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Nick Nicholas

Interview Date: June 11, 2002
Interview Location: Unknown USA
Interviewer: Steve Nelson
Collection: Hauser Collection

Nick Nicholas

NELSON: Nick, why don't we get started and just take us back to your early days, your upbringing, your childhood; where'd you come from?

NICHOLAS: Well, I grew up in a military family. My dad was a Naval Academy graduate and a submariner, and so we lived everywhere. I mean we lived in the West, in the East, in Europe on the coast somewhere, a peripatetic upbringing. God Almighty, I mean, you'd make a few friends and we'd be moving again. But at any rate, it stabilized towards my high school years, high school and college and grad school.

NELSON: Were you alone a lot at that point when he was off on duty?

NICHOLAS: Well, you know, sure. During World War II, of course, like anybody whose old man was in the Pacific, he'd be gone for a year at a time, but that's the way it was. We all got through it just fine, I think.

NELSON: Okay, so you said it stabilized around your high school years. Where were you at that point?

NICHOLAS: Well, we had been living in Europe in the late '40s and early '50s, mostly in Copenhagen, Denmark, and I had learned the language, went to the Danish schools, the whole nine yards, but when we came back to the States, my parents decided to take my brother... my older brother and my younger brother and I, and lock us away in prep school for a couple of years. I went to a place near Boston called Andover, and then after that to Princeton.

NELSON: And weren't you from New Hampshire originally?

NICHOLAS: Well, I was born in New Hampshire. There's a submarine base in Portsmouth, that's why I was born in Portsmouth.

NELSON: It's still there.

NICHOLAS: My old man was on a sub based in Portsmouth. Absolutely, it's still there. So, then off to grad school at Harvard, business school, and then to Time, Inc. in '64.

NELSON: Well, let's just stop at Princeton. What did you study as an undergraduate?

NICHOLAS: I started off as an engineer and after six weeks of that I learned real quickly I wasn't cut out to be one. I went into economics, got interested, particularly in underdeveloped economies in the world, in Africa, sub-Sahara, Asia, East Asia, kind of how did you make an economy grow, how did you improve the standard of living of the people. What worked, what didn't? Real practical kind of stuff. I wrote my thesis at Princeton on Puerto Rico and the economic development of Puerto Rico – why it prospered on a relative basis compared to the rest of the Caribbean.

NELSON: I assume because you started out in engineering and then went on to economics, you always had a facility with numbers.

NICHOLAS: Well, you know, I could add and subtract, but I know we're going to get on to the cable industry later, but...

NELSON: Well, I know later, but I see you did have a facility with numbers in terms of some of the positions you held.

NICHOLAS: Well, you know, but I mean you can't be in the business without having some facility with quantitative things. I mean you've got to understand relationships, and relationships are often expressed in numbers, so I don't think that's that big a deal.

NELSON: But it was something you were comfortable with, numbers.

NICHOLAS: Sure, sure.

NELSON: Alright, so Andover, Princeton, and then Harvard for your MBA?

NICHOLAS: Right, you know in those days...

NELSON: And what year is this?

NICHOLAS: I got out of Harvard in '64. In those days I was really one of the youngest kids on the block. Harvard liked you to be out in the real world having had experience. My experience was summer work, fundamentally. I mean I had worked every summer – gosh, probably since I've been twelve years old – in my life. I've worked in shipyards and prisons and you name it, anything to earn a buck and have an experience. At any rate, I left Harvard and went on to Time, Inc., which was purely a journalistic company at that point. It had a few television stations, but fundamentally magazines and a big landowner in Texas.

NELSON: And this was just a job you got from interviewing as a student?

NICHOLAS: No, actually, like most people coming out of school at those times, I asked these existential questions, which was "what do I want to be when I grow up?" and I looked at all the standard stuff, you know, the P&Gs, the oil companies, the really classic American large companies that hired people out of B schools, and none of it really intrigued me. Finally a friend of mine, who may or many not have been interviewed for this project, Tony Cox – Tony died a couple of years ago and it may not have happened – but Tony was a year behind me at Princeton and also at B school, and Tony one day came up to me at Harvard and said, "Hey, Nick, there's this great place, Time, Inc., I've worked there in the summers as a mail boy pushing a mail cart. Great products, great people, interesting future, take a look at their annual report." And I did, and I said, "This sounds great." I went for an interview, they offered me a job, I got lucky, and then I went to work there.

NELSON: And what was that first position?

NICHOLAS: Gosh, I was a numbers cruncher. Do you remember those great Monroe adding machines that you'd punch these keys and the damn thing would actually dance across your desk? Basically I was an apprentice job, like everybody that comes into a company, I was doing whatever they asked me to do, and as I figured out later, I learned a hell of a lot in that early job just kind of by keeping my eyes open and paying attention to what was going on around me, I learned a lot about the company. I learned a lot about what worked and what didn't. I learned a lot about people. Who were the leaders that I would follow and who were the ones I wouldn't, and kind of how people made a difference.

NELSON: So you started moving up through the corporate hierarchy there. Was this a result of somebody...?

NICHOLAS: Barely moving up. Barely moving up.

NELSON: I suppose at first progress was slow, but was this as a result of just your own initiative or had you in fact, you talk about the people to follow, would that have been part of your career track?

NICHOLAS: Well, I mean you have to be lucky to move up when you're young, so I got lucky. But I also was not politically correct, I guess is the way to say it. I used to ask "Why do we do it this way? Why do we do it this way? Certainly there's got to be a better way to do this." And occasionally I'd even suggest a better way, and pretty soon these sort of unasked for memos, I guess they call them emails today, got the attention of some people up the line who kind of said, "Geez, we ought to pay attention to this guy." So there was a journalist named Jim Shepley, and Jim had been – "brass knuckles" was his nickname – he'd grown up in the UPI, he was one of George Marshall's key aides after World War II, he eventually became president of Time, Inc., which I followed on years later, but he became sort of a surrogate father to me, and he really enabled me. He was the guy who said, "More of this, Nick, not less. Whatever it is you're thinking I want to see more of it." He had a very interesting role actually in building the cable side of Time, Inc., if not THE leadership role, and I'll get to that later.

NELSON: But when you joined, Time, Inc. was still the classic company going back from Henry Luce.

NICHOLAS: Yeah, we were Eastern, WASP – at least that was sort of the picture – white shoe, you name it, establishment publishing company, and tons of great people, I could give you a zillion names of journalists who I got to know over the years. One of the best things that happened to me in my early years, Steve, is a guy named Marshall Loeb, whose name is known to many, managing editor of Fortunate, and on and on and on. Marshall, at the time I got to know him, Marshall ran the back of the book, the business section of Time Magazine, and Marshall asked me to kind of leave my business job on the publishing side of Time and come down and join him in the magazine and become a writer about business. I wish I'd done it for a couple of years, looking back. At the time I was having trouble making the mortgage and car payments and all that stuff, so I couldn't take the risk.

NELSON: Being a writer didn't seem to be the career track?

NICHOLAS: Well, it wasn't anything I thought I had any skills at.

NELSON: With all these memos – they must have been reasonably well written.

NICHOLAS: Who knows? Who knows?

NELSON: So you started making some waves merely by asking questions, and that caught the attention of some people who started saying, "Send us more of these, not less."

NICHOLAS: Right, right.

NELSON: So sort of follow along that thread how you started moving through the company.

NICHOLAS: Well, you know, I joined Time, Inc. in '64. In 1970, Shepley became president of the company. Jim Linen, who had been president before, died of a heart attack, and this was all sudden, unexpected, and they put this guy named Shepley in charge. I'd never met Shepley at the time, but he'd been reading these memoranda of mine – I don't know how the hell he got them, but...

NELSON: Who did you write them to? Just your boss?

NICHOLAS: Well, I wrote them to people who... depending on the subject, I wrote them to somebody where I thought maybe it would get some attention or whatever. I got a call one day from his secretary saying, "Mr. Shepley wants to have lunch with you." I said, "I wonder what the hell that's about." So I showed up in the private dining room and he didn't mince any words. He said, "You're coming to work for me starting Monday." I said, "Oh?" He said, "Yep, you're going to be my assistant. You're going to kind of help me think about things. This company needs a makeover and I'm not sure what to do, but I need somebody who can help me think about it." So that was really the break. I mean that was kind of the... I suppose you could call it my intellectual curiosity, "Why do we do things this way?" Lots of people have the thought, it's just not as many people express it as should.

NELSON: Or maybe just over a beer later as opposed to a memo?

NICHOLAS: Yeah, whatever, yeah. I mean we have too many companies in America, as we all know today, and have for years, where the CEO is kind of in a corner and omnipotent and all thinking and whatever, when it shouldn't quite be that way, you know, isolated. A good CEO will surround himself with young people who ask questions and are politically incorrect and challenging him all the time. But it ain't that way.

NELSON: So 1970, at this point, did Time have any cable interests?

NICHOLAS: Yeah, we did. In the late '60s, we'd owned a bunch of VHF television stations in Grand Rapids, Denver, San Diego – God, there was another one – Indianapolis, and the guys who ran those stations participated in some of the local cable franchising activities, who knows why, they just did. This wasn't some big corporate plan, and so we ended up with some small cable franchises in those territories, in Indiana and Michigan.

NELSON: Even though you had broadcast stations there.

NICHOLAS: Yeah, in those days we did, and we had, actually, the San Diego station manager picked up half of what is now San Diego, California back then, and it's still a Time system today. So, at any rate, those existed. We had 40-50 thousand subscribers. That was the whole thing, and usually we didn't control the system. We'd own half of it with a 50/50 partnership and somebody else ran it. Basically it was a non-event, a non-issue, I guess, is the way to say it.

NELSON: But did this start to have some impact on the company, or was there some resistance because it still was a classic Time...?

NICHOLAS: No, it was like nobody even paid attention. This was beyond left field. This was a non-event. I can't even express it. This was something under the rug somewhere.

NELSON: A footnote.

NICHOLAS: Meaningless. Less than a footnote. A year or two after I went to work for Shepley, I pointed that out to him. I said, "We have these cable things and it's a footnote, or whatever, and we don't run them, and I don't know what they're worth, but I'll tell you what. Why don't we find somebody who wants to buy them who will take them over in exchange for stock in their company, and maybe we could have a small toehold in a real cable company. Maybe we can get a seat on the board and kind of watch the development of the industry." So he said, "Okay, go do it." This was Shepley. It was a five minute decision. So we scudded around and there were two companies that we spoke with. One was Continental Cable, Amos Hostetter, who I'm sure you've spoken with, and the other was ATC, Monty Rifkin, American Television Communications, and for reasons I don't totally remember, we chose ATC as the company we liked to connect with. So I called him up – I mean we didn't know these people – and introduced ourselves and said, "This is what we'd like to do. Would you like to buy them?" And they said, "Well, we might. Let's take a look." Short story, they did. We took a 5% interest in their company; Jim Shepley took the one board seat, and we, for the next couple years, cruised along. The industry started to grow and he liked what he saw. But it was a static 5% passive position in a new business, and Monty was running a good company, and it was really one of the, I'd say, three or four really good companies in the industry.

NELSON: So how did your Time's involvement in that deepen in cable?

NICHOLAS: Well, going to a different place, and then this all comes together a couple of years later, but starting also in the late '60s, maybe around 1970, the people who ran these television stations I talked to had a boss in New York to whom they all reported, that is the various stations, a guy named Wes Pullen, and somehow he got seduced into investing in something called Sterling Communications, which owned the franchise for providing cable TV in the southern half of this island, of Manhattan, and I guess that's roughly what it owned. So we became a 25% owner of that along with Chuck Dolan, of course, who everybody in the cable industry knows. Chuck was really the entrepreneur. He was in charge. And then the Lear family, which I guess is the Lear jet family, and the McCaw family of Washington, and so these were the owners. The company eventually went public and the stock traded over the counter, it quickly became a disaster. At any rate, it was early urban cable, and everything that worked in the country, amplifiers up on telephone poles, didn't work in New York where you had to put them inside the manhole and the steam corroded the amplifiers. I used to go around in Manhattan at night sometimes with amplifier crews who would open manholes and go down in there and sniff out the gas, and go down there to tune amps, just to see what it was all about. But at any rate, the story – a voracious appetite for capital, much more than budgeted, a long time to break even, the banks shut off Sterling Manhattan Cable from capital, Time, Inc. was the bank of last resort, the next thing you know our 25% is 75% because we had to keep kind of shoveling the money in. A lot of people thought we were nuts. Shepley kind of believed in it.

NELSON: So this was a kind of intuitive...

NICHOLAS: Yeah. I hate the word visionary; people who call themselves visionaries to me are suspect. I think he could just imagine the possibilities of a lot of things. At any rate, so in 1974 – it was '74, maybe '73 – he called me into his office one day and he said, "Nick, you're going down to run Manhattan Cable, Sterling, you're going to run it." Let me back up because something else happened that just occurred to me, and to be fair to some of the people in the industry...

NELSON: Yeah, get it on the record.

NICHOLAS: In 197..., I guess the year before that, it could be '73, we were fed up with Time, Inc. advancing capital to this thing, and it was getting deeper and deeper and deeper into trouble. By then there was another little company called HBO, which was owned by Sterling Manhattan Cable. It was eating capital, it had really just begun to get under way, and we said, "Look, if we're going to continue we want to own the whole thing. We're going to own it all." So there was a series of complex financial transactions. We bought out Chuck Dolan, the other shareholders. Chuck ended up buying from us a couple of franchises in Long Island, which became really the seed bed for his enormous success in the cable industry. So he owned Long Island, which was all of maybe 100 cable subscribers, something like that. We had 50,000 in Manhattan, we had HBO, which maybe had begun, maybe, but I'm not quite sure, and Chuck Dolan was running that as well. So, at any rate, we bought it all and we owned 100% of it, which allowed us to make decisions without going to a board and minority shareholders and public, and all that kind of stuff, which can be a pain in the neck when you're in trouble. So Shepley said, "Okay, we own it. You go down there and you run it. You figure out what to do. If you can't figure out what to do in six months we'll just shut it down, and sell it." So, oh God, there are more stories in here. I've got another one, which kind of comes back around and around and around. Maybe that's why we do these things.

NELSON: That's right. Exactly, exactly.

NICHOLAS: Before we bought in 100% of Manhattan Cable we said, "You know, we don't know what to do with this thing. We don't know how to run it. It's got 50,000 subs. We'll take HBO in, we'll take 100% of that, play around with that for a couple of years."

NELSON: And what did you see as the difference?

NICHOLAS: HBO was a programming company. Time, Inc. was more of the editorial, journalistic, software company. The hardware stuff, we didn't think we got that.

NELSON: Wires and poles and that stuff, yeah.

NICHOLAS: We just didn't kind of get it, for whatever reason. So we said, "Well, who the hell will buy us. Maybe this guy, Steve Ross, at Warner Communications. Maybe he'll buy it; maybe he'll buy it." So Shepley and I went over to see Steve Ross, and finally we had a deal. Steve said he'd buy it. I think the price was a million bucks. What's it worth today, a billions? 2 billion? I think it was a million bucks. Steve said, "Fine." We signed a deal, subject only to their doing the obvious due diligence. They went and did the due diligence; they came back and said, "We can't pay a million." They tried to give us a haircut, maybe it was we'll pay 800,000, and Shepley bristled and he said, "No, a million or nothing." And Steve wouldn't back down, he wouldn't give us the extra two hundred grand, so we ended up owning the damn thing. That's really what happened.

NELSON: Couldn't get rid of it.

NICHOLAS: Couldn't get rid of it. So that's why Shepley then said, "Okay, we now own it. You go down there and run it." '74, I'm pretty sure. 50,000 subs.

NELSON: Were you feeling like maybe we're stuck with this thing, it's a leftover, now they're sending me to do this?

NICHOLAS: Well, no, I didn't feel that way at all. This was my first command. You know, in the Navy you get your first command it could be a PT boat.

NELSON: Whatever it is you take it.

NICHOLAS: It's yours. You get to run it.

NELSON: You get to be captain.

NICHOLAS: Exactly. You're accountable. So after kind of brushing aside whatever kind of concerns I had, I went down to Manhattan Cable. You know, like all businesses, if you sit back and think about it a little bit, nothing's that complicated. There's no rocket science here. It's basically good equipment, good engineering, good installation, good customer service, I mean these are not unknown kinds of things. Good commonsense. So at any rate, there were a lot of good people down there.

NELSON: Where were their offices?

NICHOLAS: 23rd Street in Manhattan. They're still there. The local 3IBEW, the B card guys, they were really busting chops down at Manhattan Cable. We had a lot of problems and service calls. So one of the first things I did when I got there was to meet with the union guys and say what's this all about? What's going on? I learned pretty quickly that it was just normal kind of human stuff, that management down there treated the union guys like a bunch of, you know, dregs, like non-entities, no respect, no nothing. Well, that wasn't my style, that's not who I am, but at any rate, we got that fixed up right away and restored some pride in just kind of normal everyday work. I offloaded most of the management and brought in Glenn Britt, who's now chairman of AOL Time Warner Cable, was our finance guy, Thayer Bigelow, who at one time was president of Time Warner Cable, I don't know if you've interviewed Thayer. A one time president of HBO brought him in as my number two guy. We didn't know a thing about this business, and we had one holdover from the old regime, Frank Chiaino, who is a very knowledgeable guy. He knew how to get things done in New York City. He knew how to get trunk cable strung through the Empire City subway ducts. He understood these things, and was a class act. So together we figured out how to do it. It was a combination of... Well, there was one other thing. The relationship with the City of New York was terrible.

NELSON: Who was mayor at the time?

NICHOLAS: Oh, well, the mayor – who the hell was the mayor? I don't even remember. Beam?

NELSON: Beam, I think.

NICHOLAS: But we had a guy named Morris Tarshis, who was in charge of regulating us, and Morris was an extraordinarily decent civil servant who was just fed up with promises unkept. So it was much like the new Dick Parsons coming into AOL Time Warner, where Dick is saying to Wall Street, "Hey, I'm not going to make a promise we can't keep. I'm just not." So we adopted the same strategy, although I'm not sure we thought of it at the time. That's kind of the way people should behave. And we delivered and Morris finally said, "Okay, you guys are back in the pile of good guys again. I'm going to help you anyway I can." So with the help of the union, with the new management, with the City of New York, in a year we had it in the black, and it was a very exciting time for me, because we were survivors. We would've had to shut it down, all these guys were going to lose their jobs. It was a survivor. The rest is history. After you kind of break even you don't have to worry about being on the umbilical, taking cash from somebody else to make it. Then you just grow.

NELSON: So at that point, then, it started actually spinning off money into Time.

NICHOLAS: Well, you're talking nickels and dimes at the time, but that's survival. When you're losing money and all you've known are losses, all of the sudden you're no longer losing money, that's like victory, at least in any business I've ever been in. It gives you breathing room, it gives you time to figure out, you're not going to meetings up at the Time Life building every week with Jim Shepley saying, "Now, Nick, how about this, how about that, how about this?" Not that he was second guessing, he was pulling along with us, but it allows...

NELSON: A different dynamic.

NICHOLAS: Yeah, it's more money you can invest in upgrading, quality, programming, software, people, you name it, everything. So, you get the virtuous circle going. We were followed by other managements who just did a great job.

NELSON: And how about, where was HBO while you were working on the cable side?

NICHOLAS: HBO was struggling. This connects too, because HBO was a struggling start-up pay television company, and it basically had competition in what was called a stand alone business, which is fundamentally there would be a bunch of tape machines at the headend and people would plug in cassettes and there would be the movie. The only difference is we had one big tape recorder somewhere and microwaved the signal out, in effect a network, and half the time cable operators preferred having the stand alone network because they could decide what movie plays at eight, what movie plays at six, as opposed to taking the HBO feed, which was programmed. At any rate, it was barely making it and there was a falling out with Chuck Dolan. Chuck left HBO and went off to Long Island to kind of build Cablevision, and Levin was promoted, who was his programming chief. Jerry was hired by Chuck. Jerry became head of HBO. So, this is now mid-70s, '76, HBO is failing, and the same Jim Shepley is overseeing that at Time, Inc. and he is very upset because budget after budget after budget HBO has missed its financial targets and the company is having to do the same thing it did with the cable company, which is shovel to the cash in as the sole owner. And so I was given another call saying "You are now reporting to duty at HBO. You're going to takeover, and I want to know in six months whether this company can make it." It kind of sounds unbelievable today where HBO's profit is well in excess of half a billion dollars, its profit!

NELSON: And your role was...?

NICHOLAS: CEO. I was president.

NELSON: And where was Levin?

NICHOLAS: A very interesting transaction, and I will say it for this camera. What happened is Shepley asked me to come to HBO, to leave Manhattan Cable, and the cable was in the black, so I felt okay about leaving that, and I said, "Jim, I can't work for Levin. He's the guy who's presided over what is a disaster, and this isn't personal, but I'll only come if I can actually run it." He said, "I understand that. That's a reasonable request." And he wasn't quite prepared to do that at the time, but six months later he called back again and he said, "You've got to come up and you can run it. Levin's going to stay there as chairman, but you're the boss." And that was totally understood, by Levin, by everybody that worked there, so I went to HBO and I did the same initial thing. I cleared out all the management who worked for Levin, who were all, I would say, very intelligent thoughtful people who were basically yes men for Levin. They weren't independent minded people who would tell you what they thought about whatever it is they were in charge of. You can see what's going on here, right? You're a journalist. This is a long story here. It covers a lot of years.

NELSON: Well, this is a chance to get it out.

NICHOLAS: Yeah, this isn't going to be in the Wall Street Journal next week.

NELSON: Now at this point at HBO, and I want to let you continue the story, but just to sort of set the stage, had HBO done its first satellite feed yet?

NICHOLAS: HBO had gone on the satellite around Halloween of the prior year.

NELSON: Yeah, '75.

NICHOLAS: '75. And we had roughly 400,000 subscribers, and the thing I remember – how could you forget – is every week we lost more subscribers than we gained. This is called churn. While cable itself had a very low churn rate, basic cable, and was growing, growing, growing, and growing, cable had about 6 million subs at the time, the total industry. Today it's 60-whatever million. HBO had less than half a million and every week we lost subs, every week. So the business was going backwards, losing money. I mean that's why they sent me there. Figure it out or shut it down. If you can't figure it out, shut it down. It may not be a business. So, at any rate, I made a number of key hires. One was Austin Furst, who was responsible for the circulation launch of People Magazine, an iconoclast if there ever was one, as my programming chief. He didn't know anything about programming, but he was a hell of a businessman and he learned a lot about programming. A guy named Tony Cox – Tony was actually an old friend of mine from Princeton and Harvard. Tony had gotten fired by the magazine company, quietly fired, he worked at Life Magazine where he was general manager, and Tony called one day and he said, "I need a job." I said, "Come on down. I don't know if it's 30 days, whatever it is, but come on down, help me out, and see if you can find a job in the company."

NELSON: And he had first turned you on to the idea of going to work for Time.

NICHOLAS: Yeah. A wonderful, wonderful guy. Tony, let's see, Sean McCarthy, who I brought in as the finance guy, Jimmy Heyworth, of course, was there. Jimmy was one of the holdovers. Jimmy was a stalwart. Eddie Horowitz was there, but we moved him into the satellite and engineering function. Peter Frame, lots of...

NELSON: When did Michael Fuchs show up?

NICHOLAS: Okay, the Michael Fuchs story is one of my favorites because I'd been commuting on the Hudson River line for a lot of years and had gotten to know a guy named Neil Pilson over at William Morris, and I thought that Neil should come in and run what we called our special programming, which was everything but films, feature films. I talked to Neil one day, I talked to him about coming over to HBO and he thought about it and said, "CBS is recruiting me." He eventually became president of CBS Sports, but "CBS is recruiting me. I've got two kids and a mortgage, I can't take the risk, but I've got a guy right under me at William Morris, who doesn't have a mortgage right now. His name is Michael Fuchs, he's a great guy. He's terrific, you all ought to interview him." At any rate, Michael shows up. Michael, by the way, recruited Frank Biondi, six months, maybe a year, after Michael joined. So it was a fabulous crowd. I could probably sit here and name another 50 people because it was a fabulous team of people we put together. I've got to tell you one other thing I did pretty well, which is I tried to be very sensitive about Levin, and what would it feel like if I were in his position with some other guy in there running the place. So I behaved the way I think most of us would have tried to behave, invited him to meetings, tried to keep him very much in the loop. Used appropriately, he's a valuable guy. So, at any rate, we got Austin Furst in there negotiating with the film companies, he's bringing the costs down, he was a fabulous negotiator. When you negotiated with him and you were at a film company, you had to know that if you didn't make Austin's deal, we were just going to leave you out. We weren't going to play your movies, and we couldn't afford to do that with too many studios, but we could with one or two. So we got the prices in line, and the other thing we did was consumer research, can you believe it? In the first couple years of HBO history they never once asked their consumers "What movies do you like? How would you like us to schedule? Do you like what we're showing you?" In a sense, research. The kinds of things big networks do everyday and have done for years to kind of check the pulse of the consumer. So Lee Deboer was hired by Michael and Austin from Cox, from their media buying service in New York, and pretty soon we had a hell of a lot of intelligence about the consumer. Austin used that to tremendously modify the way we scheduled and promoted this service. That's what made the difference. That made the difference. The consumer – all of the sudden the attitudes began to shift, fewer disconnects, and pretty soon we were actually net gaining. So that's one part of the story. The other part is Malone.

NELSON: John Malone?

NICHOLAS: Yeah, it's Malone, and really, Gene Schneider. I talk mainly about the programming side – that was the product, right? And then there was the affiliate side; that is having relationships with the cable operators for the distribution of HBO, and you can imagine if we were losing subscribers every week, they weren't just our subscribers, they were fundamentally cable system subscribers, and they were losing the subscribers and they were desperately unhappy and nobody was more unhappy than Gene Schneider. And I had never met anybody in the cable industry. I was not a cable industry person at that time. So their big system was in Tulsa, Oklahoma and I climbed on a plane and I joined Bill Hooks, who was HBO's regional manager out of Dallas, I guess at the time, and we went to Tulsa and this guy named Mark Savage was there at the time running the system and we kind of went through everything. I listened, I listened, I certainly didn't have answers, but it was clearly about the product, and they were courteous, but it was clear that we had a big problem, again, the product. Let's say two months after that, I called John Malone – I did not know John. TCI probably had a million subs, I don't know, a small cable system. Again, we're talking '76, and I said, "Would you like to meet? We'll come out and meet you anywhere." And John said, "How about the Holiday Inn at Stapleton Airport?" I flew with another guy out there to Denver. John and Bob Magness – I mean, good old Magness. I loved Magness. At any rate, we met at the Holiday Inn; it had to be nine o'clock at night, and we ordered meal after meal after meal that never came out of this kitchen. We might have been the only people in the dining room. I remember Bob eating his cigars, they would get smaller... he never lit them... they would get smaller and smaller and smaller. Meanwhile we were having beers and scotch, and God knows what, but John and Bob made a lot of really terrific points about our business model, about the product, about the scheduling of sports.

NELSON: You're in the Holiday Inn at Stapleton Airport and Malone, Magness, yourself... they give you a lot of ideas or suggestions about what you should be doing with this thing – HBO.

NICHOLAS: Yeah, a critique, what we're doing that's a problem. It's really fascinating, up until this point, the management of HBO was paying a lot more attention to kind of what was on the air as opposed to what our cable affiliates were saying, and our cable affiliates were the customer, you know, and they were smart people and they were out there in the field, as it were. But at any rate, New York always sort of knew what was right. It turned out to be not so right, but I'm sure the same relationship exists in many ways between the big three over-the-air networks and their 200-odd affiliates all over the country. At any rate, I took it to heart. Malone and I began a friendship and relationship... actually, he and Magness even suggested I join them in Denver on the joint TCI at one time, which I'd forgotten about, but at any rate, a relationship which lasted many years, we had a lot of fun, and we did a lot of good things together. We compared notes almost daily about what was going on in our various operations, how we could make it better. Later on we did quite a few deals together. At any rate, between kind of listening to the consumer with the research and listening to the customer, the cable MSO, you finally got enough ideas to begin to experiment in change, how we programmed HBO in rather dramatic ways. We got our costs under control, really led by Austin; Michael started developing some rather unusual and interesting and very impactful non-film programming. I mean I remember the first time I ever saw Robin Williams was on HBO, and the first time I ever saw Steve Martin was on HBO – brilliant, brilliant stuff that never could have been done on commercial television. Those are classic, just classic events. Bette Midler. Others too numerous to mention. So we're now kind of '76-'77, and believe it or not, in the middle of, I think it was late '77, I got to go to Shepley's office and say, "Jim, we're actually making money." A year later we had turned the animal, and it was clear as soon as we had turned that disconnect rate down, it was clear that we were going to make it. The momentum had shifted in a positive direction, and ultimately profits...

NELSON: So how long did you stay there, now that you'd gotten things going?

NICHOLAS: So that's 77, I stayed there a couple more years, and my concern at that time shifted in a way. We were growing and it was like... I watch people take credit for the growth of their companies – this was like holding on to the tail of a tiger. This was how do you manage growth, not how do you grow it. We had climbed on a wave we didn't even know existed, this pay television wave, and it was going like that and we happened to be the leading surfboard perfectly positioned on the wave, so we had a hell of a ride, and it was very hard to differentiate how much of it was due to our brilliance and how much is due to the size and strength of the wave, but we knew we were on one, and my concern shifted. I began to think, "Geez, we've got this amazingly talented group of people. How do we keep them all interested? We don't want them getting raided by other people." And so there were other issues that went on. I spent more damn time trying to persuade people like Matt Blank from leaving; he's now running Showtime. It was endless.

NELSON: So you had a lot of talented people there.

NICHOLAS: Yeah, we had a lot of talented people, and you know, I was getting bored. I mean, a silly thing to say, but I was getting bored. I guess maybe I'm at my best when there's a big problem and kind of a team needs to be built to kind of figure out what to do and then just do it. I think my old man was that way, my brother is certainly that way. It's a thrill. But in the late '70s, Jerry went off. He left HBO – I'm trying to remember the timing, I can't remember the exact timing of all this – and he was put in charge of the area of Time, Inc. that oversaw its cable TV operations... no, actually, there's something else that happened that's really important from a cable industry point of view. You asked me what happened in the '70s. Before I got thoroughly bored, which I never did get bored at HBO, in 1977, I think it was, '78, after we got HBO into the black, I went to my boss and I said, "You know, we own 5% of ATC. We ought to own the whole damn thing." So he said, "Well, that's a good idea. How do we do it?" I said, "I don't know, but let me talk to Monty Rifkin." So I talked to Monty – actually what I did was... I know what it is – I called him up and I said, "We'd like to buy some more of your stock in the open market. We have 5% and we don't want to be unfriendly about it. We'd like to own 20%; it's a magical number for accounting reasons." He said, "Well, you're not going to be able to get it. It's hard to find on the market, etc., etc." I said, "I don't know about that, but we've got your permission. Thank you." I went to a brilliant guy named Dick Rosenthal at Solomon Brothers and explained the whole situation. He said, "No sweat." Well, we had the stock in three weeks, four weeks, whatever, and so we then owned 20%. Now let's say this is '77. '78 I went back to the chiefs at Time, Inc. and I said, "We ought to own the whole thing." And they said, "Okay." We were taping a Michael Fuchs special in Denver, Phyllis Diller, the Phyllis Diller Comedy Hour where she could talk about whatever she wanted at some comedy club in Denver. So I flew out for that and I asked Monty if he would join us at the show, but I wanted to chat with him about ATC, and it was at that point I said, "We'd like to buy the whole company." He said, "Let me think about it." But within 24 hours he said, "If the price is right we'll consider it." I polled my board, short story, six to nine months later we bought the whole company. I'll remember to this day we paid $300 a sub for ATC, it was like 150 million dollars for the company. None of us knew we were getting the bargain of a lifetime, but it wasn't a bargain at those prices, those were the prices of the day. Monty didn't sell below market, as a matter of fact he got a good price, but you can look back to '77, '78, $300 bucks a sub. Today it's $4,000 or whatever. So, we did that while I was still at HBO – I was sort of a sideline, and nor really part of my HBO job – and so ATC came in and Monty Rifkin stayed with the company, then Levin was moved to a job overseeing HBO, which was me, and Levin, which was cable TV. I didn't feel that was terrific to have Levin overseeing me, obviously, since it was my team that kind of figured out what to do at HBO, nonetheless, that's what happened. I applied for an exit visa out of HBO, in 1980 they gave it to me, and they put me in charge of strategy for Time, Inc. overall, and that's the end of my HBO time period. While I was in the strategy job, just real quick, we owned a rather large forest products company in Texas, land, timber, huge, very valuable. It did make sense in my view, in most people's view, for a publishing company to own it, but it was a huge political issue in the company. We had board members who came from the forest products side. Ultimately, though, we prevailed. The company got split in two, and our shareholders were given two pieces of paper – a media piece of paper called Time, Inc., and Temple Inland, which exists today, a fine company traded on the New York Stock Exchange. The largest landowner in Texas, a big deal company.

NELSON: You make it sound very simple, but I assume this was a major...

NICHOLAS: Oh, it was very complicated at the time, and of all the letters I got from people who appreciated what we did, the one I have that I've saved is from Warren Buffet, who had become a stockholder of our company before that happened and really believed that was the right thing to do to simplify and clarify the company. Also, right around that time that John Malone and I are still having our conversations about things, which continued for years, I'll get into the Turner stuff later, and one day he said, "You know, Magness and I would like you to come out to Denver and join us at TCI. You can have any title you want, you just name it. Just come out and join us. The three of us will be the little band of musketeers and that's what we'll do." And I thought about it because of my respect for John and for Bob, but my family was rooted in New York, my kids were all in school, my wife had a practice going in psychology, she's a therapist, which she started later in her life. I just couldn't do that. So it is kind of a regret that I couldn't have worked with those guys for a couple years. I think it would have been a blast, but at any rate...

NELSON: So you stayed at Time?

NICHOLAS: I stayed at Time. I was CFO for a year, for one year in 1983, and then something happened again that had happened before. Levin had problems in his job, in his oversight of both HBO and cable. Monty Rifkin resigned and Trygve Myhren came into the job. At HBO Frank Biondi had been made chief, and Frank and Michael and Tony Cox were fighting it out like biblical brothers down there, and they had made an extremely unfortunate transaction with Columbia Pictures, which damn near bankrupted Time, Inc. I mean it was a serious error in judgment, serious.

NELSON: Just gave away too much of the store?

NICHOLAS: Yeah, half a billion to a billion, which in those days was big money. Today, maybe they throw it away, but in those days...

NELSON: Some do.

NICHOLAS: In those days it was gigantic. So Gerald Levin was told one night he was out of that job, and I was put in that job. Again, "Fix it, Nick." So we fixed it, and the fixing... I have tremendous respect for Frank Biondi. A whole lot of things didn't work. Frank left, Michael came into the job, and of course Michael's history is Michael's history, and anything he tells you I'll probably agree with. He did just a phenomenal job at HBO, making it into the household name that it is today.

NELSON: In this time period what is your title in the company?

NICHOLAS: I was, whatever, Executive Vice-President at Time, Inc.

NELSON: Okay.

NICHOLAS: At ATC we had 600 people on the overhead in Denver headquarters. Tryg was moved out, I moved him out. Tryg will never speak to me again. Joe Collins went into the job. There were some interim moves. I had moved Joe to president of HBO under Michael temporarily, and Thayer Bigelow out to Denver as president, but then we swapped again. Thayer came to HBO and Joe took over from Tryg and we shut down the Denver headquarters and we moved ATC's headquarters to Stamford, Connecticut, 60 people, 10% of the staff. We were too centralized in terms of the way we ran the company. The whole idea was to have stronger managers out in the field running systems whether they be in Memphis, San Diego, whatever, and less power and control in the center. What Joe did there is legendary. He took the margins from 35 to high 40 percent in a number of years. A real class act.

NELSON: And Time Warner Cable, of course, still has a very strong regional structure.

NICHOLAS: Absolutely, absolutely. So at any rate, that was '84, '85, '86, in '86 that's what happened. It was fix-it time again.

NELSON: So what was next?

NICHOLAS: In '86 I was made president of Time, Inc. and anointed successor as chief executive of the company.

NELSON: Now you're overseeing the whole company.

NICHOLAS: Everything.

NELSON: And how was the company doing at the time?

NICHOLAS: There were three of us; Kelso Sutton was running magazines; Levin was now running strategy, the job I had had earlier; and myself. We were all directors and they kind of removed those two guys from the board, they the board did this. They said, "Nick, you're the president. You're going to succeed as CEO." And that was it. The company, overall, had been flat. The earnings per share had been flat for five or six years, not distinguished, not down, not up, not as good as it could be. By the way, I've got to go back to these two years, because this is the thing that I just somehow have had a knack for – '84 to '86 – I didn't sit there and fix ATC and HBO all by myself. As soon as I got the job and these things needed fixing, I found two young guys, Glenn Britt and Jeff Bewkes, and said, "Will you two guys be my deputies for a year? Just help me figure this out." Jeff is now running HBO; Glenn is now running Time Warner Cable. And so, I just want to make sure that these guys get the credit for whatever happened there because that's how you do things. You surround yourself by people who are bright, but also willing to take risks, willing to tell you what they think and what they believe, and willing to go out on a limb. So at any rate, I became president and I bought Thayer Bigelow back once more. Thayer is the all time utility in-fielder. He can play any position and play it well. It's astonishing how good this guy is. So we brought him in to be CFO.

NELSON: Thayer Bigelow: Utility Man.

NICHOLAS: Yeah, I mean Thayer came up to be CFO. Thayer Bigelow – I've mentioned him several times – if you were a manager or owner of a baseball team, you'd want him on your team to play almost any position. He can start, he can pinch hit, he can pitch, he can catch, he can catch fly balls, and people love working for him. But at any rate, that was '86, and all we did was do the same thing we'd done everywhere else. We just took a look at all the different operations at Time, Inc. The publishing area was too fat; it's good old Time, Inc. publishing and I loved it, but even for me there was too much fat, so I decided we were going to have to tackle that big time, and believe me I wasn't loved for that. All the nicknames I picked up, "Neutron Nick" and this, that and the other...

NELSON: "Nick the Knife".

NICHOLAS: Yeah, "Nick the Knife", and what I did – real simple – I sold all the perks, all the corporate planes, all that stuff that would be seen as entitlements of corporate people like me, sold them all. Not one person went off the payroll before all that stuff went first, every last bit of it. My job wasn't to be loved, my job was to do the right thing for the company, for the shareholders, and not to worry about my place in history.

NELSON: But there were people let go as well as the airplanes.

NICHOLAS: No question about it, yeah, but you know, it's like anything else, you've got to set a tone. You can't pay yourself some ridiculous amount of money while you're laying off 4,000 people. I mean, that's insane, that's absurd. It happens everyday, we know it. We see it. We don't pick up the paper without that happening. I don't want to point the finger at anybody other than American business as a whole, for the most part.

NELSON: There is a real disconnect there.

NICHOLAS: Big time, big time.

NELSON: This is a subject for another day, nonetheless, but you had a direct experience with it.

NICHOLAS: Absolutely, Steve. Absolutely. So at any rate, we went through things, we changed management in there at the top, and again we brought in a scrappy guy who wasn't part of the club, and bingo, things started to happen, and the next thing you know, we have three record years of earnings in a row – '87, '88, '89. And '90. Everything going into Time Warner. We set consecutive earning records. It wasn't so much what we did that was different, it's what we didn't do that was different. We made choices. We said, "We can't do everything." We had to be more selective about where we'd invest, where we'd dis-invest, where we'd prune the weeds, where we wouldn't. We applied the same lessons to the rest of the company that we'd learned at HBO. It's all common sense stuff. Again, none of this is rocket science. It takes a will and it takes a discipline, but financial discipline is the least of it. You've got to have it, a strong balance sheet – nothing substitutes for a strong balance sheet, nothing – but if you've got one and you can discipline yourselves to keep it, all the other stuff is common sense. There's lots of different ways to skin a cat. No, I'm not going to say we did it the right way, it could have been many different ways, the fact is we did it.

NELSON: So, you're running Time, Inc., it's the late '80s, the company's doing very well, at this point in time, how much is the cable operations starting to contribute to that?

NICHOLAS: Cable is a big part of the company. I'm guessing a quarter, maybe even 30% of the company. Not only is it large just in terms of scale, but Joe has done quite a job of ramping up the EBIDA, you know, the operating margins, and it was in all likelihood, in my recollection, the fastest growing part of the company at the time, maybe HBO was right after that. But it was right at that time that I remember, you undoubtedly remember, that Turner – this was '87, '88 – had gotten himself in trouble when he bought MGM. He basically took on all this debt. Remember this preferred A stock he got from Kirk Kerkorian or Drexel or whatever the hell it was, but believe me, it ate him alive. I'll never forget being at the, I think it was the Beverly Hills Hotel... no! We were at the MGM Studio when he closed the deal, and it was myself, Tony Cox, John Malone, I think John Sie, Turner, Terry McGuirk, and we're in this big Cecil B. DeMille room of the studio, and the deal is about to close. At any rate, Ted had the right idea, he just didn't get financed correctly.

NELSON: Getting ownership of his content.

NICHOLAS: Yeah, getting ownership of the content, of the MGM content. So, he got in trouble, remember Ted had owned 80% of the company, 20% by the public. John decided to mount a rescue. I think Malone was afraid that we were going to beat him to the rescue. So, John offered a rescue package to Turner of half a billion dollars. Basically he would buy out all of these other interests and I remember calling John and saying, "John, I'll tell you what, we'll split it with you. Let's do it half and half. Maybe we can persuade some of the cable guys to come in." John said, "Okay, let's do that." So here we had basically, what turned out to be 60% of Turner, and we offered it around to Chuck Dolan, to Continental, to Ross at Warner, whatever, they each took five and ten million dollar chunks... Comcast... nobody really stepped up to the plate. So Time and TCI ended up owning most of it. John and I took board seats and we worked really well with Ted. Things went very well, and Ted was accumulating land at the time. You know, Ted would leave a board meeting and he'd walk back in and he'd say, "Gee, I got this chance to get this land somewhere in Montana and I need 50 million bucks in a hurry. I just checked the stock price and the stock is $14, does anybody want to buy 15 million in stock?" And Malone's and my hands would go up and we'd split it. That's how it happened. This was not some hire Merrill Lynch or whatever to get it done. It was very informal, everything was done on a handshake, a lot of trust around in those days, and we'd do it. So the TCI and Time ownership of stock kind of crept up, and in this deal, by the way, which TCI and Time did with Ted, there was a provision in the deal, which if Time and TCI ever became the controlling shareholders of Turner, that Time was allowed to be the managing partner with respect to CNN. In other words, it was something that John conceded to us, saying that we wanted journalistic control over CNN because that's why we wanted CNN to begin with because it was a journalistic enterprise, a one-of-a-kind and a fabulous entity. So I'll come back to this later – mid-90s – but at any rate, so I enjoyed being on the Turner board, and those were good meetings in Atlanta, and soliloquies from Ted Turner over dinner, soliloquies from Hamlet. I mean, ask Ted sometime, it's amazing what he can tell you from memory. He can go on for a half an hour, Shakespeare...

NELSON: But you know Ted very well, and it's been reported here and there that sometimes he chafed under this relationship because he was used to being 100% owner and entrepreneur...?

NICHOLAS: You know something, I think a lot of things have been reported, but I think if you ask Ted, how did Turner himself and the company do in the years, '87-'92, before he and Levin had to start dealing with each other, after I left Time Warner, I think he'd say we did great. I can't think of a single thing, major initiative that Ted wanted to do... now, if there was a problem Malone and I would have lunch or dinner with Ted and we'd kind of figure things out. None of this hostile stuff, none in the press, it was collegial, what's best for the company. We admired Ted. We weren't thinking we had a lousy businessman on our hands. After all, he invented CNN, we hadn't. He started TBS, we hadn't. So, a lot of respect for Ted.

NELSON: Now what about when he was after CBS. I think that was around, if I recall, around 1990. Because that seemed to be one place where he was frustrated. Maybe that was an unrealistic thing to be reaching for.

NICHOLAS: You know something, he wanted CBS, it was an unrealistic thing to do. Had it been realistic we might have been interested. I mean realistic financially. I laughed, I remember when he came in, I said, "What do you need for this, Ted? Your Visa card?" At any rate, he came in at the same time he wanted to buy CNN he was in financial trouble, he said, "Do you want to buy CNN from me?" I said, "Yeah, sure, you got some numbers?" He pulled them out of his briefcase, we made an offer, but he didn't really want to sell it. Murdoch apparently made him an offer as well. I mean there were so many things going and coming at the time there. I mean, I think Ted's desire to own a network is a good idea. It's hardly a bad idea. The question is how do make the numbers work so that the deal can be done and everybody wins.

NELSON: Speaking of deals, we're now approaching the big deal.

NICHOLAS: Time Warner?

NELSON: The Time Warner deal. So I guess it's time to get into that?

NICHOLAS: Yeah, sure. I...

NELSON: Just give us a little bit about how that started. You had mentioned some relations with Steve Ross way back when.

NICHOLAS: Yeah, I'll tell you how it happened. I had started kind of thinking, and we put it in the maybe the '87 or '88 Time annual report, we began to see technology creeping in and affecting the media businesses in ways we hadn't previously understood, particularly as personified by Intel and the chip, and things digital. It was only 13, 14 years ago, but it was eons ago in many ways. So we began to think about, you know, at Time, Inc. fundamentally our business is a print based business, and people in the world – I remember kind of the statistics – 70% of the information and entertainment that people in the world obtain they get from the screen. In those days there weren't a lot of laptops around either, so it was a film screen or a television screen. So we thought, you know, we ought to have a stake in those businesses. That's really how... it wasn't any more complicated than that. We ought to have a stake in those businesses. Interestingly I can date this back to a trip to Africa I took with one of my children and my wife in '87 to East Africa, and for whatever reason there was a stopover in Zurich on the way home, and we got to Zurich at three in the morning and we went to some airport hotel and they slept and I couldn't sleep, and I went down to the bar, there was nobody in the bar, and I wrote, I remember very lengthy scribbles on these little hotel pads, I wrote the game plan for putting together Time and Warner. I came back to New York, I was in New York the next day, and I gave it to a guy named Phil Lockner, who was our counsel, and I said, "Phil, would you kind of write this up as a memorandum and put it into good English," and this, that and the other. Maybe it was Levin, I gave it to Levin.

NELSON: And why Warner? Why did you focus on Warner?

NICHOLAS: Well, because you look around at the different companies, they had the right collection of assets that we thought fit better. Paramount had all these other things attached to it, we thought that basically Martin Davis was an operator, while Steve Ross was much more tuned to the content of the business itself, that Davis was just an operator. I mean he could have run anything, and we wanted to be allied with somebody who was kind of more in tune with the actual content itself. So, again, it's personality, I mean presumed personality. At any rate, we hashed this around, Dick Munro, Jerry Levin, myself, some other guys, we convened a strategy group at the company of managers from different parts of Time, Inc. We considered this in a very broad way throughout the company at the higher levels. Not the Warner part, but the putting together of... Warner was just the chosen partner, so one day when I was in jury duty in Manhattan, I got out early, I called Steve and chatted with him and he said, "Why don't you come up and have coffee?" And I did and the rest is history. We negotiated a deal with all the ins and outs and they're all over the place. The stories are everywhere. We negotiated a transaction, Paramount jumped the deal. These were the days of junk bonds, you could call up your bank, "Sure we'll lend you the money." Paramount jumped us, we turned a merger – a stock for stock merger – of two equal sized companies into an acquisition of Warner by Time, in retrospect could have been a mistake. We should have said, "Okay, Paramount buy us." That company would have probably gone under, too much debt, who knows, hard to know. But in retrospect, the guy – I mean I consider myself most responsible or accountable for Time Warner – Levin was the mechanic, kind of lawyering the deal, and looking back, something I've never said for public consumption that I've said to friends of mine who've asked me, I'm not sure. You look back today, it's always easy to be a quarter back on Monday morning, the Time, Inc. businesses were thriving, the Warner business, the music business is not doing well, digital, as you know, erosion, too much management turnover in the music division, the film and entertainment is doing well, but from a return on assets point of view it's a lousy business. It really doesn't help the other businesses, it doesn't help HBO, it probably doesn't help Turner's businesses that much. Should we have done it? I would say... I could easily make the case it was not a smart idea.

NELSON: Do you think that sometimes, and I suppose we could reflect later on the AOL Time Warner merger, are some of these mergers maybe in the long run turn out to be not as productive as they looked at the time with the excitement of "let's merge, let's get bigger, let's have more product lines."

NICHOLAS: Most of them. The ones that make the most sense, I mean if two cable companies are merging and you're putting oranges and oranges together, those make sense. It is clear to me in retrospect, the one we should have done, back then, if Malone would have agreed to it, would have been Time-Turner because you have CNN, you have the cable programming channels, we were in the cable programming business, we were in the cable business, we were simpatico in many ways, kind of the journalistic thing, we were definitely simpatico with journalistic independence, don't corrupt the journalist – definitely a Time point of view, historically. So, if I could go back, Steve, and re-write history, I would, if pushed to the wall, not have done the Warner deal, forget about all the other stuff that happened or I was there or not there, just on the merits, the deal itself, and I would have tried to combine Time and Turner. That would have been, just as is, a fabulous company, and then since I know you're going to go ahead and ask me, no, I wouldn't have made the AOL deal, and I'm on record in Wired Magazine a couple of months after it was announced saying "I don't get it."

NELSON: Alright, well, we'll leave that for now, since that brings us up to date. But the Time Warner deal, obviously, as we know, did go forward. You and Steve were co-CEOs with the expectation that you would be his successor.

NICHOLAS: There was a signed agreement. I mean it was a signed, supposedly bullet-proof agreement that in five years he steps down and I'm sole CEO. That was the deal. You know, I'm one of these handshake guys. You shake my hand, you've got it, you've got my word. I know it's naïve, but I like to believe other people are that way, and I'm a grownup, I know they're not always that way. You know what, Malone was that way, lots of people are that way, most people are that way, but not Ross, not Levin.

NELSON: I think a lot of the cable industry from my observation grew up that way, on a lot of handshakes.

NICHOLAS: Yeah, you know, it was really easy. It's a very contract intensive business. The first contract we did with Malone, I think it took three years to get the thing lawyered and signed, but everybody lived up to it. There were many, many opportunities to escape these things. Story – here's the story of all time. Turner's acquisition by MGM from Kerkorian. I was on a plane from New York to LA to Hawaii for an HBO affiliates meetings. I had a 250 page prospectus of the Turner deal with MGM. I read through it – not line by line – I came to a point on there that was a clear out for Turner in what was a disaster deal. I got off the plane to change planes in LA. I called John Malone, and I said, "John, you got that prospectus sitting around? Turn to page 100 and whatever," I said, "Look at this line. I think Turner's got a clear out here." He looked at it and he said, "I think you're right." I got to Hawaii and called Ted. He said, "You're kidding! Show me." He said, "I can't do it, Nick. I gave my word. I gave my handshake." Enough said. Gotta admire people like that.

NELSON: Now, speaking of people, Steve Ross. What was your relationship with Steve Ross?

NICHOLAS: I had a good relationship with Steve Ross. Steve Ross was a dying man when we did the deal. He didn't like to talk about it, he would deny it...

NELSON: And you did not know that?

NICHOLAS: Oh, we knew that.

NELSON: You knew that?

NICHOLAS: Yes. We knew that, our general counsel knew it. The only people I told were Levin and Munro. We had irrefutable... don't ask me how, but in this world, today, unfortunately, there is no privacy. We knew everything; we knew what his life expectancy was. I asked Steve pointblank about this and he denied he had it, and I said, "Okay, what am I going to do?" But some of the real names... I'm not going to use... well, I will. Felix Rohatyn of Lazard said, "Hey Nick, just duck for a couple years. Just duck. Let this stuff fly over your head, you'll be running the company, Steve will be gone." But I couldn't duck. I mean, that was my downfall. My downfall was... it was the same characteristic that was an advantage early in my Time, Inc. career, which was I said what I thought. I said, "Why are we doing this? This is idiotic. There must be a better way." And I attacked... one of the big problems I had was with this thing called TWE, Time Warner Entertainment, which today the company is struggling to get out of, and I am on record as saying "There is no reason to do it. It's dumb. It will be the most expensive financing on record, huge inflexibility." Steve, who was dying, in retrospect, was not his normal self. Steve was a conservative financially, he liked strong balance sheets, this was not a typical Steve Ross deal, it just wasn't, but he loved it and it was so complicated and Levin kind of bowed down to everything that Steve said, and thought Steve was brilliant. Dumb deal.

NELSON: So what was it that attracted Steve to it? Just the notion of bringing this large amount of Japanese money? Was there something in that that...?

NICHOLAS: I can't even begin to tell you because you're talking about psychology now. You're talking about the psychology of a dying man who's looking to leave a legacy and Steve wanted bigger and grander. I wanted smaller, more targeted, more agile, and Arthur Lyman, who was his lifelong friend and lawyer and accomplice, came to see me about three years after Steve died, and he said, "Nick, you were right. You were right about everything. You were right about all this stuff." But he said, "I didn't think you were right. I just had this blind belief in Steve because he was right my whole life." But it is clear at the end with his cancer eating away at him, with the pain, something else was going on. Who the hell knows? I'm not a shrink. So I ran into that. Levin took advantage of it, "Nicholas is against you. Nicholas is disloyal." Disloyal – hell! I didn't work for Steve. I was trying to do the right thing for the company, and so it was a strange time, and Levin was extraordinarily adept at playing both sides of the fence. Extraordinarily adept at coming in and saying, "You're right. Ross isn't telling you..." You know, this kind of behavior. I regret to have to say things like that, but it's on the record. It's well known. It's just not well written about. So you know, the Time Warner story's been documented and written about. There's a book by Connie Bruck. I mean, I was away skiing; one of the Time directors who was the key guy – we had an even board, eight and eight – died, Jim Beré. And so they pulled a coup. But I didn't fight, I said, "Screw it. I'm not going to come to the board and try to justify myself versus Ross. You guys want to take it over, take it over. I'll go on with the rest of my life."

NELSON: So was it the Time Warner Entertainment deal you think that basically undid you because of opposing it.

NICHOLAS: No, it was opposing anything that I thought didn't make sense. Basically, they were looking... let's put it this way, I don't know what the hell they were looking for, but they weren't doing things the clean, straight ahead way. Today it's a big problem for the company. When Parsons says, "Look, I've got to simplify this. I can't get out of this, I can't get out of that." That's what he's talking about. It's the legacy of Levin and Ross. It truly is. Somebody will write about it – some journalist, you know, we're talking cable.

NELSON: So you got the word... you're out in Vail... basically snowed out, so to speak.

NICHOLAS: So I got the word that Steve Ross is at home, he's dying, he is telling the board over the phone that he will be back in a month or two. Meanwhile the doctor said he's dying, so there's an outright misrepresentation. I mean, this was all written about. So at any rate, I said, "Okay," I said, "I have one request." "What's your request?" "My request is that the board ask for my resignation. I will not resign." Captain's go down with their ships unless they're asked by the admiral to abandon ship. I don't want the record to show that I left. That I just walked away, because I didn't.

NELSON: So you preferred the record to show that you were...

NICHOLAS: I want the record to show we want you to walk away.

NELSON: Okay.

NICHOLAS: Right.

NELSON: That's a big difference.

NICHOLAS: Yeah, it is.

NELSON: So what did you do after that? All of the sudden you've gone from...

NICHOLAS: Well, since I didn't expect to be unemployed...

NELSON: Most of us don't when it happens.

NICHOLAS: I just said okay, what do you want to do with the rest of your life. You can probably tell from some of this conversation I love entrepreneurial things. Problems, problems are really opportunities waiting to happen, and the high risk stuff – it appeals to me. So I began, slowly but surely, to get into all kind of private equity kinds of things, and eventually the Internet showed up, and I ended up in the Internet big time. I had my big wins and I had my big losses, like everybody, but fortunately I came out ahead.

NELSON: Well, if you came out ahead it's pretty good.

NICHOLAS: I came out ahead, and I've had a lot of fun along the way with a lot of very interesting people kind of plowing new ground.

NELSON: Priceline – that was one of your Internet...

NICHOLAS: Well, Priceline's one of them. That one is because you look it up and it's put there, but there are a lot of them. There are a lot of them. I'm involved in one now I'm very excited about called Trip Advisor, a private company based in Boston, and there'll be various spin-offs of that. So there are a lot of interesting things going on. But that however, that kind of stuff is receding as a part of my life and has been. Two other things have really taken over because business is now not the dominant thing. I'm still on a bunch of boards and all.

NELSON: Do you want to just tick off what they are for the record?

NICHOLAS: Boston Scientific, Xerox and DB Capital, Deutsch Bank, and then private ones, ones that aren't public. But the love of my life now is really not-for-profit, and since the late '80s when George Bush the first appointed me to his commission on the environment I've gotten increasingly interested in environmental issues, and I've been fortunate enough to hook up with Fred Krupp, who is executive director of a group called Environmental Defense. For old timers it's Environmental Defense Fund and deals with major issues, very practical, entrepreneurial organization. They're not anti-regulatory, but prefer to design solutions that work in a free capitalist marketplace, which to me is incredibly appealing, and 200 people on the staff doing really exciting work, and I've been a trustee and I've recently been appointed chairman and I'm going to be devoting – I have been devoting and I will be devoting – an increasing amount of time. Seven grandchildren, more coming. I love that. How could you not? So, life is good, life is full. A few regrets. Not many.

NELSON: So clearly there was life after Time Warner.

NICHOLAS: Oh, yeah. You know, for anybody who happens to come by this tape who gets knocked off a pedestal, my advice is dust yourself off, pick yourself up, and write a new chapter because they're out there to be written, and you'll probably write a better one.

NELSON: I just want to come back to one story. You were going to talk about the acquisition of Turner Broadcasting.

NICHOLAS: Oh, Turner. You know, God, about a year before Time Warner acquired Turner, Levin, for some God knows reason, was trying to sell his interest in Turner that, as I said earlier, we had acquired this along with TCI to where we owned 30-35% of Turner, it was worth a couple of billion dollars. Sure, we didn't pay much more than 200 or 300 million for it. Levin wanted to sell it, and I kept scratching my head. I didn't know what was going on inside of the company. I said, "You ought to be doing the opposite." Well, a year later, thank God, they announced acquisition of Turner. I can quibble with it and say I think they overpaid – maybe they did, maybe they didn't – it was still the right thing to do, but the great story for me was there was this big announcement in New York, Time-Turner, Levin and Ted Turner doing their high fives and all that stuff, at any rate, about three hours of the conference I get a call from Ted and he was in his plane, and he said, "Nick, did you watch the press conference on TV?" And I said, "God, I missed it Ted. I wasn't even aware it was on." And he said, "Well, I want you to know, I'm Jerry Levin's new best friend. I'm replacing you. I'm Levin's best friend." I said, "Yeah, good luck, Ted." True story.

NELSON: And just since we had mentioned earlier, you were going to comment on your thoughts about the merger of AOL Time Warner, and obviously you've already said that maybe Time and Warner wasn't such a hot idea.

NICHOLAS: Well, yeah, you know something, I've been an AOL subscriber since '92, since I left Time Warner. I didn't even know what email was. It was a great service for me for a long time. I bought the stock back then, fortunately for me, but basically it was a kind of bet your company move, and what I didn't understand about it, I could understand taking an interest in a smaller Internet company, but what I couldn't understand was selling out this collection of irreplaceable media assets – Time, Sports Illustrated, CNN, Warner Bros., and so on, HBO – for wampum. For wampum. The bet was too big. In other words, you were basically selling out the 100 year building and accumulation on the premise that this thing called AOL was something bigger than all of them put together. That had to be a long shot. Had to be a long shot. So I had real questions about it. Sure, it was true that they had failed at Time Warner to do anything grand on the Internet, but so had everyone else. So had Viacom, so had Disney, so had CBS, it was unclear what the right strategy was here.

NELSON: They still have, by and large.

NICHOLAS: Yeah, so to kind of bet your company and your history and your traditions on something like this, I don't know. Same comment – I just don't get it. I don't get what went through the head of Levin, I don't understand the board of directors, I don't understand why they came around to vote for it. I know that Ted had real misgivings about it. He's told me many times, he eventually went along, he said, just to go along, not to be a party pooper, but he really didn't get it either. So, who knows? History isn't over yet. They're in a bad patch now. I have a lot of confidence in Dick Parsons. I think he's got good advisors in Case and Turner and others, and we'll see what happens.