Call Me Ted (24 page)
CNN Launch
W
hen I returned home from the Fastnet Race we were just nine months away from CNN’s launch and everyone was going 90 miles an hour to make it happen. Bunky was retrofitting the country club facilities while Gene Wright and his team of engineers were still making sure we secured and installed all our necessary equipment. Reese Schonfeld and Burt Reinhardt were making hires right and left and our salespeople were trying to sell cable operators and advertisers on this brand-new concept. It was an exciting time.
The CNN launch phase was particularly intense for me because I knew we were breaking one of the golden rules of start-ups—we were launching a business without sufficient capital to see it through to profitability. The problem was, I also knew I needed to move quickly and that there wouldn’t be many lenders or investors out there who would advance this kind of money considering our lack of experience in news. My only options to raise funds were to sell even more assets (we had already been selling off the billboard and radio businesses to fund our expansion), sell stock, or borrow more money.
By this time, I had been in and out of banks for years and whenever I dealt with them it was a culture clash. Banks like businesses that are proven, steady, and predictable; they are less comfortable with the unknown and with unproven strategies. At one point, after we acquired WTBS and launched the SuperStation, we were seen as such a high-risk client that we were relegated to working with Citicorp’s special division for highly collateralized, high-interest loans. Before that, we even had to work with a factoring company, to whom we paid a very high rate of interest and put up our receivables and inventory as collateral. They even made weekly checks of our books before giving us our cash. We had somehow survived it all and while it looked like the SuperStation was on a path to profitability, it was still losing several million dollars a year when we decided to move ahead with CNN. We felt the banks would not be receptive to this risky new venture, so I decided to mobilize with the resources we could generate on our own.
By this time, we owned both the Braves and the NBA’s Atlanta Hawks (which I bought from Tom Cousins in 1977). Either one of these would have fetched a sizable price but they were too important to the SuperStation strategically for me to consider a sale. With our radio and billboard businesses already sold, our most valuable and least strategic asset that remained was WRET in Charlotte. Purchasing that station eight years before had cost me about $1 million. Now, with the improvements we had made and the growth of the television marketplace, the business was valued at about $20 million. We reached an agreement to sell to Westinghouse at that price, and once the deal closed and the FCC approved the license transfer, these funds would go directly toward CNN’s launch. We would have enough money to get on the air, but nowhere near as much as we’d need to survive what was sure to be several years of losses before we made it into the black.
As a student of military history, I likened the CNN launch strategy to Irwin Rommel’s desert campaign during World War II. On several occasions, the German general attacked the British when he knew he didn’t have enough fuel to conduct an entire offensive. What he intended to do was strike when they weren’t expecting it, overrun their lines, and then capture their fuel dumps. At that point he could refuel his Panzers and continue the offensive. My vision for financing CNN was similar. If we had enough cash to get on the air and could somehow get through our first year of operation, people would see that this was a viable and valuable service. Once the concept was proven, we would have easier access to capital. Even in the worst case, I figured that if we ran out of money after launching the channel and getting some distribution, we would have created a valuable asset that we could sell to a competitor. The key for us was to get started.
Shortly after making the decision to move forward with CNN, we negotiated a deal with RCA to reserve transponder space on SATCOM III, a new satellite they had built to meet the rising demand. Cable operators currently receiving SATCOM I, the satellite that was delivering the SuperStation and HBO, would be able to get a signal from SATCOM III without having to buy any new receiving equipment. A slot on SATCOM III was vital to CNN. No matter how hard we worked on our programming plans, advertising sales, or distribution deals with cable operators, without a transponder, we couldn’t transmit. Yet despite the satellite’s importance, I really didn’t pay much attention to its launch in December 1979 as I assumed it to be a routine procedure. Then RCA called to tell us that SATCOM III had disappeared. They didn’t know whether it blew up or what, but regardless, the satellite was gone, and unless we found a substitute, our plan for CNN was in jeopardy. Amidst all the efforts to get CNN on the air, it never occurred to me that something might go wrong with the satellite. The fact that RCA owned NBC—a potential CNN competitor—concerned me, but when I headed south for SORC races, I left feeling fully confident that our team would be able to work out a solution with RCA.
I was racing in the Bahamas in February when I got a call from Terry McGuirk. In short, he let me know that RCA did not have any workable solutions. We had asked them to free up an extra slot on SATCOM I, but the best they could offer was a transponder on one of their other communications satellites. This would not work for us since cable operators couldn’t get the CNN signal without buying a second receiver. We were having enough trouble getting them to sign up for CNN, so there was no way they’d invest in a second dish just for our signal. If this was the best RCA could do, CNN—now less than four months from launch—was dead in the water.
I flew to Atlanta immediately while our team and outside legal counsel worked frantically on a solution. At first glance, RCA appeared to hold the cards. After all, it was a large, well-financed conglomerate, while Turner Broadcasting was still small and highly leveraged. Making matters worse, our SATCOM III agreement guaranteed us a transponder
only
if the satellite had a successful launch—there were no backup provisions in the case of failure.
Our lawyers kept digging until one of them remembered a provision he had carved out in the deal we had reached with RCA a few years before when we sold our Atlanta uplink facility to them. This clause stipulated that whenever RCA allocated new satellite transponders, they owed Turner Broadcasting a right of first refusal. RCA had leased several transponders in the years since this agreement was signed and in every case they had overlooked this particular provision. While this contract had no direct bearing on the current situation (and the truth is, we wouldn’t have needed these transponders had they been offered), they were technically in breach. It looked like we might have some leverage in our negotiations.
Our backs were against the wall, but that also played to our advantage. I’m convinced that one of the reasons I’ve been successful is that I’ve almost always competed against people who were bigger and stronger but who had less commitment and desire than I did. RCA was a huge company, but for Turner Broadcasting, this dispute meant everything. We had bet the future of our company on CNN and had already poured millions into it. Now, less than four months from launch, we were in jeopardy. We had to succeed.
Our team flew to New York to meet with the RCA satellite people at their plush executive offices. I decided that I had no choice but to play tough and let them know I was serious. I contended that we had been good partners for a long time and as such they should help figure out a way to get us a slot on SATCOM I. I also argued that our lawyers considered RCA to be in breach of our earlier contract regarding our first refusal rights and said that if they didn’t sort this out quickly we were going to sue and take our case to the FCC. We had already invested more than $30 million in CNN and we would seek at least that amount in damages. I also made the point that it probably wouldn’t look good to the regulators that RCA also happened to own NBC. These were senior executives—the top people in the satellite division—and I told them they better make it clear to RCA’s top management that we would litigate if we had to.
We got their attention and left that meeting with the sense that the RCA people almost wanted us to sue them. Turns out they were in a bind because we weren’t the only programmer with a SATCOM III slot reserved who now wanted space on SATCOM I. Since they had only two openings available there, if they granted a transponder to CNN, they would have no logical or legal explanation as to why Turner was taken care of while the others were not. Of course, if a lawsuit from us would actually do them a favor, we were more than happy to oblige. Our legal team worked around the clock and by the end of February, Turner Broadcasting sued RCA for breach of contract.
Within a week the court ordered an injunction. We were granted access to SATCOM I for the next six months, taking us beyond our June 1 launch date. Then in April, the FCC weighed in and ordered this access period to be extended through December. While this didn’t give us all the security we would have liked, we could move forward with our plans and we were confident that between April and December we would come up with a long-term solution.
While we went to the brink with RCA, the business of building CNN continued and the atmosphere in Atlanta was chaotic. One of our biggest challenges was recruiting. Prior to launch we had to hire about three hundred people and attracting them wasn’t easy. We did find some people in Atlanta, but in most instances, joining CNN meant a move from a different television market and taking a chance on a business that many in the industry viewed as a long shot. Oftentimes we made offers to people whose spouse also happened to work in television and for whom a move to Atlanta would mean sacrificing their job. Many local stations would not allow husband-and-wife teams to work together but we told them that was no problem at CNN. We didn’t have these rules and we hired quite a few such pairs. An anchor’s wife might be a producer at a different station or a camerawoman’s husband might work with a competitor’s studio crew and we’d just hire both of them. We wound up with so many spouses and family members on the CNN payroll that I joked the initials might as well stand for the “Cable
Nepotism
Network!” We did many things differently, and we managed to attract some great talent. We didn’t often get people who were at the height of their careers but we did find some promising up-and-comers who were attracted by CNN and the chance to be on the ground floor of something new, ambitious, and exciting.
Along with hiring the staff, Reese Schonfeld also had to figure out how to fill a twenty-four-hour, seven-day-a-week news schedule, something that no one else had ever done before. He realized that we couldn’t do it all with breaking news and felt we should hire a group of well-known people specifically to provide editorial commentary. I thought that was a good idea as long as we did our best to get people from across the political spectrum and we always identify their views as their own, not CNN’s. We managed to sign Bill Simon, Bella Abzug, Phyllis Schlafly, Rowland Evans, and Bob Novak, among others. It was an impressive group, and combined with local anchors from around the country, Reese and his recruiters assembled a solid on-air team.
A TED STORY
“These People Are Nuts!”
—Lou Dobbs
(LOU DOBBS IS CURRENTLY THE ANCHOR AND MANAGING EDITOR OF CNN’S
LOU DOBBS TONIGHT
.)
In late 1979 I was working as a reporter and anchor at KING television in Seattle when I got a couple of calls from a headhunter trying to hire people for this proposed new news service in Atlanta. After I turned them down a couple of times, Sam Zelman, the CNN executive in charge of putting together the on-air team, gave me a call. When I let him know I wasn’t interested he said, “Well you ought to at least come down here. You’ll meet a lot of unusual people, if nothing else.”
I finally made the trip in January of 1980. This was just six months before the announced launch date and when I walked into this old ramshackle, run-down Georgian colonial I thought, “These people are nuts!” It certainly did not meet my preconception of what an innovative new television news outlet might look like, but I stayed long enough to have dinner with a group of CNN people and they were great. Everybody was completely energized. When I met Ted he didn’t know me from Adam but he greeted me like a long-lost brother. His enthusiasm was infectious and he was absolutely the definition of charismatic. He was in super sales mode and explained to me that CNN was going to be the greatest thing in the history of Western civilization! My visit didn’t leave me feeling like this would be the case, but I was convinced that win, lose, or draw this would be a wonderful thing to be a part of.
At the time that we dodged the RCA satellite bullet, our all-important sale of WRET hit a snag. Our station manager in Charlotte had gotten into a dispute with representatives of a local African-American group called the Charlotte Coalition. They had been lobbying the station for more minority employment and the airing of more minority-related programming. And instead of being respectful and listening to their concerns, our manager got into a fight with them and ordered them out of his office. Following this shabby treatment, they filed a lawsuit against the station. The FCC was very attentive to potential issues of discrimination, and this claim was sure to hold up our license transfer.
Without this sale and the $20 million in proceeds, we were in big trouble. As this dispute dragged on we were forced to take out a $20 million loan at 25 percent interest, requiring us to make $400,000 interest payments every month. We couldn’t afford to keep this up through a protracted legal process, so I set up a meeting in Charlotte with members of the coalition, and in addition to our lawyers, I asked Hank Aaron to come with us. Hank was well respected in the black community and when he pointed at me in our first meeting with the coalition and said, “This guy isn’t prejudiced,” it was a powerful moment. Yet despite Hank’s support, it was a tense series of negotiations.