by Ted Turner
With his background in cable, Bob Wright seemed eager to diversify NBC beyond the broadcast business. They owned CNBC but as far as cable networks were concerned that was it, and many of the same synergies that would have existed with a Turner-ABC deal were also there with NBC. There were different ideas floating around about how a merger with NBC might work, ranging from Turner Broadcasting being acquired directly, to NBC being spun out from GE and merging with Turner to form a new, separate entity. Either way, valuations, structure, and responsibilities were issues to be resolved. Conversations grew serious enough for Bob to fly down to Atlanta with his boss, General Electric CEO Jack Welch, for a meeting with me.
We met in secret at a suite in the Ritz-Carlton in the Buckhead section of Atlanta—myself, Bob Wright, and Jack Welch. I knew Welch by reputation but didn’t really know him personally and I looked forward to meeting with him, but from the beginning of this conversation, I was disappointed. It seemed clear to me that Welch either didn’t understand or appreciate our business or he hadn’t done his homework for the meeting. Whenever he referred to a valuation of our company it was very low and when it came to corporate structure and reporting lines I could tell that if we ever were to do a deal I’d be just another employee of General Electric.
A TED STORY
“He Really Struggled with Ted”
—Bob Wright
Jack Welch was pretty open to a deal with Turner but he really struggled with Ted and the perception that we would be buying Ted and his company. Nevertheless I convinced Jack to actually get on a plane with me and go to Atlanta and pitch an offer to Ted. Jack and I flew down to Peachtree-DeKalb Airport and met with Ted at the Ritz-Carlton Hotel in Buckhead. We sort of came in the back door and went upstairs to meet in a suite. We spent about an hour and a half talking and Ted never sat down. He tried to sit down but he was really antsy. I was used to Ted’s behavior, but for Jack it was new. I said I really thought we should do this deal but Ted said we weren’t offering the right price. I think he wanted $30 a share and we were offering something like $25.50. Ted said he also had some other concerns and asked about whether Jack would want him to be a vice chairman of GE and Jack said, “No.” When Ted asked him why, Jack said, “Because I don’t want you to be a vice chairman, I want you to run CNN.” Jack was very straightforward about it and said he didn’t think Ted would add anything to GE at the corporate level and he worried that he would be too difficult to work with.
By the end of the meeting, Ted said, “You know what? I don’t think I want to do this.”
So I said, “Don’t let that be your final answer. We’ll talk when we get back.” So I called him the next day and he said, “I don’t think there’s a place for me at GE and Jack didn’t offer enough money.”
I said, “Well, is it that he didn’t give you enough money and there’s no place for you or is it there’s no place so he didn’t give you enough money?”
And Ted said, “Well, it’s six of one, half dozen of the other.”
A TED STORY
“Jack Welch Wouldn’t Be Jack Shit!”
—Tom Brokaw
I went out to spend the weekend with Ted in Montana and Jack Welch had just walked out on him. They had been talking seriously and they came that close. It’s a shame but in the end Jack just didn’t think he could be in business with Ted. So Ted was fit to be tied and we got in the Land Rover and we’re bouncing across the landscape with Chris Francis, the fishing guide, and Gordy Crawford, a major investor in Ted’s company, in the back seat. Ted is going on, “That Jack Welch, he wanted me to be vice chairman of this and the honorary chairman of that. He didn’t give me the respect I deserve! I built this company from nothing! I’m worth billions of dollars and they want me to be a vice chairman? I’ll tell you something, Tom, if it had been for . . . hadn’t been for . . . what’s the name of that guy who invented the lightbulb?”
I said, “Thomas Edison.”
“Yeah, if it hadn’t been for Thomas Edison, Jack Welch wouldn’t be Jack Shit!”
I thought Crawford and Chris were going to fall out of the truck. Years later, at Jack Welch’s retirement party, we ended his tape with me telling that story and I said, “Don’t worry, Jack. We all know you really are Jack Shit.”
I was discouraged by the NBC discussions but I didn’t think that General Electric would want to own that network forever and thought we might have discussions with them again sometime down the road (which, in fact, we did). In any event, striking out with ABC and NBC left me to consider CBS. I should point out here that by the mid-1990s, the Fox network was well established as a fourth broadcast network. But Rupert Murdoch’s News Corporation owned them, and while I knew he had coveted CNN for years, Murdoch was not someone with whom I wanted to do business. Seeing the way he used his newspapers to advance his personal political agenda really bothered me. I certainly encouraged our networks to air programming about issues I considered important, like the environment and overpopulation, but Murdoch specifically supported or tore down individual political candidates through his publications, particularly in Europe. We had worked very hard to establish CNN as an impartial outlet with the highest journalistic standards and doing a deal with him would jeopardize everything we’d built.
My conversations at CBS were with Larry Tisch, the billionaire financier who had made his fortune in a wide range of businesses including hotels, tobacco, and insurance. With no background in media, he was in the network business to get a financial return and it looked like he might be willing to sell CBS for about $5 billion. As we analyzed a valuation for CBS, we also entered discussions with King World about acquiring them. The company was founded and run by the King brothers—Roger and Michael—and I knew them from back in the ’70s when they sold me rerun rights for The Little Rascals on Channel 17. When they started out, The Little Rascals was about the only property they had but with hits like Jeopardy!,Wheel of Fortune, and Oprah, they had grown King World into the most successful syndication company in television. The King brothers were great guys—fun-loving entrepreneurs—and we liked the idea of being part of the same company. They would sell to us in a merger for about $1 billion. Their company was generating tremendous cash flow and I hoped to use those resources to help finance a bigger deal with a network.
We were also in some interesting discussions with Bill Gates of Microsoft.
A TED STORY
“A Deal Made in Heaven”
—Bill Gates
(BILL GATES IS CHAIRMAN OF MICROSOFT CORPORATION.)
The Internet was exploding and it seemed a great place for news. At Microsoft, we thought we could drive a lot of traffic but we didn’t want to start from scratch so the obvious thing to do was to take the only brand that was really specific to news at the time—CNN—and do something with them. Our offer to Ted was that we would invest in Turner at market and create a 50/50 joint venture to manage CNN.com. It was a dream deal. Ted was willing to let us do the technology piece. Neither he nor his key people at the time had really put their minds around that and we had no problem letting them retain editorial control. We were willing to guarantee all the losses of the joint venture so that Turner corporately would have only seen profits.
Ted was eager to do it. We’d have these discussions and Ted would get on the phone and yell, “We should do this! This is great, let’s do it!”
But at the time he had these weird control provisions relative to Time Warner and the other cable guys who owned pieces of his company. It kind of drove him crazy—he never really knew how to deal with having sort of a boss. You know, you get up on Monday with a wild idea and then you have to think, “Am I going to get vetoed?” He just didn’t like it. And so part of our idea with this deal was that we would dilute those guys down in terms of their control so a lot of that voting stuff wouldn’t affect Ted as much anymore. It was just a deal made in heaven.
There was a lot to be said for a deal with Microsoft. They had just invested a billion dollars in
Comcast and now they were willing to invest a billion in Turner. We could put that cash to good use and in the meantime, we’d jump-start our online business and take a lead against our competitors. With Gates’s billion and the cash that King World and our own companies were generating, we could go after CBS with $2 billion in cash and $3 billion from the banks.
But there were also issues about working with Microsoft that concerned me. Bill Gates and I are good friends now but back then I was just getting to know him and partnerships like this can be tricky. With a proposed joint management of CNN.com, I worried about being in a conflicting position with our partners over strategy or other issues. The CNN management team was particularly nervous. Microsoft had developed a reputation for being aggressive, so everyone’s guard was up. The Internet was also new and there were those who thought that CNN.com might someday be worth more than the cable network. They worried that for $1 billion we would be giving to Gates half of something that would soon be worth far more.
While all of this was going on—discussions with Capital Cities/ABC, NBC, CBS, King World, and Microsoft—I continued to speak openly about my frustration with my board, particularly Time Warner. Their ability to veto deals made it hard to get a deal done and it was a cloud that hung over even preliminary discussions I had with potential partners. In the time since they had invested in us, our company had grown substantially, and I had a number of conversations with Jerry Levin and others about buying out their shares at a healthy profit. I spoke openly to them about feeling fenced in and to turn up the pressure I shared my concerns in public. It was my hope that we might orchestrate a transaction whereby Time Warner would exit the company and we could move forward with our strategic plans.
At the height of these discussions, while I was with Jane in Montana, Jerry Levin called and said he wanted to fly out and see me. It sounded important, and it was.
27
Time Warner Merger
In the summer of 1995, Turner Broadcasting was hitting on all cylinders. Our entertainment networks were growing rapidly and CNN was once again enjoying record high ratings. This time, the spike in news viewership was not caused by a war but by the O. J. Simpson saga. This coverage didn’t make me as proud as had our telecasts from Baghdad and many advertisers weren’t too thrilled with the idea of plugging their products during a double murder trial, but whether I liked it or not it was a huge story and it was gratifying to see people turning to CNN in big numbers to keep up to date. It had taken our company until 1989 to break the $1 billion mark in annual revenues and halfway through 1995—just six years later—we were on track to grow that number to nearly $3.5 billion.
Morale was high. Over the years we had attracted a strong team and I did what I could to keep them excited about coming to work every day. I had always been frugal with the company’s resources and we couldn’t pay the extravagant salaries of the big media companies in New York and Los Angeles, but we did provide stock options that would prove to be very valuable. Many of our people could have earned bigger paychecks elsewhere but I’d like to think it was the unusual opportunities and the vibrant atmosphere at Turner Broadcasting that motivated them to stay. And because we were growing quickly and launching so many new businesses, opportunities continued to present themselves to our talented and hardworking employees. It became part of our company’s culture to take chances on younger, and oftentimes unproven, executives. Convincing people to leave stable companies to take a chance on a financially shaky UHF station or a start-up news channel was not easy and we usually didn’t fill positions with classic textbook candidates. But for young people who wanted hands-on experience in television news, there was no better training ground than CNN (a twenty-three-year-old Katie Couric worked for us as a desk assistant), and many of these quickly rose through the ranks to hold significant positions. In the summer of 1995 the head of our entertainment division, Scott Sassa, was still in his thirties, as were all but one of the network presidents reporting to him, the only exception being a twenty-nine-year-old he had put in charge of TBS SuperStation.
I continued to focus on the future and broader strategic issues and let our executives worry about the day-to-day running of the individual businesses. The company had now grown too big and complex for me to keep up with all the details. That said, each of our managers knew that there were certain things I expected to be kept informed about. I had a particular interest in programming and wanted to know about which series we were acquiring or movies we planned to produce. This part of the job was enjoyable for me and I still believe that quality programming was an important differentiator for us and I didn’t want anything going on our air that I didn’t feel good about.
From my early days I understood the importance of careful scheduling and thinking through how a TV audience flowed from one show to the next. Our network presidents didn’t run all their lineup changes by me but generally I approved the bigger ones (and every manager of TBS knew that if they planned to move The Andy Griffith Show anywhere I needed to hear about it first!). I also intervened whenever it was necessary to keep our different divisions cooperating with each other. Our success relied on the various pieces of the company working together. For example, I bought the Braves to present their games on TBS; the MGM library provided the foundation to launch TNT and was now the backbone of Turner Classic Movies; Headline News would not have worked without the newsgathering capabilities of CNN; and we purchased Hanna-Barbera specifically to launch the Cartoon Network.
Still, each of these entities had their own management structure and inevitably disputes would arise. An important part of my job was making sure they were resolved quickly and in the best interests of the overall company. The nature of my job called for decisions that weren’t always popular (tough decisions seldom are) but I did my best to make them quickly and to keep things moving forward. You’d have to ask them, but I believe that most people enjoyed working with me.
Nineteen ninety-five was shaping up to be another great year but I never stopped looking ahead and when I did I saw plenty to be concerned about. We’d done everything I could think of to acquire a broadcast network but Time Warner continued to block us. I felt like the Republicans in Spain during the Spanish Civil War; I could handle the four columns approaching Madrid from every direction but my real problem was the fifth column—the enemy behind our lines. I knew that we couldn’t win the media game if we didn’t grow and while a network might be off the table, we still had other strategic holes to fill. We didn’t own a large production facility, and while I had not been interested in owning cable systems in the past, as new channels launched and the broadcasters were handed new opportunities by the must-carry rules, I started to think that being part of a company that controlled distribution would make some sense. There were lots of options but no matter what I decided, I’d have to reconfigure our relationship with TCI and Time Warner.
A TED STORY
“He Felt Very Vulnerable”
—John Malone
Ted was on the TCI board of directors at that time. We were very close with him and he kept raising the issue that he felt very vulnerable. He decided to go talk to Mike Milken about whether it was feasible for him to raise enough capital to just outright buy a network. I believe it was at that meeting that Mike convinced Ted that he could probably do it, but it would be very risky and probably foolish. He reminded him that he took one shot with Kerkorian that damn near put him over the edge. Ted remembered the pain of that and I think he came to the conclusion that with retransmission consent and with the vertical integration going on that it was time for him to think seriously about joining forces with somebody.
He called me up and talked to me about it and said, “You know we love you guys but you’re too far right-wing for me and I think if CNN is going to be controlled by anybody or go fit with anybody it needs to fit with somebody who’s in the news business—and because of Time Inc. the most logical thing might be to do something with Time Warner.”
> When Jerry Levin called and said he wanted to meet with me, I didn’t know what to expect. We’d been having so many different discussions over the past several months it could have been anything. We had guests at the Flying D Ranch but I told him that if he wanted to see me right away he was welcome to fly out.
A TED STORY
“I Think We Should Buy”
—Jerry Levin
We had been looking at different ways to get the Time Warner stock up and one of our options was to monetize an asset. I was considering several options at the time and there were many different things we were interested in doing, like investing more in cable. We did start to have conversations about selling our interest in Turner. I believe at that time that Rupert Murdoch had shown interest in CNN, GE was interested in CNN, and I guess I took a cold shower and decided that that asset belonged together with the news operations of Time Warner. At the same time I started to think that TBS and TNT, as ad-supported entertainment channels, would be a nice complement to HBO and we were also in the cable business. So one day I told Dick Parsons, our president, and Rich Bressler, our CFO, that rather than selling I think we should buy—so let’s get a small group together—like one banker and the three of us—and figure out how to do it. We decided that the only way to finance it was with stock but it really was a question of how to convince Ted to go along with it and ultimately to get Malone on board so that he would be supportive.
I deputized myself to fly out to the ranch and Jane Fonda picked me up at the airport. I don’t think they had any idea why I was coming, and as a matter of fact, Jane said to me, “Don’t mess with my husband,” because I think she thought we were going down a completely different road and trying to do something that was antagonistic to Ted’s interest. I said, “No, no, no, this is going to be a good meeting—not to worry!”