaker 1: like in the eighties, cameras which had film in them,
Speaker 1: none of this digital stuff also had flash you know, flashes,
Speaker 1: like a separate flash unit that you had to attach
Speaker 1: to the top little cube that would flash light so
Speaker 1: you could get some light on that image you're trying
Speaker 1: to capture onto film. That's why it was called the
Speaker 1: flash cube because the building looked like one. So this
Speaker 1: building that looked like something you've never seen looked exactly
Speaker 1: like just just like that thing. So now you had
Speaker 1: a building where the actual departments could all sit together.
Speaker 1: The divisions were no longer divided. They could all be
Speaker 1: in a cohesive unit. So that amazing camaraderie they had
Speaker 1: developed back at Time Incorporated, when they had this kind
Speaker 1: of startup mentality went away. What's completely ruined. Yeah, suddenly
Speaker 1: they were physically closer and yet emotionally so distant. Um.
Speaker 1: It turned out that HBO was starting to become more
Speaker 1: of a business, less of this kind of startup entrepreneur
Speaker 1: approach and I had more of a of a corporate structure. Yeah,
Speaker 1: And it also was when HBO started to notice that
Speaker 1: growing as a business was going to get very difficult,
Speaker 1: they did what was called hitting the wall. The wall
Speaker 1: in this case was saturation. You had a saturation point
Speaker 1: where cable had pretty much entered all the markets that
Speaker 1: was gonna go into. So that meant that you no
Speaker 1: longer could expect to suddenly have access to twenty thousand
Speaker 1: new subscribers potential new subscribers because someone finally built the
Speaker 1: infrastructure out to this one region. Now all the regions
Speaker 1: pretty much had cable, so there were not going to
Speaker 1: be any of these these gift baskets of potential customers
Speaker 1: just arriving at HBO. They were gonna have to work
Speaker 1: for it. And also on top of that, they had
Speaker 1: a churn rate going on, right. So churn rate is
Speaker 1: when you lose a certain number of customers over a
Speaker 1: course of a general amount of time. So there's was
Speaker 1: about two per month back in which means that in
Speaker 1: order to just stay even, you have to grow by
Speaker 1: two percent, right to to just maintain the same number
Speaker 1: of customers from the beginning of the month to the
Speaker 1: end of the month. If you want to grow beyond that,
Speaker 1: then obviously you have to get more than two percent
Speaker 1: new customers to replace the two percent who who left. Now,
Speaker 1: some of the people who left they left because they
Speaker 1: were relocating and eventually maybe they come back, but some
Speaker 1: of them were just saying, oh, I don't want to
Speaker 1: have this expense anymore. So you had to convince them, hey,
Speaker 1: we're worth the money, or you had to convince new people, hey,
Speaker 1: we're worth the money. And now there were fewer new
Speaker 1: people to get access to. So this was a very
Speaker 1: scary time at HBO. You had this young company that
Speaker 1: had been used to this incredible growth suddenly realizing, oh,
Speaker 1: things are not going to be as easy anymore. We're
Speaker 1: not going to have this essentially blank check that we
Speaker 1: can hand out for these exclusivity deals. We're not going
Speaker 1: to have this this endless line of new customers coming
Speaker 1: in through the door. What are we gonna do? And
Speaker 1: in fact, one of the first things they had to
Speaker 1: do was layoff about a hundred and twenty five employees,
Speaker 1: which was the first time in HBO's history that people
Speaker 1: had been let go like that. Also, around the same time,
Speaker 1: the VCR became a thing, and that was a boy
Speaker 1: talk about a big bite out of the business. So
Speaker 1: keep in mind, remember this is the time when HBO
Speaker 1: their main purpose was to create way for people to
Speaker 1: watch these movies that were uncut and uncensored that wouldn't
Speaker 1: be carried on broadcast television. But now, with the birth
Speaker 1: of the VCR and the growth of the home video market,
Speaker 1: where you could go to a rental store and rent
Speaker 1: a movie, you can get access to all sorts of
Speaker 1: movies beyond the what we'll call the playlist that HBO
Speaker 1: had access to. Remember, HBO is paying licensing fees to
Speaker 1: be able to show these movies, so they don't have
Speaker 1: licenses for every movie. They have to pick and choose,
Speaker 1: and sometimes they pick before they even know what the
Speaker 1: movie is going to be like, and sometimes they lose
Speaker 1: out on that. Oh sure, and they can only air
Speaker 1: so many things at a time, They can only pay
Speaker 1: to keep so many things on the air at a
Speaker 1: single time, and whatever they happen to have might not
Speaker 1: be what you feel like watching. Once once stores started
Speaker 1: carrying rentable VHS tapes, it was I mean for for
Speaker 1: younger listeners, I mean, like I have a hard time
Speaker 1: imagining this and I remember VHS tapes. I remember all
Speaker 1: of that very clearly, and it still sounds crazy to
Speaker 1: me that you that there was a time when you
Speaker 1: couldn't just watch whatever you wanted. Yeah. Now, you would
Speaker 1: go into the store and you would hope that that
Speaker 1: one copy of Young Einstein was still available, because you
Speaker 1: know what a breakaway hit that was. Um, hey, that
Speaker 1: was an important film. Hey, yeah, who's serious one of
Speaker 1: my heroes. Okay, I'm not don't take any thing away
Speaker 1: from the series, but yeah, just just the fact that
Speaker 1: you go into the store, you know, and hope that
Speaker 1: the thing is the movie that you want is there.
Speaker 1: There was an illusion that you had a more choice
Speaker 1: with the home video market. Now, the true was dependent
Speaker 1: upon how many copies of a certain movie the rental
Speaker 1: store had and how big a customer base it had,
Speaker 1: because there might be some movies that, unless you just
Speaker 1: looked out, were constantly being checked out. So so it
Speaker 1: seems even if Blockbuster had thirty copies of whatever it was,
Speaker 1: it might all be gone right. So so hypothetically you
Speaker 1: had a much larger choice, but in practice it may
Speaker 1: or may not have happened. And either way, it was
Speaker 1: 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: that was the That was again a comment about the
Speaker 1: repeats UH and UH, which were the movies that had
Speaker 1: been 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 after midnight.
Speaker 1: I'm sure that FCC regulations and stuff like that would
Speaker 1: prevent some content from being shown during HBO specifically police
Speaker 1: themselves and put they would not allow anything that was
Speaker 1: R rated to go on before eight p m. So
Speaker 1: it had to be after eight pm to to go
Speaker 1: onto HBO Uh, there 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 life since has put limiting factors on HBO how
Speaker 1: many movies they would have access to it a given time,
Speaker 1: how many, how frequently they could show it. But then
Speaker 1: HBO also had this model, this business model, where the
Speaker 1: idea was, we're going to get this pool of movies.
Speaker 1: We're gonna make a schedule where we're going to show
Speaker 1: these movies at different times on different days, so that
Speaker 1: our customers can look at the schedule and say, oh,
Speaker 1: the movie I want to see is gonna be on
Speaker 1: at six pm on Wednesday. I'll make sure to watch
Speaker 1: it on Wednesday at six pm. But instead, what they
Speaker 1: found that was that people were treating HBO like it
Speaker 1: was a television channel. That's ridiculous. Well, I mean, you know,
Speaker 1: once again, once BCRs entered the picture and they could
Speaker 1: just record something, yeah, it didn't matter so much about
Speaker 1: when it was on, but they and also yeah, someone
Speaker 1: would just turn on the TV and just be like, oh,
Speaker 1: what's on right now? Okay, yeah, oh it's beast Master again. Yeah.
Speaker 1: That was the problem was that people were not treating
Speaker 1: it like the way the company had thought of the
Speaker 1: service and we the movie theater, which yeah, exactly. We've
Speaker 1: seen this happen in other industries, right, We've seen it
Speaker 1: 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
Speaker 1: same you know, list of movies showing so frequently, because
Speaker 1: we're going to end up driving customers away. And we're
Speaker 1: already having to deal with this churn issue and the
Speaker 1: saturation issue. So all of these factors we're going into
Speaker 1: HBO and the executive's minds thinking all right, we gotta
Speaker 1: we gotta think of a new way of approaching content. Meanwhile,
Speaker 1: Michael Folks, who we had talked about in the last
Speaker 1: episod So, who had come over from a talent agency
Speaker 1: and had joined HBO. He becomes the head of HBO.
Speaker 1: He replaced Frank Beyondi, who had pretty much been forced out.
Speaker 1: He had made a really expensive licensing agreement with Columbia Pictures. Uh,
Speaker 1: there's a little movie called Ghostbusters that nearly broke the
Speaker 1: bank for HBO. We're talking like millions of dollars, like
Speaker 1: forty million dollars just to have this one movie because
Speaker 1: they had agreed beforehand, before knowing what this was going
Speaker 1: to be, and there was no cap on how much
Speaker 1: they could spend. So that deal pretty much melt the
Speaker 1: in for Beyondi. Yeah, well that that was. That was
Speaker 1: the first place that I saw Ghostbusters. So wow, I
Speaker 1: saw it in the theater opening day. The librarians, what
Speaker 1: are we? I was two. We've got more to say
Speaker 1: about this chapter in HBO's history, but before we get
Speaker 1: to that, let's take another quick break. All Right, We're
Speaker 1: up to nineteen five and that's what HBO decided to
Speaker 1: launch a big summer advertising campaign. Now. They they saw
Speaker 1: that the wall had hit, They saw this saturation in
Speaker 1: churn issue, they saw the exclusivity issue, and they thought,
Speaker 1: how can we attract more customers so that we can
Speaker 1: continue to grow, And they decided that they would really
Speaker 1: concentrate in an advertising campaign that spanned the summer of
Speaker 1: n and they would repeat this a couple of times.
Speaker 1: Oh yeah, yeah, and why the summer, you ask. Summer
Speaker 1: is a when kids are out of school and parents
Speaker 1: need something to do with these suddenly free tiny humans. Yeah,
Speaker 1: most of us have to continue to work in the
Speaker 1: summer months, and so how do you keep the tiny
Speaker 1: humans from rising up against their masters and enslaving us
Speaker 1: all good HBO. Furthermore, as most of us know, summer
Speaker 1: is when many television shows are in reruns. All of
Speaker 1: the all of the really big primary prime time sort
Speaker 1: of things are broken for the summer. Yeah, broadcast television
Speaker 1: is tends to be pretty pretty barren over the summer,
Speaker 1: like you're either watching reruns or especially just don't care
Speaker 1: about especially back in those days. These days, it's changing
Speaker 1: a little. It's a little bit. It's a little bit
Speaker 1: now where you can get interesting programming. Yeah, especially now
Speaker 1: that you have shows that are dividing their seasons up
Speaker 1: into season breaking bad, you don't don't perpetuate the breaking
Speaker 1: bad problem. I mean, breaking bad great show, but you know,
Speaker 1: splitting up your seasons, oh bad, breaking bad bad? All right.
Speaker 1: But anyway, Yeah, HBO decided, hey, we we can take
Speaker 1: this opportunity to really grab this this audience that doesn't
Speaker 1: yet subscribe to HBO. So what they did was they
Speaker 1: sent ads through direct mail and they also did telemarketing.
Speaker 1: They called people, cold calling people to convince them to
Speaker 1: sign up, and as irritating as it was, it was worked. Yeah.
Speaker 1: They sent six hundred forty million ads to folks between
Speaker 1: six billion, twice the population of the United States. They
Speaker 1: also did start investing more in original programming. Yes, um,
Speaker 1: and and you know, sports was something that they had
Speaker 1: been doing since the beginning. Yeah, that was one of
Speaker 1: the you remember the two things you could watch an
Speaker 1: HBO when it premiered was a movie, uh that that
Speaker 1: was about logging and a hockey game. So sports had
Speaker 1: always been part of HBO. Also, stand up comedy specials
Speaker 1: had been a part of HBO since the early days.
Speaker 1: Oh yeah, yeah, those really great old rap and Williams
Speaker 1: or Richard pryor special. Steve Martin had a good one too. Yeah.
Speaker 1: You had a bunch of people who were the the
Speaker 1: kind of the loudest voices of comedy in the seventies
Speaker 1: and eighties. George Carlin another one. Some amazing comedians who
Speaker 1: would get their HBO special And even to this day
Speaker 1: you'll hear comedians talk about, you know, feeling like they
Speaker 1: made it when they got an HBO special like that.
Speaker 1: That was like a mark of success. You know, that's
Speaker 1: when you know you've you've arrived. They continued to do that,
Speaker 1: so stand up comedy also big. They also ended up
Speaker 1: backing several documentary series. They ended up creating several series,
Speaker 1: including a brand called America Undercover. There are several documentaries
Speaker 1: in that series, and that helped to differentiate them again
Speaker 1: more from the showtimes in the world. Now, keep in
Speaker 1: mind Showtime at this point not really getting into original
Speaker 1: programming that much. They were still very much dependent upon
Speaker 1: the uncut, uncensored versions of movies. HBO was trying to
Speaker 1: kind of break away from that a little bit while
Speaker 1: still having movies on the channel, but trying to differentiate
Speaker 1: themselves by adding variety that you could not get anywhere else.
Speaker 1: A right, right, it's a little bit, if you remember
Speaker 1: from our cable provider and streaming media discussion, or I mean,
Speaker 1: if you pay attention to the Internet these days, a
Speaker 1: little bit of what what Netflix is doing to kind
Speaker 1: of try to move itself forward in front of channels
Speaker 1: like HBO. In fact, if HBO had not done this,
Speaker 1: we would not have a Netflix, and we certainly wouldn't
Speaker 1: have a Netflix that's making its own content. Same thing
Speaker 1: with Hulu, same thing with am is on. The reason
Speaker 1: why they're able to make their own content, why that's
Speaker 1: a viable choice is because HBO tried it and made
Speaker 1: it work. Now, not everything HBO did with the independent
Speaker 1: stuff that they did, the original programming stuff worked and
Speaker 1: we'll talk a lot about some of both the successes
Speaker 1: and the failures. Um, not everything caught on. However, they
Speaker 1: also partnered at that time with a company called Thorne
Speaker 1: E m I, which was an independent film producer and
Speaker 1: video distributor. So their main business model was to partner
Speaker 1: with other movie studios that did not have a home
Speaker 1: video distribution market. So some of the big ones did
Speaker 1: they They had They had it all in place where
Speaker 1: either they had their own production company or distribution company
Speaker 1: or they partnered with someone already. Thorny and I would
Speaker 1: would partner with lots of smaller, smaller distribution companies. So
Speaker 1: they ended up getting a lot of um we all
Speaker 1: those cheap action movies, you know, the ones that started Internet, Darling,
Speaker 1: Chuck Norris, those were big ones. But uh. The following
Speaker 1: year six, Cannon Pictures bought out thorn em I's interest,
Speaker 1: so HBO and thorny em I had um HBO and
Speaker 1: thorny Emi had partnered together. Cannon Pictures comes in buys
Speaker 1: out thorn em I, but still partners with HBO and
Speaker 1: it becomes HBO Slash Cannon Video and again most of
Speaker 1: the movies low budget action films, awesome movies, not taking
Speaker 1: anything away from him. By seven, HBO Cannon ends up
Speaker 1: being renamed HBO Video. Short time later, it changes names
Speaker 1: again to HBO Entertainment and 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 Showcase, 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 influen inst multiple industries. In
Speaker 1: this case, they began to scramble or encode signals full
Speaker 1: time for those satellite signals. Now, if you listen to
Speaker 1: the first episode you learned about HBO using up links
Speaker 1: to send a signal up to a satellite, which used
Speaker 1: transponders leased by HBO to amplify the signal send it
Speaker 1: back down to down links across the nation to cable providers,
Speaker 1: because it spread out over the entirety of North America,
Speaker 1: and at this point, the cost of purchasing a satellite
Speaker 1: dish for yourself head lowered to the point where where
Speaker 1: common families could purchase one if they wanted yea, if
Speaker 1: they if they saved up. I mean, even back when
Speaker 1: it was still tens of thousands of dollars. You had
Speaker 1: a few crazy people with lots of money buying these
Speaker 1: things because the signals weren't scrambled, the signals were clear.
Speaker 1: So so once you bought in what i mean for
Speaker 1: for the purchase price of that satellite dish, you could
Speaker 1: watch whatever you wanted to absolutely free. And so pay
Speaker 1: TV stations didn't like this because you didn't have to
Speaker 1: subscribe to cable at all. Cable companies didn't like it
Speaker 1: because you didn't have to subscribe to cable at all.
Speaker 1: You just 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 supported, right,
Speaker 1: advertisers by advertising time on those shows, and that money
Speaker 1: goes to the production companies. They are more steps in here,
Speaker 1: but in general, the production companies are able to make
Speaker 1: shows because the money made through advertising. Well, if you're
Speaker 1: using a satellite to pull down the raw feed, you're
Speaker 1: getting the raw feed, you're getting what's called the back
Speaker 1: hall feed, which is before they put any commercials into
Speaker 1: the content. So you were getting commercial free content from
Speaker 1: all the different providers, something that broadcast and cable stations
Speaker 1: and cable providers all hated. So how do you fix
Speaker 1: this problem? Well, what HBO decided to do was to
Speaker 1: invest in this encoding and scrambling technology. They ended up
Speaker 1: going with General Instruments Video cipher to to encrypt the
Speaker 1: audio and video signals. Once they've done that, you'd have
Speaker 1: to have a decryption box on the private end in
Speaker 1: order to decrypt the signals. Right, So cable companies had
Speaker 1: these D scramblers, Right, they can just descramble it, and
Speaker 1: they had an agreement with HBO. Originally it was just HBO,
Speaker 1: but other other channels would follow suit. So HBO ended up,
Speaker 1: like I said, creating this industry standard approach. So the
Speaker 1: cable providers would all have these D scramblers. And as
Speaker 1: a private citizen, you could get a D scrambler, but uh,
Speaker 1: it wouldn't necessarily work. You'd have to pay HBO to
Speaker 1: have access. You could actually go out and buy chips
Speaker 1: that would decrypt things for you, but often these chips
Speaker 1: would only be good for about a month, and what
Speaker 1: would happen is that the provider on the other end
Speaker 1: would see that someone usually it's some fake address that's
Speaker 1: been made out to a customer has not paid their bill,
Speaker 1: and so they cut off the service. So for a
Speaker 1: month you have service and then suddenly you don't. So
Speaker 1: people kept trying to find ways to get around this,
Speaker 1: but it meant that for the most part, it was
Speaker 1: much harder to pirate a signal. Now this made satellite
Speaker 1: dish owners very, very angry. They felt entitled to the
Speaker 1: stuff they were stealing because, in their minds they had
Speaker 1: paid thousands of dollars for a Sally dish, therefore they
Speaker 1: should have access to all this content, despite the fact
Speaker 1: that all the content providers are saying, yeah, see, the
Speaker 1: money you spent didn't go to help pay for the
Speaker 1: actual content, and unless we get paid for the content
Speaker 1: we make, we can't make it. So you're actually talking
Speaker 1: about a behavior that ultimately will completely destroy the business
Speaker 1: 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 understand. I understand the other arguments,
Speaker 1: which we'll get into when we talk about streaming. I'll
Speaker 1: you know, it's not that I don't feel empathy for
Speaker 1: folks who want to have access to content. It's just
Speaker 1: that if you had the choice of either spending thousands
Speaker 1: of dollars for a satellite dish and then stealing everything
Speaker 1: or just that that is a different issue. And it's
Speaker 1: a little bit on the silly end um. But meanwhile,
Speaker 1: also in six uh, Jeff Bukes became HBO's chief financial officer.
Speaker 1: He wouldn't be finished rising the ranks because if you
Speaker 1: listen to our last episode, we kind of gave it away.
Speaker 1: HBO launches Festival. This is gonna sound like it's a
Speaker 1: like it's a Dejah all over again. All right, right?
Speaker 1: Remember take two? Yeah, that was the idea of creating
Speaker 1: a kid friendly network that was lower priced, so people
Speaker 1: who weren't either willing to pay the full subscription price
Speaker 1: for HBO or objected to the content would have an alternative.
Speaker 1: It also did not work. Yeah, apparently they didn't learn
Speaker 1: anything from Take two because Festival to me sounds like
Speaker 1: it was the same thing, exactly the same thing. Yeah,
Speaker 1: it would it would find up getting canceled entirely than
Speaker 1: a year. Yeah, the problem was that they were trying
Speaker 1: to target two different populations. They wanted to target the
Speaker 1: conservative older people who didn't want all that filth on
Speaker 1: their TV, and they wanted to target families with young
Speaker 1: children who wanted to have kid friendly programming. But the
Speaker 1: problem was all the older conservatives said, why do you
Speaker 1: have all this children programming on my station? I don't
Speaker 1: want any of this. This is not interesting to me.
Speaker 1: And all the families were saying, I got this channel
Speaker 1: so that I could watch stuff and my kids could
Speaker 1: watch stuff. But when my kids have gone to bed,
Speaker 1: the only stuff you have on is on Golden Pond
Speaker 1: times in a row. I don't care about that. So
Speaker 1: neither target audience was satisfied. So it's the lesson here
Speaker 1: is if you want to target two very different audiences,
Speaker 1: splitting the difference hardly ever works. Yes. Um the next
Speaker 1: year though in Something with Kids did work out. Yes.
Speaker 1: The Kids in the Hall in fact, premiered on HBO
Speaker 1: Canadian sketch comedy Troupe Brilliant, one of my favorites seen
Speaker 1: him live, Good stuff. And that wraps up the HBO
Speaker 1: story Part two. Next week we will have the part
Speaker 1: three of the story, and again Like I said, a
Speaker 1: lot has happened in the years since, so I'll probably
Speaker 1: have to do an update to this at some point
Speaker 1: and talk really about how HBO and Warner Brothers have
Speaker 1: really transformed the entertainment space, particularly in a world that
Speaker 1: went through a pandemic that really shook things up in
Speaker 1: a big, big way. But that'll have to wait in
Speaker 1: the meantime. If you have any suggestions for topics I
Speaker 1: should cover in future episodes of tech Stuff or ones
Speaker 1: that require an update, let me know. The best way
Speaker 1: to do that is to reach out on Twitter and
Speaker 1: the handle I use is text Stuff hs W. Next
Speaker 1: week we're gonna have part three of this, so stay
Speaker 1: tuned for that and I'll talk to you again really soon.
Speaker 1: Text Stuff is an I Heart Radio production. For more
Speaker 1: podcasts from my Heart Radio, visit the i Heart Radio app,
Speaker 1: Apple Podcasts, or wherever you listen to your favorite shows.