From Scratch

by Allen Salkin

  Soon the whole troupe—Joe, Bruce, Paul, and Jack, along with Andrew Thacher, the director of electronic initiatives for ProJo, and Paul McTear, the head of finance for Colony—was sitting around a conference table in the corner of Tryg’s office on the top floor of ProJo headquarters.

  They were aware that the arrival of the 500-channel universe had stalled a bit. Congress was considering rate regulations on the cable industry, which had been using regional monopolies to squeeze consumers, and the nervous industry was reluctant to invest in new wires and technology. But Tryg did not want to wait. He wanted to have networks up and running for the day when the expanded universe arrived. He liked the idea of a cooking channel. As Jack effused, Tryg looked over Joe’s one-pager, thinking of ways to make additional money from the concept other than by collecting subscriber fees.

  Boy, he thought, there may be other ways to make money from this: cookbooks, a food brand, maybe?

  “This could be really big,” Trygve said to the men. “This does sound like what I’m looking for.” He could see them stir with excitement. He liked their enthusiasm. But he also knew that no one in that room had started a national network from scratch before.

  Tryg knew that even channels that seemed like a good idea might not work out. CBS had famously tried to start a cable channel devoted to fine-arts programming, which had tanked after a year, costing CBS millions. “Okay, it’s not going to be that easy to execute,” Tryg said. “Food is a big area. How do you develop shows? But it has all kinds of potential. We’ve got to move with this thing. We’re going to have to go out and find some people that have experience in starting up networks, because none of us have it.”

  Outside the office, Jack told Joe, Paul, and Andrew to do as Tryg said and come up with some recommendations about who they could bring in to help launch a food channel. Joe was thrilled. Tryg was giving them permission to find someone who could actually do this thing. That meant it might get done.

  —

  Cable TV was beyond its infancy as an industry, but only just entering its turbulent adolescence. It was old enough to have developed some expert hands, but young enough that those hands could still be wild. One of them was Reese Schonfeld, who was itching to run a network again. In 1980, it was Reese who had brought Ted Turner’s vision of an all-news cable network to life. Ted had come up with the idea, but Reese had hired the talent, bought the desks, gotten the signal to the satellite. He had run CNN from its birth and served with seat-of-the-pants aplomb as its president for its first three years. In an era when the big broadcast networks were spending hundreds of millions annually to make a half hour of nightly news, CNN under Reese spent $25 million for an entire year of 24-hour-a-day programming.

  Tall and prone to impulsive decisions, Reese had gotten into the TV business after being expelled from Harvard Law School for not attending classes, and then making it through Columbia Law School, but never taking the bar exam. All that time, he’d also worked at UP Movietone News and had fallen in love with the work. When the wire service had offered him a chance to cover a Democratic National convention, he’d never looked back. Reese stayed with United Press for seventeen years, until the company was sold. He had become famous for knowing how to get things done in the TV business for far less money than anyone else. In turn, he was also known for holding grudges, impatience, and temper tantrums during which he would turn purple from the bottom of his sharp chin to the top of his oval, thinly covered scalp. He would bellow at whoever was not doing what he wanted done until he got his way, and then quickly calm down and return to a normal color.

  Ted Turner had removed him as the president of CNN in 1982 after complaints that Reese was running the network chaotically—failing to delegate, and hiring and firing anchors and hosts unilaterally, upsetting egos big and small.

  Reese spent the next eight years involved in a series of start-ups that never quite got started, including an international news network in partnership with the Soviet Union’s state-controlled news channel, TASS, which faltered when the USSR collapsed. He produced a television show for People magazine, and in 1991, put together the International Business Channel, partnering with networks in Germany, Japan, and around the world. He wanted to be the controlling owner this time. Tryg’s former nemesis, Nick Nicholas, had pledged tens of millions toward IBC, but in February 1992, Jerry Levin ousted Nicholas in a corporate coup at Time Warner and killed Reese’s project.

  So Reese was at loose ends when he got a call from Stephen Cunningham, one of his consultants on the business channel project. Joe had been given Steve’s name as a TV start-up expert who might be able to move the cooking channel concept forward. Now Steve was heading to Providence to meet with the Colony team. Steve wondered if Reese might be interested in a cable channel about food.

  The idea of cooking programming was not completely foreign to Reese. A year earlier, two old colleagues from New York, Allen Reid and Mady Land, had come to see him. A married couple, they had moved to Nashville, where they’d been making cooking shows for local channels. “They are so easy to produce,” Allen told Reese. “We could build a big business making these shows, but we need some way to syndicate them. How do we bring these shows to market? You’re the expert on that.”

  Reese knew cheap programming was useful in the cable business. But cooking shows? “It’s not the business I’m in,” he told them. “I’m a news guy. I know where to sell news. But who do you sell cooking shows to? I can’t do it without a platform in the cable industry. Listen, if I hear of something, I will let you know.”

  Now he was hearing something. “Why not?” Reese said to Steve.

  Steve, who had helped start the shopping channel that became QVC, was one of a few consultants the Colony men were interviewing, but he was the only one who could offer Reese Schonfeld, cable legend. He and Reese would charge $20,000 a month to study a launch strategy.

  Tryg knew Reese from his days on the board of CNN. He was aware of drawbacks with Reese’s temper, but recognized that there were few men with Reese’s track record for getting things started. He asked Steve to arrange for Reese to come to Providence for a follow-up meeting, which he did in the spring of 1992. Tryg, friendly and businesslike, and Jack, energetic and aggressive, both led the meeting and asked Reese what he might want to be paid to stick with a cooking network all the way through start-up.

  Reese flashed a toothy smile. This was his chance to prove he could do it again, but better. “I want to be the president of the network and to own a piece of it,” he said.

  The Providence men said they would consider it.

  After Reese left, Tryg said to Jack, “Well, Reese knows what he’s doing.” Jack nodded. They decided to agree to his terms if he confirmed that he wanted to come aboard.

  A few hours later, Reese arrived back at his apartment on Manhattan’s Upper West Side. He and his wife, Pat O’Gorman, a TV producer, had removed the kitchen from their apartment because they did not like to cook. They had a coffeemaker and a place to stow dog food. “Delivery,” Pat often said to friends, “is one of the blessings of living in Manhattan.”

  After the long round-trip to Providence, Reese settled down into bed and asked Pat what she thought of a 24-hour cable channel devoted to food.

  Like Reese, Pat had spent most of her career in news. She was a no-nonsense lady, gruff and direct. All she knew about food on television was all most people knew: Julia Child, The Galloping Gourmet, and that new one, The Frugal Gourmet: three odd ducks. “I think it’s the stupidest thing I’ve ever heard,” she answered. “Why would anybody watch people cooking on television?”

  But she could see that her husband was stirred up by the idea. Reese was at his best when he was busy. He was the type who did not move out to the beach in the summer, preferring to hole up in his Manhattan office and create deals. He studied TV ratings charts, placed calls to potential overseas investors, and took whatever
meetings he could while other men lazed away in the Hamptons.

  The Colony people seemed to have done their homework, he thought. Their research showed there was a broad audience for the existing cooking shows on PBS. People they’d interviewed wanted more.

  “Well,” he told Pat, “I think if they really offer it, I’m going to take it anyway.”

  —

  By the late spring of 1992, Joe had become a nuisance around the Johnson & Wales cooking school. He kept showing up with a small video camera and asking to stand in the back of classrooms filming. After students filed out, there would be Joe, a forty-two-year-old man with an awkward demeanor peppering instructors with questions about culinary terms and methods. Ken Levy thought it was getting stranger and stranger. He wanted to make sure Joe was not unhinged, and asked a J&W colleague to check up on him by quietly calling a friend at Colony. Was Colony seriously looking into doing something on TV involving cooking?

  “Yes, don’t worry,” came the response. “We’re serious. Joe is okay.”

  Meanwhile, Reese was well aware of the need for quick action. When he and Ted Turner had launched CNN, other entities were also thinking of cable news programming. To beat the competition, Reese and Ted had taken their plan to an annual cable convention in 1979, announced it at a press conference, and to prove how far along they were, presented a list of shows CNN would carry. In fact, they had hired their first anchor only twenty-four hours earlier, had not purchased a camera or found a studio. As Reese later told Joe, “The list of shows scared everyone else off. Everyone who was there said, ‘Wow, these guys are so far advanced, so far ahead of us,’ that they just dropped out.”

  On July 2, 1992, Reese and Steve, working with Joe and others at the Providence Journal, delivered a report. Reese had already teased it earlier with a memo to the principals:

  Gentlemen:

  Permit me to cut to the chase:

  After thirty days I am absolutely convinced that the Food Channel is a business that will be worth between $250,000,000 and $500,000,000 on the day that it is carried in 40,000,000 cable homes.

  Therefore the most difficult part of our task is to convince the cable industry that it should grant this extremely valuable franchise to the Providence Journal/Johnson & Wales.

  Our report will explain why we think the cooking franchise is so valuable and it will present and discuss various plans for gaining cable acceptance.

  Now, the authors expressed a “major concern” that a competitor, especially Discovery Channel, which carried cooking shows already, could announce a spin-off food channel first. They suggested that “we announce first.”

  The report included a list of thirty programming ideas. Among the talent mentioned were Larry King, the talk show host Reese had originally hired at CNN; Alistair Cooke, an Englishman known as host of Masterpiece Theatre on PBS; Paul Prudhomme, a noted New Orleans chef; and Julia Child. None of them had been approached. Among the show ideas:

  Haute Cuisine: Fancy meals for fancy occasions.

  Talking About Food: Larry King–type call-in show where callers and the host dissect the menus at White House dinners, the specials at the fanciest restaurants in the world, and the pros and cons of fast food.

  Cooking for Babies: What should mothers be serving their babies, and what should they be eating while they are breast-feeding?

  Eating While Pregnant: What should expectant mothers be eating, along with pickles and ice cream at 3 a.m.?

  Cooking Game Shows: The winner gets a grocery cart full of coupons or a year’s free shopping or twenty pounds of beef or a year’s supply of Campbell’s soups.

  Cooking by Dad: The show that focuses on easy-to-prepare meals for those times when the kitchen is controlled by an ignoramus, along with his screaming children who are sick of hot dogs, pizza, and peanut butter.

  Cookbook Reviews: This could be a Siskel and Ebert kind of show with a beefman and a healthmark fanatic . . .

  Great Hotel Dining Rooms: An ongoing tour of the finest hotel dining rooms in the world.

  So You Want to Own a Restaurant?: A regular feature that would serve as an ongoing exercise in entrepreneurialism.

  Great Meals from History: An Alistair Cooke–hosted discussion of the gastrointestinal tendencies of the world’s leading historic figures.

  Letting Go: Curing bad kitchen habits picked up from your mother.

  Edited Cooking Shows: We would have a host who critiques the old cooking shows and teases Julia Child about the equipment she used, highlighting those recipes that still make the mouth water.

  Another section of the report noted: “Cooking shows are among the least expensive programs produced on television . . . between $8,000 per hour (Reid/Land Productions) . . . $12,500 . . . if produced in a union situation . . .” Costs would be even lower in a company-owned studio.

  “Moreover, the programming is timeless and will retain value far into the future. Second . . . there are a number of ancillary revenue streams that could generate substantial revenues, including database applications, cookbook sales, couponing revenues, and potential magazine applications.”

  “Couponing revenues”? That was a concept from Andrew Thacher. Andrew found new technologies for ProJo to invest in—everything from cellular phone ideas to ways of delivering news via computer—and he had been asked to help with the Food Channel plan. He found a small company in Beaverton, Oregon, with the means to transmit coupons via television. If a commercial for frozen green beans was shown, a viewer could push a button on a detachable calculator-size reader. At supermarket checkout, he or she would present the reader and receive the discount.

  The Food Channel business model leaned heavily on “Couponix.” Reese accepted Tryg’s approach that to make the channel irresistible, they’d have to give it away for free. But no other start-up cable channel was forgoing subscriber fees. It was not considered economically possible to survive only on advertising. On average, cable providers were paying 12 cents per subscriber to each channel in 1992. Even Court TV was receiving 9 cents per subscriber. The free approach would set Food apart, and Couponix, it was thought, would compensate. The plan projected that advertisers would pay 5 cents per subscriber for Couponix’s power to reach consumers directly and collect data on who clicked what when. In total, the plan calculated, Couponix would deliver $420,000 to the bottom line the first year and nearly $5 million in year five.

  The plan calculated that including programming and other expenses, the network would need to raise roughly $43 million to start, even with projected advertising and Couponix revenues of $32 million over the first three years. And it projected that to attract sufficient advertising revenue to turn a profit by year four, the channel would need to be available in 3.5 million cable homes in its first year, 10 million the second, 20 million the third, and 40 million in year five.

  Colony could put the Food Channel in its 600,000 homes, but how would you get to 3.5 million in the first year if being free was not attraction enough for cable providers? The proposed solution was to approach cable companies as investors. Each company would be asked to contribute $6 million cash and to commit to putting the Food Channel into as many homes as possible. For the $6 million, each would own ten percent of the network, and for every 666,000 subscribers provided, an investor would gain an additional one percent ownership. If seven cable companies each gave $6 million, that would yield the start-up money necessary, plus however many homes they pledged. The plan included an end date on the free ride. If the Food Channel still existed after ten years, it would begin charging per-subscriber fees.

  Thus the task was set: find seven cable providers willing to put up both cash and subscribers. And do it as fast as possible. Reese wrote that to preempt competition, the network had to be on the air by June 1993, less than a year away.

  —

  Find investors, hire staff, acquire programming, and ge
t a network broadcasting into more than three million homes in less than a year? It would take iron stomachs to endure the sudden ups and downs and, worse, the dispiriting lulls.

  To start at least, there was good news on the advertising front. Jack, Andrew, and Reese had traveled to Cincinnati to meet with the top ad buyer for the consumer products giant Procter & Gamble. Without P&G it would be a rough go.

  Jack Clifford gave the pitch in his carnival barker’s voice: “It’s good, clean fare, safe for families . . .” Reese chimed in with comments about what a viable business plan they had and how economical the programming would be. Julia Child, he was sure, would be persuaded to appear now and then. Plus, there was his own experience with start-ups. Finally, the ad buyer broke in: “That’s enough.”

  Oh shit, Jack thought, anxiety rising. Here we go, they’re going to tell me to go blow it out my ears.

  Everyone looked at the buyer.

  “We’re in. We’re in,” he said. “We’ll give you a three-hundred-thousand-dollar buy the first year.”

  Jack, Reese, and Andrew tried not to gasp.

  “That’s twice as much as we usually offer to new networks. If there’s going to be a food network, we’ve got to be on it,” the buyer said. “And we think your company, your research, it’s pretty solid, and I think you’re going to make it. We’ll raise it the second year.”

  Confidence mounted in Providence, but they still needed at least seven investors. The Food Channel team started making the rounds to media companies—and suddenly the progress slowed.

  The cable company TCI—whose leader, John Malone, had coined the phrase “500-channel universe”—turned them down flat.

  Robert Stengel, an executive at Continental Cablevision, argued that not charging cable operators even one cent a subscriber was foolish and keeping the channel free for ten years, as promised, crazier. It was accepted industry wisdom that cable networks needed two streams of income: subscriber fees and advertising. If you charged at least a penny to start, it would be easier to raise it to a nickel later.