TechStuff Classic: The HBO Story-Part One

And obviously a lot has happened with HBO since I mean, there's HBO Max. That alone deserves a full episode. But let's learn about how HBO and the cable industry really were tightly knit back in the early days. And uh, what better way to do it than to jump right

in here we HBO Home Box Office. That is what we are talking about for the next three episodes because there's so much history involved and and I never realized it before we started researching this, but if it weren't for some of the people who were working in HBO's early days, we might not have cable TV or or satellite cable as we know it, right, Yeah, For example, all those other basic cable stations that you are familiar with may not have existed had it not been for

some of the efforts on the part of multiple players in the story. And also some of the other issues everything from scrambling signals to piracy to streaming online. All of these things come into play with HBO and and original content as many many of you statistically probably know, yes, whether whether you are subscribers or the other type. So we're going to um, we're gonna have to journey back in time. So yeah, I know, we just we just tossed it off recently, but it's gonna getta workout. Let's

file into the way back machine. As it turns out, we're gonna have to go back way before HBO was founded, all the way back to nineteen twenty two. So let's let's just set that right here, and uh push the button. Lauren pushed. All right, here we are sunny nineteen two. N's when Henry Loose and Brittain hadn't decided to u, you know, pack it up. They had been working for the Baltimore News and they decided they didn't want to do that anymore. They cut their ties, said their goodbyes

and went to the Big Apple. Because if you can make it there, well you know the rest. So they had this crazy idea they wanted together to launch a brand new magazine with the title of Time, and they got about eighty five dollars and startup money from initial stockholders and uh and incorporated in that November of nineteen two. That's right, So the very first issue of the magazine launched on March third, nineteen twenty three. Now, this company

would actually debut lots of other titles. It wasn't just Time. Time was the starting point. But then they also launched Fortune in nineteen thirty, which was a year after the great stock market crash of nineteen twenty nine when a lot of people lost their fortunes. UH. They also launched

Life in nineteen thirty six. The magazine Life, the actual you know, point of existence, had existed for billions of years we know, yes, at least on Earth, perhaps longer in other places, but the magazine itself didn't come into existence till nineteen thirty six. And then, of course the most important magazine of all time nineteen fifty four, Sports Illustrated. I've never read a single issue I know, of sports. But it's pretty it's pretty big. All of these are

pretty big. The company has certainly become a print media giant, and I mean, at the time was a print media giant and would go on to become an other media giants, right, because why why would you limit yourself to print media? They wanted to diversify. So moving into the nineteen sixties, just just come along with us. The nice thing about the way back machines that lets us go forward in time much faster than backward. We don't even have to

get into it. So nineteen sixties, Time Incorporated starts looking at a way of getting into this crazy television business to branch out from print media, and so as doing that, they looked at a little company called Sterling Communications and they bought up a twenty steak. In that company, there was a man running that by the name of Chuck Dolan, who um was it was a bit of a visionary, Yeah, oh,

huge visionary. He's talked about sometimes. I mean, despite the fact that he's kind of unassuming and and pretty off spoken and doesn't really he's not a public figure the way that some of our other tech visionaries are. I mean, he's not he doesn't have the stage presence of say a Steve job, but nonetheless, without him, we probably would not have cable TV as we know it. Um He was born in Cleveland and served in the Air Force, dropped out of John Carroll University and started up a

company that edited sports reels for TV syndication. Eventually he sold that and moved to New York where he founded Sterling in nineteen sixty. Yeah, that little company where he was adding sports footage. He did that out of his home. He and his wife, He and his wife in Cleveland, in their house, ran this entire company UM and and sold it for enough money that he was able to found a cable television company. And at the time, cable

was not what it is today, right. Yeah. In fact, cable at that time was really meant to deliver broadcast television as an over the air television. This is the stuff that normally you would put an antenna on top of your TV or perhaps on top of your home or apartment building, and you would get signals over the air which would then run down to your television. A lot of people considered this free television. It's not like

you had to subscribe to it. However, it's ad supported TV, I'm sure, and I mean nothing's nothing's free there in its freelance. Yeah, so even public television that exists on on grants and donations, the other commercial TV that existed

through ads supported. But anyway, the issue was that in rural areas you couldn't necessarily get a good signal because if you did not live near a transmission tower, the transmission tower might not have enough power to put out there so that you could get the same sort of content that you could if you lived closer. Al Right, So cable stations were really just ways of getting TV, regular old broadcast airway TV out to those rural areas exactly.

It didn't exist in big cities like New York, right, because the thing about New York was that you happen to live really close to all those transmission towers. Yeah, everything was being broadcast out of the Empire State Building basically. Except the thing is is that New York has other skyscrapers, and if you lived, say behind a skyscraper, you might not I mean you absolutely wouldn't be able to get

that signal from that tower. Right. If you got a signal at all, it would be really weak, so you would have lousy reception, which meant that there were people in New York who might live a few blocks away from the Empire State Building, but their reception on their televisions were worse than what you might see in the suburbs in New Jersey. You can get a better in Jersey. Why why you come on? Look, you gotta pay to get out of Jersey. Why would you have to You

know that that was the way they got you. You have to pay to get out. So then you're like, well, I get better TV over here. Anyway, I'll just stay in Jersey. I apologize everyone for starting Jonathan on that. I promise I won't I won't continue. I apologize as well that at any rate, this is exactly the case. So what Dolan thought was, why don't I bring cable into the city. That way we can have the same single over cable and even if you live right behind

a skyscraper, you're still going to have great reception. Sure. The thing is that it's really I mean, it was and still is really expensive to late this cave. We we're talking copper cable at the time. By the way, fiber optics wouldn't come into the picturing until the nineteen eighties. Yeah. And not only that, but it was in New York. They had had a blizzard several decades earlier that had wiped out a lot of the power lines and and telephone lines, and as a result, city officials said, hey,

you guys, you're gonna have to bury this. Everything has to be buried so that way we will never have an outage on this scale ever again, which meant that the cable that Dolan was gonna lay would have to be underground. Two. This meant that per mile of cable minimum,

you'd have to spend ten thousand dollars per mile. Now in New York to get those uh apartment buildings, those high rise apartment buildings wired, you have to build a cable through the apartment building to eat with a branch to each unit, right, that's the only way you could do it. That made it go up to around three hundred thousand dollars per mile. And this is in nineteen sixties dollars. We're not talking about adjusting for inflation here,

so this is really expensive stuff. And Dolan, you know, this was a very ambitious plan. And Dolan saw the long tail, right, He saw that this could be profitable, but it was going to require a lot of work, and it perhaps more work than he anticipated when he first got into the business. Yeah, Sterling almost certainly would have gone bankrupt if it hadn't been for times investment in them at that at that time. Exactly, So you're gonna say the word time as many times. There's no

way of avoiding it. Uh, just wait till Warner gets in there, because I use that word all the time. Nineteen seventy one. So, still trying to make Sterling Communications a profitable company, Dolan begins to brainstorm ideas that would convince subscribers to join on to this, to to actually willingly become a customer of cable, because again you have to convince people, Hey, I know you could get this free over the air on your antenna, but the reception

is lousy. Pay for it on cable, you'll get it. You'll get a great experience. And the people who they were contacting we're saying, but why would I Why what I do that? Yeah? I mean yeah, the stuff I get over the air is lousy. But if it's going to be the same thing, just better quality on cable, I feel like I'm getting the rough end of the deal here if I have to pay for it. So he says, what what can I do to differentiate cable to make it more more attractive? Ah? What if we

made a special channel just for cable. It's not for over the air, Only people who are subscribers to the cable will get it. And it has to be something that's really really compelling, something maybe that carries a lot of sports with it. That was his first approach, and he called this idea the Green Channel. He he referred to it and as the Macy's of television. And this was not an entirely new idea. Actually, our CIA had created a radio network specifically to give people a reason

to go out and buy our Cia radios. So why would you buy something where there's no content? This is sort of the argument people have about four K televisions right now. Why would you go out and get a four K TV? No? Same argument. That argument has been around ever since we started making this kind of tech.

Oh yeah, and and understand that at the time there was some programming on cable stations, but most of it was either extremely load budget or or very local, like a clock streaming the local Time, or just weather reports or at the very best public access, although that didn't become a mandatory thing, uh, you know, branching into the Wayne's World kind of kind of end of the deal until after the FCCS Telecommunications Act of two, wherein they

said that any station that had more than subscribers had to have public access content. Yeah at this time, but but not even that. I mean we did not even have Wayne's World, so that it was not Party Time, It was not excellent, it was not and nor Anton jessp. We had no doctor Anton Jessip. That's no. I don't want to imagine a world where there's no Anton Jessip. But so so it was considered a very commercially unviable space exactly. Yeah, this was really again just an alternative

to deliver broadcast over the air TV. It wasn't thought of as a way to create new types of content, and also very regionalized, very much spread out and separated. Like we didn't have these massive cable companies that had enormous networks. You had all these different, smaller regional companies that serviced little rural areas. And so even if you wanted to launch a big idea like a big program.

Let's say that it's a company that's out in the middle of nowhere, in the in the middle of a state where there's hardly anything else, and they think, we've got a great idea of our show. We're gonna produce a show. They might only be able to deliver that show to a very small audience because it wasn't a nationwide network. So very different world than the one we live in now. So how do you make the Green

Channel a must buy product? You know, we had a lot of these attempts to make pay television channels before, but they had failed. And again that over the air for free model was very compelling. Well, nineteen seventy two, Dolan decides to pitch this idea to Time, which had invested in Sterling Communications. Right. He wound up talking with one of their lawyers, a man named Jerry Levin, and

the two convinced the company to take on the idea. Yeah, and so, fifty years after the founding of Time Incorporated, remember those back in ninety two. Now we're in nineteen seventy two, Time Incorporated launches a new cable television channel. They had taken the Green Channel idea. They renamed it after a series of long and arduous meetings, and they figured that this name wouldn't really stick for that long

because it was pretty lame. Yeah, this was supposed to just be a temporary kind of placeholder home box office. That was the name HBO for short. They thought, will will home box office until we figure out something better. They never figured out anything better, and they went with it.

Uh So this was again the idea originally was a paid television premium channel that would carry uncut, uncensored movies that you wouldn't find on broadcast television, plus a few live sports events from Madison Square Gardener Right, So again very new thing. The cable television itself did not have that many subscribers, and they in time, was not ready to commit full on with this, you know, and so

they said, well, let's find a test market. Let's look around and see if we can figure out what we can, you know, how to develop the strategy to make sure it works before we really throw in. And they did have on their side the fact that TV execs were

eager for a way to make television unfree. I mean, you know, if if you can turn a profit on something that's always better than giving it away for free and UM and stealing cable is a lot harder than it is to steal signals out of thin air, right, Yeah, if you were just broadcasting this over the air, then obviously anyone with an antenna could get at it. There'd have to be some other kind of scrambling thing. And

we'll talk about scrambling later on in another episode. Sure, But okay, So, so this test market wound up being UM in Pennsylvania and New York. Yeah, so the very first one was just Wilkes bar Pennsylvania, tiny community like people. Yeah, yeah, we're talking. I mean, I think they had four hundred subscribers at first. I think three five was the estimate, and I saw a title so even even fewer than that.

But the reason for that, uh, well, they wanted to do Wilkes Barre Pennsylvania mainly because one of the big partnerships that Time had struck was with the NBA, and the idea was to be able to cover NBA games live so that people who wouldn't have access to that kind of programming could actually watch it live and that would be really exciting and be a good reason to

subscribe to the service. However, the NBA, like a lot of different sporting organizations, has blackout rules where where they don't want you to uh to publish too broadcast, broadcast a game within a certain radius of the stadium where it's being played exactly. And so if they had launched in say Alan Town or Philadelphia, that would have been in the radius for all the Philadelphia teams. So they said, well, why don't we do Wilkes Bar. It's just outside that radius.

We're not going to be hit by any blackout dates. It'll be the best possible experience and that will give us the test that we need that can be used as word of mouth. So subscriptions six dollars per month for HBO. So uh it goes live on November eighth, ninety two. And the very first movie carried on HBO

was titled Sometimes a Great Notion, A fantastic film about logging. Yeah, Henry Fondo was in it and Paul Newman was in it, and it was really a story about individualism and being able to strike out on your own and to survive against odds both from nature and man. And I'm making it sound way more exciting than what it really was. But yes, that's that was the movie. And then the other thing that they aired was a hockey game, not an NBA after all that travel. Yeah, the NBA does

not tend to play in hockey games. Uh. This was a game featuring the Rangers against the Canucks. And I know you're all dying to know who won, Rangers five to ALRIGHTMG spoilers. Yeah, well, you know, for those other people who are using way back machineans of their own to go back into nineteen seventy two and watch all those games, forget I said that. So back in these early years, the service would only be on the air for a few hours each day. It was not a

twenty four hour channel, all right. They would sign off at a certain point. Yeah. I actually watched the little cartoon that used to play at the very end. It's very cute. This is it's actually like several minutes long. It wasn't like a little twenty second thing. But it's a cartoon showing, you know, lights going out in the city and setting an alarm clock and fluffing a pillow. And this is all cartoonish, right, all cartoons. It was essentially saying good night, good night. Yeah, it was at

almost had a night veil moment again there. Boy, it just creeps in, doesn't it. So meanwhile, on the back on the corporate side of things, so so that's what's going on on the actual television. On the corporate side of things, you have Time Incorporated, and they had to carve out space for this new uh, this new enterprise HBO. So originally they started making space in their own office building and Time Incorporated headquarters in New York, which was

already a bustling office. Yeah. So that meant that as HBO began to grow, and it grew pretty quickly, Uh, it meant that they had to start getting creative finding places to stick people. So departments wouldn't necessarily be all set together. You might have a department head who's on a different floor from the rest of the office. Uh. There were stories about people having to find an office space in an old broom closet, or or four or five people all sharing a common office area that used

to be a meeting room. That kind of stuff, things that we can kind of identify with here at how stuff works. But the interesting thing was that this actually promoted a kind of camaraderie among the office workers. They had a closeness and kind of a party atmosphere too. Is this idea that we're all in it together, We're doing this exciting thing. A lot of the people who

were working there were very young. It was. It was a very happening, very startup kind of vibe in despite the fact that it was being owned operated by this very large company exactly that had been in business for fifty years, and yet it had a very start up feel. That's a very good way of putting it. We've got so much more to say about HBO, but before we get to that, let's take a quick break. All right,

we're back and it's nine. This was the year that Time bought HBO outright from Chuck Dolan and the rest of the Sterling investors. And poor Chuck Dolan, he must have I mean, he must have really missed out on everything, right that just uh yeah, no, no not but the the the opposite of that. In fact, if we can set the way back machine to be the way forward machine for just a second, I'll just get on in here and you just you keep going, I'm gonna I'm

gonna work on this, okay, okay. So Dolan would would use this buyout money to found Cable Vision, which would make him billions. Today, it is the largest cable provider in the New York metro area, along with its spinoffs like AMC and i f C, the two very popular channels which you might know from everything from using your remote control. Yeah, well, walking Dead and etcetera. Madman Um and his resulting properties like Madison Square Garden and the New York Nixon Rangers. This from a guy who had

a little business out of his kitchen right in Cleveland. Cleveland. Boy, So he's he's still kicking as at this podcast. He's worth some three point six billion. He has six children who um more or less run a lot of his empire. And it's a huge success story. And someday he's a very interesting person and I would really like to do

more on him and or Cablevision and or all of that. Yeah, but okay, back in, I just got this thing fixed to go for Oh forget it, We'll just stay here, Okay, alright, So, uh seventy three, Jerry Levin continues working with the HBO brand, but it only has about eight thousand subscribers, and uh that's spread across maybe fourteen different cable operating systems, all of which are still in Pennsylvania. Yeah, it still hasn't

moved into New York yet. So the big, the big irony here is that it was possible because of the stake in Sterling Communications, but that was based solely in New York, and Sterling Communications did not yet carry HBO. It was all still in Pennsylvania. Meanwhile, that same year, nineteen seventy three, you saw several other pay television channels launch. They had names like Star Channel from Warner Cable, Theater Vision and Channel one. And if you're asking yourself, okay,

well where did those go? Yeah? Nowhere. Yeah they didn't. They did not succeed. They did not, in the long run survive, so but they it did show that HBO was starting to kind of set a precedent, and other other companies were thinking, how can we also capitalize on this? They just hadn't quite figured out the best way of doing it. Nineteen seventy four, we see HBO clawing its weight, you know, just inch by inch, to fifty seven thousand subscribers in Pennsylvania and finally also in New York, also

finally available on Sterling Communications. But now time had bought out the rest of the interest in Sterling and it renamed it Manhattan Cable so nine yeah. Yeah. In an effort to reach an even broader audience, Levin convinced the then president of Time to let HBO begin to deliver content via satellite. And this was crazy. No one, no one wanted to believe that this was going to work

at all. This is the very first television station in the United States to use satellite as a means of distribution. And it didn't mean that they were using satellite to beam it two households that had satellite dishes, because because satellite dishes at the time cost some seventy five thousand dollars in that day's money, something your average homeowner probably wasn't going to probably invest in. I wouldn't know. I

wouldn't have either. So what they were doing was sending beaming the signal up to a satellite that would then beam down to satellite receiver dishes that were owned by other cable systems, all right, So the cable operator would then send that signal out via cable. Right. Because originally what these companies were doing was using microwave transmission, but microwave transmission has a limited range and you need line

of sight for it to work. So in other words, if you had even a really powerful microwave radio station in say Pennsylvania, it's not going to reach all the way out to the other side of the United States, not without a bunch of relays exactly between exactly you'd have to end line of sight relays. So getting those rocky mountains be kind of tricky. But what they decided to do was instead use geo stationary satellites. So geo stationary orbit it means that the satellite is actually maintaining

its position above a specific point on the Earth. And these satellites are way the heck out there. Okay, So our satellites that we tend to think of in our you know, the ones that, by the way, in the in the biz, they're called birds. Apparently I did not know that until I started reading all the information to

call them birds. So these birds up there, like if you're talking about normal ones that just pass over in low earth orbit, we're talking to maybe a hundred hundred fifty miles out from the surface of the Earth, like where the ISS is. Yeah, these these satellites, they don't maintain a position directly over a point, you have to go much further out. So the geo stationary UH satellites that that HBO was interested in, we're twenty two thousand,

three hundred miles out. Because from that distance they had a broadcast footprint that covered all of North America. So with one satellite you could then being the signals that could be picked up across the United States. Because the further out you kind of think of it like a flashlight.

The further out you go, the more area it covers. Yeah, yeah, absolutely, And I mean to put it in perspective, if you remember from our A T and T episode, the very first active communication satellite had only been launched like twelve years earlier, in nineteen sixty two. So so although twelve years a long time and technological thinking, that's still this is this is cutting edge technology at the time. Exactly

no one else had done it yet. You know, no one else had managed to do the television stuff yet like HBO did. So they the technical term for beaming it up, that's using the up link satellite to antenna. So you're that's the transmission, use the up link to send it up to the satellite. The satellite has transponders on it, specifically that have been leased by whatever company in this case HBO to then beam this amplify that signal that it picks up, and then beam it back

down to the Earth. And then you have the down link receiver dishes that capture that signal and then send it onto the cable station for transmission. It might do that might be transmitted over microwave at that point, depending upon whether or not the receiving station and the cable station are adjoining or if they're separated by several miles

or whatever. So that was the basic principle behind it, and so on September was able to carry the Muhammad Ali Joe Frasier boxing match also known as the Thrilla

in Manila. They were the only live carrier in the US for for this programming, and the organizers time to the fight to happen during East Coast prime time, and so those Pennsylvania and New York subscribers who could already enjoy HBO because it was being transmitted via microwave transmission to to cable operators were joined by folks in Florida, like fifteen thousand of them who were able to see

this simultaneously. Because of this, it actually could technically be picked up across the entire United States, just whichever ones were affiliated with HBO. Three towns in Florida. I think we're the only ones that actually had the satellite down

link at that time. Yeah. So the thing was that because HBO was able to do this, and because they could, they could back up the claim that they could do this to anywhere in the United States that happened to have cable service as long as the cable operator carried HBO. So if they partner with us, we can let you see this stuff too. It ended up being a huge boon.

In fact, uh there there are reports that if someone came out to install cable in a neighbor's house and other neighbors notice, they would chase down the cable car, don't see HBO on the side of the van, and like run down the street and like knock on the side, and so could you also hook me up? I would love to have that too, So big big boost to HBO. If it hadn't been for the satellite move, it probably never would have gone much further than the regionalized pay

TV network that it was. Maybe eventually would have crept further along, but it wouldn't be near where it is now certainly. And by the end of nineteen seventy five, they had more than three hundred thousand subscribers in sixteen states to show for it. Furthermore, I mean, this really proved that there was a lot of money and space

in the cable and satellite TV field. Yeah. And not only did they prove that to their subscribers, they proved it to competitors, all right, because in n Yeah, HBO had a rival pop up, a rival known as Showtime. Now here's an interesting thing to me, Lauren. Uh. When I started doing the research for this episode and we started building out these notes, I did not realize that HBO dated all the way back to nineteen seventy two.

Nor did I realize that Showtime dated back to nineteen seventy six, probably because I didn't have cable as a kid until I was at least seven or eight years old. Uh. And and so to me, and and we didn't have Showtime. We did get HBO. But to me, I always thought of this, why it must have been late seventies, maybe early eighties. I didn't realize that it was actually much older than that. Now, if you subscribe to HBO, you know that there aren't any commercials there. Well, this is

an HBO, folks. We're going to take an ad break, but we'll be right back now. Showtime very similar in concept to HBO. It also would run uncut, uncensored movies. In fact, HBO and Showtime would often have a very similar, if not nearly identical, list of movies that they could run at any given time at this early beginning stage, Yes, yea, and some would argue moving forward, same thing, um within

two years, so Showtime would follow suit. It would follow HBO's example and go nationwide with a satellite service, which at that time had only been done by one other channel besides HBO, which was ted Turner's superstation w TBS also known as just TVs are Turner Broadcast System. So TBS and HBO together were companies that made cable subscriptions more attractive. Keep in mind it's still really expensive to install cable into cities. It wasn't just New York that

was a special case. That was an example that was mirrored in cities across the United States. So although supposedly Ted Turner and and TVs got into the game because he heard about HBO mostly after that that big prize fight had occurred. Legend has it that someone said, yeah, someone convinced time to to use the satellite hook up and they're and they're getting the fight live. It's on HBO, and he was like, what's an HBO, which was a

common refrain at the time. Apparently right in those early days before that boom, no one had really heard of it, but everyone was fascinated once they did, because again, in those early days, it was only available to a few tens of thousands of people. So if you didn't live in one of those regions that that was currently served

by HBO, why would you have heard of it. So, yeah, it was one of those things where Turner ended up jumping on that that strategy, even though he had not really heard of the the channel that had already done it. It's also why we all got to enjoy Georgia Championship Wrestling, So thank you, Mr Turner. Um. So, then uh, we start seeing some competition showing up with showtime there and some actual competition that that lasts. It's not like those

other channels we mentioned earlier that faded away. Yeah, that made it go into it and didn't succeed. So nineteen seventy seven, HBO, for the first time since it started the nineteen two turns a profit, which not again not very surprising. You've got a lot of money that has to go out from HBO for it to be able to run its business. It had to pay licensing fees to movie studios in order to get the rights to

show the movies on HBO. So it had to spend money in order to even have content, and then it

had to try and make that up in subscriptions. Also, all of that infrastructure was certainly not cheap, right, So while HBO probably didn't have to put the bill for most of that, considering that they would partner with cable companies, they had to convince cable companies to go through the trouble of installing all that cable into major metropolitan areas, uh in order to have a larger subscription base, right, I mean, they had to say, like, hey, cable company

that services Nashville, Tennessee, you want to put cable in all your homes. I know that it's a lot of money, poor concrete and build a nine foot dish to get a satellite down link so that you can run, you know, dollars worth of cable per mile these homes. But just keep in mind that over the long term you're gonna make lots of money. So that was an argument they had to make over and over again. They got really

good at making that argument. Also, in ninety seven, a law your name Michael Fooks came over to HBO from the William Morris Agency. He'll be pretty important later on in the story. That's why I decided to mention when he showed up. Sure, absolutely, um, but at the time in so, at this point, HBO has about one point five million subscribers, but they are losing tens of thousands. Yeah, because of a pretty nasty business move on the part

of Showtime. So here's the thing about the cable business, y'all. It's it's not polite. This is it is a competitive, cutthroat business, so that the gloves are off. Yeah. No, we've seen this in multiple ways, both as consumers and on the other side. I mean, there are a lot of considerations you have to make when you're running a cable business, whether you're an operator, there are a lot of of considerations you have to make, or if you're a content creator, there are a lot of considerations you

have to make. Absolutely um and so okay, so so Showtime. Showtime's parent company was Viacom. Yeah, big big company, big competitor to Time, and they had made a deal with a cable provider called Teleprompter, which was the largest cable operator in the United States, to be their exclusive pay TV movie channel, which meant that any Teleprompter subscriber could get Showtime, but would not be able to get HBO even if they wanted it. It was not an option.

So that meant that HBO was suddenly cut off from a large portion of potential customers. So what does Time Incorporated do? They purchase American Television and Communications Corporation, which was the second largest cable system operator in the US. They were hoping that perhaps the six thousand or so Steamers would also subscribe to HBO, and HBO also continue to add premium films to its collection, making some pretty

interesting business deals. They were able to negotiate a block of forty MGM and United Artists titles for about thirty five million dollars. Now, these were titles that were movies. Some of them hadn't come out yet, so this was just kind of a you know, here's thirty five million, we want to be able to grab forty titles that

you guys come up with, right right. They were investing in pre production in return for exclusive rights to these films, um and it was a huge gamble because you don't know if that film is going to be a flop or not. You you don't know if people are going to want to subscribe to your service. Right right, You might be like, wow, HBO has exclusive rights to some of the worst movies I've ever had in fever. That's great. Yeah, sorry, Cabin Fever. I'm not sure where that came from, but yeah,

sometimes it paid off, sometimes it didn't. And in fact, they also began to learn lessons down the line. One of the early lessons they learned, actually I guess it wasn't that early. One of the lessons they would eventually learn is that they could set minimums for how much money they would spend for a title. This was something that was negotiated with the movie studio. So they might say, all right, at minimum, will pay you fifty dollars for this title. That's I'm just pulling a number out of

the air. By the way, that's not necessarily a real number. But what they didn't think to do is set a cap on how much ultimately a movie might be valued at. And if they entered an agreement ahead of time to purchase a certain number of movies from a certain studio, and one of those movies becomes a runaway hit and they are obligated to purchase the rights to that movie, and the movie studio is in the the bargaining position where they can demand huge amounts of money for that.

That became a huge, uh expense for HBO. We'll talk about a specific example of that a little bit later on in another episode. So yeah, yeah, big risks, but it also what meant that it was paying off and helping differentiate HBO from Showtime. Now we move up to nineteen seventy nine. This is where we're going to conclude

this episode. But nineteen nine, we see a man named Jeff Bukes who had started as a trainee at City Bank in their law department, and also, by the way, is rumored to have had a very what's HBO response when he first heard about the network and figured out what the network was, and and left his entire career in order to go be a part of this new media company. Yeah, he had worked, he had entered City

Banks trainee program. He worked there in the law department for two years and then said I'm going to HBO. And I'm sure some of the people at that time said, what's HBO? So he would end up doing pretty well over at HBO. We'll talk more about Bukes throughout the next few episodes, but in general, just to give you

a little preview. In n he became president of HBO, so pretty good, became the CEO's that's even better, and into those night he became CEO of the parent company Time Warner than now, granted Time Warner itself is still off in the future. It's back in nineteen seventy nine, it was still just Time Incorporated. But yeah, he he

became the head honcho. And the same year, back in nineteen HBO decided to experiment with launching a complementary pay TV channel that ran more kid friendly PG rated movies and was priced at a lower price point because some people were saying, you know, it's too expensive or I don't really want all this sex and violence on my television, and so they thought, oh, well we'll we'll caeter to this.

This group of people will be able to get people who can't justify the expense of a monthly subscription to HBO or who wants something that's kid friendly. Well we'll give them this and it'll be terrific. We'll call it Take two, which if you start searching for it's gonna take you a while to find, because terrific. It didn't know, Yeah, no one really cared. It died out pretty quietly. Um so, yeah,

finding finding mentions of Take two somewhat challenging. I mean, I'm pretty sure Wikipedia has a short little entrigue about not not an entry on Take two, but I think it mentions it in the overall article for HBO. It's a little red link. Yeah probably. Yeah, one of those things where like you've you may have heard of it if you worked for HBO. That's how how oscure we're talking. That wraps up part one of the HBO story. So next week we will jump right to part three, and

then we'll come back to part two. No, no, no, I'm kidding. We're going to do them in order because reasons. But I hope you enjoyed it. If you have any suggestions for future topics I should cover, or perhaps a topic that I have covered that requires an update, let me know. Reach out on Twitter. The handle we use is tech stuff h s W and I'll talk to you again really soon. Tech Stuff is an I Heart

Radio production. For more podcasts from my Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows. Eight